Capital Trust CEO Discusses Q2 2011 Results - Earnings Call Transcript

The reality is either legacy borrowers nor investors have fully recovered from the shock of the 2008 CMBS market collapse and the constant reminder provided by continued week credit performance of many legacy securitizations. As a result investors and borrowers have been slow to return to the CMBS market and now the market they contract before it starts to grow again.

And with lending companies approaching peak origination levels, they cannot take up the flag from the declining CMBS and still weak bank market. These market forces combined with the maturity of many peak of the market financing should create a better more opportunistic investment environment. With over $80 billion of loans still in special servicing and values improved from trough levels, there will be fewer extensions and more loans (inaudible) foreclosures that will generate additional transactions.

We are active as an investor and a special servicer on large structured financing. It will be on the frontlines of the several upcoming workouts. While the specific opportunities in commercial mortgage finance will evolve a change over time, we believe that the scale of the opportunity is great and that our platform is very well positioned to capitalizing these opportunities. There will be need for mezzanine financing to fill the gap on recapitalizations and acquisitions as the peak of the market five-year loans mature.

The floating rate market, a historic area of strength for CT is still dislocated and highly inefficient. The commercial banks, CMBS originators and CMBS investors, have not returned to the floating-rate market, which is now significantly funded by private bridge lenders with the high cost of capital.

We also see an expanding investment opportunity in the low LTD mezzanine segment, particularly as the CMBS market struggles to absorb large offerings. We continue to be active at this space through a high-grade funds and related separate accounts, providing low risk financing, genitive investment-grade loans on core assets.

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