As filed with the Securities and Exchange Commission on April 30, 1999
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K/A1
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1998
-----------------
[ ] 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
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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
par value $0.01 per share
Securities registered pursuant to Section 12(g) of the Act: None
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 the filing
requirements for at least the past 90 days.
Yes X No
- --
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K (ss.229.405 of this chapter) is not contained herein, and will
not be contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K. [X]
<PAGE>
MARKET VALUE
Based on the closing sales price of $5.50 per share, the aggregate
market value of the outstanding Class A Common Stock held by non-affiliates of
the registrant as of April 29, 1998 was $61,210,727.
OUTSTANDING SHARES
As of April 29, 1998 there were 18,352,983 outstanding shares of
Class A Common Stock. The Class A Common Stock is listed on the New York Stock
Exchange (trading symbol "CT"). Trading is reported in many newspapers as
"CapitalTr".
<PAGE>
CAPITAL TRUST, INC.
PART III
Item 10. Directors and Executive Officers of the Registrant...................1
Item 11. Executive Compensation...............................................6
Item 12. Security Ownership of Certain Beneficial Owners and Management......12
Item 13. Certain Relationships and Related Transactions......................17
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K....18
Signatures....................................................................19
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<PAGE>
Capital Trust, Inc. (the "Company") hereby amends the following items
of Part III and Part IV of its Form 10-K Annual Report for the fiscal year ended
December 31, 1998 as filed with the Securities and Exchange Commission on March
31, 1999. Unless the context otherwise requires, references to the governance
and capital structures and affairs of the Company include those of its
predecessor, Capital Trust, a California business trust.
PART III
ITEM 10. Directors and Executive Officers of the Registrant
The name, age as of April 30, 1999, and existing positions with the
Company of the directors and executive and senior officers of the Company are as
follows:
<TABLE>
<CAPTION>
Name Age Office or Position Held
- ---- --- -----------------------
<S> <C> <C>
Samuel Zell ....................... 57 Chairman of the Board of Directors
Jeffrey A. Altman ................. 32 Director
Thomas E. Dobrowski ............... 55 Director
Martin L. Edelman ................. 57 Director
Jeremy FitzGerald ................. 35 Managing Director
Gary R. Garrabrant................. 42 Director
Craig M. Hatkoff ................. 45 Director, Vice Chairman and Chairman of the
Executive Committee
John R. Klopp ..................... 45 Director, Vice Chairman, Chief Executive Officer
and President
Donald J. Meyer ................... 48 Managing Director and Chief Investment Officer
Stephen D. Plavin ................. 39 Chief Operating Officer
Sheli Z. Rosenberg ................ 57 Director
Steven Roth ...................... 57 Director
Lynne B. Sagalyn ................. 51 Director
Alvin J. Sarter .................. 42 Managing Director
Edward L. Shugrue III ............ 33 Managing Director, Chief Financial Officer,
Treasurer and Assistant Secretary
</TABLE>
The name, principal occupation for the last five years, selected
biographical information and the period of service as a director or officer of
the Company of each of the directors and executive and senior officers are set
forth below.
<PAGE>
Directors
Samuel Zell has been chairman of the board of directors of the Company
since July 1997. Mr. Zell is chairman of Equity Group Investments, L.L.C., a
privately held real estate and corporate investment firm ("EGI"), American
Classic Voyages Co., an owner and operator of cruise lines, Anixter
International Inc., a provider of integrated network and cabling systems
("Anixter"), Manufactured Home Communities, Inc., a REIT specializing in the
ownership and management of manufactured home communities ("MHC"), Jacor
Communications, Inc., an owner of radio stations ("Jacor"), and Chart House
Enterprises, Inc., an owner and operator of restaurants. He is chairman of the
board of trustees of Equity Residential Properties Trust ("ERPT"), a REIT
specializing in the ownership and management of multi-family housing, and of
Equity Office Properties Trust ("EOPT"), a REIT specializing in the ownership
and management of office buildings. Mr. Zell is also a director of Fred Meyer,
Inc., an owner and operator of supermarkets and discount stores, Ramco Energy
PLC, an independent oil company based in the United Kingdom, and Davel
Communications, Inc., an owner and operator of pay telephones.
Jeffrey A. Altman has been a director of the Company since November
1997. Since November 1996, Mr. Altman has been a senior vice president of
Franklin Mutual Advisers, Inc., formerly Heine Securities Corporation, a
registered investment adviser ("FMA"), and a vice president of Franklin Mutual
Series Fund Inc., a mutual fund with assets in excess of $25 billion, advised by
FMA. From August 1988 to October 1996, Mr. Altman was an analyst with FMA. Mr.
Altman is also a director of Resurgence Properties Inc., a company engaged in
diversified real estate activities.
Thomas E. Dobrowski has been a director of the Company since August
1998. Mr. Dobrowski has been the managing director of real estate and
alternative investments of General Motors Investment Management Corporation
("GMIMCo"), an investment advisor to several pension funds of General Motors
Corporation ("GM") and its subsidiaries and to several other clients also
controlled by GM for more than the past five years. Mr. Dobrowski is a trustee
of EOPT and a director of MHC and Red Roof Inns, Inc., an owner and operator of
hotels.
Martin L. Edelman has been a director of the Company since February
1997. Mr. Edelman served as president of Chartwell Leisure Inc., an owner and
operator of hotel properties ("Chartwell"), from January 1996 until it was sold
in March 1998. He has been a director of Cendant Corporation and a member of
that corporation's executive committee since November 1993. Mr. Edelman has been
of counsel to Battle Fowler LLP, a New York City law firm that provides services
to the Company, since January 1994 and was a partner with that firm from 1972
through 1993. Mr. Edelman also serves as a director of Avis Rent-A-Car, Inc., G.
Soros Realty, Inc., Acadia Realty Trust and Northstar Capital Investment
Corporation.
Gary R. Garrabrant has been a director of the Company since January
1997. Mr. Garrabrant was the vice chairman of the Company from February 1997
until July 1997. Mr. Garrabrant has been a managing director and chief
investment officer of Equity International Properties, Ltd., a privately-held
international real estate investment company, since July 1, 1998. Mr. Garrabrant
is executive vice president of EGI and managing partner of EGI Capital Markets,
L.L.C. He joined EGI as senior vice president in January 1996. Previously, Mr.
Garrabrant was director of Sentinel Securities Corporation
-2-
<PAGE>
and co-founded Genesis Realty Capital Management in 1994, both of which were
based in New York and specialized in real estate securities investment
management. From 1989 to 1994, he was associated with The Bankers Trust Company.
Craig M. Hatkoff has been a director and a vice chairman of the
Company since July 1997. Mr. Hatkoff was a founder and was a managing partner of
Victor Capital Group, L.P. ("Victor Capital") from 1989 until the acquisition of
Victor Capital by the Company in July 1997. Mr. Hatkoff was a managing director
and co-head of Chemical Realty Corporation, the real estate investment banking
arm of Chemical Banking Corporation, from 1982 until 1989. From 1978 to 1982,
Mr. Hatkoff was the head of new product development in Chemical Bank's Real
Estate Division, where he previously served as a loan officer.
John R. Klopp has been a director of the Company since January 1997,
the chief executive officer, a vice chairman and the president of the Company
since February 1997, July 1997 and January 1999, respectively. Mr. Klopp was a
founder and was a managing partner of Victor Capital from 1989 until the
acquisition of Victor Capital by the Company in July 1997. Mr. Klopp was a
managing director and co-head of Chemical Realty Corporation from 1982 until
1989. From 1978 to 1982, Mr. Klopp held various positions with Chemical Bank's
Real Estate Division, where he was responsible for originating, underwriting and
monitoring portfolios of construction and permanent loans. He is a director of
Metropolis Realty Trust, Inc., a Manhattan office REIT.
Steven Roth has been a director of the Company since August 1998. Mr.
Roth has been chairman of the board of trustees and chief executive officer of
Vornado Realty Trust ("Vornado") since May 1989 and chairman of the executive
committee of the board of Vornado since April 1980. Since 1968, he has been a
general partner of Interstate Properties, a real estate and investment company,
and, more recently, he has been managing general partner. On March 2, 1995, he
became chief executive officer of Alexander's, Inc., a real estate company. Mr.
Roth is also a director of Alexander's, Inc.
Sheli Z. Rosenberg has been a director of the Company since July
1997. Ms. Rosenberg has been the chief executive officer and president of EGI
for more than the past five years. She was a principal of the law firm Rosenberg
& Liebentritt P.C. from 1980 until September 1997. Ms. Rosenberg is a director
of Jacor, MHC, Anixter, CVS Corporation, a drugstore chain, and Illinois Power
Co., a supplier of electricity and natural gas in Illinois, and its holding
company, Illinova Corporation. She is also a trustee of ERPT and EOPT. Ms.
Rosenberg was a vice president of First Capital Benefit Administrators, Inc.,
which filed a petition under the federal bankruptcy laws on January 3, 1995,
which resulted in its liquidation on November 15, 1995.
Lynne B. Sagalyn has been a director of the Company since July 1997.
Dr. Sagalyn has been a professor and the director of the M.B.A. Real Estate
Program at the Columbia University Graduate School of Business since 1992. From
1991 to 1992, she was a visiting professor at Columbia. From 1987 to 1991, she
was an associate professor of Planning and Real Estate Development at the
Massachusetts Institute of Technology. She is also on the faculty of the Weimer
School for Advanced Studies in Real Estate and Land Economics. Dr. Sagalyn is a
director of United Dominion Realty Trust, a self- administered REIT in the
apartment communities sector, and The Retail Initiative and serves on an
advisory board for Initiatives for a Competitive Inner City.
-3-
<PAGE>
Executive and Senior Officers
Jeremy FitzGerald has been a managing director of the Company since
July 1997. Prior to that time, Ms. FitzGerald served as a principal of Victor
Capital and had been employed in various positions at such firm since May 1990.
She was previously employed in various positions at PaineWebber Incorporated.
Donald J. Meyer has been a managing director and chief investment
officer of the Company since July 1997. From 1979 through July 1997, Mr. Meyer
held various positions at The First National Bank of Chicago ("First Chicago").
From 1989 until 1990, Mr. Meyer served as senior credit officer for real estate
at First Chicago. From 1990 to 1993, Mr. Meyer, at different times, was the head
of First Chicago's real estate enhancement division and the asset disposition
department. Mr. Meyer was the senior credit officer for product risk management
at First Chicago from 1993 until 1995. From 1995 until 1997, Mr. Meyer was head
of structural investments and managed First Chicago's investments in
non-investment grade tranches of commercial mortgage-backed securities. In 1991,
Mr. Meyer became a senior vice president at First Chicago.
Stephen D. Plavin has been the chief operating officer of the Company
since August 1998. Prior to that time, Mr. Plavin was employed for fourteen
years with the Chase Manhattan Bank and its securities affiliate, Chase
Securities Inc. (collectively "Chase"). Mr. Plavin held various positions within
the real estate finance unit of Chase including the management of real estate
loan syndications, portfolio management, banking services and REO (real estate
owned) sales. Since 1995, he served as a managing director responsible for real
estate client management in which position he directed the origination of loan
and financing transactions, as well as investment banking and advisory
assignments for Chase's major real estate relationships.
Alvin J. Sarter has been a managing director of the Company since
April 1998. Prior to that time, Mr. Sarter was a partner in the law firm of
Battle Fowler, LLP since 1989, where he specialized in real estate law
representing a national client base in connection with the acquisition,
development, management, financing and securitization of real estate.
Edward L. Shugrue III has been the chief financial officer of the
Company since September, 1997 and has been a managing director, an assistant
secretary and the treasurer of the Company since July 1997, July 1997 and
January 1999, respectively. Prior to that time, Mr. Shugrue served as a
principal of Victor Capital since January 1997. He previously served as director
of real estate for and a vice president of River Bank America from April 1994
until June 1996 after serving as a vice president of the bank since January
1992. He was previously employed in various positions at Bear, Stearns & Co.
Inc.
Compliance with Section 16(a)
Section 16(a) of the Exchange Act requires the Company's officers and
directors, and persons who own more than ten percent of a registered class of
the Company's equity securities, to file reports of ownership and changes in
ownership with the Securities and Exchange Commission ("SEC") and the New York
Stock Exchange ("NYSE"). Officers, directors and greater than ten percent
stockholders are required by regulation of the SEC to furnish the Company with
copies of all Section 16(a) forms they file.
-4-
<PAGE>
Based solely on its review of Forms 3, 4 and 5 and amendments thereto
available to the Company and written representations from certain of the
directors, officers and 10% shareholders that no form is required to be filed,
the Company believes that no director, officer or beneficial owner of more than
10% of its Class A Common Stock failed to file on a timely basis reports
required pursuant to Section 16(a) of the Exchange Act with respect to 1998.
-5-
<PAGE>
ITEM 11. Executive Compensation
Executive Compensation
The following table sets forth for the years indicated the annual
compensation of the chief executive officer and the other executive officers of
the Company who earned annual salary and bonus in excess of $100,000.
<TABLE>
<CAPTION>
Summary Compensation Table
-----------------------------------------------------------------------------
Annual Compensation Long Term Compensation
- -----------------------------------------------------------------------------------------------------------
Restricted Securities
Stock Underlying Other
Name and Principal Position Year Salary($)(1) Bonus($) Awards($) Options(#) Compensation($)(6)
- --------------------------- ---- --------- -------- --------- ---------- -----------------
<S> <C> <C> <C> <C> <C> <C>
John R. Klopp
Vice Chairman, Chief
Executive Officer and 1998 575,000 750,000 -- 100,000 5,455
President 1997 935,964(2) 500,000 -- 75,000 992
Craig M. Hatkoff
Vice Chairman and
Chairman of the 1998 575,000 750,000 -- 100,000 5,388
Executive Committee 1997 935,964(2) 500,000 -- 75,000 992
Stephen D. Plavin
Chief Operating Officer 1998 118,295(4) 850,000 -- 100,000 126
Edward L. Shugrue III
Managing Director, 1998 287,500 400,000 198,750(5) 80,000 300
Chief Financial Officer 1997 275,067 200,000 -- 50,000 --
and Treasurer
Donald J. Meyer
Managing Director and 1998 300,000 150,000 49,688(5) 22,500 353
Chief Investment Officer 1997 139,773(3) 150,000 -- 75,000 35,125
</TABLE>
- ------------------
(1) The Company paid total compensation of $140,000 and $180,000 to Frank
M. Morrow, the Company's former chief executive officer, for the
years ended 1997 and 1996, respectively.
(2) Includes $235,417 of base salary paid by the Company for the pro rata
portion of each of Messrs. Klopp and Hatkoff's $500,000 annual base
salary for 1997, payment of which commenced after the acquisition of
Victor Capital. Also includes an allocation equal to half of the
$407,021 of total management fees ($235,417) paid by Victor Capital
to Valentine & Wildove & Company, Inc., a company owned equally by
Messrs. Klopp and Hatkoff, and $463,036 of capital distributions made
by Victor Capital to each of Messrs. Klopp and Hatkoff. The foregoing
management fees and capital distributions were paid or made prior to
the Company's acquisition of Victor Capital in 1997.
(3) Represents pro rata portion of $300,000 annual base salary for the
portion of the year employed.
(4) Represents pro rata portion of $350,000 annual base salary for the
portion of the year employed.
(5) Represents the value of the 20,000 and 5,000 shares of restricted
Class A Common Stock awarded to Messrs. Shugrue and Meyer,
respectively (based on the $9.94 per share NYSE closing price on the
date of grant). The value of such restricted stock awards to Messrs.
Shugrue and Meyer at December 31, 1998 were $120,000 and $30,000,
respectively (based on the $6.00 per share NYSE closing price on such
date).
(6) Represents term life insurance premiums paid by the Company and, in
the case of Mr. Meyer, relocation expenses paid by the Company in
1997.
-6-
<PAGE>
Employment Agreements
The Company is a party to employment agreements with John R. Klopp
and Craig M. Hatkoff. The employment agreements provide for five-year terms of
employment commencing as of July 15, 1997. On the fifth anniversary of the
commencement of the employment agreements, and on each succeeding anniversary,
the terms of the employment agreements shall be automatically extended for one
additional year unless, not later than three months prior to such anniversary
date, either party shall have notified the other that it will not extend the
term of the agreement. Pursuant to the employment agreements, Messrs. Klopp and
Hatkoff currently receive for calender year 1999 annual base salaries of
$600,000, which are subject to further increases each calendar year to reflect
increases in the cost of living or as otherwise determined in the discretion of
the board of directors. Mr. Klopp and Mr. Hatkoff are also entitled to annual
incentive cash bonuses to be determined by the board of directors based on
individual performance and the profitability of the Company. Mr. Klopp and Mr.
Hatkoff are also participants in the incentive stock and other employee benefit
plans of the Company.
If the employment of Mr. Klopp or Mr. Hatkoff is terminated without
cause, with good reason or following a change of control, as those terms are
defined in the employment agreements, the affected employee would be entitled to
(i) a severance payment equal to the greater of the amount payable to such
employee over the remainder of the term of the employment agreement or an amount
equal to the aggregate base salary and cash incentive bonus paid to the employee
during the previous year; (ii) continued welfare benefits for two years; and
(iii) automatic vesting of all unvested stock options such that all of the
employee's stock options would become immediately exercisable. Each vested
option will remain exercisable for a period of one year following the employee's
termination. The employment agreements provide for a non-competition period of
one year if Mr. Klopp or Mr. Hatkoff terminates his employment voluntarily or is
terminated for cause.
The Company is a party to an employment agreement, as amended, with
Stephen D. Plavin which provides for a term of employment commencing as of
August 15, 1998 and expiring on January 2, 2002. On the date of expiration of
the initial term, the employment agreement shall be automatically extended until
December 31, 2002 unless, prior to April 7, 2001, either party shall have
delivered to the other a non-renewal notice. The employment agreement provides
for an annual base salary of $350,000, which will be increased each calendar
year to reflect increases in the cost of living and may otherwise be further
increased in the discretion of the board of directors. The employment agreement
also provides for annual incentive cash bonuses for calender years 1999 through
2001 to be determined by the board of directors based on individual performance
and the profitability of the Company, provided that the minimum of each of said
three annual incentive bonuses shall be no less than $750,000. In addition to
the base salary and incentive bonus, Mr. Plavin will receive during calender
year 1999 only, a total of $1,200,000 of special cash payments of which $850,000
was expensed in 1998. Mr. Plavin is entitled to participate in employee benefit
plans of the Company at levels determined by the board of directors and
commensurate with his position and receives Company provided life and disability
insurance. In accordance with the agreement, Mr. Plavin was granted pursuant to
the Company's incentive stock plan options to purchase 100,000 shares of Class A
Common Stock with an exercise price of $9.00 immediately vested and exercisable
as of the date of the agreement. The Company also agreed to grant pursuant to
the incentive stock plan fully vested Class A Common Stock, 50,000 shares on
January 1, 1999 and 100,000 shares on each of the three successive anniversaries
thereof.
-7-
<PAGE>
If the Company terminates Mr. Plavin's employment for other than for
cause or disability, as those terms are defined in the agreement, or Mr. Plavin
terminates employment with good reason (including following a change in
control), as those terms are defined in the agreement, he would be entitled to
(i) his base salary accrued and unpaid up to the termination date, (ii) a
severance payment equal to the greater of his base salary payable over the
remainder of the employment term and his base salary as of the termination date
for one full calender year, plus the minimum bonus to the extent not paid for
each of calender years 1999 through 2001, plus the minimum bonus to the extent
not paid for calender year 2002 unless the initial term expires without renewal,
(iii) any unpaid calender year 1999 special payments, (iv) medical insurance
coverage for him and his family for a period expiring on the earlier of the
second anniversary of the termination date or such time as he obtains employment
offering comparable or better medical insurance coverage, (v) receive a grant of
all of the shares of Class A Common Stock not yet granted that the Company has
agreed to grant to him and (vi) exercise his stock options for a period of one
year from the termination date. If Mr. Plavin terminates for special reason
(i.e., he shall not have been appointed chief executive officer when neither
Messrs. Klopp nor Hatkoff hold such position), Mr. Plavin would be entitled to
the foregoing compensation and benefits, except that, instead of the severance
payment set forth in clause (ii), he would be entitled to a severance payment
equal his base salary as of the termination date for one full calender year,
plus $750,000 and would not be entitled to any grant of Class A Common Stock as
set forth in clause (v). The employment agreement also specifies termination
payments in the event of voluntary termination by Mr. Plavin for other than
special reason or good reason and in the event of termination by the Company
following death or disability and for cause. The employment agreement provides
for restrictions on solicitation of employees and clients of the Company
following termination by the Company for cause or termination by Mr. Plavin for
other than good reason or special reason.
The Company is a party to an employment agreement with Donald J.
Meyer which provides for a term of employment for two years. The employment
agreement provides for an annual base salary of $300,000, minimum annual bonuses
of $150,000 at the end of 1997 and 1998, and for participation in the Company's
incentive stock plan.
Compensation of Directors
The Company pays two of its non-employee directors an annual cash
retainer of $30,000 which is paid monthly. The remaining non-employee directors
are not paid any cash fees for their services as such, but rather are
compensated with an annual award of stock units under the Company's non-employee
director stock plan with a value equal to $30,000. The number of stock units
awarded to each director, which are convertible into an equal number of shares
of Class A Common Stock according to individual schedules set by each director,
is determined quarterly in arrears by dividing one-quarter of the annual
retainer amount ($7,500) by the average closing price of the Class A Common
Stock for the quarter. The stock units vest when issued. There is no separate
compensation for service on committees of the board of directors. All directors
are also reimbursed for travel expenses incurred in attending board and
committee meetings.
The Company was a party to a consulting agreement, dated as of July
15, 1997, with Gary R. Garrabrant, a director of the Company, pursuant to which
he provided consulting services for the Company, including, strategic planning,
identifying and negotiating mergers, acquisitions, joint ventures and strategic
alliances, and advising as to capital structure matters. The consulting
agreement had a term
-8-
<PAGE>
of one year (which was extended to and which terminated on December 31, 1998)
and, as amended, provided for a consulting fee of $165,000 in 1998 and $150,000
in 1997. Mr. Garrabrant was also entitled to participate in the Company's
incentive stock plan, as determined by the compensation committee of the board
of directors. In 1998, Mr. Garrabrant was awarded 35,000 options to purchase
Class A Common Stock in recognition of his ongoing contributions to the Company.
The compensation committee also awarded him a one-time discretionary bonus of
$150,000 for services rendered during 1997 in connection with the Company's
public offering of 9,000,000 shares of Class A Common Stock (the "Offering").
The Company is a party to a consulting agreement, dated as of January
1, 1998, with Martin L. Edelman, a director of the Company. Pursuant to the
agreement, Mr. Edelman provides consulting services for the Company including
client development and advisory services in connection with lending and
investment banking activities and asset and business acquisition transactions.
The consulting agreement, which had an initial term of one year, was
automatically extended for an additional one year term. The agreement is
terminable by either party upon thirty (30) days prior notice and provides for a
consulting fee of $8,000 per month. Pursuant to the agreement, the Company
granted 50,000 options to purchase Class A Common Stock. Mr. Edelman is also
entitled to participate in the Company's incentive stock plan.
In 1998, the compensation committee awarded Samuel Zell 120,000
options to purchase Class A Common Stock in recognition of his ongoing
contributions to the Company.
Compensation Committee Interlocks and Insider Participation
The compensation committee of the board of directors was comprised
during 1998 of Ms. Rosenberg, Dr. Sagalyn and Messrs. Altman, Edelman and Klopp.
Other than Mr. Klopp, none of the committee's members was an officer or employee
of the Company during 1997. No committee member had any interlocking
relationships requiring disclosure under applicable rules and regulations.
Mr. Zell and Ms. Rosenberg serve as members of the board of directors
of numerous non-public companies owned or controlled in whole or in part by Mr.
Zell or his affiliates which do not have compensation committees, and in many
cases, the executive officers of those companies include Mr. Zell and Ms.
Rosenberg.
For a description of certain relationships and transactions with
members of the board of directors or their affiliates, see "Item 13 Certain
Relationships and Related Transactions."
-9-
<PAGE>
Stock Options
The following table sets forth stock options issued in 1998 to the
executive officers named in the Summary Compensation Table. The table also sets
forth the hypothetical gains that would exist for the stock options at the end
of their ten-year terms, assuming compound rates of appreciation of 5% and 10%
from the $9.94 and $7.94 market prices on the respective January 30, 1998 and
August 13, 1998 dates of grant. The actual future value of the options will
depend on the market value of the Company's Class A Common Stock.
<TABLE>
<CAPTION>
Option/SAR Grants in Last Fiscal Year
Potential Realizable Value at
Assumed Annual Rates of Stock
Price Appreciation for Option
Individual Grants Term(2)
- ---------------------------------------------------------------------------------------------------------
(a) (b) (c) (d) (e) (f) (g)
Number of
Securities % of Total
Underlying Options/SARs
Options/ Granted to
SARs Employees Exercise or Expira-
Granted in Fiscal Base Price tion
Name (#)(1) Year ($/sh) Date 5% ($) 10% ($)
- ---- ---------- ---------- ----------- ------- ------- ----------
<S> <C> <C> <C> <C> <C> <C>
John R. Klopp 100,000 9.0% 10.00 1/30/08 618,714 1,577,532
Craig M. Hatkoff 100,000 9.0% 10.00 1/30/08 618,714 1,577,532
Stephen D. Plavin 100,000 9.0% 9.00 8/15/08 392,935 1,158,783
Edward L. Shugrue III 80,000 7.2% 10.00 1/30/08 494,971 1,262,025
Donald J. Meyer 22,500 2.0% 10.00 1/30/08 139,211 354,945
</TABLE>
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(1) Represents shares underlying stock options; none of the executive
officers were granted SARs. One-third of the options become
exercisable in equal increments on the first, second and third
anniversaries of the date of grant, except in the case of Mr. Plavin,
which options were immediately exercisable on the date of grant.
(2) The amounts of potential realizable value, which are based on assumed
appreciation rates of 5% and 10% prescribed by Securities and
Exchange Commission rules, are not intended to forecast possible
future appreciation, if any, of the Company's share price. The
amounts of potential value with respect to the options do not account
for expiration of the options upon termination of employment or the
phased-in exercise schedule. Future compensation resulting from the
options is based solely on the actual performance of the Company's
share price in the trading market.
-10-
<PAGE>
The following chart shows the 1998 year-end value of the stock
options held by the named executive officers. None of the named executive
officers exercised stock options during 1998.
Year End 1998 Option/SAR Values
<TABLE>
<CAPTION>
Number of Securities
Underlying Unexercised Value of Unexercised In-the-
Options/SARs at Year Money Options/SARs at
End # Year End(1)
------------------------- -----------------------------
Name Exercisable Unexercisable Exercisable Unexercisable
---- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
John R. Klopp 25,000 150,000 $-- $--
Craig M. Hatkoff 25,000 150,000 -- --
Stephen D. Plavin 100,000 -- -- --
Edward L. Shugrue III 16,667 113,333 -- --
Donald J. Meyer 25,000 72,500 -- --
</TABLE>
- -----------
(1) No amounts are shown because the exercise prices of the stock options
exceeded the market value of the underlying Class A Common Stock at
year end based upon the $6.00 per share closing price reported on the
NYSE on December 31, 1998. The actual value, if any, an executive may
realize is dependent upon the amount by which the market price of
Class A Common Stock exceeds the exercise price when the stock
options are exercised.
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<PAGE>
ITEM 12. Security Ownership of Certain Beneficial Owners and Management
The following table sets forth as of April 29, 1999 certain
information with respect to the beneficial ownership of Class A Common Stock and
class A 9.5% cumulative convertible preferred stock, par value $0.01 per share
("Class A Preferred Stock" and together with the Class A Common Stock, "Company
Stock"), and the voting power possessed thereby (based on 18,352,983 shares of
Class A Common Stock and 12,267,658 shares of Class A Preferred Stock
outstanding on that date), by (i) each person known to the Company to be the
beneficial owner of more than 5% of each of the outstanding Class A Common Stock
and Class A Preferred Stock, (ii) each director and named executive officer of
the Company who is a beneficial owner of any Class A Common Stock or Class A
Preferred Stock and (iii) all directors and executive officers of the Company as
a group. Such information (other than with respect to directors and officers of
the Company) is based on a review of statements filed with the Commission
pursuant to Sections 13(d), 13(f) and 13(g) of the Exchange Act with respect to
the Company's Class A Common Stock.
<TABLE>
<CAPTION>
Class A Common Stock Class A Preferred Stock
------------------------------ -------------------------
Amount and Nature of Amount and Nature of
Beneficial Ownership Beneficial Ownership
------------------------------ -------------------------
Five Percent Stockholders, Percent Percent of
Trustees and Executive Officers Number of Class Number Class Voting Power
- ------------------------------------- ----------------- --------- ------------ ---------- ------------
<S> <C> <C> <C> <C> <C>
Veqtor Finance Company, LLC (2)(3) 6,959,593(3) 37.9% 12,267,658(3) 100% 62.8%
EOP Operating Limited Partnership (4) 4,273,500(5) 18.9 -- -- 12.2
State Street Bank and Trust Company, 4,273,500(5) 18.9 -- -- 12.2
as Trustee for General Motors
Employes Global Group Pension
Trust (6)
Vornado Realty, L.P. (7) 4,273,500(5) 18.9 -- -- 12.2
FMR Corp. (8) 2,007,782 10.9 -- -- 6.6
Wanger Asset Management, L.P. (9) 1,677,300 9.1 -- -- 5.5
Jeffrey A. Altman 30,000 * -- -- *
Thomas E. Dobrowski -- (10) -- -- -- --
Martin L. Edelman 31,447(11) * -- -- *
Gary R. Garrabrant (12) 18,113(11) * -- -- *
Craig M. Hatkoff (3)(12) 7,035,927(13)(14) 38.2 12,267,658(13) 100 62.9
John R. Klopp (3)(12) 7,027,927(13)(14) 38.2 12,267,658(13) 100 62.9
Donald J. Meyer 50,000(15) * -- -- *
Stephen D. Plavin 150,000(15) * -- -- *
Sheli Z. Rosenberg (12) 6,446(11) * -- -- *
Steven Roth --(16) -- -- -- --
Lynne B. Sagalyn 14,780(11) * -- -- *
Edward L. Shugrue III 107,001(15) * -- -- *
Samuel Zell (3)(12) 7,081,039(11)(13)(17) 38.5 12,267,658(13) 100 63.1
All executive officers and directors as a 7,633,496(13) 40.7% 12,267,658(13) 100% 64.1%
group ((13) persons) (3)(12)
* Represents less than 1%.
</TABLE>
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<PAGE>
- ----------------------
(1) The number of shares owned are those beneficially owned, as determined
under the rules of the Commission, and such information is not
necessarily indicative of beneficial ownership for any other purpose.
Under such rules, beneficial ownership includes any shares as to which a
person has sole or shared voting power or investment power and any shares
which the person has the right to acquire within 60 days through the
exercise of any option, warrant or right, through conversion of any
security or pursuant to the automatic termination of a power of attorney
or revocation of a trust, discretionary account or similar arrangement.
(2) Capital Trust Investors Limited Partnership ("CTILP") and V2 Holdings,
LLC ("V2") are the sole managing and common members of Veqtor. The
general partner of CTILP is SZ Investments LLC, the managing member of
which is Zell General Partnership, Inc. ("Zell GP"). The sole stockholder
of Zell GP is the Samuel Zell Revocable Trust (the "Zell Trust"). Mr.
Samuel Zell serves as the trustee of the Zell Trust. Messrs. John R.
Klopp and Craig M. Hatkoff are the sole members of V2. The address of
Veqtor is c/o Capital Trust, 605 Third Avenue, 26th Floor, New York, New
York 10016.
(3) John R. Klopp, Craig M. Hatkoff and Samuel Zell collectively indirectly
control the affairs of Veqtor. Each of Messrs. Hatkoff, Klopp and Zell
disclaim beneficial ownership of the Class A Common Stock and Class A
Preferred Stock owned by Veqtor. In 1997, Veqtor issued $50.0 million of
12% convertible redeemable notes ("Veqtor Notes") to four institutional
lenders to fund the purchase of its Company Stock. In 1998, the Veqtor
Notes were converted into preferred units of Veqtor ("Veqtor Preferred
Units") by agreement among Veqtor's common members and the institutional
lenders. The foregoing persons entered into an amended and restated
limited liability agreement of Veqtor (the "Restated LLC Agreement")
which provided for, among other things, the conversion of the Veqtor
Notes into Veqtor Preferred Units and the admission of the institutional
lenders as preferred members of Veqtor. The Restated LLC Agreement
provides that the Veqtor Preferred Units may be redeemed by the Company
or the holders thereof for a portion of the Company Stock at any time
after July 15, 1999. Pursuant to the Restated LLC Agreement, if all
Veqtor Preferred Units were redeemed by the holders thereof for Company
Stock on July 16, 1999 (the earliest possible date of redemption),
Veqtor's preferred members would receive in exchange for their units an
aggregate of 9,655,381 of the shares of Company Stock owned by Veqtor; if
all Veqtor Preferred Units were redeemed by the Company at any time on or
after July 16, 1999 prior to July 15, 2000, Veqtor's preferred members
would receive in exchange for their units an aggregate of 9,905,811 of
the shares of Company Stock owned by Veqtor (assuming redemption on the
earliest possible date of redemption, July 16, 1999). In addition, in
connection with the Offering, CTILP, V2 and Veqtor entered into an
agreement with the Company that, in the case of any redemption of all of
the preferred units then authorized by the original limited liability
company agreement of Veqtor in effect at such time (the "Original LLC
Agreement") for the portion of Veqtor's shares of Company Stock specified
in the original LLC Agreement, Veqtor shall convert the remaining shares
of Class A Preferred Stock owned by it into Class A Common Stock. CTILP,
V2 and Veqtor also agreed that Veqtor shall redeem the then authorized
preferred units on the earliest date upon which Veqtor has the right to
effect such redemption. Veqtor has confirmed to the Company that the
foregoing agreements obligate Veqtor to convert its Class A Preferred
Stock and redeem the Veqtor Preferred Units, as the case may be,
according to the timetables specified therein.
(4) Beneficial ownership information as of December 31, 1998 is based on a
statement filed pursuant to Section 13(d) of the Exchange Act by EOP
Operating Limited Partnership ("EOP"). The address of EOP is Two North
Riverside Plaza, Chicago, Illinois 60606.
(5) Represents shares which may be obtained upon conversion of $50,000,000 in
liquidation amount of 8.25% Step Up Convertible Trust Preferred
Securities issued by the Company's consolidated statutory trust
subsidiary, CT Convertible Trust I, to each of EOP, State Street Bank and
Trust Company, as trustee for General Motors Employes Global Group
Pension Trust (the "GM Trust") and VNO.
(6) Beneficial ownership information as of December 31, 1998 is based on
statements filed pursuant to Section 13(d) of the Exchange Act by GMIMCo
and the GM Trust as another reporting person named therein. State Street
Bank and Trust Company acts as the trustee (the "Trustee") for the GM
Trust, a trust under and for the benefit of certain employee benefit
plans of GM and its subsidiaries. These shares may be deemed to be owned
beneficially by GMIMCo, a wholly owned subsidiary of GM. GMIMCo's
principal business is providing investment advice and investment
management services with respect to the assets of certain employee
benefit plans of GM and its subsidiaries and with respect to the assets
of certain direct and indirect subsidiaries of GM and associated
entities. GMIMCo is serving as the Trust's investment manager with
respect to these shares and in that capacity it has sole power to direct
the Trustee as to the voting and disposition of these shares. Because of
the Trustee's limited role, beneficial ownership of the shares by the
Trustee is disclaimed. The address of GMIMCo is 767 Fifth Avenue, New
York, New York 10153.
(7) Beneficial ownership information as of December 31, 1998 is based on a
statement filed pursuant to Section 13(d) of the Exchange Act filed by
VNO. The address of VNO is c/o Vornado Realty Trust, Park 80 West, Plaza
II, Saddle Brook, New Jersey 07663.
(8) Beneficial ownership information as of December 31, 1998 is based on the
Schedule 13G jointly filed by FMR Corp. ("FMR"), Edward C. Johnson 3rd,
Abigail P. Johnson, Fidelity Management and Research Company ("FMR
Advisor") and Fidelity Growth & Income Fund ("FGI Fund") reporting
ownership of shares by FGI Fund and other funds advised by FMR Advisor.
FMR and FMR Advisor are located at 82 Devonshire Street, Boston,
Massachusetts 02109.
(9) Beneficial ownership information as of December 31, 1998 is based on the
Schedule 13G jointly filed by Wanger Asset Management, L.P. ("WAM"), its
general partner, Wanger Asset Management, Ltd. ("WAM Ltd") and its
client, Accorn Investment Trust ("Accorn")
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<PAGE>
reporting beneficial ownership of shares on behalf of discretionary
clients, including Accorn. WAM, WAM Ltd. and Accorn are located at 227
West Monroe Street, Suite 3000, Chicago, Illinois 60606.
(10) Does not include the shares that may be deemed beneficially owned by
GMIMCo, as to which Mr. Dobrowski disclaims beneficial ownership.
(11) Includes 6,446 shares which may be obtained upon conversion of vested
stock units and, in the case of Mr. Edelman, Dr. Sagalyn, Mr. Garrabrant
and Mr. Zell, 25,000, 8,334, 11,667 and 40,000, respectively, shares
issuable upon the exercise of vested stock options.
(12) Messrs. Zell, Klopp, Hatkoff and Garrabrant and Ms. Rosenberg hold
indirect economic ownership interests in Veqtor equal to approximately
34.2%, 25%, 25%, 4.5% and 4.5%, respectively.
(13) Includes the 6,959,593 shares of Class A Common Stock and the 12,267,658
shares of Class A Preferred Stock owned by Veqtor. The inclusion of such
shares in the table shall not be construed as an admission that any of
Messrs. Hatkoff, Klopp and Zell are beneficial owners of such shares
within the meaning of Section 13(d) of the Exchange Act.
(14) Includes 58,334 shares issuable upon the exercise of vested stock options
held by each of Messrs. Hatkoff and Klopp.
(15) Includes 61,667 and 17,500 shares for Mr. Shugrue and Mr. Meyer,
respectively, that are the subject of restricted stock awards for which
the recipients retain voting rights. Includes 43,334, 32,500 and 100,000
shares issuable upon the exercise of vested stock options held by Mr.
Shugrue, Mr. Meyer and Mr. Plavin, respectively.
(16) Does not include the shares that may be deemed beneficially owned by VNO,
as to which Mr. Roth disclaims beneficial ownership.
(17) Does not include the shares that may be deemed beneficially owned by EOP,
as to which Mr. Zell disclaims beneficial ownership.
Buy/Sell Agreement
Veqtor, CTILP, V2 and Messrs. Klopp and Hatkoff are parties to an
agreement, dated July 15, 1997, that contains buy/sell provisions pursuant to
which (i) one member of Veqtor may purchase from or sell to the other member its
interests in Veqtor or (ii) one member of V2 or CTILP may purchase the other V2
member's interest in V2 (the "Buy/Sell Agreement"). Pursuant to the agreement,
from and after July 15, 2000, either CTILP or V2 as the initiating party (the
"Initiating Party") may initiate the buy/sell process by notifying (the
"Buy/Sell Notice") the other party (the "Responding Party") of its desire either
to sell for cash all of its common units of Veqtor ("Veqtor Common Units") (as
defined in the Buy/Sell Agreement) to the Responding Party or to purchase for
cash all of the Veqtor Common Units owned by the Responding Party, in each case,
at the per unit price specified by the Initiating Party (the "Specified Price").
Upon receipt of the Buy/Sell Notice, the Responding Party must within 150 days
elect either to sell its Veqtor Common Units to the Initiating Party or purchase
the Initiating Party's Veqtor Common Units at the Specified Price. If the
Responding Party fails to respond to the Buy/Sell Notice, it shall be deemed to
have elected to sell its Veqtor Common Units at the Specified Price.
The Buy/Sell Agreement provides that upon the termination of employment
(including through death or disability) with the Company of either John R. Klopp
or Craig M. Hatkoff (the "Departing Person") other than by voluntary termination
(the "Termination Event"), whomever of Messrs. Klopp or Hatkoff has not been the
subject of the Termination Event (the "Remaining Person") shall have the right
to purchase all of the interests in V2 then held by the Departing Person for
cash at their fair market value as defined in the Buy/Sell Agreement ("Fair
Market Value"). If the Remaining Person does not purchase the Departing Person's
interest in V2, the Buy/Sell Agreement provides that CTILP shall have the right
to purchase for cash from V2 50% of the Veqtor Common Units then held by V2 at
their fair market value, upon which purchase V2 shall distribute to the
Departing Person (or his estate or representative) an amount equal to the net
proceeds of such sale reduced by 50% of V2's aggregate liabilities in full
redemption of the interest in V2 then held by the Departing Person (or his
estate or representative). If CTILP does not elect to purchase the Veqtor Common
Units held by V2 pursuant to the foregoing, (i) Veqtor must distribute to V2 50%
of its assets that V2 would be entitled to receive upon a liquidation of Veqtor
(whereupon V2's economic interest
-14-
<PAGE>
in Veqtor shall be correspondingly reduced) and (ii) V2 must distribute to the
Departing Person 50% of such assets reduced by 50% of V2's aggregate liabilities
in full redemption of the Departing Person's interest in V2.
Pursuant to the Buy/Sell Agreement, upon the voluntary termination of
employment with the Company of either of Messrs. Klopp or Hatkoff (the
"Voluntarily Departing Person"), CTILP shall have the right to purchase from V2
50% of the Veqtor Common Units then held by V2 for cash at their fair market
value, upon such purchase V2 shall distribute to the Voluntarily Departing
Person an amount equal to the net proceeds of such sale reduced by 50% of V2's
aggregate liabilities in full redemption of the interest in V2 then held by the
Voluntarily Departing Person. If CTILP does not purchase the Veqtor Common Units
pursuant to the foregoing, the agreement provides that whomever of Messrs. Klopp
or Hatkoff is not the Voluntarily Departing Person (the "Voluntarily Remaining
Member") shall have the right to purchase all of the interest in V2 then held by
the Voluntarily Departing Person for cash at its Fair Market Value. If the
Voluntarily Remaining Member does not purchase from the Voluntarily Departing
Person all of the interest in V2 then held by the Voluntarily Departing Person
for cash at its Fair Market Value pursuant to the foregoing, (i) Veqtor must
distribute to V2 50% of its assets that V2 would be entitled to receive in a
liquidation of Veqtor (whereupon V2's economic interest in Veqtor shall be
correspondingly reduced) and (ii) V2 must distribute to the Voluntarily
Departing Person 50% of such assets reduced by 50% of V2's aggregate liabilities
in full redemption of the Voluntarily Departing Person's interest in V2.
Pursuant to the Buy/Sell Agreement, upon the termination of employment
with the Company of both Messrs. Klopp and Hatkoff, within any 30-day period,
for any or no reason, whether voluntary or involuntary, including, without
limitation, by reason of death or disability, CTILP shall have the right to
purchase from V2 all of the Veqtor Common Units then held by V2 for cash at
their Fair Market Value. If CTILP does not purchase the Veqtor Common Units
pursuant to the foregoing, Veqtor shall distribute to V2 100% of its assets that
V2 would be entitled to receive upon a liquidation of Veqtor in full redemption
of 100% of the Veqtor Common Units then held by V2.
Pursuant to the Buy/Sell Agreement, upon the termination of employment
with the Company of either of Messrs. Klopp or Hatkoff for any or no reason,
whether voluntary or involuntary, including, without limitation, by reason of
his death or disability, following by more than 30 days the prior termination of
employment with the Company of the other individual for any or no reason,
whether voluntary or involuntary, including, without limitation, by reason of
his death or disability, CTILP shall have the right to purchase from V2 all of
the Veqtor Common Units then held by V2 for cash at their Fair Market Value. If
CTILP does not purchase the Veqtor Common Units pursuant to the foregoing,
Veqtor shall distribute to V2 100% of its assets that V2 would be entitled to
receive upon a liquidation of Veqtor in full redemption of 100% of the Veqtor
Common Units then held by V2.
The Buy/Sell Agreement prohibits the transfer of Veqtor Common Units and
interests in V2 except to permitted transferees as defined in the agreement or
pursuant to right of first refusal provision contained in the agreement. The
Buy/Sell Agreement contains provisions governing the management of Veqtor.
Pursuant to such provisions, in the event that V2 and CTILP do not hold the same
number of Veqtor Common Units, then, notwithstanding anything to the contrary in
the operating agreement governing Veqtor (the "Veqtor Operating Agreement"), all
matters to be determined by V2 and CTILP as the managing members of Veqtor shall
be determined as between V2 and CTILP by an affirmative vote of a majority of
the Veqtor Common Units then held by V2 and CTILP, and V2 and CTILP shall be
bound to act on such matter as managing members in the manner determined by such
vote. The agreement provides that no permitted transferee or
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<PAGE>
other third party transferee shall be entitled to be appointed, or otherwise act
as, a managing member of Veqtor.
The Buy/Sell Agreement provides that notwithstanding anything to the
contrary in the Veqtor Operating Agreement, as long as V2 and CTILP hold the
same number of Veqtor Common Units, each shall be entitled to direct the
nomination of an equal number of trustees/directors of the Company, and if
Veqtor shall be entitled to nominate an odd number of trustees/directors, V2 and
CTILP shall jointly select one of the trustee/director nominees. If V2 and CTILP
do not hold the same number of Veqtor Common Units, then, notwithstanding
anything to the contrary in the Veqtor Operating Agreement, V2 and CTILP each
shall be entitled to direct the nomination of a number of trustees/directors
equal to their relative percentage holdings of Veqtor Common Units multiplied by
the total number of trustees/directors which Veqtor is then entitled to nominate
(rounded to the nearest whole number).
-16-
<PAGE>
ITEM 13. Certain Relationships and Related Transactions
Reimbursement Arrangement
Pursuant to an expense reimbursement arrangement with EGI, the Company
has agreed to reimburse EGI the costs for certain general administrative
services to the Company, including, among others, certain legal, tax,
shareholder relations and insurance acquisition services, which are provided by
employees of EGI. The Company had charged to operations approximately $215,674
during the 1998 fiscal year.
Relationships with Battle Fowler LLP
Martin L. Edelman, a director of the Company, is of counsel to Battle
Fowler LLP, a New York City law firm that provides the Company with ongoing
legal representation with respect to various matters and has represented the
Company and certain affiliates thereof, including Victor Capital, in the past
with respect to various legal matters. The Company expects to continue to engage
Battle Fowler LLP to provide legal representation in the future.
Relationship with Rosenberg & Liebentritt, P.C.
During 1998, the Company retained the services of Rosenberg &
Liebentritt, P.C., a law firm which performs legal services exclusively for
entities in which Samuel Zell, chairman of the board of directors, has an
interest.
Asset Management Agreements
VP Metropolis Services, LLC, a wholly owned subsidiary of the Company
("VPM"), is a party to an asset management agreement (the "VPM Asset Management
Agreement") with MVB Metropolis Properties, L.P. ("MVB") pursuant to which VPM
has agreed to manage, service and administer certain real estate assets owned by
MVB and its affiliates, initially including a New York City property consisting
of 46 condominium units and a pool of 18 mortgages secured by properties located
throughout the Unites States. John R. Klopp and Craig M. Hatkoff, both trustees
of the Company, are each 25.05% owners of VP-LP, LLC, which owns a 1.0% interest
in MVB. In addition, Mr. Klopp is a vice president of MVB Metropolis Corp., the
general partner and a 1.0% owner of MVB. Pursuant to the VPM Asset Management
Agreement, fees of $102,834 were paid to VPM and recognized as income by the
Company during 1998.
Victor Asset Management Partners, LLC, a wholly-owned subsidiary of the
Company ("VAMP"), is a party to an asset management agreement (the "VAMP Asset
Management Agreement I") with S.H. Mortgage Acquisition, LLC ("S.H. Mortgage
Acquisition") pursuant to which VAMP has agreed to manage, service and
administer certain real estate assets owned by S.H. Mortgage Acquisition and its
affiliates, initially including 21 loans secured by various properties and other
assets located in New Jersey. Messrs. Klopp and Hatkoff are managing members of
VP-NJ, LLC, which owns a 1.0% interest in and is the managing member of S.H.
Mortgage Acquisition. Pursuant to the VAMP Asset Management Agreement I, fees of
$87,078 were paid to VAMP and recognized as income by the Company during 1998.
VAMP is also a party to an asset management agreement (the "VAMP
Asset Management Agreement II") with RE Acquisition, LLC ("RE Acquisition")
pursuant to which VAMP has agreed to manage, service and administer certain real
estate assets owned by RE Acquisition, initially including a pool of five
mortgages and other rights relating to real properties located in New York and
New Jersey. Messrs. Klopp and Hatkoff are managing members of VPC Partners, LLC,
which owns a 0.7772% interest in RE Acquisition. In
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<PAGE>
addition, Mr. Klopp is a manager of RE Acquisition. Pursuant to the VAMP Asset
Management Agreement II, fees of $1,491,819 were paid to VAMP and recognized as
income by the Company during 1998.
Trust Preferred Private Placement and Co-Investment Agreement
On July 28, 1998, the Company privately placed $50,000,000 aggregate
liquidation amount of the Trust Preferred Securities to each of EOP, VNO and
Mellon Bank N.A., as trustee for General Motors Hourly-Rate Employes Pension
Trust and General Motors Salaried Employes Pension Trust. The Trust Preferred
Securities acquired by the foregoing trusts were subsequently transferred
without consideration to State Street Bank and Trust Company, as trustee for
General Motors Employes Global Group Pension Trust. In connection with the
foregoing private placement transaction, the Company entered into a
Co-Investment Agreement, dated as of July 28, 1998, with EOP, VNO and GMIMCo, as
agent for and for the benefit of pension plans of General Motors Corporation and
its affiliates, pursuant to which the Company, subject to certain terms and
conditions, is obligated to extend to the other parties to such agreement the
opportunity to co-invest in any loan or other investment for which the Company
in its sole and absolute discretion seeks to obtain co-investors. Following the
consummation of the foregoing private placement transaction, upon formal
recommendation to the full board of directors, Steven Roth and Thomas E.
Dobrowski, were appointed directors of the Company on August 13, 1998.
The Company believes that the terms of the foregoing transactions are no
less favorable than could be obtained by the Company from unrelated parties or
an arms-length basis.
PART IV
ITEM 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K.
(a)(3) Exhibits.
Exhibit
Number
- -----------------
21.1 Subsidiaries of Capital Trust, Inc.
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<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or Section 15(d) 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.
April 30, 1999 /s/ John R. Klopp
- -------------- -----------------
Date John R. Klopp
Vice Chairman, Chief Executive Officer
and President
-19-
Exhibit 21.1
CAPITAL TRUST, INC. LIST OF SUBSIDIARIES
ENTITY JURISDICTION OF D/B/A (JURISDICTION)
INCORPORATION
Victor Capital Group, L.P. Delaware
VIC, Inc. Delaware VIC NY (New York)
VICT, INC.(California)
VCG Montreal Management, New York
Inc.
Victor Asset Management New York
Partners, L.L.C.
970 Management LLC New York
VP Metropolis Services, L.L.C. New Jersey
B.B. Real Estate Investment Delaware
Corporation
Cal-REIT Totem Square, Inc. Washington
Narest Funding I, Inc. Delaware
CT-BB Funding Corp. Delaware
833189.1
