Hello, and welcome to the Capital Trust Third Quarter 2007Results Conference Call. Before we begin, please be advised that theforward-looking statements expressed in today's call are subject to certainrisks and uncertainties, including, but not limited to, the continuedperformance, new origination volume and the rate of repayment of the Company'sand its funds, loan and investment portfolios; the continued maturity andsatisfaction of the Company's portfolio assets, as well as, other riskscontained in the Company's latest Form 10-K and Form 10-Q filings with theSecurities and Exchange Commission. The Company assumes no obligation to update or supplementforward-looking statements that become untrue because of subsequent events.There will be a Q&A session following the conclusion of this presentation.At that time, I will provide instructions for submitting a question tomanagement. I will now turn the call over to John Klopp, CEO of CapitalTrust. Please go ahead, sir.

Thank you. Good morning, everyone. Thank you for joining usonce again and for your continued interest in Capital Trust. Last night, wereported our numbers for the third quarter and filed our 10-Q. During a periodof continued upheaval in virtually all sectors of the financial market, CapitalTrust produced steady earnings, strong credit performance and a solid balancesheet. Geoff will run you through the detailed numbers in just amoment, but here are the headlines: Net income of $15.5 million or $0.87 perdiluted share; new originations of $110 million with only $65 million for thebalance sheet, substantially and purposely down from our previous pace as we dialback originations in anticipation of better opportunities that we see coming inthe months ahead. More on that in a moment. Continued credit quality across all of our portfolios withzero losses on provisions during the quarter. In an environment when downgradesseem to be ever present, we received upgrades on seven classes of our CDO IIIBonds, reflecting improved credit quality and seasoning of the underlyingcollateral. And in a market where liquidity is king, we added $250million of new borrowing capacity from a new line vendor, increased the capitalwhen one of our investment management vehicles by $100 million, and ended thequarter with more immediately available balance sheet liquidity than we haveever had. Lastly, and of great importance to us, we paid a regularquarterly dividend of $0.80 per share against our net income of $0.87. On acumulative basis, 2007 dividends, so far, are $2.40 per share versusyear-to-date net earnings of $3.14 per share, reflecting a payout ratio of only76%. With new write-downs of residential and CDO exposuresannounced or rumored by banks and broker dealers almost everyday, it's clearthat the crisis tripping the financial markets has not yet fully run itscourse. Closer to home, CMBS spreads have reached an all- time wide…

Thank you, John, and good morning, everyone. I'll begin withthe balance sheet. Total assets of the company were $3.1 billion as at 9/30, adecline of $89 million or 3%, when compared to where we were at the end of thesecond quarter. And as John explained, the decline was due to our strategicdecision to be a spectator during the recent market volatility. During the period, we originated $65 million of balancesheet loans including $2 million of unfunded commitments for new fundings of $63million. And we funded an additional $42 million of new advances on ourexisting portfolio. This activity was offset by repayment during the periodthat totaled $212 million, netting to roughly $100 million decrease ininterest-earning assets for the period. At September 30th, the entire $3 billion portfolio ofinterest-earning assets had a weighted average all-in effective rate of 8.04%.From a credit standpoint, the average rating of the CMBS portfolio remains BB+and the weighted average last dollar loan to value for the loan portfolio was69%. Looking inside the origination numbers, new loans werecomprised of $22 million of whole loans and $43 million of B Notes andmezzanine loans. The weighted average all-in effective rate on the originationswas 8.19% and the average last dollar loan to value was 71%. Looking across the entire portfolio, credit performanceremains strong in all investment categories. The CMBS portfolio experienced 12upgrades and no downgrades during the period and inside the loan portfolio allassets are performing. We booked no provision for loan losses this quarter andfeel very comfortable with the quality of the portfolio. Moving down the balance sheet, equity investments inunconsolidated subsidiaries increased to $17 million at the end of the thirdquarter. Activity included $5 million of fundings associated with ourinvestment in Bracor that we upsized from an initial commitment of $15 millionto $30 million during the period, offset by…

And I guess at this point, we'll turn itover to you to ask any and all questions. Carmen?

(Operator Instructions) We'll take our first question fromDavid Boardman, from Wachovia. Please go ahead.

Good morning and thank you very much for taking my questionregarding investment activity within the quarter, and then you're going forwardhere, I mean, spread did blow out in the quarter probably continuing here, butthe originations within the quarter really didn’t, kind of, witness that? Wherewould spread be today on the whole loan B Note mezzanine side compared to whereyour book currently sets?

So I think the trend is still to the wider side. It'sprobably on the capital structure and anywhere from 50 basis points to 250basis points wider. So I think the trend is still to the wider side. It'sprobably on the capital structure and anywhere from 50 basis points to 250basis points wider.

Regarding your hotel portfolio concentration, I think it wasthe end of last quarter in the 26%, considering economic growth may be slowingdown, are any concerns regarding……

No, I think the hotels in our portfolio continue to performwell. RevPar week-by-week, month-by-month RevPar across most markets is stillpositive. I do think that there is a significant economic recession activity,hotel performance will be impacted, but we don't see any imminent risks in ourhotel portfolio at this point.

Well, I would just say that obviously our repo providershave to agree on that credit that we pose to them. So I'd say that would be theconstraint.

Thank you very much for taking my questions.

Thank you.

We'll take our next question from Don Fandetti, fromCitigroup. Please go ahead.

Hi, John. Quick question, if you look at CMBS obviouslyspreads of that are notably, I know is mostly liquid index. But do you thinkthe market it wrong on that side or do think we're headed to a major correctionin commercial [off takes].

Well I am not sure that CMBS at the moment is a particularlygood indicator or a particularly correlated index to anything. There seems tobe an awful lot of action in the index, people trying to get short, make bets,anticipate downturns in this business and that doesn't seem to be a goodcorrelation with the cash market, although obviously there is some. I think the better question is the second half of yourswhich is where do we see things going irrespective of CMBS and clearly there isuncertainty at this point in time as to where values really are going, giventhe on-going credit issues in the various different financial markets and theirultimate potential impact on the U.S. economy. I think there is no question about it that values havebacked off, but I also think that it's quite different in terms of its impact.The better quality, better product is holding value better, at least so far.The lesser quality stuff is probably falling more. But at least at this pointin time underline performance, in terms of cash flows has held pretty strong,and we are cautiously optimistic about valuation going forward. Steve?

I think things is about when you look at the index, whilethe index trading duly reflects the perception of the quality of the first half2007 CMBS originations, during a period of time when values were peaking andunderwriting was at it's most aggressive point. So, we are not fixed half's --of first half 2007 CMBS, but I do think the index does reflect that as well.

Okay, and John I think on the Q2 call you said that you didbelieve that the CRE CDO market would open back up, are you more positive orless positive today?

I don't think I'm any different in terms of the view than Iwas three months ago. The CRE CDO market is basically closed today toeverybody. I think that has an awful lot to do with stuffs going on in othermarkets as opposed to commercial real estate CDO market, because if you look atthe underlying performance of collateral, ours and others, it continue so farto be very, very strong. I do not know, we do not know when that market, and how thatmarket will reopen, but my sense is, it's going to take a while and when itcomes back it's going to come back on different terms than we had before,certainly less leverage more plains and [other] structures and with the focusmuch more than we had in the past, on the quality of the manager, which has, Ithink we saw over the course of preceding year or two or so. Virtually anybodywho could assemble collateral could execute a CDO. I do not see that happeninggoing forward.

We have seen, I think, one other company in this space to thesingle buyer through the CDOs, is that an option or not necessarily for CT?

Geoff?

I think that there are a lot of opportunities out there with-- unfortunately the single buyer typically may rap or so the state of thatcommunity, I think impacts that transaction going forward. But I think thatthere certainly are some – again, as John said, some more [vanilla] CDOs and by[vanilla] they probably will not have the same marketing aspect. They probablywon't sell down as much of the liabilities, but I think CDOs will come back. Ithink you are going to be surprised how quickly they do. I think there a lot ofideas that are in the queue right now that people are just waiting for theopportunity to consummate these transactions.

Okay. Thanks for the answers.

Thank you.

We'll take our next question from Rich Shane of Jefferies andCompany. Please go ahead, your line is open.

Thanks for taking my question. A couple of different thingshere, it looks like there were pay downs or principal pay downs in CT LargeLoan, is that correct? So it actually didn't grow during the quarter?

That is correct. There were pay downs across all of the portfolios,but obviously the pace of pay down has declined in this current marketenvironment.

Okay. And is the expectation, and this ties in really to mysecond question, John you made the comment that there is no difference betweenbeing right or being wrong. Should we expect to be more conservative in termsof deploying CT Large Loan? We had previously assumed it was going to be fullydeployed by the end of third quarter. Obviously that's not the case. Do youthink you are going to be slower there as well?

I think short answer, yes. Steve you can give the longeranswer, if you choose?

Well, I think the opportunities for largeloan relates primarily the deals that have already been deals that have alreadybeen struck and identified in the market. Some of the deals are a littlebit challenging given the timing of when they are originated. The LBO activity,going forward, obviously it's going to be greatly reduced. And so we don't feellot of new opportunities coming on the pike for large loans like what we saw inthe first half of the year. But we are looking at the inventory of existingdeals, and when the time is ripe, we’ll probably make an investment or two inthose deals.

And so, basically what you are saying is that you think thatthere is probably some product on dealer desks that needs to be discounted, andmay be, as we get towards the end of the year, they are willing to take thosemarks, you might have an opportunity?

Yes.

Okay. And strategically, John, getting back to your commentabout early versus wrong, you know, obviously you guys have maintained a lot ofdiscipline and the comment was made that if you look every two weeks it feelslike spreads have widened out, and we've reached a new level and then all of asudden they start to widen out again. What keeps -- how do you maintain thediscipline of being on the sidelines, and what's going to be the event or thecatalyst, for you to say, you know, what we’ve done here and now it’s time toweigh back in?

Well. I don't know, if you are ever going to know that weare “done” and I think the issue is when we find transaction that we are comfortablewith from a risk standpoint and which we believe have been priced at a levelwith returns makes sense relative to that risks and makes sense relative to howwe can finance it, in other words, produce a Return on Equity that we think iscommensurate then we will pull the trigger. We are beginning to find those newlevels on some of the existing products. We are beginning to see the pricing on new originationsreflect that set of criteria for us. I don't think there's going to be a bellthat goes off that says we're at the bottom, I think it's going to be choppierthan that. But as we wade our way through this process, I think we definitelyexpect to find good opportunities to deploy our capital and the capital of ourpartners in our investment management vehicles.

And maybe the -- I'd just refine that question a little bit.Are there specific negative catalyst that you guys are looking for between nowand either the end of the year or early next year, whether it's auditor effector dealers needing the dumb product or anything like that.

Well, we certainly have seen year-ends, fiscal yearends forthe broker-dealers calendar, for the banks be in previous years of crisis, be acatalyst, there is no question about it. Cleaning up before statement date,often in fact, taking the hits, before the statement data and then moving theinventory shortly thereafter has certainly been a pattern in the past. So yes,time does matter. And we think we're approaching those dates and there is goingto be more product that issues forth and has liberated off of the currentholders balance sheets.

Okay, great. That's very helpful. I appreciate you guysanswering these questions.

Thank you.

We'll take our next question from David Fick from StifelNicolaus. Please go ahead.

Good morning. Stepping back for a minute, you talked aboutbeing somewhat bullish that the CDO market will return. But if you look at themajority of your capital structure today, whether it's equity or CDOs andexcluding your floating rate debt, virtually none of it would be available toyou on replacement basis right now. And so you couldn't build your engine thisway. And I am hearing you to talk of a conservative game in terms of net assetgrowth, but there's no funding, and I am hearing you talk about alternativesources of or -- but no specificity there. What is really the future of themodel?

Okay, I think the future of the model goes back to the way,let just step back. First of all we do believe CDOs are going to come back.Whether or not they come back at a balance sheet is unclear. Okay, so we are100% prepared to continue to run this business without the financingalternative that was a [acquired] as debt obligation. We ran this business from1997 to 2004 without CDOs and we are capable of doing it for the next 10 yearsas well. I think what you need to do if you would like to run a bookbased upon a shorter-term repo financing is, you need to have a much keener eyetowards matching of index indurations and you need to have more liquidity. AndI think as we mentioned at a discussion of this in the 10-Q that we expectuntil other alternatives make themselves available we expect to run to thisbook with a high level of liquidity and I think that's -- we have do know todefend your book when it is repo finance.

All right, and in terms of value what are the implicationsof your statement that you're going to be more cautious and sit on sidelinesuntil you see adjustment in market levels. What you are saying I think is thatcap rates have to move. And if that's the case, what does that mean for yourcurrent book?

We think that there is equity question in the deals that wehave on our book towards the end, the kinds of drop in cap rates that we'reanticipating, I think values have already declined, I think 5% to sort of 15%.I think it's a good range to apply across the board, obviously with everysituation being unique. So, we are continuing to look at the fundamentalperformance of markets and collateral across all of ourportfolios very intently to make sure to see if there is -- we see early signsof any erosion of performance, and if so, we make the proper defensive move.

But so far, you are seeing virtuallynothing. You are not having to re-negotiate deals or grant extensions or adjustfee structure or anything?

No.

Okay. My last question is, I guess forGeoff, you have to hold the maturity strategy, but I am wondering if there isany potential impact that you've identified from FAS 159?

No, I think that we have a healthymaturity -- we've elected healthy maturity for our interest bearing assets, andwe expect to continue to hold these maturities. We are very comfortable withthat position, and obviously, given the letter of gap, we have the intentionand capability of holding the asset maturity as well.

And we made that decision obviouslyquite a long time ago.

Alright. Okay. Thanks.

Thank you.

We'll take our next question from MarsellaMartino from KeyBanc Capital. Please go ahead.

Good morning. As you talk about andthink about originations going forward and you see opportunities out there, isthere any areas in terms of like asset classes that you think, provide somegood opportunities for you or anything that you'll particularly focus on?

I don't think we’ve focused on anyparticular asset class here. We just try and remain very opportunistic lookingfor transactions, in general, which meet our risk and return profile. So welook across all of the asset classes, I mean, we have been avoiding -- as youmay have noticed in John’s comments, assets related to for sale of housingland and condominiums for quite some time, and I don't know whether we are goingto be the first ones to try and pick the exact [volume] of that market whenthey jump back and set more of category that we will be continue to be veryconservative in investing it. But in terms of the other major asset classes, wethink there will be opportunities in all of them, you know, in selectedsituations.

And then just one small housekeeping, I think G&A on alinked-quarter basis declined a little bit, anything there, and was lastquarter kind of an anomaly?

No, there was nothing there. I think it was justprofessional fees and our accruals on those really accounted for much of thedifference.

Okay. Great. Thank you.

Our next question comes from Tayo Okusanya from UBS. Pleasego ahead.

Yes. Good morning my question about the CRE CDO market hasbeen answered, but in regards to the CMBS portfolio that helps the maturity,could you tell us what the fair market value of that portfolio is right now ifyou were to mark-to-market?

Versus 884 which is in the book?

That's right. That’s a $30 million difference.

Great. Thank you very much.

Thank you.

Next, we have a follow-up from David Boardman of Wachovia.Please go ahead.

Just kind of piggyback off of Don's question, we sawsomebody in this space today not do a CDO, if you will, through one buyer, butkind of re-negotiate a warehouse line or repo line and have no mark-to-marketfeature, and it looks like maybe except higher cost of funds. I am justwondering if you could just talk about that, and is that something that youwould look like and then frame up how you feel about trading higher costs forthat mark-to-market valuation elimination?

Certainly a trade off, we would look at as it was presentedto us, but in general if somebody offered me a down mark-to-market line withsome reasonable increasing cost I think we would find it pretty attractive.

Fair enough. All right, have a good day.

At this time we have no further questions queued.

Well. Then thank you again for your interest in CapitalTrust and we'll talk to you next quarter. Thanks.

Ladies and gentlemen this concludes today's teleconference.You may disconnect at any time.