As filed with the Securities and Exchange Commission on May 14, 1999 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) [ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 1999 -------------- OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ____________ to _____________ Commission File Number 1-14788 ------- Capital Trust, Inc. ------------------- (Exact name of registrant as specified in its charter) Maryland 94-6181186 -------- ---------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 605 Third Avenue, 26th Floor, New York, NY 10016 ------------------------------------------ ---------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (212) 655-0220 -------------- Securities registered pursuant to Section 12(b) of the Act: Name of Each Exchange Title of Each Class on Which Registered ------------------- --------------------- Class A Common Stock, New York Stock Exchange $0.01 par value ("Class A Common Stock") Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes[ X ] No[ ] APPLICABLE ONLY TO CORPORATE ISSUERS: The number of outstanding shares of the Registrant's Class A Common stock as of May 13, 1999 was 18,352,983.
EXPLANATORY NOTE - ---------------- Capital Trust, Inc., a Maryland corporation (the "Company"), is the successor to Capital Trust, a California business trust (the "Predecessor"), following consummation of the reorganization on January 28, 1999 whereby the Predecessor ultimately merged with and into the Company. Unless the context otherwise requires, references to the business, assets, liabilities, capital structure, operations and affairs of the Company include those of the Predecessor prior to the reorganization.
CAPITAL TRUST, INC. INDEX Part I. Financial Information Item 1: Financial Statements 1 Consolidated Balance Sheets - March 31, 1999 (unaudited) and December 31, 1998 (audited) 1 Consolidated Statements of Income - Three Months Ended March 31, 1999 and 1998 (unaudited) 2 Consolidated Statements of Changes in Stockholders' Equity - Three Months Ended March 31, 1999 and 1998 (unaudited) 3 Consolidated Statements of Cash Flows - Three Months Ended March 31, 1999 and 1998 (unaudited) 4 Notes to Consolidated Financial Statements (unaudited) 5 Item 2: Management's Discussion and Analysis of Financial Condition and Results of Operations 12 Item 3: Quantitative and Qualitative Disclosures about Market Risk 18 Part II. Other Information Item 1: Legal Proceedings 20 Item 2: Changes in Securities 20 Item 3: Defaults Upon Senior Securities 20 Item 4: Submission of Matters to a Vote of Security Holders 20 Item 5: Other Information 21 Item 6: Exhibits and Reports on Form 8-K 22 Signatures 23
Capital Trust, Inc. and Subsidiaries Consolidated Balance Sheets March 31, 1999 and December 31, 1998 (in thousands) <TABLE> <CAPTION> March 31, 1999 ----------------------- Assets (Unaudited) <S> <C> Cash and cash equivalents $ 24,837 Other available-for-sale securities, at fair value 2,814 Commercial mortgage-backed securities, available-for-sale and recorded at fair value 222,051 Certificated mezzanine investments available-for-sale, at fair value 45,333 Loans receivable, net of $4,582 and $4,017 reserve for possible credit losses at March 31, 1999 and December 31, 1998, respectively 497,839 Excess of purchase price over net tangible assets acquired, net 303 Deposits and other receivables 336 Accrued interest receivable 8,136 Deferred income taxes 3,321 Prepaid and other assets 7,718 ======================= Total assets $812,688 ======================= Liabilities and Stockholders' Equity Liabilities: Accounts payable and accrued expenses $ 9,635 Notes payable 3,820 Credit facilities 313,651 Term redeemable securities contract 127,135 Repurchase obligations 51,945 Deferred origination fees and other revenue 3,646 ----------------------- Total liabilities 509,832 ----------------------- Company-obligated, mandatorily redeemable, convertible preferred securities of CT Convertible Trust I, holding solely 8.25% junior subordinated debentures of Capital Trust, Inc. ("Convertible Trust Preferred Securities") 145,744 ----------------------- Stockholders' equity: Class A Convertible Preferred Stock, $0.01 par value, $0.26 cumulative annual dividend, 100,000 shares authorized, 12,268 shares issued and outstanding (liquidation preference of $33,000) 123 Class A Common Stock, $0.01 par value, 100,000 shares authorized, 18,159 shares issued and outstanding 182 Restricted Class A Common Stock, $0.01 par value, 144 and 55 shares issued and outstanding at March 31, 1999 and December 31, 1998, respectively 1 Additional paid-in capital 189,578 Unearned compensation (817) Accumulated other comprehensive income (395) Accumulated deficit (31,560) ----------------------- Total stockholders' equity 157,112 ----------------------- Total liabilities and stockholders' equity $812,688 ======================= </TABLE> See accompanying notes to unaudited consolidated financial statements.
<TABLE> <CAPTION> December 31, 1998 ------------------------ Assets (Audited) <S> <C> Cash and cash equivalents $46,623 Other available-for-sale securities, at fair value 3,355 Commercial mortgage-backed securities, available-for-sale and recorded at fair value 31,650 Certificated mezzanine investments available-for-sale, at fair value 45,480 Loans receivable, net of $4,582 and $4,017 reserve for possible credit losses at March 31, 1999 and December 31, 1998, respectively 620,858 Excess of purchase price over net tangible assets acquired, net 308 Deposits and other receivables 401 Accrued interest receivable 8,041 Deferred income taxes 3,029 Prepaid and other assets 6,693 ======================== Total assets $766,438 ======================== Liabilities and Stockholders' Equity Liabilities: Accounts payable and accrued expenses $ 12,356 Notes payable 4,247 Credit facilities 371,754 Term redeemable securities contract - Repurchase obligations 79,402 Deferred origination fees and other revenue 4,448 ------------------------ Total liabilities 472,207 ------------------------ Company-obligated, mandatorily redeemable, convertible preferred securities of CT Convertible Trust I, holding solely 8.25% junior subordinated debentures of Capital Trust, Inc. ("Convertible Trust Preferred Securities") 145,544 ------------------------ Stockholders' equity: Class A Convertible Preferred Stock, $0.01 par value, $0.26 cumulative annual dividend, 100,000 shares authorized, 12,268 shares issued and outstanding (liquidation preference of $33,000) 123 Class A Common Stock, $0.01 par value, 100,000 shares authorized, 18,159 shares issued and outstanding 182 Restricted Class A Common Stock, $0.01 par value, 144 and 55 shares issued and outstanding at March 31, 1999 and December 31, 1998, respectively 1 Additional paid-in capital 188,816 Unearned compensation (418) Accumulated other comprehensive income 4,665) Accumulated deficit (35,352) ------------------------ Total stockholders' equity 148,687 ------------------------ Total liabilities and stockholders' equity $766,438 ======================== </TABLE> See accompanying notes to unaudited consolidated financial statements.
Capital Trust, Inc. and Subsidiaries Consolidated Statements of Income Three Months Ended March 31, 1999 and 1998 (in thousands, except per share data) (unaudited) <TABLE> <CAPTION> 1999 1998 --------------------- --------------------- <S> <C> <C> Income from loans and other investments: Interest and related income $ 22,152 $ 7,977 Less: Interest and related expenses 8,618 3,081 ------------------- ---------------- Income from loans and other investments, net 13,534 4,896 ------------------- ---------------- Other revenues: Advisory and investment banking fees 3,093 2,860 Other interest income 620 370 ------------------- ---------------- Total other revenues 3,713 3,230 ------------------- ---------------- Other expenses: General and administrative 5,255 3,241 Other interest expense 91 106 Depreciation and amortization 87 46 Provision for possible credit losses 1,079 480 ------------------- ---------------- Total other expenses 6,512 3,873 ------------------- ---------------- Income before income taxes and distributions and amortization on Convertible Trust Preferred Securities 10,735 4,253 Provision for income taxes 5,202 1,580 ------------------- ---------------- Income before distributions and amortization on Convertible Trust Preferred Securities 5,533 2,673 Distributions and amortization on Convertible Trust Preferred Securities, net of income tax benefit of $1,554 1,741 - ------------------- ---------------- Net income $ 3,792 $ 2,673 Less: Class A Preferred Share dividend requirement (784) (784) ------------------- ---------------- Net income allocable to Class A Common Shares $ 3,008 $ 1,889 =================== ================ Per share information: Net earnings per share of Class A Common Stock Basic $ 0.16 $ 0.10 =================== ================ Diluted $ 0.12 $ 0.09 =================== ================ Weighted average shares of Class A Common Stock outstanding Basic 18,317,103 18,207,900 =================== ================ Diluted 30,884,761 30,736,405 =================== ================ </TABLE> See accompanying notes to unaudited consolidated financial statements. 2
Capital Trust, Inc. and Subsidiaries Consolidated Statements of Changes in Stockholders' Equity For the Three Months Ended March 31, 1999 and 1998 (in thousands) (unaudited) <TABLE> <CAPTION> Restricted Accumulated Class A Class A Class A Additional Comprehensive Preferred Common Common Paid-In Income Stock Stock Stock Capital ------------------- -------------- -------------- -------------- -------------- <S> <C> <C> <C> <C> <C> Three months ended March 31, 1998 - ---------------------------------------- Balance at December 31, 1997 $ - $ 123 $ 182 $ - $188,257 Net income 2,673 - - - - 6 Change in unrealized gain on available-for-sale securities (118) - - - - Issuance of restricted Class A Common Stock - - - 1 724 Restricted Class A Common Stock earned - - - - - =================== ============== ============== ============== ============== Balance at March 31, 1998 $ 2,555 $ 123 $ 182 $ 1 $188,981 =================== ============== ============== ============== ============== Three months ended March 31, 1999 - ---------------------------------------- Balance at December 31, 1998 $ - $ 123 $ 182 $ 1 $188,816 Net income 3,792 - - - - Change in unrealized loss on available-for-sale securities 4,270 - - - - Cancellation of previously issued restricted Class A Common Stock - - - (1) (149) Issuance of Class A Common Stock unit awards - - - - 312 Issuance of restricted Class A Common Stock - - - 1 599 Restricted Class A Common Stock earned - - - - - =================== ============== ============== ============== ============== Balance at March 31, 1999 $ 8,062 $ 123 $ 182 $ 1 $189,578 =================== ============== ============== ============== ============== </TABLE> See accompanying notes to unaudited consolidated financial statements. <TABLE> <CAPTION> Other Unearned Comprehensive Accumulated Compensation Income Deficit Total ----------------- -------------------- ----------------- -------------- <S> <C> <C> <C> <C> Three months ended March 31, 1998 - ---------------------------------------- Balance at December 31, 1997 $ - $ 387 $ (45,660) $ 143,289 Net income - - 2,673 2,673 Change in unrealized gain on available-for-sale securities - (118) - (118) Issuance of restricted Class A Common Stock (725) - - - Restricted Class A Common Stock earned 32 - - 32 ================= ==================== ================= ============== Balance at March 31, 1998 $ (693) $ 269 $ (42,987) $ 145,876 ================= ==================== ================= ============== Three months ended March 31, 1999 - ---------------------------------------- Balance at December 31, 1998 $ (418) $ (4,665) $ (35,352) $ 148,687 Net income - - 3,792 3,792 Change in unrealized loss on available-for-sale securities - 4,270 - 4,270 Cancellation of previously issued restricted Class A Common Stock 104 - - (46) Issuance of Class A Common Stock unit awards - - - 312 Issuance of restricted Class A Common Stock (600) - - - Restricted Class A Common Stock earned 97 - - 97 ================= ==================== ================= ============== Balance at March 31, 1999 $ (817) $ (395) $ (31,560) $ 157,112 ================= ==================== ================= ============== </TABLE> See accompanying notes to unaudited consolidated financial statements. 3
Capital Trust, Inc. and Subsidiaries Consolidated Statements of Cash Flows Three months ended March 31, 1999 and 1998 (in thousands) (unaudited) <TABLE> <CAPTION> 1999 1998 ----------------- -------------------- <S> <C> <C> Cash flows from operating activities: Net income $ 3,792 $ 2,673 Adjustments to reconcile net income to net cash provided by operating activities: Deferred income taxes (292) - Provision for credit losses 1,079 480 Depreciation and amortization 87 46 Restricted Class A Common Stock earned 97 32 Net amortization of premiums and accretion of discounts on loans and investments 54 - Accretion of discounts on term redeemable securities contract 250 - Net accretion of discounts and fees on Convertible Trust Preferred Securities 200 - Expenses reversed on cancellation of restricted stock previously issued (46) - Changes in assets and liabilities: Deposits and other receivables 65 (3,540) Accrued interest receivable (95) (2,600) Prepaid and other assets (1,058) (895) Deferred origination fees and other revenue (802) 1,730 Accounts payable and accrued expenses (2,409) (620) --------------- -------------------- Net cash provided by (used in) operating activities 922 (2,694) --------------- -------------------- Cash flows from investing activities: Purchases of commercial mortgage-backed securities (185,947) (28,959) Principal collections on commercial mortgage-backed securities - 10,963 Principal collections on certificated mezzanine investments 147 159 Origination and purchase of loans receivable (2,975) (148,153) Principal collections and proceeds from sale of loans receivable 124,689 248 Purchases of equipment and leasehold improvements (49) (126) Principal collections and proceeds from sales of available-for-sale securities 529 2,253 --------------- -------------------- Net cash used in investing activities (63,606) (163,615) --------------- -------------------- Cash flows from financing activities: Proceeds from repurchase obligations 24 26,612 Repayment of repurchase obligations (27,481) (10,840) Proceeds from credit facilities 26,957 148,714 Repayment of credit facilities (85,060) (39,864) Proceeds from notes payable 78 - Repayment of notes payable (505) (506) Net proceeds from issuance of term redeemable securities contract 126,885 - --------------- -------------------- Net cash provided by financing activities 40,898 124,116 --------------- -------------------- Net decrease in cash and cash equivalents (21,786) (42,193) Cash and cash equivalents at beginning of year 46,623 49,268 --------------- -------------------- Cash and cash equivalents at end of period $ 24,837 $ 7,075 =============== ==================== </TABLE> See accompanying notes to unaudited consolidated financial statements. 4
Capital Trust, Inc. and Subsidiaries Notes to Consolidated Financial Statements March 31, 1999 (unaudited) 1. Presentation of Financial Information The accompanying unaudited consolidated interim financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. The accompanying unaudited consolidated interim financial statements should be read in conjunction with the financial statements and the related management's discussion and analysis of financial condition and results of operations filed with the Annual Report on Form 10-K of Capital Trust, Inc. and Subsidiaries (collectively, the "Company") for the fiscal year ended December 31, 1998. In the opinion of management, all adjustments (consisting only of normal recurring accruals) considered necessary for a fair presentation have been included. The results of operations for the three months ended March 31, 1999, are not necessarily indicative of results that may be expected for the entire year ending December 31, 1999. The accompanying unaudited consolidated interim financial statements of the Company include the accounts of the Company, VIC, Inc., which holds Victor Capital and its wholly-owned subsidiaries, Natrest Funding I, Inc. (a single purpose entity holding one Mortgage Loan), CT Convertible Trust I (a statutory trust which issued the Convertible Trust Preferred Securities) and CT-BB Funding Corp. (a single purpose entity holding fifteen CMBS). All significant intercompany balances and transactions have been eliminated in consolidation. The accounting and reporting policies of the Company conform in all material respects to generally accepted accounting principles. Certain prior period amounts have been reclassified to conform to current period classifications. 2. Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principals requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. 5
Capital Trust, Inc. and Subsidiaries Notes to Consolidated Financial Statements (continued) (unaudited) 3. Earnings Per Share of Class A Common Stock Earnings per share of Class A Common Stock is presented based on the requirements of Statement of Financial Accounting Standards No. 128 ("SFAS No. 128"). Basic EPS is computed based on the income applicable to Class A Common Stock (which is net income reduced by the dividends on the Class A Preferred Stock) divided by the weighted-average number of shares of Class A Common Stock outstanding during the period. Diluted EPS is based on the net earnings applicable to Class A Common Stock plus dividends on the Class A Preferred Stock, divided by the weighted average number of shares of Class A Common Stock and potentially dilutive shares of Class A Common Stock that were outstanding during the period. At March 31, 1999, potentially dilutive shares of Class A Common Stock include the convertible Class A Preferred Stock and dilutive Class A Common Stock unit awards. At March 31, 1997, potentially dilutive shares of Class A Common Stock include the convertible Class A Preferred Stock and dilutive Class A Common Stock options. The options outstanding during the period ended March 31, 1999 are not dilutive. 4. Supplemental Disclosures for Consolidated Statements of Cash Flows Interest paid on the Company's outstanding debt during the three months ended March 31, 1999 and 1998 was $9,020,000 and $2,260,000, respectively. Income taxes paid by the Company during the three months ended March 31, 1999 and 1998 was $3,422,000 and $143,000, respectively. 5. Commercial Mortgage-Backed Securities ("CMBS") On March 3, 1999, the Company, through its newly formed wholly-owned subsidiary, CT-BB Funding Corp., acquired a portfolio of fixed-rate "BB" rated CMBS (the "BB CMBS Portfolio") from an affiliate of the Company's credit provider under the First Credit Facility (as hereinafter defined). The portfolio, which is comprised of 11 separate issues with an aggregate face amount of $246.0 million, was purchased for $196.9 million. In connection with the transaction, an affiliate of the seller provided three-year term financing for 70% of the purchase price at a floating rate above the London Interbank Offered Rate ("LIBOR") and entered into an interest rate swap with the Company for the full duration of the BB CMBS Portfolio securities thereby providing a hedge for interest rate risk. The financing was provided at a rate which was below the current market for similar financing and, as such, the carrying amount of the assets and the debt were reduced by $10.9 million to adjust the yield on the debt to current market terms. The BB CMBS Portfolio securities bear interest at fixed rates that average 7.74% on the face amount and mature at various dates from March 2005 to December 2014. After giving effect to the discounted purchase price and the adjustment of the carrying amount of the assets to bring the debt to current market terms, the weighted average interest rate in effect at March 31, 1999 is 11.23%. 6
Capital Trust, Inc. and Subsidiaries Notes to Consolidated Financial Statements (continued) (unaudited) 6. Loans receivable At March 31, 1999 and December 31, 1998, the Company's loans receivable consisted of the following (in thousands): March 31, December 31, 1999 1998 ---------------- ----------------- (1) Mortgage Loans $ 243,188 $ 305,578 (2) Mezzanine Loans 257,225 317,278 (3) Other mortgage loans receivable 2,008 2,019 ---------------- ----------------- 502,421 624,875 Less: reserve for possible credit losses (4,582) (4,017) ================ ================= Total loans $ 497,839 $ 620,858 ================ ================= At March 31, 1999, the weighted average interest rate in effect, after giving effect to interest rate swaps and including amortization of fees and premiums, for the Company's loans receivable was as follows: (1) Mortgage Loans 10.28% (2) Mezzanine Loans 11.21% (3) Other mortgage loans receivable 8.40% Total Loans 10.75% At March 31, 1999, $346,582,000 (69%) of the aforementioned loans bear interest at floating rates ranging from LIBOR plus 320 basis points to LIBOR plus 700 basis points. The remaining $155,839,000 (31%) of loans were financed at fixed rates ranging from 8.50% to 12.50%. During the quarter ended March 31, 1999, the Company provided $3.0 million of additional fundings on four existing loans. The Company had unfunded commitments on such assets totaling $28.0 million at March 31, 1999. At March 31, 1999, the Company has letters of intent outstanding for various other lending transactions, which were subject to satisfaction of certain conditions. 7
Capital Trust, Inc. and Subsidiaries Notes to Consolidated Financial Statements (continued) (unaudited) 7. Long-Term Debt Credit Facilities At December 31, 1998, the Company was party to a credit agreement with a commercial lender that provided for a three-year $355 million line of credit (the "First Credit Facility"). Effective February 26, 1999, pursuant to an amended and restated credit agreement, the Company extended the expiration of such credit facility from December 2001 to February 2002 with an automatic one-year amortizing extension option, if not otherwise extended. At December 31, 1998, the Company was party to an additional credit agreement with another commercial lender that provided for a $300 million line of credit scheduled to expire in December 1999 (the "Second Credit Facility" together with the First Credit Facility, the "Credit Facilities"). Effective March 30, 1999, pursuant to an amended and restated credit agreement, the Company extended the expiration of such credit facility from December 1999 to June 2000 with an automatic nine-month amortizing extension option, if not otherwise extended. Term Redeemable Securities Contract In connection with the purchase of the BB CMBS Portfolio described in Note 5, an affiliate of the seller provided financing for 70% of the purchase price, or $137.8 million, at a floating rate of LIBOR plus 50 basis points pursuant to a term redeemable securities contract. This rate was below the market rate for similar financing, and, as such, a discount on the term redeemable securities contract was recorded to reduce the carrying amount by $10.9 million, which had the effect of adjusting the yield to current market terms. The debt has a three-year term that expires in February 2002. An affiliate of the seller also entered into an interest rate swap with the Company for the full duration of the BB CMBS Portfolio securities thereby providing a hedge for interest rate risk. The nominal values of the swaps were tied to the amount of debt for the term of the debt and then to the assets for the remaining terms of the assets. The market value of the swap at March 31, 1999 was $715,000. By entering into the interest rate swap, the Company has effectively converted the term redeemable securities contract to a fixed interest rate of 6.55%. After adjusting the carrying amount and yield to current market terms, the term redeemable securities contract bears interest at a fixed interest rate of 9.55%. 8
Capital Trust, Inc. and Subsidiaries Notes to Consolidated Financial Statements (continued) (unaudited) 8. Income Taxes The Company and its subsidiaries file a consolidated federal income tax return. The provision for income taxes for the three months ended March 31, 1999 and 1998 is comprised as follows (in thousands): 1999 1998 --------------- --------------- Current Federal $ 3,270 $ 787 State 1,168 417 Local 1,055 376 Deferred Federal (176) - State (60) - Local (55) - --------------- -------------= Provision for income taxes $ 5,202 $ 1,580 =============== ============== The Company has federal net operating loss carryforwards ("NOLs") as of March 31, 1999 of approximately $12.6 million. Such NOLs expire through 2012. The Company also has a federal capital loss carryover of approximately $1.6 million that can be used to offset future capital gains. Due to CalREIT Investors Limited Partnership's ("CRIL") purchase of 6,959,593 Common Shares from the Company's former parent in January 1997 and another prior ownership change, a substantial portion of the NOLs are limited for federal income tax purposes to approximately $1.4 million annually. Any unused portion of such annual limitation can be carried forward to future periods. The reconciliation of income tax computed at the U.S. federal statutory tax rate (35%) to the effective income tax rate for the three months ended March 31, 1999 and 1998 are as follows (in thousands): <TABLE> <CAPTION> 1999 1998 ------------------------------- -------------------------------- $ % $ % --------------- --------------- ---------------- --------------- <S> <C> <C> <C> <C> Federal income tax at statutory rate $ 3,757 35.0% $ 1,489 35.0% State and local taxes, net of federal tax benefit 1,370 12.8% 523 12.3% Utilization of net operating loss carryforwards (122) (1.1)% (425) (10.0)% Compensation in excess of deductible limits 190 1.7% - - % Other 7 0.1% (7) (0.1)% --------------- --------------- ---------------- ---------------- $ 5,202 48.5% $ 1,580 37.2% =============== =============== ================ ================ </TABLE> 9
Capital Trust, Inc. and Subsidiaries Notes to Consolidated Financial Statements (continued) (unaudited) Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for tax reporting purposes. The components of the net deferred tax assets as of March 31, 1999 and December 31, 1998 are as follows (in thousands): <TABLE> <CAPTION> March 31, December 31, 1999 1998 ---------------------- -------------------- <S> <C> <C> Net operating loss carryforward $ 4,437 $ 4,559 Reserves on other assets and for possible credit losses 4,887 4,621 Other 146 119 ---------------------- -------------------- Deferred tax assets 9,470 9,299 Valuation allowance (6,149) (6,270) ---------------------- -------------------- $ 3,321 $ 3,029 ====================== ==================== </TABLE> The Company recorded a valuation allowance to reserve a portion of its net deferred tax assets in accordance with Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes" ("SFAS No. 109"). Under SFAS No. 109, this valuation allowance will be adjusted in future years, as appropriate. However, the timing and extent of such future adjustments can not presently be determined. 9. Employee Benefit Plans 1997 Long-Term Incentive Stock Plan During the three months ended March 30, 1998, the Company issued an aggregate of 352,000 options to acquire shares of Class A Common Stock with an exercise price of $6.00 per share (a price higher than the fair value market value based on reported trading prices on the dates of the grant). The Company also issued 104,167 restricted shares of Class A Common Stock which vest one third on each of the following dates: January 30, 2000, January 30, 2001 and January 30, 2002. The Company also reserved for issuance 52,083 performance based restricted shares of Class A Common Stock which will be issued upon the achievement of stock price performance goals and thereafter will vest over specified vesting periods. 10
Capital Trust, Inc. and Subsidiaries Notes to Consolidated Financial Statements (continued) (unaudited) The following table summarizes the option activity under the incentive stock plan for the quarter ended March 31, 1999: <TABLE> <CAPTION> Weighted Average Options Exercise Price Exercise Price Outstanding per Share per Share --------------------- ------------------- ---------------- <S> <C> <C> <C> Outstanding at January 1, 1999 1,269,084 $6.00 - $11.38 $ 8.46 Granted in 1999 352,000 $6.00 6.00 Exercised in 1999 - - - Canceled in 1999 (173,334) $6.00 - $11.38 9.11 ----------------- ---------------- Outstanding at March 31, 1999 1,447,750 $6.00 - $10.00 $ 7.85 ================= ================ </TABLE> At March 31, 1999, 413,658 of the options are exercisable. At March 31, 1999, the outstanding options have various remaining contractual exercise periods ranging from 8.25 to 9.83 years with a weighted average life of 8.94 years. 10. Segment Reporting In 1998, the Company adopted Statement of Financial Accounting Standards No. 131 Disclosures about Segments of an Enterprise and Related Information (SFAS No. 131). SFAS No. 131 is based on reporting information the way that management organizes its segments within the Company for making operating decisions and assessing performance. During the first quarter of 1999, the Company reorganized the structure of its internal organization by merging its Lending/Investment and Advisory segments and thereby no longer managing its operations as separate segments. Previously, the Company operated as two segments: Lending/Investment and Advisory. Restatement of prior periods is not presented as the Company did not apply SFAS No. 131 to interim financial statements in the initial year of its application. 11
ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations The following discussion should be read in conjunction with the consolidated financial statements and notes thereto appearing elsewhere in this Form 10-Q. Historical results set forth are not necessarily indicative of the future financial position and results of operations of the Company. Overview of Financial Condition - ------------------------------- During the first quarter of 1999, the Company, through its newly formed wholly owned subsidiary, CT-BB Funding Corp., acquired a portfolio (the "BB CMBS Portfolio") of "BB" rated commercial mortgage-backed securities ("CMBS") from an affiliate of the Company's credit provider under the First Credit Facility (as hereinafter defined). The portfolio, which is comprised of 11 separate issues with an aggregate face amount of $246.0 million, was purchased for $196.9 million. In connection with the transaction, an affiliate of the seller provided three-year term financing for 70% of the purchase price at a floating rate above the London Interbank Offered Rate ("LIBOR") and entered into an interest rate swap with the Company for the full duration of the BB CMBS Portfolio thereby providing a hedge for interest rate risk. The financing was provided at a rate which was below the current market for similar financing and, as such, the carrying amounts of the assets and the debt were reduced by $10.9 million which had the effect of adjusting the yield on the debt to current market terms. These securities bear interest at various fixed rates, which, when including the amortization of the discount, average 11.23%. Since December 31, 1998, the Company funded $3.0 million of commitments under four existing loans. The Company received full satisfaction of four loans totaling $114.6 million and recorded a write-down of one loan asset by $500,000 and subsequently sold it for $9.5 million during the quarter. At March 31, 1999, the Company had outstanding loans, certificated mezzanine investments and investments in commercial mortgage-backed securities totaling approximately $770 million and additional commitments for fundings on outstanding loans and certificated mezzanine investments of approximately $36.6 million. In connection with the sale of a loan described above, one of the repurchase obligations outstanding at December 31, 1998 for $7.5 million was satisfied. Another repurchase obligation outstanding at December 31, 1998 for $19.3 million was satisfied by transferring the liability to the Second Credit Facility (as hereinafter defined). At March 31, 1999, the Company was party to five repurchase obligations relating to assets sold by the Company with an aggregate carrying amount of $71.0 million, which approximates the assets' market value, and has a liability to repurchase these assets for $51.9 million. The average interest rate in effect for all repurchase obligations at March 31, 1999 is 6.36%. At December 31, 1998, the Company was a party to a credit agreement with a commercial lender that provided for a three-year $355 million line of credit (the "First Credit Facility"). Concurrent with the BB CMBS Portfolio transaction, the First Credit Facility's maturity was extended to February 28, 2002 with an automatic one-year amortizing extension option, if not otherwise extended. 12
At December 31, 1998, the Company was a party to a credit agreement with another commercial lender that provided for a $300 million line of credit (the "Second Credit Facility" and together with the First Credit Facility, the "Credit Facilities"). During the first quarter of 1999, the Company extended the expiration date of its Second Credit Facility from December 1999 to June 2000 with an automatic nine-month amortizing extension option, if not otherwise extended. At March 31, 1999, the Company had $313.7 million outstanding under the Credit Facilities. The decrease in the amount outstanding under the Credit Facilities from the amount outstanding at December 31, 1998 was due to the significant loan repayments received, offset by the cash utilized in the BB CMBS Portfolio purchase and cash utilized to satisfy the repurchase obligation which matured. As of March 31, 1999, certain of the Company's loans and other investments have been hedged so that the assets and the corresponding liabilities were matched at floating rates over LIBOR and certain of the Company's liabilities have been hedged so that the liabilities and the corresponding CMBS were matched at fixed rates. During the quarter ended March 31, 1999, the Company terminated two swaps and partially terminated a third swap in connection with the payoff of a loan and the sale of a loan resulting in a payment of $323,000. The Company has entered into interest rate swap agreements for notional amounts totaling approximately $238.4 million at March 31, 1999 with financial institution counterparties whereby the Company swapped fixed-rate instruments, with average interest rates of approximately 6.01%, for floating rate instruments with interest rates at LIBOR. The agreements mature at varying times from September 2001 to July 2014. Comparison of the Three Months Ended March 31, 1999 to the - ---------------------------------------------------------- Three Months Ended March 31, 1998 ---------------------------------- The Company reported net income allocable to shares of Class A Common Stock of $3,008,000 for the three months ended March 31, 1999, an increase of $1,119,000 from the net income allocable to shares of Class A Common Stock of $1,889,000 for the three months ended March 31, 1998. This increase was primarily the result of the increased revenues generated from the loan and other investment portfolio which has more than doubled from the level a year earlier. Income from loans and other investments, net, amounted to $13,534,000 for the three months ended March 31, 1999, an increase of $8,638,000 over the $4,896,000 amount for the three months ended March 31, 1998. This increase was primarily due to the increase in the amount of average interest earning assets from approximately $290.6 million earning 11.1% for the three months ended March 31, 1998 to approximately $665.0 million earning 13.5% for the three months ended March 31, 1999. This increase in the interest rate earned in 1999 over that earned in 1998 was mainly due to additional interest and fees which were recognized upon the early termination of three loans by the borrowers that resulted in an additional $3.6 million of interest income. Without this additional interest income, the earning rate for 1999 would have been 11.3% which is consistent with the earning rate for the prior year. The increase in revenues was partially offset by an increase in the amount of average interest bearing liabilities from approximately $163.9 million at an average rate of 7.6% for the three months ended 13
March 31, 1998 to approximately $430.8 million at an average rate of 8.1% for the three months ended March 31, 1999. In addition, the Company also utilized $150.0 million of Convertible Trust Preferred Securities which it issued on July 28, 1998 to finance its interest earning assets. During the first quarter of 1999, the Company recognized $1,741,000 of net expenses related to these securities. This amount consisted of distributions to the holders totaling $3,094,000 and amortization of discount and origination costs totaling $201,000. This was partially offset by a tax benefit of $1,554,000. During the three months ended March 31, 1999, other revenues totaled $3,713,000, an increase of $483,000 over the same three month period in 1998. The increase for the three months ended March 31, 1999 was due to an additional of $233,000 of advisory and investment banking fees generated by Victor Capital Group, L.P. and its related subsidiaries over the amount of such fees generated in the prior year and a $250,000 increase in other interest income. The increase in other interest income was due to the Company maintaining a higher level of liquidity during the first quarter of 1999. Other expenses increased from $3,873,000 for the three months ended March 31, 1998 to $6,512,000 for three months ended March 31, 1999. The increase was primarily due to the additional general and administrative expenses necessary for the full-scale operations as a specialty finance company, the largest components of such expenses are employee salaries and related costs and the provision for possible credit losses. During March 1999, to reduce general and administrative expenses to a level in line with budgeted business activity, the Company reduced its workforce by approximately 30% and recorded a restructuring charge of $650,000. During the period ended March 31, 1999, the Company had an average of 45 full time employees as compared to average of 32 during the period ended March 31, 1998. The Company had 30 full time employees at March 31, 1999. The increase in the provision for possible credit losses from $480,000 for the three months ended March 31, 1998 to $1,079,000 for the three months ended March 31, 1999 was due to the increase in average earning assets as previously described. For the three months ended March 31, 1999 and 1998, the Company accrued $5,202,000 and $1,580,000, respectively, of income tax expense for federal, state and local income taxes. The increase (from 37.2% to 48.5%) in the effective tax rate was primarily due to a decrease in the net operating loss carryforward available to offset taxable income. For the three months ended March 31, 1998, net operating loss carryforwards reduced the effective tax rate by 10.0% due to significant losses generated in 1997 which were not limited for utilization in 1998. For the three months ended March 31, 1999, the reduction was only 1.1% as all of the losses generated in 1997 were utilized in 1998. The preferred stock dividend and dividend requirement arose in 1997 as a result of the Company's issuance of $33 million of shares of Class A Preferred Stock on July 15, 1997. Dividends accrue on these shares at a rate of 9.5% per annum on a per share price of $2.69 for the 12,267,658 shares outstanding. 14
Liquidity and Capital Resources - ------------------------------- At March 31, 1999, the Company had $24,837,000 in cash. The primary sources of liquidity for the Company for the remainder of 1999, which the Company believes will adequately meet future operating liquidity and capital resource requirements, will be cash on hand, cash generated from operations, interest and principal payments received on its investments, loans and securities and additional borrowings under the Company's Credit Facilities. The primary demands on the Company's capital resources will be the funding required for the origination or acquisition of loans and other investments as the Company continues to expand its specialty finance operations and the growth of its portfolio of loans and other investments. The Company experienced a net decrease in cash of $21,786,000 for the three months ended March 31, 1999, compared to the net decrease of $42,193,000 for the three months ended March 31, 1998. The use of cash in the first quarter of 1999 was primarily due to the purchase of the BB CMBS Portfolio (net of the proceeds from the term redeemable securities contract) while the use of cash in the first quarter of 1998 was due to the utilization of the proceeds of the Class A Common Stock offering completed in the fourth quarter of 1997 in making loans and other investments offset by additional borrowings. Cash provided by operating activities during the three months ended March 31, 1999 increased by $3,616,000 to $922,000, from cash used in operating activities of $2,694,000 during the same period of 1998. For the three months ended March 31, 1999, cash used in investing activities was $63,606,000, a decrease of $100,009,000 from $163,615,000 used during the same period in 1998 primarily as a result of the significant repayments received on loans and other investments since December 31, 1998. The decrease in cash provided by financing activities, which decreased $83,218,000 to $40,898,000 from $124,116,000, was due primarily to significant repayments of borrowings under the Credit Facilities. At March 31, 1999, the Company has two outstanding notes payable totaling $3,820,000, outstanding borrowings under the Credit Facilities of $313,651,000, outstanding borrowings on the term redeemable securities contract of $127,135,000 and outstanding repurchase obligations of $51,945,000. At March 31, 1999, the Company had $341,349,000 of borrowing capacity available under the Credit Facilities. Year 2000 Information - --------------------- General Description of the Year 2000 Issue and the Nature and Effects of the Year 2000 on Information Technology ("IT") and Non-IT Systems The Year 2000 Issue is the result of computer programs being written using two digits rather than four to define the applicable year. Any of the Company's computer programs or hardware that have date-sensitive software or embedded chips may recognize a date using "00" as the year 1900 rather than the year 2000. This could result in a system failure or miscalculations causing disruptions of operations, including, among other things, a temporary inability to process transactions, send invoices, or engage in similar business activities. Based upon recent assessments, the Company determined that it was required to replace certain of its software and certain hardware so that those systems will properly utilize dates 15
beyond December 31, 1999. The Company believes that with the replacement of the previously existing software and certain hardware, the Year 2000 Issue can be mitigated. However, if certain replacements are not made, or not completed timely, the Year 2000 Issue could have a material impact on the operations of the Company. The Company's plan to resolve the Year 2000 Issue involves the following four phases: assessment, remediation, testing and implementation. To date, the Company has completed all phases of the plan for its in-house systems that could be significantly affected by the Year 2000 Issue. In addition, the Company will continue to gather information about the Year 2000 compliance status of its significant service providers to monitor their compliance. Status of Progress in Becoming Year 2000 Compliant, Including Timetable for Completion of Each Remaining Phase The Company believes it is 100% Year 2000 compliant with its in-house IT systems (both software and hardware). The testing phase of the project was completed during the quarter ended March 31, 1999. Nature and Level of Importance of Third Parties and their Exposure to the Year 2000 Issue The Company's loan servicing function is performed by an independent third party. This service includes the calculation of interest and principal for the Company's loans receivable, the processing of bills to the Company's customers and the maintenance of lock boxes and escrow accounts on behalf of borrowers. The vendor has advised the Company that they will be Year 2000 compliant by June 1999. The Company has queried its significant service providers that do not share information systems with the Company (external agents). To date, the Company is not aware of any external agent with a Year 2000 Issue that would materially impact the Company's results of operations, liquidity, or capital resources. However, the Company has no means of ensuring that any external agents used by the Company will be Year 2000 compliant. The inability of external agents to complete their Year 2000 Issue resolution process in a timely manner could materially impact the Company. The effect of non-compliance by external agents is not determinable. Costs of Year 2000 Compliance The Company utilized both internal and external resources to replace, test, and implement the software and operating equipment for Year 2000 modifications. The project was completed during the quarter ended March 31, 1999 and the Company incurred approximately $225,000 ($30,000 expensed and $195,000 capitalized for new systems and equipment) related to all phases of the Year 2000 project which was funded through operating cash flow. The Company does not expect any additional project costs. Risks of Year 2000 The Company believes it has an effective program in place to resolve the Year 2000 Issue and has completed all the necessary phases of the Year 2000 program for its in-house IT systems. 16
While the Company has completed its project, disruptions in the economy generally resulting from Year 2000 Issue could materially adversely affect the Company. The amount of potential liability and lost revenue cannot be reasonably estimated at this time. The Company currently has no contingency plans in the event that the noted third parties do not complete their Year 2000 compliance. The Company plans to evaluate the status of their completion in the second quarter of 1999 and determine whether a contingency plan is necessary. Explanatory Note for the Use of Forward-Looking Statements Except for historical information contained herein, this quarterly report on Form 10-Q contains forward-looking statements within the meaning of the Section 21E of the Securities and Exchange Act of 1934, as amended, which involve certain risks and uncertainties. Forward-looking statements are included with respect to, among other things, the Company's current business plan, business strategy and portfolio management. The Company's actual results or outcomes may differ materially from those anticipated. Representative examples of such factors are discussed in more detail in the Company's 1998 fiscal year Annual Report on Form 10-K, as amended, and include, among other things, the availability of desirable loan and investment opportunities, the ability to obtain and maintain targeted levels of leverage and borrowing costs, changes in interest rates, continued loan performance and repayment and the maintenance of loan loss allowance levels. The Company disclaims any intention or obligation to update publicly or revise any forward-looking statements, whether as a result of new information, future events or otherwise. 17
ITEM 3. Quantitative and Qualitative Disclosures about Market Risk The principal objective of the Company's asset/liability management activities is to maximize net interest income, while minimizing levels of interest rate risk. Net interest income and interest expense are subject to the risk of interest rate fluctuations. To mitigate the impact of fluctuations in interest rates, the Company uses interest rate swaps to effectively convert fixed-rate assets to variable-rate assets and variable-rate liabilities to fixed-rate liabilities for proper matching with variable-rate liabilities and fixed-rate assets. Each derivative used as a hedge is matched with an asset or liability with which it has a high correlation. The swap agreements are generally held to maturity and the Company does not use derivative financial instruments for trading purposes. The Company uses interest rate swaps to reduce the Company's exposure to interest rate fluctuations on certain fixed-rate loans and investments and to provide more stable spreads between rates received on loans and investments and the rates paid on their financing sources. 18
The following table provides information about the Company's financial instruments that are sensitive to changes in interest rates at March 31, 1999. For financial assets and debt obligations, the table presents cash flows and weighted average interest rates based on the contractual maturity dates. For interest rate swaps, the table presents notional amounts and weighted average fixed pay and variable receive interest rates by contractual maturity dates. Notional amounts are used to calculate the contractual cash flows to be exchanged under the contract. Weighted-average variable rates are based on rates in effect as of the reporting date. <TABLE> <CAPTION> Expected Maturity Dates ---------------------------------------------------------------------------------------------------- 1999 2000 2001 2002 2003 Thereafter Total Fair Value ---- ---- ---- ---- ---- ---------- ----- ---------- (dollars in thousands) <S> <C> <C> <C> <C> <C> <C> <C> <C> Assets: CMBS Fixed Rate - - - $189,855 - - $189,855 $189,885 Average interest rate - - - 11.23% - - 11.23% Variable Rate - - - - $ 32,196 - $ 32,196 $ 32,196 Average interest rate - - - - 9.72% - 9.72% Certificated Mezzanine Investments Variable Rate - $45,333 - - - - $ 45,333 $ 45,333 Average interest rate - 9.65% - - - - 9.65% Loans receivable Fixed Rate $ 19,780 - $ 35,000 $ 3,000 - $ 98,059 $155,839 $158,130 Average interest rate 11.51% - 11.77% 12.50% - 10.59% 11.01% Variable Rate $109,991 $77,767 $132,325 - - $ 26,500 $346,582 $334,042 Average interest rate 11.90% 9.36% 10.35% - - 10.75% 10.65% Liabilities: Credit facilities Variable Rate - $77,503 - $236,148 - - $313,651 $313,651 Average interest rate - 8.38% - 7.20% - - 7.49% Term redeemable securities contract Variable Rate - - - $127,135 - - $127,135 $127,135 Average interest rate - - - 8.47% - - 8.47% Repurchase obligations Variable Rate $ 51,945 - - - - - $ 51,945 $ 51,945 Average interest rate 6.36% - - - - - 6.36% Convertible Trust Preferred Securities Fixed Rate - - - - - $145,744 $145,744 $145,744 Average interest rate - - - - - 8.25% 8.25% Interest rate swaps - - $ 28,000 $137,812 $ 19,310 $53,250 $238,372 $ (77) Average fixed pay rate - - 5.79% 6.05% 6.04% 6.01% 6.01% Average variable receive rate - - 4.97% 4.96% 4.95% 4.94% 4.96% </TABLE> 19
PART II. OTHER INFORMATION ITEM 1: Legal Proceedings None ITEM 2: Changes in Securities None ITEM 3: Defaults Upon Senior Securities None ITEM 4: Submission of Matters to a Vote of Security Holders (a). The Registrant's predecessor, Capital Trust, a California business trust (the "Predecessor"), held its 1998 annual meeting of shareholders on January 28, 1999. (b) and (c). The Predecessor's shareholders acted on the following proposals: 1. To reorganize the Predecessor from a California common law business trust into a Maryland corporation (the "Reorganization") ("Proposal 1"); 2. To approve an amendment, necessary to implement the Reorganization, to the Predecessor's amended and restated declaration of trust, dated as of July 15, 1997 ("Proposal 2"); 3. To elect ten trustees of the Predecessor (identified in the table below) to serve until the next annual meeting of shareholders or until such trustees' successors are elected and shall have been duly qualified ("Proposal 3"); 4. To approve the Predecessor's amended and restated 1997 long-term incentive share plan, which increases the number of shares available under and amends certain other provisions of the original plan ("Proposal 4); 5. To approve the Predecessor's amended and restated 1997 non-employee trustee share plan, which increases the number of shares available under and amends certain other provisions of the original plan ("Proposal 5"); 6. To approve the Predecessor's 1998 employee share purchase plan ("Proposal 6"); 7. To approve the Predecessor's 1998 non-employee share purchase plan ("Proposal 7"); 8. To approve the Predecessor's share purchase loan plan ("Proposal 8"); and 20
9. To ratify the appointment of Ernst & Young LLP as independent auditors of the Predecessor for the fiscal year ending December 31, 1998 ("Proposal 9"). The following table sets forth the number of votes in favor, the number of votes opposed the number of abstentions (or votes withheld in the case of the election of trustees) and broker non-votes with respect to each of the foregoing proposals. <TABLE> <CAPTION> Proposal Votes in Favor(1) Votes Opposed(1) Abstentions Broker Non-Votes(1) (Withheld)(1) <S> <C> <C> <C> <C> Proposal 1 24,259,243 2,029,018 11,664 3,324,058 12,267,658 (2) -- (2) -- (2) -- (2) Proposal 2 24,246,283 2,032,799 20,843 3,324,058 Proposal 3 Samuel Zell 29,580,500 -- 43,483 -- Jeffrey A. Altman 29,580,982 -- 43,001 -- Thomas E. Dobrowski 29,580,982 -- 43,001 -- Martin L. Edelman 29,580,982 -- 43,001 -- Gary R. Garrabrant 29,580,731 -- 43,252 -- Craig M. Hatkoff 29,580,731 -- 43,252 -- John R. Klopp 29,580,982 -- 43,001 -- Sheli Z. Rosenberg 29,580,982 -- 43,001 -- Steven Roth 29,580,982 -- 43,001 -- Lynne B. Sagalyn 29,581,056 -- 42,927 -- Proposal 4 23,853,425 2,414,625 31,875 3,324,058 Proposal 5 23,844,156 2,423,208 32,531 3,324,088 Proposal 6 26,106,763 164,403 28,759 3,324,058 Proposal 7 26,093,348 177,131 29,446 3,324,058 Proposal 8 24,101,471 2,169,101 29,353 3,324,058 Proposal 9 29,577,981 27,916 18,086 -- </TABLE> (1) The holders of the Predecessors's class A common shares of beneficial interest, $1.00 par value, ("Common Shares"), and the holders of the Predecessor's class A 9.5% preferred shares of beneficial interest, $1.00 par value ("Preferred Shares"), voted together as a single class on all proposals acted upon at the annual meeting. In addition, the holders of Preferred Shares voted as a separate class on Proposal 1. There were 17,356,325 Common Shares and 12,267,658 Preferred Shares represented at the annual meeting. The table sets forth information with respect to the voting of the holders of Common Shares and Preferred Shares as a single class, and in the case of Proposal 1, information with respect to the voting of the holders of Preferred Shares. (2) Represents information with respect to the voting of the holders of Preferred Shares. ITEM 5: Other Information None 21
ITEM 6: Exhibits and Reports on Form 8-K (a) Exhibits Exhibit Number Description 10.1 Third Amendment to Amended and Restated Credit Agreement, dated as of February 26, 1999, between Capital Trust, Inc. and German American Capital Corporation (filed as Exhibit 10.12.b to Capital Trust, Inc.'s Annual Report on Form 10-K (File No. 1-14788) filed on March 31, 1999 and incorporated herein by reference). 10.2 First Amendment to Master Loan and Security Agreement, dated as of March 30, 1999, between Capital Trust Inc. and Morgan Stanley Mortgage Capital Inc. 11.1 Statements regarding computation of earnings (loss) per share 27.1 Financial Data Schedules (b) Reports on Form 8-K During the fiscal quarter ended March 31, 1999, the Company filed the following Current Reports on Form 8-K: (1) Current Report on Form 8-K (File No. 333-52619), dated January 28, 1999, as filed with the Commission on January 29, 1999, reporting under Item 5 "Other Events" the consummation of the reorganization pursuant to which the Predecessor ultimately merged with and into the Company. (2) Current Report on Form 8-K (File No. 1-14788), dated February 26, 1999, as filed with the Commission on March 17, 1999, reporting under Item 2 "Acquisition or Disposition of Assets" the acquisition of 15 separate classes of 11 issues of BB rated CMBS. 22
SIGNATURES Pursuant to the requirement of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. CAPITAL TRUST May 14. 1999 /s/ John R. Klopp - ------------ ----------------- Date John R. Klopp Chief Executive Officer /s/ Edward L. Shugrue III ------------------------- Edward L. Shugrue III Managing Director and Chief Financial Officer 23