The Company’s objective is to provide attractive risk-adjusted returns to its investors through a combination of dividends and capital appreciation. The Company will seek to achieve this objective by opportunistically investing in a portfolio of real estate-related securities, real estate-related loans and certain other real estate-related assets. The Company expects to invest primarily in real estate-related assets.

The Company intends to invest in CMBS that are secured by, or evidence ownership interests in, pools of mortgage loans secured by commercial properties. These securities will consist primarily of subordinated, non-investment grade rated or unrated interests, but may be senior or investment grade. The Company expects some of its CMBS investments to be rated by at least one nationally recognized rating agency, and to consist of securities that are part of a capital structure or securitization where the rights of such class to receive principal and interest are subordinated to senior classes but senior to the rights of lower rated classes of securities. The Company also may invest in CMBS that are not rated by any agency. The Company intends to primarily invest in CMBS that will pay current interest. The Company intends to acquire CMBS from private originators of, or investors in, mortgage loans, including mortgage bankers, commercial banks, finance companies, investment banks and other entities. The Company may enter into interest rate swaps, futures, options or other strategies to manage or mitigate or hedge against potential changes in values caused by changes in interest rates for these investments.

The Company intends to invest in CDOs. In general, CDOs are issued by a special purpose entity, or SPE, that owns a portfolio of debt obligations and/or securities. The SPE issues tranches of debt securities of different seniority and equity to fund the purchase of the portfolio. The debt tranches are typically rated based on collateral quality, diversification and structural subordination. The equity securities issued by the SPE are the most subordinated piece of the CDO capital structure, but they are also generally entitled to all residual amounts available for payment after the SPE's obligations to the debt holders have been satisfied. Some SPEs are "synthetics," in which the credit risk to the collateral pool is transferred to the SPE by means of a credit derivative such as a credit default swap.

The Company intends to invest in real estate subordinated loans, which are referred to as B-Notes. B-Notes are typically privately negotiated loans that are secured by a first mortgage on a single large property or a group of related properties; and subordinated to an A-Note secured by the same first mortgage on the same property. The Company may acquire B-Notes in negotiated transactions with the originators of the related mortgage, as well as in the secondary market.

Interest expense was $0.9 million for the three months ended March 31, 2005, compared to $2.8 million for the same period in 2004.

Equity in losses of unconsolidated entities was $0.0 and $1.5 million for the three months ended March 31, 2005 and 2004, respectively.

Interest income from combined CMBS and mortgage loan portfolios decreased to $24.5 million for the three months ended March 31, 2005, from $35.0 million for the same period in 2004.

Interest income from CMBS portfolio decreased to $19.7 million for the three months ended March 31, 2005, from $26.6 million for the same period in 2004.