UNITED STATES
SECURITIES AND EXCHANGE COMMISSIONWASHINGTON, D.C. 20549

FORM 10-K/A

(Amendment No. 1)

ý

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended December 31, 2008ORo

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the transition period from            to


Commission file number: 333-146211

CAPMARK FINANCIAL GROUP INC.(Exact name of registrant as specified in its charter)

Nevada(State or other jurisdiction of
incorporation or organization)

91-1902188(I.R.S. Employer Identification No.)116 Welsh RoadHorsham, Pennsylvania

19044(Address of principal executive offices)

(Zip Code)


(215) 328-4622(Registrant's telephone number, including area code)

Securities
registered pursuant to Section 12(b) of the Act:None

Securities
registered pursuant to Section 12(g) of the Act:None

Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities
Act. Yes o    No ý

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the
Act. Yes o    No ý

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 ý    No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (§ 229.405 of this chapter) during the preceding 12 months (or for such shorter period
that the registrant was required to submit and post such
files). Yes o    No o

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K 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. ý

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting
company. See the definitions of "large accelerated filer," "accelerated filer," and "smaller reporting company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer o

Accelerated filer o

Non-accelerated filer ý (Do not check if a smaller
reporting company)

Smaller reporting company o


Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange
Act). Yes o    No ý

The aggregate market value of the registrant's common stock outstanding and held by non-affiliates as of June 30, 2008 was approximately
$59,938,534. The registrant's common stock is not traded on a public market. The aggregate market value was determined using the fair market value of a share of common stock as determined by the
registrant's board of directors. The board of directors determined that the fair market value of a share of common stock was $5.87 on April 30, 2008. This was the most recent determination of
fair market value prior to June 30, 2008. For this purpose, directors, executive officers and greater than 10% record shareholders are considered the affiliates of the registrant.

The
registrant had 427,130,631 shares of common stock outstanding on March 31, 2009.



---





EXPLANATORY NOTE

This amendment to our Annual Report on Form 10-K for the fiscal year ended December 31, 2008
("Form 10-K") is being filed for the sole purpose of adding the conformed signature of Deloitte & Touche LLP to the "Report of Independent Registered Public Accounting
Firm," which was inadvertently not included within our Form 10-K. At the time of the April 24, 2009 filing of the Form 10-K with the Securities and
Exchange Commission, Capmark Financial Group Inc. was in possession of manually-signed copies of the audit opinion, but the signature in typed form was inadvertently omitted from the electronic
version. The sole purpose of this amendment is to file the "Report of Independent Registered Public Accounting Firm" which includes the signature in typed form. For convenience and ease of reference,
this amendment sets forth "Item 8Financial Statements and Supplementary Data" from the Form 10-K in its entirety with the applicable change. Because this
amendment only incorporates the signature in typed form of Deloitte & Touche LLP on the "Report of Independent Registered Public Accounting Firm," the date of such report remains as
originally filed.

No
revisions have been made to our financial statements or any other disclosures contained in the Form 10-K. This amendment does not reflect any events that may have
occurred subsequent to the original filing of the Form 10-K. All other information not affected by this amendment remains unchanged and reflects the disclosure made at the time of
the filing of the original filing of the Form 10-K. In addition, as required by Rule 12b-15 under the Securities Exchange Act of 1934, as amended, new
certifications by our principal executive officer and principal financial officer are filed as exhibits to this Annual Report on Form 10-K/A.

---





Item 8.    Financial Statements and Supplementary Data

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To
the Board of Directors and Stockholders of
Capmark Financial Group Inc.
Horsham, Pennsylvania

We
have audited the accompanying consolidated balance sheets of Capmark Financial Group Inc. and subsidiaries (the "Company") as of December 31, 2008 and 2007, and the
related consolidated statements of operations, changes in stockholders' equity, and cash flows for the years ended December 31, 2008 and 2007 and for the period from March 23, 2006 to
December 31, 2006 (successor) and the period from January 1, 2006 to March 22, 2006 (predecessor). These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based on our audits.

We
conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal
control over financial reporting. An audit includes consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but
not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining,
on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In
our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2008 and 2007, and the
results of its operations and its cash flows for the years ended December 31, 2008 and 2007 and the period from March 23, 2006 to December 31, 2006 (successor) and for the period
from January 1, 2006 to March 22, 2006 (predecessor) in conformity with accounting principles generally accepted in the United States of America.

The
accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the consolidated
financial statements, the Company has incurred operating losses and its stockholders' equity has declined, resulting in noncompliance with covenants and an event of default under certain credit
agreements; uncertainty about the outcome of negotiations with lenders to waive the covenants and modify the terms of the credit agreements raise substantial doubt about the Company's ability to
continue as a going concern. Management's plans concerning these matters are also discussed in Note 2 to the consolidated financial statements. The consolidated financial statements do not
include any adjustments that might result from the outcome of this uncertainty.

As
discussed in Note 3 to the consolidated financial statements, effective January 1, 2008 the Company adopted the provisions of Statement of Financial Accounting Standards
("SFAS") No. 159,The Fair Value Option for Financial Assets and LiabilitiesIncluding an Amendment of FASB Statement No. 115,
and SFAS No. 157,Fair Value Measurements.

As
discussed in Note 3 to the consolidated financial statements, as of January 1, 2007, the Company changed its method of accounting for income taxes to conform to the
provisions of Financial Accounting Standards Board ("FASB") Interpretation No. 48,Accounting for Uncertainty in Income Taxesan interpretation of FASB
Statement No. 109.

1

---



As
discussed in Note 3 to the consolidated financial statements, as of March 23, 2006, the Company changed its basis of accounting in connection with the business
combination in which the Company pushed down the purchase price in accordance with SEC Staff Accounting Bulletin No. 54,Application of "Push Down" Basis of Accounting
in Financial Statements of Subsidiaries Acquired by Purchase.

|                          |  | 
|------------------------- |  | 
|/s/ DELOITTE & TOUCHE LLP |  | 

April 23,
2009
Philadelphia, Pennsylvania

2

---





CAPMARK FINANCIAL GROUP INC.        Consolidated Balance Sheet        (in thousands, except share amounts)

December 31,
2008

December 31,
2007AssetsCash, cash equivalents and restricted cash

$
874,390

$
1,436,752Accounts and other receivables


343,780


470,669Investment securities:Trading


1,457,384


185,692Available for sale


843,967


949,682Loans held for sale


3,970,683


7,783,769Loans held for investment, net of allowance for loan losses of $108.2 million as of December 31, 2008 and $28.8 million as of December 31,
 2007


8,207,980


6,891,714Real estate investments


1,844,924


1,748,555Equity investments


1,568,057


1,984,140Mortgage servicing rights


817,189


890,550Current taxes receivable


133,395


201,916Deferred tax assets





32,029Goodwill and other intangible assets, net


99,348


182,549Other assets


477,078


506,379Total assets

$
20,638,175

$
23,264,396Liabilities and Stockholders' EquityLiabilities:Short-term borrowings

$
3,310,758

$
3,832,637Collateralized borrowings in securitization trusts


184,086


260,524Other long-term borrowings


8,098,749


8,047,162Deposit liabilities


5,690,930


5,552,607Real estate syndication proceeds and related liabilities


1,258,743


1,563,151Other liabilities


689,624


1,069,068Total liabilities


19,232,890


20,325,149Commitments and Contingent Liabilities





Minority Interest


186,400


330,196Mezzanine Equity


72,851


102,418Stockholders' Equity:Preferred stock, $.001 par value; 100,000,000 shares authorized; none issued and outstanding as of December 31, 2008 and 2007





Common stock, $.001 par value; 650,000,000 shares authorized; 412,900,918 shares issued and outstanding as of December 31, 2008 and 412,898,576 shares
issued and outstanding as of December 31, 2007


413


413Capital paid in excess of par value


2,063,280


2,050,361Retained (deficit) earnings


(941,398
)

418,876Accumulated other comprehensive (loss) income, net of tax:Net unrealized (loss) gain on investment securities and derivative instruments


(18,468
)

17,536Net foreign currency translation adjustment


42,207


19,447Total accumulated other comprehensive (loss) income, net of tax


23,739


36,983Total stockholders' equity


1,146,034


2,506,633Total liabilities and stockholders' equity

$
20,638,175

$
23,264,396


The accompanying notes are an integral part of these consolidated financial statements.

3

---





CAPMARK FINANCIAL GROUP INC.        Consolidated Statement of Operations        (in thousands, except per share data)

Successor

PredecessorYear ended
December 31,
2008

Year ended
December 31,
2007

Period from
March 23, 2006 to
December 31, 2006

Period from
January 1, 2006 to
March 22, 2006Net Interest IncomeInterest income

$
959,585

$
1,251,192

$
901,753

$
253 691Interest expense


761,018


914,460


659,514


172,176Net interest income


198,567


336,732


242,239


81,515Provision for loan losses


179,665


32,666


73,585


1,031Net interest income after provision for loan losses


18,902


304,066


168,654


80,484Noninterest IncomeNet (losses) gains:Net (losses) gains on loans


(1,029,772
)

(128,413
)

95,038


46,941Net (losses) gains on investments and real estate


(326,949
)

65,104


(27,992
)

12,187Other gains (losses), net


197,785


75,944


1,809


(10,683
)Mortgage servicing fees


187,776


206,414


152,401


46,766Placement fees


62,240


65,756


76,893


11,194Investment banking fees and syndication income


97,950


111,954


64,596


(42,263
)Asset management fees


75,730


103,266


46,365


14,001Trust fees


132,217


193,866


134,001


32,398Other fees


12,625


53,685


55,643


19,533Equity in (loss) income of joint ventures and partnerships


(206,227
)

56,018


81,040


(13,198
)Net real estate investment and other income


106,026


104,485


75,726


19,790Total noninterest income


(690,599
)

908,079


755,520


136,666Net revenue


(671,697
)

1,212,145


924,174


217,150Noninterest ExpenseCompensation and benefits


303,867


414,479


366,895


129,016Amortization of mortgage servicing rights


139,557


130,457


97,696


23,312Occupancy and equipment


77,781


107,203


79,743


21,801Professional fees


114,554


102,882


96,597


16,439Other expenses


147,493


134,353


129,250


30,371Total noninterest expense


783,252


889,374


770,181


220,939(Loss) income before minority interest and income tax provision (benefit)


(1,454,949
)

322,771


153,993


(3,789
)Minority interest income


110,480


124,331


53,308


12,264(Loss) income before income tax provision (benefit)


(1,344,469
)

447,102


207,301


8,475Income tax provision (benefit)


8,300


166,778


63,157


(3,972
)Net (Loss) Income

$
(1,352,769
)
$
280,324

$
144,144

$
12,447Basic net (loss) income per shareNet (loss) income per share

$
(3.13
)
$
0.65

$
0.33

$
0.03Weighted average basic shares outstanding


431,672


433,071


431,899


412,803Diluted net (loss) income per shareNet (loss) income per share

$
(3.13
)
$
0.65

$
0.33

$
0.03Weighted average diluted shares outstanding


431,672


434,315


432,037


412,803


The accompanying notes are an integral part of these consolidated financial statements.

4

---





CAPMARK FINANCIAL GROUP INC.        Consolidated Statement of Changes in Stockholders' Equity        (in thousands)

Successor

PredecessorYear ended
December 31,
2008

Year ended
December 31,
2007

Period from
March 23, 2006 to
December 31, 2006

Period from
January 1, 2006 to
March 22, 2006Common StockBalance at beginning of period

$
413

$
413

$
413

$
413Balance at end of period


413


413


413


413Capital Paid in Excess of Par ValueBalance at beginning of period


2,050,361


2,034,875


415,146


469,545Recapitalization








1,613,372


Capital contribution from parent











14,698Additional shares issued


9


512


2


Dividend paid to parent











(69,097
)Stock-based compensation expense


13,194


15,843


6,355


Other


(284
)

(869
)




Balance at end of period


2,063,280


2,050,361


2,034,875


415,146Retained (Deficit) EarningsBalance at beginning of period


418,876


144,144


1,566,276


1,553,829Cumulative effect of adopting FASB Interpretation No. 48





(9,535
)




Cumulative effect of adopting Statement of Financial Accounting Standards No. 159


(9,805
)







Recapitalization








(1,566,276
)

Net (loss) income


(1,352,769
)

280,324


144,144


12,447Other


2,300


3,943





Balance at end of period


(941,398
)

418,876


144,144


1,566,276Accumulated Other Comprehensive (Loss) Income, Net of TaxBalance at beginning of period


36,983


49,793


(9,132
)

(27,165
)Recapitalization








9,132


Net unrealized (loss) gain on investment securities and derivative instruments


(36,004
)

(13,762
)

31,298


(3,960
)Net foreign currency translation adjustment


22,760


952


18,495


21,993Balance at end of period


23,739


36,983


49,793


(9,132
)Total Stockholders' Equity

$
1,146,034

$
2,506,633

$
2,229,225

$
1,972,703Comprehensive (Loss) IncomeNet (loss) income

$
(1,352,769
)
$
280,324

$
144,144

$
12,447Other comprehensive (loss) income


(13,244
)

(12,810
)

49,793


18,033Comprehensive (loss) income

$
(1,366,013
)
$
267,514

$
193,937

$
30,480


The
accompanying notes are an integral part of these consolidated financial statements.

5

---





CAPMARK FINANCIAL GROUP INC.        Consolidated Statement of Cash Flows        (in thousands)

Successor

PredecessorYear ended
December 31,
2008

Year ended
December 31,
2007

Period from
March 23,
2006 to
December 31,
2006

Period from
January 1,
2006 to
March 22,
2006Operating ActivitiesNet (loss) income

$
(1,352,769
)
$
280,324

$
144,144

$
12,447Adjustments to reconcile net (loss) income to net cash provided by (used in) operating activities:Provision for loan losses


179,665


32,666


73,585


1,031Provision (benefit) for deferred income taxes


44,283


50,693


20,677


(26,412
)Net losses (gains)


1,158,936


(12,635
)

(68,855
)

(48,445
)Provision for unrecognized tax benefits under FASB Interpretation No. 48


1,072


15,118





Depreciation and amortization of real estate, property and equipment


29,728


53,684


37,507


8,498Amortization of intangible assets and mortgage servicing rights and goodwill impairment


176,040


146,935


110,301


24,729Amortization of debt issuance costs


17,389


18,786


24,684


Accretion/amortization on loans and investment securities


(65,136
)

(57,972
)

(15,141
)

(20,279
)Extinguishment of real estate syndication proceeds


(182,409
)

(318,433
)

(132,609
)

(38,519
)Other real estate syndication activities


(79,134
)

(16,779
)

(4,575
)

52,334Capitalized interest income/expense, net


(46,584
)

(50,474
)

(26,723
)

(8,691
)Equity in net losses of investees and cash return on investment


399,368


350,462


178,321


58,830Minority interest income


(110,480
)

(124,331
)

(53,308
)

(12,264
)Stock-based compensation expense


13,194


15,843


6,355


Other adjustments


10,692


2,520


21,979


1,600Net change in assets and liabilities which provided (used) cash:Accounts and other receivables


33,479


24,784


(185,831
)

43,131Investment securities classified as trading


(1,316,013
)

922,539


(55,680
)

271,589Other assets


(186,594
)

(126,180
)

(21,453
)

(9,845
)Other liabilities


(501,284
)

(62,106
)

195,322


(461,376
)Current taxes payable


100,463


(221,857
)

(91,690
)

(28,572
)Proceeds from sales of/payments from loans held for sale


9,420,887


15,040,791


11,856,012


4,176,120Origination/purchase of loans held for sale


(6,526,836
)

(18,193,899
)

(12,355,934
)

(3,397,485
)Net cash provided by (used in) operating activities


1,217,957


(2,229,521
)

(342,912
)

598,421Investing ActivitiesNet decrease (increase) in restricted cash


82,656


20,690


(74,476
)

(29,955
)Proceeds from sales of investment securities classified as available for sale


21,507


492,188


152,485


70,611Proceeds from repayments of investment securities classified as available for sale


126,072


304,622


127,078


33,264Purchases of investment securities classified as available for sale


(117,696
)

(556,158
)

(561,841
)

(124,053
)Proceeds from repayments of loans held for investment


1,460,852


2,552,115


2,098,893


695,527Origination/purchase of loans held for investment


(2,935,081
)

(2,213,284
)

(1,480,893
)

(441,635
)Proceeds from sales of real estate investments


186,146


371,685


255,163


43,074Purchases of real estate investments


(165,978
)

(728,389
)

(347,223
)

(12,718
)Net purchases of property and equipment


(8,009
)

(2,500
)

(8,367
)

(4,552
)Proceeds from repayments of investment securities classified as held to maturity











442Proceeds from sales of/capital distributions from equity investments


207,102


1,097,667


361,972


51,939




6

---



CAPMARK FINANCIAL GROUP INC.

Consolidated Statement of Cash Flows (Continued)

(in thousands)

Successor

PredecessorYear ended
December 31,
2008

Year ended
December 31,
2007

Period from
March 23,
2006 to
December 31,
2006

Period from
January 1,
2006 to
March 22,
2006Purchases of equity investments


(176,721
)

(1,274,559
)

(346,499
)

(82,022
)Purchases of mortgage servicing rights


(17,933
)

(126,838
)

(72,156
)

(20,116
)Sales of mortgage servicing rights





39,554


21,286


Other investing activities, net


(2,264
)

2,029


27,482


2,308Net cash (used in) provided by investing activities


(1,339,347
)

(21,178
)

152,904


182,114Financing ActivitiesNet (decrease) increase in short-term borrowings


(398,139
)

680,334


(6,711,483
)

589,092Proceeds from issuance of collateralized borrowings in securitization trusts





47,608


517,794


10,385Repayments of collateralized borrowings in securitization trusts


(9,225
)

(1,275,535
)

(327,986
)

(33,405
)Proceeds from issuance of other long-term borrowings


1,122,354


4,670,461


8,377,212


113,469Repayments of other long-term borrowings


(1,129,545
)

(3,981,157
)

(1,912,333
)

(393,930
)Net increase (decrease) in deposit liabilities


3,607


2,641,650


(310,438
)

(832,766
)Real estate syndication proceeds received


46,492


262,485


240,387


73,927Minority interest (payments) proceeds


(1,455
)

48,663


(45,809
)

(16,230
)(Repurchases of)/proceeds from issuance of mezzanine equity and additional common shares


(27,540
)

(3,400
)

102,277


Dividend paid to parent











(69,097
)Other financing activities, net


16,518


12,543





14,698Net cash (used in) provided by financing activities


(376,933
)

3,103,652


(70,379
)

(543,857
)Effect of Foreign Exchange Rates on Cash


18,616


25,720


2,935


1,000Net (Decrease) Increase in Cash and Cash Equivalents


(479,707
)

878,673


(257,452
)

237,678Cash and Cash Equivalents, Beginning of Period


1,204,477


325,804


583,256


345,578Cash and Cash Equivalents, End of Period(1)

$
724,770

$
1,204,477

$
325,804

$
583,256Supplemental Disclosures of Cash Flow Information:Income taxes (refunded) paid

$
(97,391
)
$
304,670

$
107,560

$
46,273Interest paid


770,233


747,787


570,705


142,941Non-cash Investing and Financing Activities:Impact of push down accounting on stockholders' equity








56,229


Cumulative effect of adopting FASB Interpretation No. 48 on retained earnings





(9,535
)




Cumulative effect of adopting Statement of Financial Accounting Standards No. 159 on retained earnings


(9,805
)







Transfer of loans held for sale to loans held for investment





4,509,711





Financing obligations assumed by third party related to sale of operations





677,148





Transfer of loans to real estate


92,782


46,625


2,715


Various non-cash assets and liabilities (derecognized) acquired through (deconsolidation) consolidation of variable interest and other entities,
net


(95,867
)

37,985


274,614


88,770


---

The
accompanying notes are an integral part of these consolidated financial statements.

7

---





CAPMARK FINANCIAL GROUP INC.        Notes to Consolidated Financial Statements

1. Organization and Operations

Capmark Financial Group Inc. ("Capmark") is a diversified company that provides financial services to investors in commercial real estate-related assets. Capmark has three core
businesses: lending and mortgage banking, investments and funds management, and servicing. Capmark operates in North America, Europe and Asia. As used herein, the term "Company" refers to Capmark
Financial Group Inc. and its consolidated subsidiaries, except where it is clear that the term means only Capmark Financial Group Inc.

Prior
to March 23, 2006, the Company was an indirect wholly-owned subsidiary of GMAC LLC, formerly known as General Motors Acceptance Corporation ("GMAC"). On
March 23, 2006, an investor entity owned by affiliates of Kohlberg Kravis Roberts & Co. L.P., Five Mile Capital Partners LLC, Goldman Sachs Capital Partners and Dune
Capital Management LP (collectively, the "Sponsors") acquired a controlling equity stake in the Company from a subsidiary of GMAC. As of December 31, 2008, the Sponsors and one other
investor owned approximately 75.4 percent of the Company's common stock, employees, former employees and non-employee directors (collectively, the "Management Stockholders") owned
approximately 3.3 percent of the Company's common stock and a subsidiary of GMAC owned approximately 21.3 percent of the Company's common stock. The changes in ownership and the other
related transactions that occurred on March 23, 2006 are referred to as the "Sponsor Transactions" in these notes to the consolidated financial statements.

The
Company operates primarily through the following subsidiaries:

Capmark
Finance Inc. ("Capmark Finance"), a wholly-owned subsidiary of the Company, originates and sells commercial mortgage loans primarily in the secondary mortgage market, and
services these loans on an ongoing basis. Capmark Finance is an approved national lender and servicer of mortgage loans by the Department of Housing and Urban Development, Freddie Mac, Fannie Mae,
Federal Housing Administration ("FHA") and Ginnie Mae.

Capmark
Capital Inc. ("Capmark Capital"), a wholly-owned subsidiary of the Company, is a holding company for the Company's broker-dealer and affordable housing operations. Capmark
Securities Inc. ("Capmark Securities"), a wholly-owned subsidiary of Capmark Capital, is registered with the Securities and Exchange Commission ("SEC") as a general securities broker-dealer and
is a member of the Financial Industry Regulatory Authority. Capmark Affordable Equity Holdings Inc. ("Capmark Affordable Equity"), a wholly-owned subsidiary of Capmark Capital, previously
syndicated affordable housing investment partnerships and is currently focused on the ongoing management of syndicated real estate investment partnerships and on the management of its existing
inventory of non-syndicated investments that generate low-income housing tax credits and historic tax credits provided under Sections 42 and 48 of the Internal Revenue
Code. See Note 3 for disclosure of the sale of a majority of Capmark Capital's affordable housing debt platform in 2007.

Capmark
Investments LP ("Capmark Investments"), a subsidiary of Capmark Finance, makes real estate debt and equity investments on behalf of the Company and for third parties,
including pension plans, investment funds, insurance companies, other institutions and high net worth individuals. Capmark Investments is registered with the SEC as an investment adviser pursuant to
the Investment Advisers Act of 1940.

Capmark
Bank ("Capmark Bank US"), Escrow Bank USA ("Escrow Bank") and Capmark Bank Europe p.l.c ("Capmark Bank Europe") are the Company's wholly-owned banking subsidiaries. Capmark Bank
US and Escrow Bank are industrial banks chartered by the State of Utah. Capmark Bank Europe is an Irish bank. Capmark Bank US accepts deposits in the form of time and money

8

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CAPMARK FINANCIAL GROUP INC.

Notes to Consolidated Financial Statements (Continued)

1. Organization and Operations (Continued)

market
deposits and issues non-callable and callable fixed rate certificates of deposit in the brokered deposit market. Following the cessation of Escrow Bank's trust operations in 2008 as
described below, Capmark Bank US also accepts deposits of principal, interest, escrow and reserve balances that borrowers maintain in custodial accounts for the purpose of paying principal and
interest on their loans and funding repairs, tenant improvements, taxes and insurance on the properties that are financed with their loans. Deposits held in a fiduciary capacity are not assets or
liabilities of the Company and, accordingly, are not included in the Company's consolidated balance sheet. A portion of these deposits are eligible for investment as deposits at Capmark Bank US at the
discretion of its trust department and may provide the Company with an alternative form of financing. The deposits maintained by Capmark Bank US are eligible for insurance by the Federal Deposit
Insurance Corporation (the "FDIC"). Capmark Bank US is subject to regulation and periodic examination by the Utah Department of Financial Institutions and the FDIC and must pay applicable FDIC
insurance premiums and comply with applicable capital adequacy requirements, limitations on transactions with affiliates, provisions of the Bank Secrecy Act, the USA PATRIOT Act and
Regulation O of the Federal Reserve.

In
June 2008, Escrow Bank ceased its trust operations and the trust customers of Escrow Bank appointed Capmark Bank US as their new trustee. Following the cessation of trust operations,
Escrow Bank no longer has any daily operations and has requested and received notice from the FDIC of termination of its deposit insurance effective June 30, 2009. Until the termination of
deposit insurance is
effective, Escrow Bank remains subject to regulation and periodic examination by the FDIC and must pay applicable FDIC insurance premiums and comply with applicable capital adequacy requirements. The
Company intends to liquidate Escrow Bank's remaining assets, return the Industrial Bank Charter under which Escrow Bank has operated since inception, and dissolve Escrow Bank. Until such time as
Escrow Bank is dissolved, it remains subject to regulation and periodic examination by the Utah Department of Financial Institutions and must comply with limitations on transactions with affiliates,
provisions of the Bank Secrecy Act, the USA PATRIOT Act and Regulations of the Federal Reserve.

Capmark
Bank Europe is required to comply with various laws, rules and regulations in Ireland, including capital adequacy requirements, administrative notices implementing European Union
Directives relating to business activities carried out by credit institutions and supplementary requirements and standards that are from time to time established by financial regulators. In July 2008,
Capmark Bank Europe notified the Irish banking regulatory authority that, in connection with the Company's decision to end proprietary lending in Europe, Capmark Bank Europe is commencing cessation of
its banking operations. In connection with the wind-down of banking activities, Capmark Bank Europe will voluntarily surrender its banking license once it has repaid all of its deposits
and unwound or transferred to a third party all of the obligations under which it is required to hold a banking license. The Company expects that the process of winding down Capmark Bank Europe's
banking activities will be completed and the banking license will be relinquished prior to June 30, 2009. Until it relinquishes its license, Capmark Bank Europe is required to comply with the
various laws, rules and regulations in Ireland described above. See Note 27 for disclosure of certain regulatory matters.

Historically,
the Company has performed certain lending, real estate investment and servicing activities in Europe and Asia. In 2008, the Company ceased proprietary lending and investing
activities in Europe and Asia and focused on managing its existing loan, investment and fee-for-services businesses. Although the Company continued to originate loans for third
parties and government

9

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CAPMARK FINANCIAL GROUP INC.

Notes to Consolidated Financial Statements (Continued)

1. Organization and Operations (Continued)

sponsored
entities, in light of market conditions, the Company also substantially reduced proprietary loan originations and investment activities in North America.

2. Risks and Uncertainties

Going Concern

As a result of the adverse conditions in the financial and capital markets and general economic conditions throughout 2008, the Company
incurred operating losses due principally to fair value adjustments on its loans held for sale, real estate and investment portfolios and an increase in the provision for loan losses on its portfolio
of loans held for investment. The combination of pre-tax operating losses and valuation allowances on the Company's deferred tax assets recognized in the fourth quarter of 2008 has
contributed to a significant decline in stockholders' equity. As a result, the Company was not in compliance with the leverage ratio covenant in the senior credit facility and bridge loan agreement as
of the quarter ended December 31, 2008.

In
light of adverse market conditions and the Company's operating results as well as the negative effect on its liquidity from the near-term maturity of its bridge loan, the
Company entered into discussions with the lenders under its senior credit facility and bridge loan agreement. These discussions have included negotiating modifications to certain terms of both the
senior credit facility and bridge loan agreement. As of April 20, 2009, lenders representing approximately 94% of the outstanding loans under the bridge loan agreement have agreed to extend the
maturity date of the bridge loan to May 8, 2009. Additionally, the required lenders under the senior credit facility and the bridge loan agreement have agreed to waive the Company's compliance
with the leverage ratio covenant as of the quarters ended December 31, 2008 and March 31, 2009 and the requirement to deliver its annual audited financial statements within
110 days after year end. These waivers are effective through May 8, 2009.

Unless
the lenders under the senior credit facility and bridge loan agreement continue to waive or eliminate the leverage ratio covenant beyond May 8, 2009, further extend the
maturity of the bridge loan agreement and otherwise restructure the senior credit facility and bridge loan agreement, upon expiration of the waivers the Company will default under these agreements and
the required lenders
under such agreements can immediately declare all loans due and payable. Any such acceleration of the maturity of the Company's debt obligations would permit its senior noteholders and certain other
lenders and contractual counterparties to terminate and/or accelerate the maturity of obligations due under other financing instruments and agreements, including the senior notes. If the lenders,
noteholders, and/or other counterparties demand immediate repayment of all of its obligations, the Company would likely be unable to pay all such obligations. In such an event, if the Company has not
otherwise been able to recapitalize, refinance, or raise additional liquidity by selling some or all of its assets or through some other form of restructuring, it will have to seek to reorganize under
Chapter 11 of the United States Bankruptcy Code. Due to these conditions and events, substantial doubt exists about the Company's ability to continue as a going concern. The Company's
management believes that access to capital markets is extremely limited in the current economic environment and it is unlikely that it will be able to access new capital if it is unable to complete
the restructuring of the senior credit facility and bridge loan agreement.

The
Company plans to continue to negotiate with its lenders to complete a restructuring of its senior credit facility and bridge loan agreement. In addition, the Company is performing a
review of all of its businesses, including exploring strategic alternatives for such businesses and implementing significant expense reduction initiatives. The Company has engaged financial advisors
to assist with its

10

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CAPMARK FINANCIAL GROUP INC.

Notes to Consolidated Financial Statements (Continued)

2. Risks and Uncertainties (Continued)

efforts
to manage expenses and evaluate its strategic alternatives. There is no assurance that the Company will be able to restructure its borrowing arrangements on acceptable terms, if any, or obtain
further waivers to or elimination of its leverage ratio covenant to adequately reduce the risk of default in the near future.

The
Company continues to actively manage its assets and intends to reduce its overall debt while maintaining adequate liquidity to support its operations. Further, the Company's
management is focused on maintaining appropriate regulatory capital at Capmark Bank US.

The
consolidated financial statements have been prepared on the basis that the Company will continue as a going concern, which contemplates the realization of assets and discharge of
liabilities in the normal course of business for the foreseeable future. The consolidated financial statements do not include any adjustments to reflect possible future effects on the recoverability
and classification of assets, or the amounts of liabilities that may result from the outcome of the Company's discussions with the lenders under the senior credit facility and bridge loan agreement,
which would affect its ability to continue as a going concern.

Other Risks and Uncertainties

In addition to the risks discussed above, the Company's primary business risks include: (i) liquidity risk, (ii) credit
risk, (iii) interest rate and other market risks, and (iv) operational risk. Management of these risks affects both the level and stability of the Company's earnings.

Liquidity
risk is the risk the Company will be unable to preserve stable, reliable, and cost-effective funding sources to meet all near-term and projected
long-term financial obligations. The Company's external funding sources have consisted primarily of its unsecured senior notes; committed unsecured funding provided by banks, including a
senior credit facility, a bridge loan and other bank loans; committed unsecured debt including junior subordinated debentures; secured funding facilities including repurchase agreements and other
secured funding facilities; and other uncommitted funding sources, including certificates of deposit issued by Capmark Bank US and other unsecured funding provided by third-party banks. Factors that
are significant to the determination of the Company's credit ratings or otherwise affect its ability to raise financing include the level and volatility of earnings, degree of leverage, relative
competitive position, risk management policies, cash liquidity, capital adequacy, ability to retain key personnel, and legal, regulatory and tax developments. In the event that any or all of the
Company's credit ratings were downgraded, the ability to raise financing could be adversely affected and the cost of capital could increase significantly. In addition, because amounts of interest that
are payable on the Company's borrowings under its senior credit facility and bridge loan are determined by, among other factors, reference to its credit ratings, a credit ratings downgrade could
adversely impact the Company's financing costs and results of operations. A credit ratings downgrade could also make it more difficult or costly for the Company to enter into hedging transactions and
could possibly increase the amount of collateral that the Company would be required to provide counterparties under its secured contractual obligations. Proceeds from the repayment of loans are also a
significant external source of funding for the Company. This funding would be negatively impacted by direct and indirect relationships with borrowers who may default.

The
Company's ability to access the capital markets and other sources of secured and unsecured funding, which is critical to the Company's ability to do business, has been and could
continue to be adversely affected by recent events in the global markets and economy. Global market and economic conditions have been, and continue to be, disrupted and volatile to an unprecedented
extent. The

11

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CAPMARK FINANCIAL GROUP INC.

Notes to Consolidated Financial Statements (Continued)

2. Risks and Uncertainties (Continued)

Company's
cost and availability of funding have been and may continue to be adversely affected by illiquid credit markets and wider credit spreads. Due to widespread concerns about the stability of
the markets and the strength of counterparties, many lenders have reduced and, in some cases, ceased to provide funding to borrowers. Further or prolonged disruptions in the global markets and economy
may further adversely affect the Company's liquidity and financial condition.

The
global market and economic conditions have led to an overall reduction in liquidity in the debt capital markets, including sources of liquidity that the Company utilizes, such as
securitizations and other sales of commercial mortgage loans, real estate investments and other assets and unsecured and secured debt financing arrangements. The Company has experienced a decline in
the fair value of its loans and real estate-related investments that has caused the Company to hold such loans and investments for a longer period of time or to sell them at lower values than
anticipated. This has resulted in an increase in the net losses/decrease in the net gains the Company has realized on the sale of these assets and downward valuation adjustments taken on its loan and
investment portfolios.

The
Company's primary exposure to credit risk arises from its direct and indirect relationships with borrowers who may default and potentially cause the Company to incur losses if it is
unable to collect amounts due through loss mitigation strategies, and from institutional counterparties to the extent they do not fulfill their obligations to the Company under the terms of specific
contracts or agreements. Changes in credit risk are evaluated in the context of estimating the allowance for loan losses and in estimating the fair values of investment securities and loans held for
sale. Negative trends in the financial position of borrowers, values of collateral underlying loans, and delinquencies and defaults on loans may materially adversely affect the Company's results of
operations.

The
Company's primary exposure to interest rate and other market risks is associated with its portfolio of loans and investment securities as well as fixed-rate borrowings. Changes in
the level of interest rates or changes in yield curves, as well as basis risk resulting from changes in the interest rate spread between different financial instruments, could adversely affect the
estimated fair value of the Company's portfolio of loans and investment securities and its net income. Changes in foreign currency exchange rates could also adversely affect the Company's earnings and
the value of certain assets and liabilities. As discussed in Note 19, the Company manages interest rate and other market risks through the use of derivative instruments and other risk
mitigation strategies. The Company's exposure to market risk is also impacted by the amount of real estate and equity investments which the Company owns directly and indirectly due to the depressed
fair values and lessening demand for those types of assets.

The
Company continues to monitor market conditions and manages its loan origination and real estate investment activities to adapt to the current environment. These actions have included
ceasing proprietary lending activities and emphasizing products with better liquidity and lower funding costs, such as agency and third party originations.

Operational
risk is the risk of loss resulting from inadequate or failed internal processes, systems, facilities, human factors or external events such as information technology and
organizational structure issues, weaknesses in internal controls, human error, fraud, and external threats in the U.S. and internationally. Primary responsibility for the management of operational
risk lies with the Company's business segments and support functions, which are required to maintain controls designed to identify, assess and mitigate operational risks for their existing activities.
These controls include the Company's systems and processes that relate to theft and fraud, general business practices, technology, the safeguarding of assets and data security, personnel, customers,
financial reporting and external service

12

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CAPMARK FINANCIAL GROUP INC.

Notes to Consolidated Financial Statements (Continued)

2. Risks and Uncertainties (Continued)

providers.
In addition, the Company has developed and continued to enhance specific policies and procedures that are designed to ensure that transactions are properly approved, processed, recorded,
reported, monitored/updated and reconciled on a timely basis and that it has adequate business continuity and disaster recovery plans for critical facilities and resources.

3. Basis of Presentation and Summary of Significant Accounting Policies

Basis of Presentation

The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in
the United States of America ("GAAP"). The preparation of financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets
and liabilities, the disclosure of contingent assets and liabilities and the reported amounts of revenue and expense. The Company's estimates and assumptions are affected by risks and uncertainties
associated with credit exposure and interest rate and market spread volatility. The Company has established detailed policies and control
procedures intended to ensure that valuation methods, including any judgments made as part of such methods, are well-controlled, reviewed and applied consistently from period to period.
Management bases their estimates on historical corporate and industry experience and various other assumptions they believe are appropriate under the circumstances, including market-based inputs when
available. Future changes in credit and market trends and conditions may occur which could cause actual results to differ materially from the estimates used in preparing the accompanying consolidated
financial statements. Certain of the Company's critical accounting estimates require higher degrees of judgment and are more complex than others in their application. For all of these estimates,
future events rarely develop exactly as forecasted and, therefore, routinely require adjustment.

The
Company consolidates all wholly-owned and majority-owned subsidiaries that it controls. In certain cases, economic ownership interests and control do not strictly align and there are
other specific consolidation criteria that must be applied under GAAP, and in those cases the Company follows the accounting policies discussed below.

The
Company sells assets to and has involvement with special purpose entities, some of which are variable interest entities ("VIEs"). Under the provisions of Financial Accounting
Standards Board ("FASB") Interpretation No. ("FIN") 46 (revised December 2003), "Consolidation of Variable Interest Entities, an interpretation of ARB No. 51," or "FIN 46R," a VIE is
consolidated by the entity holding the variable interest that will absorb a majority of the VIE's expected losses, receive a majority of the VIE's expected residual returns, or both. The entity that
consolidates a VIE is referred to as the "primary beneficiary."

The
identification of the primary beneficiary involves a number of assumptions and estimates about the economics of the VIE and the variable interest holders. Where the Company has
determined that it does not have a sufficiently large variable interest to be a potential primary beneficiary or that it is the only variable interest holder with a sufficiently large interest, the
Company determines the primary beneficiary using a qualitative approach based on the estimated economics of the VIE. Otherwise, the Company uses a quantitative approach, allocating estimated cash
flows to each variable interest holder based on seniority of each of the cash flow scenarios that are probability weighted and used to determine the VIE's expected losses and expected residual
returns.

13

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CAPMARK FINANCIAL GROUP INC.

Notes to Consolidated Financial Statements (Continued)

3. Basis of Presentation and Summary of Significant Accounting Policies (Continued)

For
investment partnerships and similar entities (e.g., limited liability corporations) in which the Company serves as general partner or managing member through one of its
subsidiaries, the Company follows the guidance in Emerging Issues Task Force ("EITF") Issue No. 04-5, "Determining whether a General Partner, or the General Partners as a Group,
Controls a Limited Partnership or Similar Entity when the Limited Partners have Certain Rights," or "EITF 04-5," to determine whether it needs to consolidate these entities.
Generally, if the limited partners or non-managing members of these entities have substantive rights
to remove the Company as the general partner or managing member, or to cause the entity to be liquidated, or have other substantive participating rights, the Company does not consolidate these
entities. If the limited partners or non-managing members do not have such rights, the Company consolidates the entities.

All
significant intercompany accounts and transactions have been eliminated in consolidation.

The
financial statements of subsidiaries outside the United States of America are generally measured using the local currency as the functional currency. All assets and liabilities of
foreign subsidiaries are translated into U.S. dollars at period-end exchange rates. Income and expense items of foreign subsidiaries are translated into U.S. dollars at average exchange
rates prevailing during the reporting period. The resulting translation adjustments are recorded as a component of accumulated other comprehensive income, net of tax, a component of stockholders'
equity.

Deposits
held in a fiduciary capacity, primarily related to Capmark Bank US's trust operations, are not assets or liabilities of the Company and, accordingly, are not included in the
Company's consolidated balance sheet.

Business Combination

The Sponsor Transactions were accounted for as a purchase as prescribed by Statement of Financial Accounting Standards ("SFAS")
No. 141, "Business Combinations," or "SFAS No. 141," and the purchase price was pushed down to the Company's consolidated financial statements in accordance with SEC Staff Accounting
Bulletin No. 54, "Application of 'Push Down' Basis of Accounting in Financial Statements of Subsidiaries Acquired by Purchase." Accordingly, the purchase price paid by the Sponsors plus related
purchase accounting adjustments, have been reflected in the Company's consolidated financial statements as of and for the periods beginning March 23, 2006. This resulted in a new basis of
accounting that reflects the estimated fair value of the Company's assets and liabilities, to the extent of the combined 79 percent ownership interest acquired by the Sponsors and Management
Stockholders. Because of the continuing residual interest retained by GMAC, its 21 percent ownership interest in the Company's assets and liabilities continued to be reflected at its historical
basis. Information for all periods prior to March 23, 2006 is presented using the historical basis of accounting.

As
a result of the Sponsor Transactions, the period from January 1, 2006 to March 22, 2006, for which the Company's results of operations and cash flows are presented, is
reported as the "Predecessor" period. The periods beginning March 23, 2006, for which the Company's results of operations, financial position, and cash flows are presented, are reported as
"Successor" periods.

Sale of Operations

In February 2007, the Company sold a majority of its affordable housing debt platform to an unaffiliated buyer for approximately
$500 million in cash and the buyer also assumed approximately $700 million of related financing obligations. The Company recognized a pre-tax gain on sale of

14

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CAPMARK FINANCIAL GROUP INC.

Notes to Consolidated Financial Statements (Continued)

3. Basis of Presentation and Summary of Significant Accounting Policies (Continued)

approximately
$65.3 million in the year ended December 31, 2007 and reported the gain as a component of other gains (losses), net in the consolidated statement of operations. At the time
of the transaction, the Company retained approximately $300 million of investment securities associated with the affordable housing debt platform that were not included in the sale. The
earnings and cash flows of the entire affordable housing debt platform are fully consolidated in the consolidated statement of operations and the consolidated statement of cash flows for the year
ended December 31, 2007. The affordable housing debt platform was not classified as a discontinued operation because its operations and cash flows could not be clearly distinguished from the
rest of the Company. The affordable housing debt platform was included in the North American Affordable Housing business segment. See Note 26 for segment information.

Significant Accounting Policies and Recently Issued Accounting Standards

Fair Value of Financial Instruments

The Company adopted SFAS No. 157, "Fair Value Measurements," or "SFAS No. 157," on January 1, 2008. SFAS
No. 157 defines fair value, establishes a framework for measuring fair value under GAAP, and enhances disclosures for fair value measurements. The statement does not require new fair value
measurements, but is applied to the extent that other accounting pronouncements require or permit fair value measurements. The statement emphasizes that fair value is a market-based measurement that
should be determined based on the assumptions that market participants would use in pricing an asset or liability. Companies are required to disclose the extent to which fair value is used to measure
assets and liabilities, the inputs used to develop the measurements, and the effect of certain of the measurements on earnings (or changes in net assets) for
the period. Although the Company accounts for a significant portion of its financial instruments at fair value or considers fair value in their measurement, the adoption of this statement did not have
a material impact on the method in which the Company determines fair value. See Note 18 for additional disclosures required by SFAS No. 157.

The
Company also adopted SFAS No. 159, "The Fair Value Option for Financial Assets and Financial LiabilitiesIncluding an amendment of FASB Statement No. 115,"
or "SFAS No. 159," on January 1, 2008. SFAS No. 159 permits an entity to irrevocably elect fair value for the initial and subsequent measurement of certain financial assets and
financial liabilities on an instrument-by-instrument basis. Subsequent changes in fair value of these instruments are recognized in earnings when they occur. SFAS
No. 159 required that the difference between the carrying value and the fair value of financial assets and financial liabilities for which the fair value option was elected be recorded as an
adjustment to beginning retained earnings in the period of adoption. Effective January 1, 2008, the Company elected fair value accounting for certain loan assets and deposit liabilities not
previously carried at fair value. The after-tax cumulative effect from electing the fair value option for the selected financial instruments decreased retained earnings by
$9.8 million on January 1, 2008.



In accordance with SFAS No. 157, the Company categorizes its financial instruments, based on the priority of the inputs to the
valuation technique, into a three-level fair value hierarchy. The fair value hierarchy gives the highest priority to quoted prices in active markets for identical assets or liabilities
(Level 1) and the lowest priority to unobservable inputs (Level 3). If the inputs used to measure the

15

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CAPMARK FINANCIAL GROUP INC.

Notes to Consolidated Financial Statements (Continued)

3. Basis of Presentation and Summary of Significant Accounting Policies (Continued)

financial
instruments fall within different levels of the hierarchy, the categorization is based on the lowest level input that is significant to the fair value measurement of the instrument.

As
required by SFAS No. 157, financial assets and financial liabilities recorded on the Company's consolidated balance sheet are categorized based on whether the inputs to the
valuation techniques are observable or unobservable as follows:

Level 1financial
assets and financial liabilities whose values are based on unadjusted quoted prices for identical assets or liabilities in an active market that the
Company has the ability to access.

Level 2financial
assets and financial liabilities whose values are based on quoted prices for similar assets or liabilities in active markets; quoted prices for
identical or similar assets or liabilities in markets that are not active; pricing models whose inputs are observable either directly or indirectly for substantially the full term of the asset or
liability (examples include most over-the-counter derivatives, including interest rate and currency swaps); and pricing models whose inputs are derived principally from or
corroborated by observable market data through correlation or other means for substantially the full term of the asset or liability.

Level 3financial
assets and financial liabilities whose values are based on prices or valuation techniques that require inputs that are both unobservable and
significant to the overall fair value measurement. Level 3 assets and liabilities include financial instruments whose value is determined using pricing models, discounted cash flow ("DCF")
methodologies, or similar techniques, as well as instruments for which the determination of fair value requires significant management judgment or estimation.



Under SFAS No. 157, the Company determines fair value based on the price that would be received to sell an asset or paid to
transfer a liability in an orderly transaction between market participants at the measurement date. It is the Company's policy to maximize the use of observable inputs and minimize the use of
unobservable inputs when developing fair value measurements, in accordance with the fair value hierarchy as described above. For assets and liabilities where there exists limited or no observable
market data, fair value measurements are based primarily upon management's own estimates, and are calculated based upon the Company's pricing policy, the economic and competitive environment, the
characteristics of the asset or liability and other such factors. Therefore, the fair value amounts may not be realized in an actual sale or immediate settlement of the asset or liability.

Following
is a description of the valuation methodologies used for financial instruments measured at fair value on a recurring basis, including those accounted for at fair value prior to
the adoption of SFAS No. 159, as well as the general classification of such instruments pursuant to the three-level fair value hierarchy.



Investment securities classified as trading and available for sale are carried at fair value. Where quoted prices are available in an
active market for identical instruments, investment securities are classified within Level 1 of the valuation hierarchy. Level 1 investment securities include highly liquid U.S. Treasury
securities. If quoted market prices are not available, then investment securities are classified as Level 2 and fair values are estimated by using pricing models, quoted prices of securities

16

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CAPMARK FINANCIAL GROUP INC.

Notes to Consolidated Financial Statements (Continued)

3. Basis of Presentation and Summary of Significant Accounting Policies (Continued)

with
similar characteristics or DCFs. Examples of instruments which would generally be classified within Level 2 of the valuation hierarchy include certain CMBS, ABS, CDOs and GSE securities.
In cases where there is limited activity or less transparency around inputs to the valuation, investment securities are classified within Level 3 of the valuation hierarchy. Investment
securities classified within Level 3 include certain residual interests in securitizations and CDOs, tax-exempt securities, certain Japanese bonds ("TMK securities") and other less
liquid investment securities. The Company estimates the fair value of residual interests in securitizations based on a DCF analysis. See Note 16 for the assumptions used in the estimation of
value of residual interests in securitizations. The Company estimates the fair value of tax-exempt securities in inactive markets using inputs from third-party pricing providers for
similar securities and makes qualitative adjustments based on current market conditions. The fair value of TMK securities is estimated based on a DCF analysis using spreads and discount rates the
Company believes market participants would use given the current market conditions as well as qualitative adjustments for internal risk ratings, anticipated credit losses and collateral values.



Loans held for sale consist of domestic and international, fixed and floating rate loans that are secured by commercial and multifamily
real estate properties. Loans are typically classified as held for sale at the time of origination when the Company does not intend to hold the loan for the foreseeable future or until maturity or
payoff. These loans remain classified as held for sale unless a change occurs in the Company's ability or intent to hold such loans for the foreseeable future or until maturity or payoff. The Company
regularly reviews the appropriateness of its loan classifications based on a number of factors, including market demand for the Company's loan products, liquidity needs and corporate objectives.

In
connection with the adoption of SFAS No. 159, the Company elected to account for its loans held for sale at fair value. This election allows the offsetting of the changes in
fair value of the loans and the derivative instruments used to economically hedge such loans without the administrative burden of
complying with the requirements for hedge accounting under SFAS No. 133. The fair values of the Company's loans held for sale are generally determined using a pricing model based on current
market information obtained from external sources, including updated securitization spreads where appropriate and when available, interest rates, whole loan spreads for each property type based on
loan-to-value ratios of collateral and other factors, and bids or indications provided by market participants on specific loans that are actively marketed for sale. In
addition, the impact of potential extensions, interest-rate floors and unfunded commitments on the Company's floating rate loan portfolio are taken into consideration when determining the
fair value for each loan. The Company also considers changes in borrowers' credit status and the fair value of collateral in estimating the fair value of certain loans. Although the Company bases its
loan valuations on historical and actual observable inputs to the extent possible, the valuations typically require significant judgment and therefore are estimates. Changes in market conditions,
borrower credit-worthiness and collateral values between the dates of management's estimates and the dates of disposition of the loans can have a significant impact on the amounts ultimately realized
upon disposition. The Company's loans held for sale are classified within Level 2 or Level 3 of the valuation hierarchy.

As
of December 31, 2008, loans held for sale for which the fair value option was elected had an aggregate fair value of $3.9 billion and an aggregate unpaid principal
balance of $4.8 billion. Interest income on these loans continues to be recorded as a component of interest income in the consolidated statement of operations. Net realized and unrealized
losses of $1.0 billion resulting from the changes in

17

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CAPMARK FINANCIAL GROUP INC.

Notes to Consolidated Financial Statements (Continued)

3. Basis of Presentation and Summary of Significant Accounting Policies (Continued)

fair
value of loans held for sale for which the fair value option was elected were recorded during the year ended December 31, 2008, and reported as a component of net (losses) gains on loans
in the consolidated statement of operations. In connection with the adoption of SFAS No. 159, the Company no longer defers recognition of placement fees and direct loan origination costs with
respect to its loans held for sale because such loans are carried at fair value. Previously, placement fees and direct loan origination costs were deferred as part of the carrying value of the loans
and recognized as a component of the net gain or loss on sale of such loans.

Prior
to the adoption of SFAS No. 159, for valuation purposes the loans held for sale portfolio was divided into nine distinct pools, based upon geographic location, loan type
(fixed or floating rate), and exit strategy. These pools were consistent with the guidance in SFAS No. 65, "Accounting for Certain Mortgage Banking Activities." which required that the fair
value of a loan should be determined by type of loan, and specifies that either the aggregate or individual loan basis may be used in determining the lower of cost or fair value for each type of loan.
The Company utilized the aggregate basis within each of its nine pools. A current fair value for each individual loan was determined with emphasis that the fair value of an asset was a market-based
measurement which was determined based upon the assumptions that market participants would use in pricing the loan. The Company accounted for its loans held for sale at the lower of amortized cost or
estimated fair value taking into consideration the aggregate value of each of the nine pools. Therefore, the Company's operating results were negatively affected by changes in the fair value if one or
more of its loan pools were valued lower than amortized cost.

Interest
income on loans held for sale is recorded on an accrual basis. Interest income is accrued until the loans become 90 days contractually delinquent at which time accrued
but uncollected interest is reversed against interest income.



Derivative instruments are carried at fair value. Exchange-traded derivative instruments that are valued using quoted market prices are
classified within Level 1 of the valuation hierarchy. However, the majority of the Company's derivative instruments are not exchange-traded and are valued using internally developed models that
use readily observable market parameters and are classified within Level 2 of the valuation hierarchy. Such derivatives include basic interest rate swaps and options and credit default swaps.
Derivatives that are valued based upon models with significant unobservable market parameters are classified within Level 3 of the valuation hierarchy. Such derivatives may include unfunded
fixed-rate loan commitments.



Upon the adoption of SFAS No. 159, the Company elected to account for all brokered certificates of deposit ("Brokered CDs") at
fair value. Beginning October 1, 2008, the Company elected to account for newly issued Brokered CDs with original maturities greater than one year at amortized cost and simultaneously enter
into interest rate swaps to hedge the deposit liabilities against changes in fair value due to changes in the benchmark interest rate. The Company continues to account for Brokered CDs issued with
original maturities of one year or less at fair value. To estimate the fair value of Brokered CDs, cash flows are evaluated taking into consideration any embedded derivative features and then are
discounted using the appropriate market rates for the applicable maturities. Brokered

18

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CAPMARK FINANCIAL GROUP INC.

Notes to Consolidated Financial Statements (Continued)

3. Basis of Presentation and Summary of Significant Accounting Policies (Continued)

CDs
are classified within Level 2 of the valuation hierarchy because the valuation inputs are primarily based on readily observable pricing information.

The
fair value option for Brokered CDs allows the offsetting of the changes in fair value of the Brokered CDs and the derivative instruments used to economically hedge such deposits.
Interest expense on these Brokered CDs continues to be recorded as a component of interest expense in the consolidated statement of operations. Net losses of $105.7 million resulting from the
changes in fair value of these deposits were recorded during the year ended December 31, 2008, and reported as a
component of other gains (losses), net in the consolidated statement of operations. In connection with the adoption of SFAS No. 159, the Company ceased deferring recognition of issuance costs
with respect to its Brokered CDs because such deposits are carried at fair value. Previously, issuance costs were deferred and recognized as a component of interest expense over the term of such
deposits. Beginning October 1, 2008, the Company accounts for newly issued Brokered CDs with original maturities greater than one year at amortized cost. Related issuance costs for such
long-term Brokered CDs are deferred and recognized as a component of interest expense over the term of such deposits.

Loan Sales and Securitizations

The Company periodically enters into transactions in which it sells financial assets, principally commercial mortgage loans. Upon a
transfer of financial assets, the Company sometimes retains or acquires subordinated interests in the related assets. In addition, the Company generally retains servicing rights for all mortgage loans
sold or securitized.

Gains
and losses on such transactions are recognized according to the guidance in SFAS No. 140, "Accounting for Transfers and Servicing of Financial Assets and Extinguishments of
Liabilitiesa Replacement of FASB Statement No. 125" as amended by SFAS No. 156, "Accounting for Servicing of Financial Assets," or together, "SFAS No. 140," which is
based on a financial components approach that focuses on control. Under this approach, after a transfer of financial assets, an entity recognizes the financial and servicing assets it controls and the
liabilities it has incurred, derecognizes financial assets when control has been surrendered, and derecognizes liabilities when extinguished.

The
gain or loss on sale is determined by allocating the carrying value of the underlying mortgage loans between securities or loans sold and the interests retained, including mortgage
servicing rights, based on their fair values. The gain or loss on sale is the difference between the cash proceeds from the sale and the amount allocated to the securities or loans sold. Whether the
Company records a gain or loss on sale depends, in part, on the carrying value of the financial assets involved in the transfer, allocated between the assets sold and the interests retained based on
their fair values at the date of transfer.

Due
to recent market developments summarized in Note 2, the volume and pricing of loan sales and securitizations declined significantly in 2008, which resulted in the Company
incurring realized losses compared to historical recognition of realized gains. Realization of gains or losses on future sales is heavily dependent on the extent and timing of recovery of the markets
for commercial mortgage products and changes in other market factors.

19

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CAPMARK FINANCIAL GROUP INC.

Notes to Consolidated Financial Statements (Continued)

3. Basis of Presentation and Summary of Significant Accounting Policies (Continued)

Allowance for Loan Losses

The allowance for loan losses provides for the risk of losses inherent in the Company's portfolio of loans held for investment. A
portion of the allowance for loan losses is used to cover estimated losses on loans that have been specifically identified as being impaired.

In
accordance with SFAS No. 114, "Accounting by Creditors for Impairment of a Loan, an amendment of FASB Statements No. 5 and 15," or "SFAS No. 114," impaired loans
typically consist of those loans for which it is probable the Company will not be able to collect all contractual principal and interest amounts due. An impaired loan is generally valued based on the
estimated fair value of the underlying collateral and includes estimated costs of selling or realizing such collateral on a discounted basis. In addition to specific allowances for impaired loans, the
Company also maintains allowances that are based upon a collective evaluation of the non-impaired portion of the portfolio as a whole and estimates such losses in accordance with SFAS
No. 5, "Accounting for Contingencies," or "SFAS No. 5." This analysis considers the Company's past loan loss experience, the current credit composition of the total portfolio, historical
credit migration, property type diversification, default and loss severity statistics, and other relevant factors.

The
Company utilizes a risk-rating process for measuring credit exposure that combines quantitative analysis and qualitative judgment in order to measure potential loan
losses. The Company initially allocates a quantitative risk rating to a loan based on modeling, or other objective, fact-based credit criteria that consider key financial data, such as a
loan's debt service coverage ratio, loan-to-value ratio and time to maturity, and collateral characteristics, such as a property's location, type and occupancy. The Company
subsequently adjusts its initial quantitative rating based on our assessment of qualitative factors, such as quality of sponsorship, financial reporting, quality and stability of cash flows, loan
structure, loan documentation and the loan's performance relative to underwriting.

The
allowance for loan losses is increased as necessary by recording a charge to the provision for loan losses in the consolidated statement of operations. Amounts deemed to be
uncollectible are charged against the allowance for loan losses. Amounts recovered on previously charged-off loans are added back to the allowance for loan losses.

Uncertainties
about the economies in the Company's primary market areas, including the United States, increase uncertainty about management's estimates of the allowance for loan losses.
Increases in unemployment and/or low employment, decreases in corporate profits and adverse trends in other key economic indicators may correlate with increasing loan delinquencies and other factors
affecting the timing and amounts the Company ultimately realizes on its portfolio of loans held for investment.

Income Recognition and Impairments Relating to Acquired Non-Performing Loans

The Company has acquired non-performing loans, primarily in Asia, with a strategy of restructuring the loans or entering
into workouts with borrowers, which may include foreclosure. These loans were typically purchased at a substantial discount to par, reflecting the Company's determination that it is probable all
amounts due under the loans' governing instruments may not be collected. These loans are accounted for in accordance with American Institute of Certified Public Accountants ("AICPA") Statement of
Position 03-3, "Accounting for Certain Loans or Debt Securities Acquired in a Transfer," or "SOP 03-3." Under SOP 03-3, the excess of the estimated
undiscounted principal, interest and other cash flows expected to be collected over the initial investment in the acquired asset is

20

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CAPMARK FINANCIAL GROUP INC.

Notes to Consolidated Financial Statements (Continued)

3. Basis of Presentation and Summary of Significant Accounting Policies (Continued)

accreted
into interest income over the expected life of the asset. These loans are classified as held for investment in the consolidated balance sheet.

The
amount of accretion for such loans or pools of loans is adjusted when there is an increase or decrease in the expected cash flows. Further, the Company assesses impairment on such
loans or pools of loans for which there has been a decrease in expected cash flows in accordance with SOP 03-3 and SFAS No. 114. Impairment is measured based on the present
value of the expected cash flows from the loan discounted using the loan's effective interest rate or, in specific circumstances, through the estimated fair value of the underlying collateral minus
the estimated costs of selling or realizing the underlying collateral. Impairment is recognized as a charge to the provision for loan losses in the consolidated statement of operations.

Derivative Instruments and Hedging Activities

The Company uses derivative instruments in connection with its risk management and investment activities. The Company's primary
objective in utilizing derivative instruments is to minimize market risk volatility associated with interest rate and foreign currency risks related to the assets and liabilities of the Company.
Minimizing this volatility enables the Company to mitigate the impact of market risk on earnings. Additionally, the Company uses interest rate swaps to more closely match interest rate characteristics
of its interest-bearing liabilities with its interest-earning assets. The Company also utilizes derivative instruments to mitigate foreign currency exposure related to foreign currency denominated
transactions and its net investments in foreign operations. At times, the Company uses derivative instruments in lieu of cash transactions for investment purposes.

The
derivative instruments that the Company has used include swaps, caps, forwards, options, swaptions, spread locks, loan commitments, credit derivatives and treasury-related derivative
instruments. These instruments may be exchange-traded or contracted in the over-the-counter market.

In
accordance with SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities," or "SFAS No. 133," as amended and interpreted, among other pronouncements,
by SFAS No. 138, "Accounting for Certain Derivative Instruments and Certain Hedging Activities, an amendment of FASB Statement No. 133," or "SFAS No. 138," and SFAS
No. 149, "Amendment of Statement 133 on Derivative Instruments and Hedging Activities," or "SFAS No. 149," the Company records derivative instruments at estimated fair value on its
consolidated balance sheet. Gains and losses resulting from changes in the estimated fair value of such instruments are accounted for depending on whether or not they qualify for hedge accounting.

The
Company formally documents its risk management objective and strategy for undertaking various hedge transactions. For transactions that qualify for hedge accounting, this process
includes linking the derivatives that are designated as fair value, cash flow, or foreign currency hedges to specific assets, or pools of similar assets, and specific liabilities in the consolidated
balance sheet or to forecasted transactions.

Each
designated hedging relationship is expected to be highly effective in offsetting the designated risk during the hedge period. The Company formally assesses, both at inception and on
an ongoing basis, whether the derivative instruments used in hedging transactions are highly effective in offsetting changes in estimated fair values or cash flows of the hedged items.

21

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CAPMARK FINANCIAL GROUP INC.

Notes to Consolidated Financial Statements (Continued)

3. Basis of Presentation and Summary of Significant Accounting Policies (Continued)

The
Company discontinues hedge accounting prospectively when: (1) it is determined that the derivative is no longer effective in offsetting changes in the estimated fair value or
cash flows of a hedged item (including firm commitments or forecasted transactions); (2) the derivative expires or is sold, terminated, or exercised; or (3) the derivative is no longer
designated as a hedge instrument because: a) it is unlikely that a forecasted transaction will occur; b) a hedged firm commitment no longer meets the definition of a firm commitment; or
c) management determines that designation of the derivative as a hedge instrument is no longer appropriate. When hedge accounting is discontinued because it is determined that the derivative no
longer qualifies as an effective fair value hedge, the derivative will continue to be carried in the consolidated balance sheet at its estimated fair value. The hedged asset or liability, if not
normally carried at estimated fair value, will no longer be adjusted for changes in estimated fair value. When hedge accounting is discontinued because the hedged item no longer meets the definition
of a firm commitment, the derivative will continue to be carried in the consolidated balance sheet at its estimated fair value and any asset or liability that was recorded pursuant to
recognition of the firm commitment will be removed from the consolidated balance sheet and recognized as a gain or loss in current period earnings. When hedge accounting is discontinued because it is
no longer probable that a forecasted transaction will occur, the derivative will continue to be carried in the consolidated balance sheet at its estimated fair value and gains and losses that were
recorded in accumulated other comprehensive income, net of tax, will be recognized immediately in current period earnings. In all situations in which hedge accounting is discontinued, the derivative
will be carried at its estimated fair value in the consolidated balance sheet with changes in its estimated fair value recognized in current period earnings.

Classification, Valuation, and Impairment of Investment Securities Including Retained Interests in Securitized Assets

When the Company securitizes mortgage loans in transactions accounted for as a sale in accordance with SFAS No. 140, it may
retain an interest in the assets sold. These retained interests may take the form of interest-only, investment grade, subordinate, or unrated securities. The subordinate interests that the
Company retains provide a form of credit enhancement for the more highly-rated securities.

In
accordance with SFAS No. 115, "Accounting for Certain Investments in Debt and Equity Securities," or "SFAS No. 115," the classification of investment securities is based
on management's intent with respect to those securities. Investment securities classified as trading are carried at estimated fair value with unrealized gains and losses recognized in current period
earnings. Investment securities classified as available for sale are carried at estimated fair value with unrealized gains and losses reported as a component of accumulated other comprehensive income,
net of tax, which is a component of stockholders' equity. Realized gains and losses on the sale of investment securities are determined using the specific identification method and recognized in
current period earnings. Interest income is recorded using the interest method which is reviewed and adjusted periodically based on changes in estimated cash flows.

Investment
securities classified as available for sale are periodically reviewed for potential impairment in accordance with EITF 99-20, "Recognition of Interest
Income and Impairment on Purchased Beneficial Interests and Beneficial Interests that Continue to be Held by a Transferor in Securitized Financial Assets," or "EITF 99-20," and FASB
Staff Position ("FSP") No. EITF 99-20-1, "Amendments to the Impairment Guidance of EITF Issue No. 99-20," or "FSP
EITF 99-20-1," or

22

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CAPMARK FINANCIAL GROUP INC.

Notes to Consolidated Financial Statements (Continued)

3. Basis of Presentation and Summary of Significant Accounting Policies (Continued)

EITF 03-1,
"The Meaning of Other-Than-Temporary Impairment and its Application to Certain Investments," or "EITF 03-1," and FSP
FAS 115-1 and FAS 124-1, "The Meaning of Other-Than-Temporary Impairment and Its Application to Certain
Investments," or "FSP FAS 115-1 and FAS 124-1," depending on the nature of the security. Impairment is measured using a systematic methodology intended to
consider all available evidence. If the carrying value of an investment security exceeds its estimated fair value, the Company evaluates, among other factors, the magnitude and duration of the decline
in estimated fair value, the performance of the underlying assets, and the Company's intent and ability to hold the asset until its value recovers. Once a decline in estimated fair value is determined
to be other-than-temporary, an impairment charge is recorded in the Company's consolidated statement of operations and a new cost basis is established.

Valuation and Impairment of Mortgage Servicing Rights

In accordance with SFAS No. 140, the Company capitalizes originated mortgage servicing rights based upon their fair value when
the related loans are sold. Purchased mortgage servicing rights are recorded at their cost at the time of acquisition, which approximates the fair value of such assets. Subsequent to origination or
acquisition, mortgage servicing rights ("MSRs") are carried at the lower of amortized cost or estimated fair value. Amortization expense is recorded for each stratum, as discussed below, in proportion
to, and over the period of, the projected net servicing cash flows.

MSRs
do not trade in an active, open market with readily observable prices. While sales of MSRs do occur, precise terms and conditions vary with each transaction and are not readily
available. Accordingly, the Company estimates the fair value of MSRs using DCF models that calculate the present value of estimated future net servicing income. These models consider and incorporate
portfolio characteristics, contractually specified servicing fees, prepayment assumptions, delinquency rates, late charges, other ancillary revenue, costs to service and other economic factors. The
Company periodically reassesses and adjusts the underlying inputs and assumptions used in the models to reflect observable market conditions and assumptions that a market participant would consider in
valuing an MSR asset. Generally, valuations of servicing rights for commercial mortgages are less sensitive to change than valuations of servicing rights for residential mortgages, due to lower levels
of prepayments and other factors.

MSRs
are evaluated for impairment by stratifying the portfolio according to predominant risk characteristics, primarily investor and loan type (e.g., CMBS,
agencyFannie Mae's DUS program, agencynon-Fannie Mae's DUS program and other). To the extent that the carrying value of an individual
stratum exceeds its estimated fair value, the MSR asset is considered to be impaired. Impairment that is considered to be temporary is recognized through the establishment of a valuation allowance,
with a corresponding charge to earnings in the period that the impairment is determined to have occurred. If the impairment is determined to be other-than-temporary, the
valuation allowance is reduced along with the carrying value of the MSR. Declines in the value of MSRs are most likely to occur in circumstances when both interest rates are declining and commercial
real estate credit markets are competitive, or when defaults on underlying loans increase.

Gains
and losses on sales of MSRs are recognized when the related sales contracts have been executed and legal title and substantially all risks and rewards of ownership of the servicing
rights have passed to the buyer. Gains and losses are determined as the difference between the net sales proceeds received and the carrying value of the servicing rights sold less costs to sell.

23

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CAPMARK FINANCIAL GROUP INC.

Notes to Consolidated Financial Statements (Continued)

3. Basis of Presentation and Summary of Significant Accounting Policies (Continued)

Liability for Low-Income Housing Tax Credit Guarantees

The Company syndicated limited partnership interests in affordable housing partnerships. These investments were in the form of limited
partner ownership interests that were pooled into funds ("upper-tier funds"). These funds held limited partner ownership interests in various operating partnerships that develop, own, and
operate affordable housing properties throughout the United States. In certain upper-tier funds, the Company has guaranteed a specified rate of return to the investors. Returns to
investors in the partnerships are principally derived from flow-through low-income housing tax credits and tax losses generated by underlying operating partnership entities
("lower-tier partnerships").

Syndicated
affordable housing partnerships that contain a guarantee are reflected in the Company's consolidated financial statements under the financing method in accordance with SFAS
No. 66, "Accounting for Sales of Real Estate," or "SFAS No. 66." More specifically, cash, cash equivalents, restricted cash and equity investments (in the underlying operating
partnership entities) of the guaranteed syndicated real estate partnerships are included in the Company's consolidated balance sheet. Liabilities of the guaranteed syndicated real estate partnerships
consist primarily of a financing liability, initially equal to the amount of equity contributed by each investor, payable to each tax credit fund investor. The financing liability, included as a
component of real estate syndication proceeds and related liabilities in the consolidated balance sheet, is extinguished over the life of the guaranteed syndicated real estate partnerships as annual
tax benefits guaranteed to each investor are delivered.

Returns
to investors in the partnerships are principally derived from flow-through low-income housing tax credits and tax losses generated by underlying operating
partnership entities. The Company is exposed to losses based on its limited partnership interests and to the investors in the guaranteed syndicated real estate partnerships for a specific guaranteed
rate of return. The loss exposure represents the potential under-delivery of income tax benefits by the syndicated real estate partnership to the investors. In the event of a shortfall in the delivery
of tax benefits to the investors, the Company is required to make cash payments to the investors of the syndicated affordable housing partnerships.

Costs
associated with maintaining the guaranteed yield are quantified initially, and then subsequently evaluated on a quarterly basis, in order to ensure that the recorded liability for
each guaranteed tax credit fund is sufficient to cover repayment of principal plus the guaranteed yield to the investors. When deficiencies are identified for a tax credit fund, the liability is
increased to cover the shortfall associated with that tax credit fund. The loss contingency policy is governed by SFAS No. 5, which requires establishment of a liability for losses when it is
probable that an asset has been impaired or a liability has been incurred at the date of the financial statements and the amount of the loss can be reasonably estimated. The SFAS No. 5
liability is reduced as payments are made to settle it. When the Company applied push down accounting on March 23, 2006 as a result of the Sponsor Transactions, the Company recorded an estimate
of the fair value of the guarantees, which was in excess of the liability determined under SFAS No. 5. The Company amortizes that excess using a systematic and rational method, which
approximates straight-line over the period of delivery of the tax benefits to investors, except that amortization of the liability for a particular fund may be accelerated when certain
events occur and result in partial settlement of the guarantee, such as the sale of a lower-tier partnership and related settlement with the guaranteed investors.

The
estimate of the fair value of the aforementioned guarantee liability recorded in push down accounting, and periodic estimates of SFAS No. 5 liabilities described above,
involve significant

24

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CAPMARK FINANCIAL GROUP INC.

Notes to Consolidated Financial Statements (Continued)

3. Basis of Presentation and Summary of Significant Accounting Policies (Continued)

estimates
with varying degrees of uncertainty. Amounts ultimately realized as income by the Company as the liability for real estate syndication proceeds and related liabilities is reduced are
uncertain as to timing, and the total amount realized over time depends on the operating performance of the lower-tier partnerships and the ability of the upper-tier funds to
deliver tax credits and, in some cases, guaranteed yields, to investors. The Company has not originated any new lower-tier partnerships since 2005, and the remaining expected lives of the
upper-tier funds vary from one to 14 years.

Accounting for Income Taxes

Prior to the Sponsor Transactions, the Company had operated within the General Motors Corporation ("GM")-controlled tax group under the
principles of a tax-sharing arrangement. Under this arrangement, the Company was generally treated as a standalone taxpayer, except with regard to foreign tax credits and net operating
losses. The Company would receive credit for such attributes only if the GM group as a whole could utilize such benefits.

Upon
the closing of the Sponsor Transactions, the Company became deconsolidated from the GM-controlled tax group. Therefore, the Company is no longer an eligible member of
the GM consolidated tax return for any periods after the date of the Sponsor Transactions. Thus, the Company is now liable for worldwide taxes based solely on its consolidated operations as a
standalone
taxpayer. Moreover, based on applicable tax rules, certain tax attributes represented by net operating losses and foreign tax credits were specifically allocated by GM to the Company in respect to an
intercompany receivable due from GM. These amounts were reclassified as deferred tax assets in the consolidated balance sheet as of the Sponsor Transactions date.

The
Company accounts for income taxes under the asset and liability method in accordance with SFAS No. 109, "Accounting for Income Taxes, as amended," or "SFAS No. 109." On
January 1, 2007, the Company adopted FIN 48, "Accounting for Uncertainty in Income Taxesan interpretation of FASB Statement No. 109," or "FIN 48," which
clarifies SFAS No. 109 by defining the confidence level that an income tax position must meet in order to be recognized in the financial statements. FIN 48 requires the tax effects of a
position to be recognized only if it is "more-likely-than-not" to be sustained solely on its technical merits. The
"more-likely-than-not" threshold represents a positive assertion by management that a company is entitled to the economic benefits of a tax position. If a tax
position is not considered "more-likely-than-not" to be sustained based solely on its technical merits, no benefits of the tax position are to be recognized.

As
a result of adopting FIN 48, management reviewed the income tax positions it has recorded in the application of push down accounting and has evaluated the impact of
EITF 93-7, "Uncertainties Related to Income Taxes in a Purchase Business Combination," or "EITF 93-7," as it relates to income tax exposures related to periods
prior to the Sponsor Transactions. Under the guidance of EITF 93-7, the Company recorded the impact of adopting FIN 48 on its Predecessor period tax liabilities as an
increase to goodwill in the consolidated balance sheet. For its Successor period tax liabilities, the Company recorded the impact of adopting FIN 48 as a cumulative effect adjustment to
retained earnings in the consolidated balance sheet. Adjustments to tax liabilities subsequent to the adoption of FIN 48 (e.g., through actual or effective settlement) are recorded
through income tax expense or through additional adjustments to goodwill depending on whether the liabilities arose from transactions prior to or after the Sponsor Transactions. The Company classifies
interest and penalties related to

25

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CAPMARK FINANCIAL GROUP INC.

Notes to Consolidated Financial Statements (Continued)

3. Basis of Presentation and Summary of Significant Accounting Policies (Continued)

unrecognized
tax benefits as income tax expense. See Note 15 for the impact of adopting FIN 48 on the Company's consolidated financial statements.

The
Company recognizes tax credits (net of any expected recapture) from its investments in un-syndicated low-income housing tax credit, or "LIHTC" limited
partnership interests and retained interests in syndicated LIHTC partnerships as an investor to the extent they are delivered to a lower-tier LIHTC partnership and reflected on its income
tax return. These tax credits are recognized as a reduction to income tax expense in the Company's consolidated statement of operations.

The
Company establishes valuation allowances for its deferred tax assets based on a "more-likely-than-not" threshold. The Company's ability to realize its deferred tax assets depends on
its ability to generate sufficient taxable income within the carryback or carryforward periods provided for by law within each applicable tax jurisdiction. Management evaluates all positive and
negative evidence, including scheduled reversals of existing deferred tax liabilities, projected future taxable income and tax planning strategies. Management also considers the nature, frequency and
severity of recent losses and the duration of statutory carryforward periods. In making such judgments, significant weight is given to evidence that can be objectively verified. Concluding that a
valuation allowance is not required is difficult when there is significant negative evidence that is objective and verifiable, such as cumulative losses in recent years.

If
the Company generates future taxable income in jurisdictions where it has recorded full valuation allowances, on a sustained basis, management's conclusion regarding the need for full
valuation allowances in these tax jurisdictions could change, resulting in the reversal of some or all of the valuation allowances. If the Company's operations generate taxable income prior to
reaching profitability on a sustained basis, the Company would reverse a portion of the valuation allowance related to the corresponding realized tax benefit for that period, without changing
management's conclusions on the need for a full valuation allowance against the remaining net deferred tax assets.

The
valuation of deferred tax assets requires significant judgment. The Company's accounting for deferred tax consequences of events that have been recognized in its financial statements
and its future taxable income represent management's best estimate of those future events.

Cash, Cash Equivalents and Restricted Cash

Cash and cash equivalents include cash in banks and in overnight investments. The Company also considers all highly liquid investments
with an original maturity of 90 days or less to be cash equivalents. Cash equivalents are reported at cost, which approximates fair value. Restricted cash represents cash that is restricted as
to withdrawal or usage and includes amounts required to be maintained in escrow under certain of the Company's debt obligations, amounts required to meet certain regulatory liquidity ratios, and cash
held by the Company's consolidated low-income housing tax credit funds that is required to be held in accordance with third-party investor agreements.

Loans Held for Investment

Loans held for investment include domestic and international, fixed and floating rate loans secured by real estate which are not
expected to be sold, and construction loans for multifamily projects, affordable housing projects and commercial buildings. Such loans are carried at amortized cost, net of deferred origination fees,
costs and any associated premiums or discounts, less an allowance for loan

26

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CAPMARK FINANCIAL GROUP INC.

Notes to Consolidated Financial Statements (Continued)

3. Basis of Presentation and Summary of Significant Accounting Policies (Continued)

losses.
The Company believes it has the intent and ability to hold these loans for the foreseeable future or until their maturity or payoff.

Interest
income on loans held for investment is accrued as earned. Interest income is generally accrued until the loans become 90 days contractually delinquent at which time
accrued but uncollected interest is reversed against interest income and interest income is subsequently recorded when collected. Loans return to an accrual status when principal and interest become
current and are anticipated to be fully collected. Loan origination fees and costs are deferred and recognized as yield adjustments over the life of the related loan pursuant to SFAS No. 91,
"Accounting for Nonrefundable Fees and Costs Associated with Originating or Acquiring Loans and Initial Direct Costs of Leasesan amendment of FASB Statements No. 13, 60, and 65 and
a rescission of FASB Statement No. 17" or "SFAS No. 91."

Real Estate Investments

Real estate investments include real estate held for sale, held for investment and acquired through foreclosure. Real estate held for
sale consists primarily of domestic and international real estate assets that are expected to be disposed of by sale within one year. The designation and carrying value of such assets are determined
in accordance with SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets, as amended," or "SFAS No. 144." Real estate held for sale is carried at the
lower of cost, including impairments, or estimated fair value less costs to sell and is not depreciated. Real estate held for investment consists primarily of office buildings, hotels, retail and
distribution centers, vacant land and parking lots. In addition, real estate held for investment consists of real estate owned by general partnerships that operate domestic affordable housing projects
where the Company is the general partner or has consolidated the affordable housing projects when it has been determined the Company is the primary beneficiary of the partnerships under
FIN 46R. Real estate held for investment is carried at cost less accumulated depreciation and is periodically reviewed for impairment in accordance with SFAS No. 144. Real estate
acquired through foreclosure is initially recorded at estimated fair value less costs to sell and subsequently carried at the lower of cost or estimated fair value less costs to sell and any related
valuation allowances.

Equity Investments

The Company acquires and holds non-marketable equity positions in certain real estate projects. Such equity positions are
in the form of limited partnership and limited liability company investments and are accounted for under the equity method. The Company also holds non-marketable equity investments in
commercial mortgage-backed securities ("CMBS"), mezzanine debt and real estate investment funds accounted for under the equity method. The investments made by certain of these funds are carried by the
funds at estimated fair value and, accordingly, the Company's equity in the earnings of the investees includes both net investment income and net realized and unrealized gains and losses. Valuations
of the underlying investments in such funds are subject to many of the same risks and uncertainties affecting the valuations of the Company's directly-owned loans and investment securities, and the
Company's operating results are affected to the extent of its equity interests in such funds.

The
Company also holds non-marketable equity investments in entities that invest in pools of performing and non-performing commercial loans and real estate
assets, including non-performing

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CAPMARK FINANCIAL GROUP INC.

Notes to Consolidated Financial Statements (Continued)

3. Basis of Presentation and Summary of Significant Accounting Policies (Continued)

commercial
and mortgage loans. Non-performing investments are purchased at discounts to par at a market yield that is commensurate with the related risk. Resolutions are typically
accomplished through sale of the underlying collateral, discounted payoff, debt restructuring or foreclosure. Income is recognized as earned based on the Company's participation interest in the
underlying equity method investment.

Non-marketable
equity investments that are not carried at fair value, as described above, are reviewed for impairment. In evaluating whether a decline in value of an equity
investment is other-than-temporary, the Company evaluates the investee's ability to generate and sustain an earnings capacity that would support the carrying value of the
investment, as well as the Company's ability and intent to hold the investment until the decline in value is recovered. When it is determined that an other-than-temporary
impairment has occurred, the Company records a charge for the difference between the investment's carrying value and its fair value.

Goodwill

Goodwill represents the excess of the cost of an acquired business over the estimated fair value of identifiable assets and liabilities
acquired. In accordance with SFAS No. 142, "Goodwill and Other Intangible Assets," or "SFAS No. 142," goodwill is reviewed for impairment at the reporting unit level and is not
amortized. A reporting unit is an operating segment or one level below an operating segment as that term is defined in SFAS No. 131, "Disclosures about Segments of an Enterprise and Related
Information," or "SFAS No. 131." The Company reviews goodwill for impairment annually in the fourth quarter. The Company may also review goodwill for impairment more frequently if events or
changes in circumstances indicate that the asset might be impaired. An impairment loss is recorded to the extent that the carrying value of goodwill exceeds its implied fair value, which is determined
based on a DCF analysis.

Intangible Assets

The Company holds intangible assets which primarily consist of customer relationships and contracts. These intangible assets were
initially recorded at estimated fair value. In accordance with SFAS No. 142, these intangible assets are amortized on a straight-line basis over their estimated useful lives,
ranging from 3 to 14 years. The Company reviews intangible assets for impairment annually in the fourth quarter. The Company may also review intangible assets for impairment more frequently if
events or changes in circumstances indicate that the asset might be impaired. An impairment loss is recorded to the extent that the carrying value of the intangible asset exceeds its implied fair
value, which is determined based on a DCF analysis.

Mezzanine Equity

The Company issued common stock to Management Stockholders for estimated fair value. The shares are redeemable upon the occurrence of
certain events. The Company classifies this equity in accordance with EITF D-98, "Classification and Measurement of Redeemable Securities," or "EITF D-98" which requires that
conditionally redeemable securities be classified outside of permanent stockholders' equity. Accordingly, the Company classifies these shares as mezzanine equity. There were 14,229,713 and 20,126,963
shares of common stock classified as mezzanine equity as of December 31, 2008 and 2007, respectively.

28

---



CAPMARK FINANCIAL GROUP INC.

Notes to Consolidated Financial Statements (Continued)

3. Basis of Presentation and Summary of Significant Accounting Policies (Continued)

Stock-Based Compensation

The Company has a stock option award program which provides Management Stockholders with the option to purchase shares of common stock
at a specified price, once certain time-based and performance-based vesting conditions are met. The Company accounts for share-based payments issued to employees and
non-employee
directors in accordance with SFAS No. 123 (Revised 2004), "Share-Based Payment" or "SFAS No. 123R." This statement establishes the standards for accounting for transactions in which an
enterprise receives goods or employee services in exchange for equity instruments of the enterprise, or incurs liabilities in exchange for goods or employee services that are based on the estimated
fair value of the enterprise's equity instruments or that may be settled by the issuance of such equity instruments. SFAS No. 123R requires companies to estimate the fair value of share-based
payment awards on the date of grant using an option-pricing model. Accordingly, the Company measures the fair value of its option awards based on the grant date fair value of the award, which is
estimated through a Black-Scholes option-pricing model.

The
Company has classified these stock options as equity instruments under the guidelines of SFAS No. 123R. The Company recognizes compensation expense associated with these
equity instruments as a component of compensation and benefits for the portion of outstanding awards which are ultimately expected to vest. These instruments are recognized in expense over the
requisite service period, which the Company considers to be the vesting period of the options.

Earnings per share

Basic earnings per share is computed by dividing income available to common stockholders by the weighted-average number of common
shares outstanding during the period. Diluted earnings per share is determined using the weighted-average number of common shares outstanding during the period, adjusted for the dilutive effect of
common stock equivalents, consisting of shares that might be issued upon exercise of common stock options. In periods where losses are reported, the weighted-average number of diluted common shares
outstanding excludes common stock equivalents, because their inclusion would be anti-dilutive.

Guarantees other than Low-Income Housing Tax Credit Guarantees

For guarantees issued since January 1, 2003, the Company records liabilities equal to the estimated fair value of the guarantee
obligations undertaken. For guarantee obligations for which the Company receives fees in exchange for undertaking the obligation, the fees received are considered to be a measure of estimated fair
value in accordance with FIN 45, "Guarantor's Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others," or "FIN 45."

For
mortgage loans originated under the Fannie Mae Delegated Underwriting and Servicing ("DUS") program, the Company accounts for its exposure to loss under the service
contract with Fannie Mae as a guarantee under FIN 45, recording a liability that approximates the cash flows deemed to represent remaining compensation for the Company's guarantee or, if
greater, the Company's expected loss.

29

---



CAPMARK FINANCIAL GROUP INC.

Notes to Consolidated Financial Statements (Continued)

3. Basis of Presentation and Summary of Significant Accounting Policies (Continued)

Recently Issued Accounting Standards

In April 2007, the FASB issued FSP No. FIN 39-1, "Amendment of FASB Interpretation No. 39," or "FSP
FIN 39-1." FSP FIN 39-1 modifies FIN No. 39, "Offsetting of Amounts Related to Certain Contracts," and permits companies to offset cash collateral
receivables or payables with net derivative positions under certain circumstances. FSP FIN 39-1 was effective for the Company on January 1, 2008. The adoption of FSP
FIN 39-1 did not have a material impact on the Company's consolidated financial statements.

In
December 2007, the FASB issued SFAS No. 141 (revised 2007), "Business Combinations," or "SFAS No. 141R," which is intended to improve reporting by creating greater
consistency in the accounting and financial reporting of business combinations, resulting in more complete, comparable, and relevant information for investors and other users of financial statements.
To achieve this goal, the new standard requires the acquiring entity in a business combination to recognize all (and only) the assets acquired and liabilities assumed in the transaction; establishes
the acquisition-date fair value as the measurement objective for all assets acquired and liabilities assumed; and requires the acquirer to disclose to investors and other users all of the
information they need to evaluate and understand the nature and financial effect of the business combination. Prior to the adoption of SFAS No. 141R, any adjustments to the FIN 48
reserve are recorded as an increase to goodwill if an expense and, if a benefit, are applied (a) first to reduce to zero any goodwill related to the acquisition, (b) second to reduce to
zero other noncurrent intangible assets related to the acquisition, and (c) third to reduce income tax expense. Subsequent to the adoption of SFAS No. 141R, the above rule will no longer
apply and any expense or benefit associated with realizing (or re-measuring) unrecognized tax benefits will be recorded as part of income tax expense. SFAS No. 141R shall be applied
by the Company prospectively to business combinations for which the acquisition date is after January 1, 2009. Management is currently evaluating the potential impact of SFAS No. 141R on
the Company's consolidated financial statements.

In
December 2007, the FASB issued SFAS No. 160, "Noncontrolling Interests in Consolidated Financial Statementsan amendment of ARB No. 51," or "SFAS
No. 160," which is intended to improve the relevance, comparability, and transparency of financial information provided to investors by requiring all entities to report noncontrolling
(minority) interests in subsidiaries as equity (as
opposed to as a liability or mezzanine equity) in the consolidated financial statements. In addition, SFAS No. 160 eliminates the diversity that currently exists in accounting for transactions
between an entity and noncontrolling interests by requiring they be treated as equity transactions. SFAS No. 160 is effective for the Company on January 1, 2009. Management is currently
evaluating the impact of SFAS No. 160 on the Company's consolidated financial statements.

In
February 2008, the FASB issued FSP No. FAS 157-2, "Effective Date of FASB Statement No. 157," or "FSP FAS 157-2." This FSP delays the
effective date of SFAS No. 157 for nonfinancial assets and nonfinancial liabilities, except for items that are recognized or disclosed at fair value in the financial statements on a recurring
basis (at least annually), to fiscal years beginning after November 15, 2008, and interim periods within those fiscal years. FSP FAS 157-2 became effective upon issuance and
was adopted by the Company.

In
March 2008, the FASB issued SFAS No. 161, "Disclosures about Derivative Instruments and Hedging Activitiesan amendment of FASB Statement No. 133," or "SFAS
No. 161." SFAS No. 161 changes disclosure requirements about (a) how and why an entity uses derivative instruments, (b) how

30

---



CAPMARK FINANCIAL GROUP INC.

Notes to Consolidated Financial Statements (Continued)

3. Basis of Presentation and Summary of Significant Accounting Policies (Continued)

derivative
instruments and related hedged items are accounted for under SFAS No. 133 and its related interpretations, and (c) how derivative instruments and related hedged items affect
an entity's financial position, financial performance, and cash flows. SFAS No. 161 is effective for the Company on January 1, 2009. Management is currently evaluating the potential
impact of SFAS No. 161 on the disclosures included in the Company's consolidated financial statements.

In
April 2008, the FASB issued FSP No. FAS 142-3, "Determination of the Useful Life of Intangible Assets," or "FSP FAS 142-3." This FSP amends the
factors an entity should consider in developing renewal or extension assumptions used in determining the useful life of a recognized intangible asset under SFAS No. 142. The FSP affects
entities with recognized intangible assets and is effective for the Company on January 1, 2009. This new guidance applies to (1) intangible assets that are acquired individually or with
a group of other assets and (2) intangible assets acquired in business combinations and asset acquisitions. The adoption of FSP FAS 142-3 is not expected to have a material
impact on the Company's consolidated financial statements.

In
June 2008, the FASB issued FSP No. EITF 03-6-1, "Determining Whether Instruments Granted in Share-Based Payment Transactions Are Participating
Securities," or "FSP EITF 03-6-1." This FSP addresses whether instruments granted in share-based payment transactions are participating securities prior to vesting and
therefore need to be included in the earnings allocation in calculating earnings per share under the two-class method described in SFAS No. 128, "Earnings per Share." This FSP
requires companies to treat unvested share-based payment awards that have non-forfeitable rights to dividends or dividend equivalents as a separate class of securities in calculating
earnings per share. The FSP is effective for the Company on January 1, 2009. All prior-period earnings per share data presented shall be adjusted retrospectively (including interim financial
statements, summaries of earnings, and selected
financial data) to conform to the provisions of this FSP. Early application is not permitted. The adoption of FSP EITF 03-6-1 is not expected to have a material impact
on the Company's calculation of earnings per share.

In
September 2008, the FASB issued FSP No. FAS 133-1 and FIN 45-4, "Disclosures about Credit Derivatives and Certain Guarantees: An Amendment of
FASB Statement No. 133 and FASB Interpretation No. 45; and Clarification of the Effective Date of FASB Statement No. 161." The FSP amends SFAS No. 133 to require certain
disclosures by sellers of credit derivatives, including credit derivatives embedded in hybrid instruments. The FSP also amends FIN 45 to require additional disclosures about the current status
of the payment/performance risk of a guarantee. The FSP also clarifies that, as noted above, SFAS No. 161 is effective for the Company on January 1, 2009. The provisions of the FSP that
amend SFAS No. 133 and FIN 45 were effective for the Company on December 31, 2008. The adoption of the FSP did not have a material impact on the Company's consolidated financial
statements.

In
September 2008, the FASB issued EITF 08-05, "Issuer's Accounting for Liabilities Measured at Fair Value with a Third-Party Credit Enhancement," or
"EITF 08-05." EITF 08-05 requires issuers of liability instruments with a third-party guarantee or other credit enhancement to exclude the effect of the credit
enhancement when measuring the liability's fair value. The effect of initially applying the guidance in EITF 08-05 shall be included in the change in fair value in the period of
adoption. EITF 08-05 is effective for the Company on January 1, 2009. Management is currently evaluating the potential impact of EITF 08-05 on the
Company's consolidated financial statements.

31

---



CAPMARK FINANCIAL GROUP INC.

Notes to Consolidated Financial Statements (Continued)

3. Basis of Presentation and Summary of Significant Accounting Policies (Continued)

In
October 2008, the FASB issued FSP No. FAS 157-3, "Determining the Fair Value of a Financial Asset When the Market for That Asset Is Not Active," or "FSP
FAS 157-3." FSP FAS 157-3 applies to financial assets within the scope of accounting pronouncements that require or permit fair value measurements in accordance
with SFAS No. 157. The FSP clarifies the application of SFAS No. 157 in a market that is not active and provides an example to illustrate key considerations in determining the fair value
of a financial asset when the market for that financial asset is not active. The FSP became effective upon issuance. The Company has considered this guidance in measuring the fair value of assets and
liabilities.

In
November 2008, the FASB issued EITF 08-06, "Equity Method Investment Accounting Considerations," or "EITF 08-06." EITF 08-06
addresses the potential effect of SFAS No. 141R and SFAS No.160 on equity method accounting under Accounting Principles Board Opinion No. 18, "The Equity Method of Accounting for
Investments in Common Stock," or "Opinion No. 18." EITF 08-06 will continue existing practices under Opinion No. 18 including the use of a cost accumulation approach
to initial measurement of the investment. The
EITF will not require the investor to perform a separate impairment test on the underlying assets of an equity method investment. However, an equity method investor is required to recognize its
proportionate share of impairment charges recognized by the investee, adjusted for basis differences, if any, between the investee's carrying value for the impaired assets and the cost allocated to
such assets by the investor. The investor is also required to perform an overall other-than-temporary impairment test of its investment in accordance with Opinion
No. 18. EITF 08-06 is effective for the Company on January 1, 2009. Management is currently evaluating the potential impact of EITF 08-06 on the
Company's consolidated financial statements.

In
December 2008, the FASB issued FSP FAS No.140-4 and FIN 46(R)-8, "Disclosures by Public Entities (Enterprises) about Transfers of Financial Assets and
Interests in Variable Interest Entities." The purpose of this FSP is to improve disclosures by public entities and enterprises until the pending amendments to SFAS No. 140 and FIN 46R
are finalized and approved by the FASB board. The FSP amends SFAS 140 to require public entities to provide additional disclosures about transferors' continuing involvement with transferred
financial assets. It also amends FIN 46R to require public enterprises, including sponsors that have a variable interest in a variable interest entity, to provide additional disclosures about
their involvement with variable interest entities. The FSP also requires disclosures by a public enterprise that is (a) a sponsor of a qualifying special-purpose entity ("SPE") that holds a
variable interest in the qualifying SPE but was not the transferor of financial assets to the qualifying SPE and (b) a servicer of a qualifying SPE that holds a significant variable interest in
the qualifying SPE but was not the transferor of financial assets to the qualifying SPE. The FSP increases disclosure requirements for public companies and is effective for reporting periods (interim
and annual) that end after December 15, 2008. FSP FAS 140-4 and FIN 46(R)-8 was adopted by the Company upon issuance. The Company has considered this
guidance in preparing the disclosures included in the Company's consolidated financial statements.

In
January 2009, the FASB issued FSP EITF 99-20-1, "Amendments to the Impairment Guidance of EITF 99-20," or "FSP
EITF 99-20-1." This FSP amends EITF 99-20 to align the guidance on other-than-temporary impairments for beneficial interests
with the guidance in SFAS No. 115 and other related guidance. The FSP was effective for the Company on December 31, 2008. The adoption of FSP EITF 99-20-1
did not have a material impact on the Company's consolidated financial statements.

32

---



CAPMARK FINANCIAL GROUP INC.

Notes to Consolidated Financial Statements (Continued)

3. Basis of Presentation and Summary of Significant Accounting Policies (Continued)

In
April 2009, the FASB issued FSP FAS 157-4, "Determining Fair Value When the Volume and Level of Activity for the Asset or Liability Have Significantly Decreased and
Identifying Transactions That Are Not Orderly," or "FSP FAS 157-4," to provide additional guidance for estimating fair value in accordance with SFAS No. 157 when the volume
and level of market activity for the asset and liability have significantly decreased. FSP FAS 157-4 is effective for
interim and annual periods ending after June 15, 2009. Management is currently evaluating the impact of FSP FAS 157-4 on the Company's consolidated financial statements.

In
April 2009, the FASB issued FSP FAS 115-2 and FAS 124-2, "Recognition and Presentation of Other-Than-Temporary
Impairments," or "FSP FAS 115-2 and FAS 124-2." The FSP modified the requirement in existing accounting guidance to demonstrate the intent and ability to hold an
investment security for a period of time sufficient to allow for any anticipated recovery in fair value. When the fair value of a debt or equity security has declined below the amortized cost at the
measurement date, an entity that intends to sell a security or is more-likely-than-not to sell the security before the recovery of the security's cost basis must
recognize the other-than-temporary impairment in earnings. For a debt security with a fair value below the amortized cost at the measurement date where it is
more-likely-than-not that an entity will not sell the security before the recovery of its cost basis, but an entity does not expect to recover the entire cost basis
of the security, the security is considered other-than-temporarily impaired. The related other-than-temporary impairment loss on the debt security will
be recognized in earnings to the extent of the credit losses with the remaining impairment loss recognized in accumulated other comprehensive income. FSP FAS 115-2 and
FAS 124-2 is effective for interim and annual periods ending after June 15, 2009. Management is currently evaluating the impact of FSP FAS 115-2 and
FAS 124-2 on the Company's consolidated financial statements.

In
April 2009, the FASB issued FSP FAS 107-1 and APB 28-1, "Interim Disclosures about Fair Value of Financial Instruments," or "FSP
FAS 107-1 and APB 28-1". The FSP amends SFAS No. 107, "Disclosures about Fair Value of Financial Instruments," or "SFAS No. 107," to require an
entity to provide disclosures about fair value of financial instruments in interim financial statements. FSP FAS 107-1 and APB 28-1 is effective for interim and
annual periods ending after June 15, 2009. Management is currently evaluating the impact of FSP FAS 107-1 and APB 28-1 on the Company's consolidated
financial statements.

4. Investment Securities Available For Sale

Investment securities classified as available for sale include: CMBS; asset-backed securities ("ABS"); collateralized debt obligations ("CDOs") which may be collateralized by CMBS,
unsecured real estate investment trust debt and other real estate-related investments; tax-exempt securities; TMK securities; securities backed by Ginnie Mae, Fannie Mae and Freddie Mac
(government sponsored enterprise or "GSE securities"); U.S. Treasury securities; and other investment securities.

33

---



CAPMARK FINANCIAL GROUP INC.

Notes to Consolidated Financial Statements (Continued)

4. Investment Securities Available For Sale (Continued)

The
following table summarizes the Company's investment securities classified as available for sale as of December 31, 2008, by security type (in thousands):

Amortized
cost

Unrealized
gains

Unrealized
losses

Fair
valueCMBS, ABS and CDOs

$
43,459

$
917

$


$
44,376Tax-exempt securities


242,568


57





242,625TMK securities


325,343








325,343GSE securities


219,264


7





219,271U.S. Treasury and other securities


12,033


319





12,352Total

$
842,667

$
1,300

$


$
843,967


The
following table summarizes the Company's investment securities classified as available for sale as of December 31, 2007, by security type (in thousands):

Amortized
cost

Unrealized
gains

Unrealized
losses

Fair
valueCMBS, ABS and CDOs

$
104,252

$
16,265

$
(2,646
)
$
117,871Tax-exempt securities


247,395


3,162


(58
)

250,499TMK securities


311,827


821


(486
)

312,162GSE securities


235,138


1,404


(417
)

236,125U.S. Treasury and other securities


32,346


679





33,025Total

$
930,958

$
22,331

$
(3,607
)
$
949,682


The
following table summarizes the gross realized gains and losses recognized by the Company on sales of investment securities classified as available for sale and the related proceeds
received on such sales (in thousands):

Successor

PredecessorYear ended
December 31, 2008

Year ended
December 31, 2007

Period from
March 23, 2006 to
December 31, 2006

Period from
January 1, 2006 to
March 22, 2006Gains recognized

$
624

$
21,322

$
10,706

$
Losses recognized


(100
)

(6,535
)

(1,592
)

(630
)Net gains (losses)

$
524

$
14,787

$
9,114

$
(630
)Proceeds received

$
21,507

$
215,322

$
152,485

$
70,611


The
gains and losses were recorded as a component of net (losses) gains on investments and real estate in the consolidated statement of operations. The proceeds received for the year
ended December 31, 2007 do not include the transfer of investment securities in connection with the Company's sale of a majority of its affordable housing debt platform in February 2007.

The
Company has pledged investment securities classified as available for sale with a carrying value of $456.6 million and $489.1 million as of December 31, 2008 and
2007, respectively, primarily to support LIHTC yield guarantees and debt obligations.

34

---



CAPMARK FINANCIAL GROUP INC.

Notes to Consolidated Financial Statements (Continued)

4. Investment Securities Available For Sale (Continued)

The
Company evaluates unrealized losses to identify those impairments that would be considered other-than-temporary. The Company's evaluation includes a credit
analysis of its investment securities based on the preparation of cash flow projections reflecting its monitoring of the underlying assets and relevant market information. In the case of subordinate
CMBS,
ABS and CDOs, the Company also considers its projected loss position in the relevant securities. Impairments considered other-than-temporary typically result from a decline in
the projected cash flows due to increased loss projections and the Company's determination that the impairments will not otherwise be recovered. As a result of the Company's evaluation, and its
conclusion that the amount it expects to recover on some of its investment securities was less than the amortized cost of those securities, the Company recognized charges for declines in value in
certain investment securities classified as available for sale, primarily consisting of CMBS, ABS and CDOs, that were considered other-than-temporary and generally related to
credit worthiness of issuers. Related impairment charges recognized for such declines in value were $53.6 million and $26.9 million for the years ended December 31, 2008 and 2007,
respectively, $1.4 million for the period from March 23, 2006 to December 31, 2006 and none for the period from January 1, 2006 to March 22, 2006. In addition, as of
December 31, 2008, management determined that the Company may no longer have the ability to hold certain securities where the fair value had declined below amortized cost for a period of time
sufficient to allow for the recovery in fair value. As a result of this determination, the Company recognized a $56.4 million impairment charge on those securities that were in an unrealized
loss position as of December 31, 2008. The impairment charges were recorded as a component of net (losses) gains on investments and real estate in the consolidated statement of operations.

The
following table summarizes the fair value and gross unrealized losses of the Company's investment securities classified as available for sale, aggregated by length of time that
individual securities have been in a continuous unrealized loss position, as of December 31, 2007 (in thousands):

Less than 12 months

12 months or more

TotalFair
value

Unrealized
losses

Fair
value

Unrealized
losses

Fair
value

Unrealized
lossesCMBS, ABS and CDOs

$
33,955

$
(1,518
)
$
20,120

$
(1,128
)
$
54,075

$
(2,646
)Tax-exempt securities








1,991


(58
)

1,991


(58
)TMK securities


87,086


(194
)

89,748


(292
)

176,834


(486
)GSE securities


49,319


(72
)

96,851


(345
)

146,170


(417
)Total

$
170,360

$
(1,784
)
$
208,710

$
(1,823
)
$
379,070

$
(3,607
)


The
following table summarizes the maturities of debt securities classified as available for sale as of December 31, 2008 (in thousands):

Amortized cost

Fair valueDue in one year or less

$
227,483

$
227,505Due after one year through five years


167,004


168,105Due after five years through ten years


2,310


2,116Due after ten years


445,870


446,241Total

$
842,667

$
843,967


35

---



CAPMARK FINANCIAL GROUP INC.

Notes to Consolidated Financial Statements (Continued)

4. Investment Securities Available For Sale (Continued)

The
maturities reported in the above table reflect the instruments' final maturity dates. Actual maturities may differ from the maturities reported above due to periodic payments and
prepayments.

The
Company's subordinated CMBS and CDO securities provide credit support to the more senior classes of the related securitization. Cash flows from the assets underlying the CMBS and CDO
investment securities generally are allocated first to the senior classes, with the most senior class having a priority entitlement to cash flow. Then, any remaining cash flows are allocated generally
among the other CMBS and CDO security classes in order of their relative seniority. To the extent there are defaults and unrecoverable losses on the underlying investments, resulting in reduced cash
flows, the most subordinated CMBS and CDO securities class will bear this loss first. To the extent there are losses in excess of the most subordinated class' entitlement to principal and interest,
the remaining CMBS and CDO securities classes will bear such losses in order of their relative subordination level.

5. Loans Held for Sale

The following table summarizes the Company's loans held for sale as of December 31, 2008 and 2007, by loan type, carried at fair value as of December 31, 2008 and at the
lower of amortized cost or fair value as of December 31, 2007 (in thousands):

December 31,
2008

December 31,
2007Floating rate mortgage loans

$
3,178,369

$
6,653,675Fixed rate mortgage loans


788,317


1,118,042Construction loans


3,997


12,052Total

$
3,970,683

$
7,783,769


The
Company periodically reviews its loan portfolio to determine whether any changes in classification should be made between "held for sale" and "held for investment." The Company
classifies a loan as "held for investment" when it intends to hold the loan for the foreseeable future or until maturity or payoff. The Company defines "foreseeable future" based upon what it believes
to be reasonable under the circumstances, including events and conditions that the Company can reasonably anticipate. The Company considers many factors in determining what the "foreseeable future" is
including: its financial condition and liquidity positions; its anticipated capital requirements; its business strategy and operating plans; the current and expected economic environment and market
conditions; and the nature and type of loans, including expected durations. The consideration of many of these factors requires the Company to make forward-looking evaluations for a period of time not
less than twelve months. Beyond the twelve-month period, the Company is less confident in its ability to predict future events. If the Company is aware of any specific events which are likely to occur
beyond the twelve-month period but prior to a loan's maturity or payoff, the Company considers such events in its evaluation. Based upon its analysis of the factors and all other relevant information,
the Company determines whether the loan should be classified as either "held for sale" or "held for investment." No loans were transferred from "held for sale" to "held for investment" during the year
ended December 31, 2008. During the year ended December 31, 2007, approximately $4.5 billion of loans were transferred from "held for sale" to "held for investment" at the lower
of amortized cost or fair value. The amortized cost basis of such loans exceeded estimated fair value by approximately

36

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CAPMARK FINANCIAL GROUP INC.

Notes to Consolidated Financial Statements (Continued)

5. Loans Held for Sale (Continued)

$76.6 million.
This amount is reported as a component of net (losses) gains on loans in the consolidated statement of operations for the year ended December 31, 2007.

The
Company has pledged loans held for sale with a carrying value totaling $1.2 billion and $2.6 billion as of December 31, 2008 and 2007, respectively, to support
debt obligations.

The
following table summarizes the Company's loans held for sale as of December 31, 2008 and 2007, by collateral type (in thousands):

December 31, 2008

December 31, 2007Collateral type

Carrying
amount

Percent of
portfolio

Collateral type

Carrying
amount

Percent of
PortfolioMultifamily

$
1,131,849


28
%
Retail

$
2,010,241


26
%Office


1,041,867


26

Multifamily


1,775,332


23Retail


497,693


13

Office


1,745,748


22Hospitality


431,605


11

Hospitality


517,102


7Healthcare


188,849


5

Healthcare


247,720


3Mixed-use and other


678,820


17

Mixed-use and other


1,487,626


19Total

$
3,970,683


100
%
Total

$
7,783,769


100
%


The
following table summarizes the Company's loans held for sale by location of underlying collateral as of December 31, 2008 and 2007, by geographic region (in thousands):

December 31, 2008

December 31, 2007Amount

Percent of
portfolio



Amount

Percent of
portfolioNorth America

$
3,475,691


88
%
North America

$
4,970,429


64
%Asia


288,910


7

Asia


209,732


3Europe


206,082


5

Europe


2,603,608


33Total

$
3,970,683


100
%
Total

$
7,783,769


100
%


The
collateral underlying the Company's loans held for sale in North America is widely dispersed across many markets and major metropolitan areas in the United States.

In
April 2008, in two separate transactions, certain subsidiaries of the Company completed the sale of significant interests in 39 loans held for sale in the Company's European loan
portfolio to an institutional buyer for a total aggregate sale price of approximately $1.8 billion.

37

---



CAPMARK FINANCIAL GROUP INC.

Notes to Consolidated Financial Statements (Continued)

5. Loans Held for Sale (Continued)

Prior
to the adoption of SFAS No. 159, the amount by which the amortized cost basis of loans held for sale exceeded estimated fair value was recorded as a valuation allowance. The
following table summarizes activity related to the Company's valuation allowance in prior years (in thousands):

Successor

PredecessorYear ended
December 31,
2007

Period from
March 23, 2006 to
December 31, 2006

Period from
January 1, 2006 to
March 22, 2006Balance at beginning of period

$
26,422

$
30,167

$
27,314Initial impact of push down adjustments





(30,167
)

Lower of cost or fair value adjustment


222,056


26,400


2,782Loans charged off


(18,814
)

(12
)

Foreign currency translation adjustment


674


34


71Transfers and other


(74,951
)




Balance at end of period

$
155,387

$
26,422

$
30,167


With
the implementation of push down accounting in connection with the Sponsor Transactions, the valuation allowance as of March 22, 2006 was transferred to the carrying value of
loans held for sale as a basis adjustment to the carrying value of such loans on March 23, 2006.

6. Loans Held for Investment

The following table summarizes the Company's loans held for investment as of December 31, 2008 and 2007, by loan type (in thousands):

December 31,
2008

December 31,
2007Floating rate mortgage loans

$
5,895,031

$
5,172,955Fixed rate mortgage loans


692,780


579,909Construction loans


1,423,119


809,234Acquired non-performing loans


305,261


358,368Total


8,316,191


6,920,466Allowance for loan losses


(108,211
)

(28,752
)Net

$
8,207,980

$
6,891,714


The
"Total" amounts set forth in the table above are equal to the unpaid principal balance of the loans less the amount of any fair value adjustments applied to any loans that were
previously classified as held for sale and other discounts to carrying value. The aggregate amount of such adjustments/discounts for all loans held for investment was $56.0 million and
$106.6 million as of December 31, 2008 and 2007, respectively.

38

---



CAPMARK FINANCIAL GROUP INC.

Notes to Consolidated Financial Statements (Continued)

6. Loans Held for Investment (Continued)

The following table summarizes the Company's loans held for investment as of December 31, 2008 and 2007, by collateral type (in thousands):

December 31, 2008

December 31, 2007Collateral type

Amount

Percent of
portfolio

Collateral type

Amount

Percent of
PortfolioHospitality

$
1,716,490


21
%
Healthcare

$
1,364,009


20
%Healthcare


1,511,110


18

Office


1,306,374


19Office


1,493,476


18

Multifamily


1,052,954


15Multifamily


1,235,706


15

Hospitality


1,041,070


15Retail


809,169


10

Retail


798,413


12Mixed-use and other


1,550,240


18

Mixed-use and other


1,357,646


19Total

$
8,316,191


100
%
Total

$
6,920,466


100
%


The
Company has pledged loans held for investment with carrying values totaling $4.5 billion and $1.4 billion as of December 31, 2008 and 2007, respectively, to
support debt obligations.

The
following table summarizes the Company's loans held for investment by location of underlying collateral as of December 31, 2008 and 2007, by geographic region (in thousands):

December 31, 2008

December 31, 2007Amount

Percent of
portfolio



Amount

Percent of
portfolioNorth America

$
7,590,037


91
%
North America

$
5,954,845


86
%Asia


506,431


6

Asia


639,630


9Europe


219,723


3

Europe


325,991


5Total

$
8,316,191


100
%
Total

$
6,920,466


100
%


The
collateral underlying the Company's loans held for investment in North America is widely dispersed across many markets and major metropolitan areas in the United States.

The
Company's allowance for loan losses is established, monitored and maintained on the basis of past loan experience, the current composition of the portfolio, historical credit
migration, property type diversification, default, loss severity, industry loss experience, economic conditions and trends, and other relevant factors.

39

---



CAPMARK FINANCIAL GROUP INC.

Notes to Consolidated Financial Statements (Continued)

6. Loans Held for Investment (Continued)

The
following table summarizes activity related to the Company's allowance for loan losses (in thousands):

Successor

PredecessorYear ended
December 31,
2008

Year ended
December 31,
2007

Period from
March 23, 2006 to
December 31, 2006

Period from
January 1, 2006 to
March 22, 2006Balance at beginning of period

$
28,752

$
61,715

$
27,594

$
31,283Initial impact of push down adjustments








(27,594
)

Provision for loan losses


179,665


32,666


73,585


1,031Loans charged off


(82,264
)

(70,880
)

(13,323
)

(4,756
)Foreign currency translation adjustment


98


4,898


1,200


36Transfers and other(1)


(18,040
)

353


253


Balance at end of period

$
108,211

$
28,752

$
61,715

$
27,594


---

With
the implementation of push down accounting in connection with the Sponsor Transactions, the allowance for loan losses as of March 22, 2006 was transferred to the carrying
value of mortgage loans held for investment as a basis adjustment to the carrying value of such loans on March 23, 2006.

The
following table summarizes information about loans originated by the Company that are held for investment and have specifically been identified as being impaired as of
December 31, 2008 and 2007 (in thousands):

December 31,
2008

December 31,
2007Impaired loans with an allowance for loan losses

$
330,822

$
56,761Impaired loans without an allowance for loan losses


54,473


44,474Total impaired loans


385,295


101,235Allowance for loan losses on impaired loans


(50,111
)

(6,919
)Net impaired loans

$
335,184

$
94,316


The
average balance of total impaired loans was $180.3 million, $117.7 million and $111.5 million for the years ended December 31, 2008, 2007 and 2006,
respectively.

The
allowance for loan losses on impaired loans is included in the Company's overall allowance for loan losses. The Company does not recognize interest income on impaired loans. Impaired
loans also include loans that have been modified in troubled debt restructurings where concessions to borrowers who experienced financial difficulties have been granted.

As
discussed in Note 3, the Company purchased non-performing loans at significant discounts to the loans' unpaid principal balance, principally in Asia. At the time of
acquisition, these loans evidenced credit quality deterioration and the probability that not all contractual payments would be

40

---



CAPMARK FINANCIAL GROUP INC.

Notes to Consolidated Financial Statements (Continued)

6. Loans Held for Investment (Continued)

collected.
The Company established an allowance for loan losses on acquired non-performing loans of $3.6 million as of December 31, 2008. In addition, charges for impairments
of acquired non-performing loans totaled $55.4 million and $12.5 million for the years ended December 31, 2008 and 2007, respectively, $11.3 million for the period from
March 23, 2006 to December 31, 2006, and $1.5 million for the period from January 1, 2006 to March 22, 2006.

The
carrying value of acquired non-performing loans, net of the allowance for loan losses, totaled $301.7 million and $358.4 million as of December 31,
2008 and 2007, respectively. Certain of the acquired non-performing loans are accounted for using the cost recovery method because the Company cannot reasonably estimate the timing and
amount of expected future cash flows. The following table summarizes the carrying amounts of acquired non-performing loans accounted for using the cost recovery method (in thousands):

December 31,
2008

December 31,
2007Loans acquired during the year

$
63

$
1Loans at the end of period


206,301


127,419


The
following table summarizes activity related to the accretable yield on acquired non-performing loans that are not accounted for using the cost recovery method (in
thousands):

December 31,
2008

December 31,
2007Balance at beginning of period

$
45,600

$
84,886Additions


29,997


29,041Accretion


(23,954
)

(59,002
)Disposals


(1,462
)

(5,675
)Transfers to cost recovery method


(26,029
)

(3,650
)Balance at end of period

$
24,152

$
45,600


Acquisitions
of non-performing loans were not material during the year ended December 31, 2008. During the year ended December 31, 2007, the Company acquired
non-performing loans for $69.6 million, which approximated fair value, with contractually required payments receivable totaling $195.8 million. At acquisition in 2007, the
Company estimated it would collect $84.0 million in total cash flow related to these acquired non-performing loans. The timing and amount of the Company's expected cash flows
associated with acquired non-performing loans are based upon a number of assumptions that are subject to business and economic uncertainties, including the amount and timing of principal
payments, collateral disposition activity and other factors. The Company could experience earnings volatility to the extent that the timing and the amount of actual cash flows received differ from
management's expected future cash flow projections.

41

---



CAPMARK FINANCIAL GROUP INC.

Notes to Consolidated Financial Statements (Continued)

7. Real Estate Investments

The following table summarizes the Company's real estate investments as of December 31, 2008 and 2007, by classification and geographic region (in thousands):

North America

Asia

TotalAs of December 31, 2008Held for investment, net of depreciation

$
454,511

$
925,444

$
1,379,955Held for sale


12,769


314,702


327,471Acquired through foreclosure


99,266


38,232


137,498Total

$
566,546

$
1,278,378

$
1,844,924As of December 31, 2007Held for investment, net of depreciation

$
460,158

$
1,146,572

$
1,606,730Held for sale


67,292





67,292Acquired through foreclosure


28,933


45,600


74,533Total

$
556,383

$
1,192,172

$
1,748,555


The
Company has pledged real estate with carrying values totaling $769.2 million and $555.9 million as of December 31, 2008 and 2007, respectively, to support debt
obligations. Real estate acquired through foreclosure as of December 31, 2008 included four assets classified as in-substance foreclosure totaling $27.0 million. There were
no assets classified as in-substance foreclosures as of December 31, 2007.

42

---



CAPMARK FINANCIAL GROUP INC.

Notes to Consolidated Financial Statements (Continued)

8. Equity Investments

The following table summarizes the Company's equity investments as of December 31, 2008 and 2007, by investment type (in thousands):

December 31, 2008

December 31, 2007Amount

Percent of
portfolio

Amount

Percent of
portfolioInvestments in affordable housing partnerships in the United States

$
786,512


50
%
$
942,176


48
%Investments in real estate equity investment funds in the United States


342,304


22


491,941


25Investments in other real estate ventures in the United States


138,050


9


154,062


8Investments in non-performing commercial loan and real estate joint ventures, principally in Asia


119,429


8


148,239


7Investments in real estate projects, joint ventures and real estate equity investment funds in Europe


83,752


5


162,487


8Investments in CMBS and debt investment funds, with collateral principally in the United States


34,386


2


66,095


3Other(1)


63,624


4


19,140


1Total

$
1,568,057


100
%
$
1,984,140


100
%


---

Investments in affordable housing partnerships in the United StatesThe Company makes investments in and syndicates investments in real estate
partnerships to unaffiliated investors in the form of limited partner ownership interests that are pooled into upper-tier funds. These funds hold limited partner ownership interests in
various operating partnerships that develop, own, and operate affordable housing properties throughout the United States. These entities are considered variable interest entities under FIN 46R
and are discussed in further detail in Note 13.

Investments in real estate equity investment funds in the United StatesThe Company makes investments in real estate partnerships and limited
liability companies in the form of limited or general partner/member ownership interests. These funds invest in various real estate ventures with real estate developers, the purpose of which is to
acquire, maintain and develop improved and unimproved real property located within the United States, either directly or indirectly through equity interests.

Investments in other real estate ventures in the United StatesThe Company acquires and holds equity positions in various real estate projects.
Ownership of real estate or real estate development projects may take several forms which differ in legal form and economic substance. Typical structures include equity positions in certain
credit-worthy "to-be-built" and rehabilitation commercial and multifamily projects that are expected to meet the investment criteria of a permanent investor upon

43

---



CAPMARK FINANCIAL GROUP INC.

Notes to Consolidated Financial Statements (Continued)

8. Equity Investments (Continued)

project
completion. Such equity positions are often in the form of limited partnerships and limited liability companies.

Investments in non-performing commercial loan and real estate joint venturesAs discussed in Note 3, income associated with these
investments is recognized as earned based on the Company's participation interest in the underlying equity method investment. Generally, the revenue recognition policies applied by these investees are
consistent with those applied by the Company with respect to accretion of interest income.

Investments in real estate projects, joint ventures and real estate equity investment funds in EuropeThe Company makes investments in real estate
partnerships and companies in the form of unit trust or share ownership interests. These investments are focused primarily on underperforming properties in European markets that have the potential to
generate returns through capital improvements, re-leasing, intensive management, repositioning and financial restructuring.

OtherPrimarily includes equity investments accounted for under the cost method.

9. Mortgage Servicing Rights

The following table summarizes activity related to the Company's mortgage servicing rights (in thousands):

Successor

PredecessorYear ended
December 31,
2008

Year ended
December 31,
2007

Period from
March 23, 2006 to
December 31, 2006

Period from
January 1, 2006 to
March 22, 2006Balance at beginning of period

$
890,550

$
829,011

$
648,832

$
631,002Initial impact of push down adjustments








216,584


Additions


66,466


193,003


122,523


41,142Amortization


(139,557
)

(130,457
)

(97,696
)

(23,312
)Portfolio sale








(19,809
)

Transfer to assets related to operations held for sale








(39,907
)

Other


(270
)

(1,007
)

(1,516
)

Balance at end of period

$
817,189

$
890,550

$
829,011

$
648,832


The
Company originated mortgage servicing rights totaling $48.6 million and $66.2 million for the years ended December 31, 2008 and 2007, respectively,
$50.3 million for the period from March 23, 2006 to December 31, 2006 and $21.0 million for the period from January 1, 2006 to March 22, 2006. The Company
purchased mortgage servicing rights totaling $17.9 million and $126.8 million for the years ended December 31, 2008 and 2007, respectively, $72.2 million for the period
from March 23, 2006 to December 31, 2006 and $20.1 million for the period from January 1, 2006 to March 22, 2006.

Based
on the Company's impairment analyses, the Company did not have a valuation allowance related to any of its four principal strata of mortgage servicing rights in any period
presented.

The
estimated fair value of mortgage servicing rights was $894.9 million and $949.1 million as of December 31, 2008 and 2007, respectively.

44

---



CAPMARK FINANCIAL GROUP INC.

Notes to Consolidated Financial Statements (Continued)

10. Loans Serviced

The Company originates, and either sells to or directly places with investors, loans that are secured by
commercial and multifamily projects. Investors generally retain the Company to collect the monthly principal and interest payments and perform certain escrow and collection services. The Company also
purchases the right to service loans and performs asset management services on behalf of others. Asset management services include debt restructuring and asset disposition through whole loan sales,
discounted pay-offs and foreclosure. The Company services loans collateralized by assets located in North America, Europe and Asia.

The
following table summarizes the Company's aggregate servicing portfolio as of December 31, 2008 (in thousands):

December 31, 2008Number of
loans

Unpaid
principal balance

Weighted average
rate

Weighted average
remaining maturity(in years)CMBS


18,312

$
182,725,237


5.76
%

5.6Fee for service


17,370


57,238,003


5.21


7.2Special serviced


3,735


24,861,971


7.08


3.1Agency


5,433


32,846,484


5.73


12.1Life company


1,977


9,830,204


6.19


8.3Other


2,902


54,623,081


5.63


7.8Total


49,729

$
362,124,980


5.76
%

6.7


The
following table summarizes the Company's aggregate servicing portfolio as of December 31, 2007 (in thousands):

December 31, 2007Number of
loans

Unpaid
principal balance

Weighted average
rate

Weighted average
remaining maturity(in years)CMBS


21,444

$
201,320,149


6.00
%

6.3Fee for service


18,232


49,172,578


6.09


8.0Special serviced


4,873


33,909,861


6.85


4.4Agency


5,266


29,158,643


6.00


13.6Life company


2,124


10,557,207


6.27


9.1Other


3,233


47,612,273


6.91


3.8Total


55,172

$
371,730,711


6.21
%

6.7


The
calculation of weighted average rate and weighted average remaining maturity presented in the tables above excludes unpaid principal balance of $25.6 billion and
$22.6 billion as of December 31, 2008
and 2007, respectively. The unpaid principal balances which are excluded relate primarily to loans serviced in Asia for which information was not readily available.

45

---



CAPMARK FINANCIAL GROUP INC.

Notes to Consolidated Financial Statements (Continued)

10. Loans Serviced (Continued)

The
following table summarizes the five largest U.S. geographic concentrations of the Company's servicing portfolio as of December 31, 2008 and 2007 (in thousands):

December 31, 2008



December 31, 2007Unpaid
principal
balance

Percent of
Portfolio



Unpaid
principal
balance

Percent of
PortfolioCalifornia

$
41,713,495


12
%
California

$
44,319,764


12
%New York


27,986,916


8

New York


29,480,287


8Texas


20,441,021


6

Texas


20,646,874


6Florida


15,743,927


4

Florida


16,619,530


4Illinois


10,607,845


3

Illinois


10,028,610


3Other(1)


245,631,776


67

Other(1)


250,635,646


67Total

$
362,124,980


100
%
Total

$
371,730,711


100
%


---

The
Company held escrow funds related to the loans it serviced aggregating to approximately $4.9 billion and $5.7 billion as of December 31, 2008 and 2007,
respectively. These funds are not owned by the Company and are held in segregated trust accounts that are not included in the consolidated balance sheet of the Company. As of December 31, 2008
and 2007, approximately $4.1 billion and $3.9 billion, of such escrow funds were held in segregated trust accounts at Capmark Bank US and Escrow Bank, respectively.

Included
in the above tables are loans serviced on behalf of the Company and reported as a component of loans held for sale or loans held for investment, as appropriate, in the
consolidated balance sheet. See Note 24 for amounts serviced on behalf of GMAC.

46

---



CAPMARK FINANCIAL GROUP INC.

Notes to Consolidated Financial Statements (Continued)

11. Goodwill and Other Intangible Assets

The following table summarizes the changes in the carrying value of the Company's goodwill by reporting unit (in thousands):

North
American
Lending and
Mortgage
Banking

North
American
Investments and
Funds
Management

North
American
Servicing

Asian
Operations

European
Operations

ConsolidatedBalance as of December 31, 2006

$
31,171

$
10,701

$
8,568

$
7,476

$
997

$
58,913Adjustment as a result of adoption of FIN 48


31,763


468











32,231Other tax adjustments(1)


(17,036
)

(244
)










(17,280
)Impairment of goodwill


(387
)













(387
)Other(2)


(1,655
)




(857
)

(1,199
)

55


(3,656
)Balance as of December 31, 2007


43,856


10,925


7,711


6,277


1,052


69,821Other tax adjustments(1)


(21,805
)

(10,620
)

(7,711
)

(6,277
)

(305
)

(46,718
)Impairment of goodwill


(22,051
)

(305
)







(747
)

(23,103
)Balance as of December 31, 2008

$


$


$


$


$


$



---

In
connection with the adoption of FIN 48, the Company recorded an increase to goodwill of $32.2 million as of January 1, 2007 due to the accrual of reserves for
uncertain tax positions that existed as of the Sponsor Transactions date.

In
the second quarter of 2008, the Company recorded goodwill impairment of $0.7 million in connection with the sale of significant interests in 39 loans in its European Operations
reporting unit. The Company performed its annual goodwill impairment review in the fourth quarter of 2008 using a DCF analysis and concluded that carrying value of the goodwill of the North American
Lending and Mortgage Banking and North American Investments and Funds Management reporting units was fully impaired. The Company recorded goodwill impairment of $22.4 million due to the impact
of adverse market conditions on the financial performance and the implied fair value of the reporting units. The adverse market conditions included the global market and economic conditions that have
been disrupted and volatile to an unprecedented extent and the rapid deterioration of the commercial real estate and the debt capital markets in the fourth quarter of 2008. The Company recorded
goodwill impairment of $0.4 million for the year ended December 31, 2007 in connection with exiting its tender option bond program in its North American Lending and Mortgage Banking
reporting unit. Goodwill impairment is reported as a component of other expenses in the consolidated statement of operations.

47

---



CAPMARK FINANCIAL GROUP INC.

Notes to Consolidated Financial Statements (Continued)

11. Goodwill and Other Intangible Assets (Continued)

The
following table summarizes the Company's intangible assets, other than goodwill, as of December 31, 2008 and 2007, by type (dollars in thousands):

Weighted
average
remaining
amortization
period as of
December 31,
2008December 31, 2008

December 31, 2007Original
Balance

Accumulated
amortization

Carrying
value

Original
Balance

Accumulated
amortization

Carrying
value(years)Customer relationships and contracts


10.5

$
114,202

$
(25,147
)
$
89,055

$
114,202

$
(16,082
)
$
98,120Covenants not to compete


2.3


17,400


(9,743
)

7,657


17,400


(6,303
)

11,097Other


4.0


5,040


(2,404
)

2,636


5,040


(1,529
)

3,511Total


9.6

$
136,642

$
(37,294
)
$
99,348

$
136,642

$
(23,914
)
$
112,728


In
connection with the Sponsor Transactions, the Company capitalized $154.3 million in new intangible assets. These intangible assets primarily consisted of customer relationships
and contracts. These intangible assets were recorded at estimated fair value, to the extent of the 79% ownership interest of the Sponsors and Management Stockholders.

The
Company recorded scheduled amortization expense on its intangible assets of $13.4 million and $16.1 million for the years ended December 31, 2008 and 2007,
respectively, $13.1 million for the period from March 23, 2006 to December 31, 2006 and $0.7 million for the period from January 1, 2006 to March 22, 2006.
Amortization expense is reported as a component of other expenses in the consolidated statement of operations.

The
following table summarizes the estimated aggregate amortization expense related to the Company's intangible assets as of December 31, 2008 (in thousands):

2009

$
13,2162010


13,1572011


10,4942012


9,3862013


9,3482014 and thereafter


43,747Total

$
99,348


48

---



CAPMARK FINANCIAL GROUP INC.

Notes to Consolidated Financial Statements (Continued)

12. Short-term and Long-term Borrowings

The following table summarizes the Company's outstanding borrowings and weighted average contractual interest rates in effect as of December 31, 2008 and 2007 (in thousands):

Amount

Weighted Average RateDecember 31,
2008

December 31,
2007

December 31,
2008

December 31,
2007Short-term borrowings

$
3,310,758

$
3,832,637


3.15
%

4.81
%Collateralized borrowings in securitization trusts


184,086


260,524


5.77


5.79Other long-term borrowings


8,098,749


8,047,162


3.04


5.63Total

$
11,593,593

$
12,140,323


3.11
%

5.37
%


The
Company funds its operations utilizing both U.S. dollar and non-U.S. dollar denominated borrowings. As of December 31, 2008, total borrowings included
$10.0 billion funded in U.S. dollars and $1.6 billion funded in foreign currencies, primarily Japanese yen and British pounds sterling. As of December 31, 2008, total borrowings
consisted of $6.1 billion issued at a fixed rate and $5.5 billion issued at a variable rate. As of December 31, 2007, total borrowings included $8.6 billion funded in U.S.
dollars and $3.5 billion funded in foreign currencies, primarily Japanese yen, Euro and British pounds sterling. As of December 31, 2007, total borrowings consisted of
$5.4 billion issued at a fixed rate and $6.7 billion issued at a variable rate.

The
rates shown in the table above represent the contractual interest rates in effect as of December 31, 2008 and 2007. The Company utilizes foreign exchange forward contracts to
manage the foreign exchange impact of certain borrowings.

Short-term borrowings

In connection with the Sponsor Transactions, the Company entered into a senior credit facility with a syndicate of lenders. The senior
credit facility is unsecured and includes a $2.75 billion multi-currency revolving credit facility. The contractual maturity date of the revolving credit facility is March 23, 2011.
However, individual borrowings under the revolving credit facility are on a short-term basis (i.e. less than one year). The revolving credit facility is divided into a U.S.
sub-facility, a Canadian sub-facility, an Irish sub-facility and a Japanese sub-facility. The U.S. sub-facility only permits borrowings to
be denominated in U.S. dollars. All other sub-facilities allow for borrowings that are denominated in Euros, British pounds sterling, Japanese yen or U.S. dollars and, in the case of the
Canadian sub-facility, Canadian dollars. In addition, the revolving credit facility includes borrowing capacity available for letters of credit and for borrowings on same day notice, which
are commonly referred to as swing lines. The Company is permitted to borrow, repay and re-borrow amounts under the revolving credit facility from time to time. In October 2008, the Company
drew down substantially all of the remaining capacity under the revolving credit facility. The Company had $2.7 billion and $1.1 billion of indebtedness outstanding under the revolving
credit facility as of December 31, 2008 and 2007, respectively. These amounts bear interest at rates equal to short-term index rates appropriate for the currencies borrowed (such as
LIBOR) plus a margin that is based on the credit ratings assigned to the Company's long-term senior unsecured indebtedness. In addition, the Company pays a facility fee based on the
committed amount of the facility. See Note 2 for a discussion of the Company's negotiations regarding potential modification of terms to the senior credit facility.

The
Company has secured and unsecured lines of credit with various banks. Balances borrowed on a short-term basis under these lines of credit totaled $618.3 million
and $2.7 billion as of December 31,

49

---



CAPMARK FINANCIAL GROUP INC.

Notes to Consolidated Financial Statements (Continued)

12. Short-term and Long-term Borrowings (Continued)

2008
and 2007, respectively. The Company had $1.4 billion of remaining capacity under these agreements as of December 31, 2008 which could be utilized on a short and/or long term basis
depending upon the terms of the specific agreements. The lines of credit are generally renewable on an annual basis. Interest rates are fixed or variable and proceeds may have been discounted at the
time of issuance. The Company's secured borrowings from unaffiliated entities provide multi-currency denominated funding through repurchase agreements and collateralized borrowing arrangements.
Interest rates are variable and based on market rate indices. Generally, interest is paid monthly on these borrowings.

Capmark
Bank US also has access to Federal funds issued by various unaffiliated banks. These borrowings are unsecured and issued at fixed interest rates at terms not greater than
364 days. There were no outstanding balances under these arrangements as of December 31, 2008 and 2007.

See
Note 2 for a discussion of the status of the Company's compliance with the covenant requirements for the senior credit facility. Management believes that the Company was in
compliance with its covenant requirements for all other short-term borrowings as of December 31, 2008.

Long-term borrowings

Collateralized borrowings in securitization trustsIn accordance with SFAS No. 140, certain securitizations are not accounted for as sales.
Such securitizations are accounted for as secured borrowings with the pledge of collateral. These transactions represent long-term, match-funded, asset-backed financings and are
non-recourse to the Company.

The
Company accounts for certain securitizations of loans as on-balance sheet borrowings with the pledge of collateral. The related loans are reported as loans held for
investment in the consolidated balance sheet. Balances outstanding under these collateralized borrowings totaled $184.1 million and $260.5 million as of December 31, 2008 and
2007, respectively. The weighted-average interest rate on these collateralized borrowings was 5.77% and 5.79% as of December 31, 2008 and 2007, respectively.

Other long-term borrowingsIn May 2007, the Company issued $2.55 billion of senior unsecured notes. The notes were issued in three
series: $850.0 million of floating rate notes priced at three-month LIBOR plus 0.65% due May 10, 2010; $1.2 billion of 5.875% fixed rate notes due May 10, 2012; and
$500.0 million of 6.300% fixed rate notes due May 10, 2017. The interest rate payable on the notes is subject to adjustment from time to time if either Moody's or Standard &
Poor's modifies the debt rating assigned to the notes. Proceeds of the issuance after payment of the initial purchasers' discounts were applied to repay approximately $2.0 billion of
indebtedness outstanding under the Company's bridge loan and the remainder was used to pay fees and expenses relating to the issuance and for general corporate purposes, including the repayment of
short-term borrowings.

In
2008, the Company purchased and retired $192.5 million of its outstanding floating rate senior notes due 2010. The notes were purchased at a discount to the outstanding
principal amount resulting in gains of $61.5 million, net of unamortized issuance costs. These gains are reported as a component of other gains (losses), net, in the consolidated statement of
operations for the year ended December 31, 2008.

In
the fourth quarter of 2007, the Company purchased and retired $20.0 million of its outstanding floating rate senior notes due 2010 and recognized a gain of $3.6 million.
The gain is reported as a component of other gains (losses), net, in the consolidated statement of operations for the year ended December 31, 2007.

50

---



CAPMARK FINANCIAL GROUP INC.

Notes to Consolidated Financial Statements (Continued)

12. Short-term and Long-term Borrowings (Continued)

The
indentures under which the notes were issued contain certain financial, affirmative and negative covenants. The indenture covenants include limitations (each of which is subject to
certain exceptions) on the Company's consolidated leverage ratio as well as the ability of the Company and certain of the Company's current and future subsidiaries to grant liens to secure
indebtedness, merge, consolidate or engage in sales of substantially all assets. The indenture covenants also require the Company to purchase the notes upon the request of the holders upon a change of
control accompanied by a credit rating downgrade, and obligate the Company to file periodic financial reports with the trustee.

The
senior credit facility also includes a $2.75 billion multi-currency term loan facility. The Company had $2.7 billion and $2.8 billion of indebtedness outstanding
under the term loan facility as of December 31, 2008 and 2007, respectively. The amounts bear interest at rates equal to the base rates appropriate for the currencies borrowed (such as LIBOR)
plus 75.0 basis points and 67.5 basis points as of December 31, 2008 and 2007, respectively. In addition, the Company pays a facility fee based upon the amount of the term loan outstanding.

In
connection with the Sponsor Transactions, the Company entered into a $5.25 billion bridge loan agreement with a syndicate of lenders. The Company had $833.0 million and
$1.7 billion of indebtedness outstanding under the bridge loan as of December 31, 2008 and 2007, respectively. This amount bears interest at a rate that is equal to a specified LIBOR
rate plus a margin that is based on the credit ratings that are assigned to the Company's long-term senior unsecured indebtedness. In addition, the Company pays a facility fee based on the
amount of bridge loan outstanding. The bridge loan contains financial and other covenants that are substantially similar to those contained in the senior credit facility. In 2008, the Company repaid
$900.0 million of outstanding indebtedness under the bridge loan agreement, with the remaining outstanding principal balance of $833.0 million due on March 23, 2009.

See
Note 2 for a discussion of the status of the Company's compliance with the covenant requirements for the senior credit facility and bridge loan agreement.

Also
in connection with the Sponsor Transactions, the Company issued $250.0 million in aggregate principal amount of junior subordinated debentures to Capmark Trust (the "Trust"),
a Delaware statutory trust, which in turn issued $250.0 million in aggregate liquidation amount of floating rate trust preferred securities to GMAC in exchange for the reduction of an
equivalent amount of indebtedness that the Company owed GMAC and one of its affiliates at the time. The trust preferred securities entitle GMAC to receive, on a quarterly basis, cumulative cash
distributions of amounts actually received by the trust in respect of the junior subordinated debentures, including upon redemption of the junior subordinated debentures. Interest accrues and is
payable on the junior subordinated debentures on a quarterly basis at an annual rate equal to three-month LIBOR plus an applicable margin. The junior subordinated debentures mature on March 23,
2046. Prior to March 23, 2011, the junior subordinated debentures are redeemable upon the occurrence of certain events. From and after March 23, 2011, the Company may redeem the junior
subordinated debentures, at the Company's option, at any time at a price equal to 100% of the principal amount plus accrued interest. The Company has agreed, however, for the benefit of the lenders
under the bridge loan and the holders of other debt that may be designated by the Company, that the Company will not redeem the junior subordinated debentures prior to maturity except with the
proceeds from the sale of certain qualifying securities. The Company has the option to defer interest payments from time to time on the junior subordinated debentures for a period of up to ten years,
subject to certain limitations. In addition,

51

---



CAPMARK FINANCIAL GROUP INC.

Notes to Consolidated Financial Statements (Continued)

12. Short-term and Long-term Borrowings (Continued)

interest
payments are mandatorily deferred if the Company does not meet certain financial tests relating to its capital adequacy, interest coverage or adjusted earnings before taxes. As a result of
two consecutive fiscal quarters of negative adjusted earnings before taxes and an average four quarter fixed charge ratio of less than 1.20, a mandatory deferral event was in effect beginning in early
2008 and is continuing. The Company provided notice of such occurrence to the indenture trustee. Upon the occurrence and during the existence of a mandatory deferral event, the Company may pay
interest on the junior subordinated debentures only with the proceeds of eligible equity offerings. If the Company is unable to raise sufficient proceeds from eligible equity offerings to pay all
accrued interest on the junior subordinated debentures prior to the second anniversary of the mandatory deferral event, the applicable margin for the junior subordinated debentures is reduced until
the earlier of its compliance with the financial tests referred to above and the tenth anniversary of the mandatory deferral event. The Company is required to use commercially reasonable efforts to
complete an eligible equity offering if a mandatory deferral occurs and continues for a period of more than one year, or an optional deferral occurs and continues for a period of more than five years.
Unless the mandatory deferral events are no longer continuing at the end of the first quarter of 2009, a mandatory deferral event will have occurred and been continuing for a period of more
than one year on June 27, 2009.

Capmark
Bank US has entered into a secured funding facility with the FHLB of Seattle. Borrowings under this arrangement provide for long-term funding that is collateralized
with loans or investment securities that meet the eligibility requirements. The borrowings were issued at terms ranging from one to five years. Interest rates are fixed or variable based on market
rate indices and interest is generally paid monthly. The Company had $1.1 billion and $350.0 million of indebtedness outstanding under this facility as of December 31, 2008 and
2007, respectively. As of December 31, 2008, borrowings under this facility had a weighted average remaining maturity of 32 months.

The
Company has also entered into term loans and unsecured and secured credit lines with a number of banks and non-bank finance companies in North America and Asia. The
Company
has used these loans to fund liquidity needs in connection with lending and real estate investment activities. The Company had $579.1 million and $362.0 million of indebtedness
outstanding under these financing arrangements as of December 31, 2008 and 2007, respectively. These borrowings are denominated in U.S. dollars, Taiwanese dollars or Japanese yen and bear
interest at either fixed or floating rates. As of December 31, 2008, borrowings under these financing arrangements had a weighted average remaining maturity of 21 months.

Other
long-term borrowings also include $180.4 million and $335.9 million of mortgage loans payable in connection with the Company's interests in affordable
housing partnerships as of December 31, 2008 and 2007, respectively. These mortgages are payable over various periods, have various terms, and are secured by real estate investments totaling
$264.4 million and $528.0 million as of December 31, 2008 and 2007, respectively. As of December 31, 2008, borrowings under these financing arrangements had maturity dates
ranging from 2009 through 2045.

52

---



CAPMARK FINANCIAL GROUP INC.

Notes to Consolidated Financial Statements (Continued)

12. Short-term and Long-term Borrowings (Continued)

Management believes that the Company was in compliance with its covenant requirements for all other long-term borrowings as of December 31, 2008.

The
following table reflects the scheduled maturity of the Company's long-term borrowings as of December 31, 2008 assuming that no early redemptions will occur. The
actual payment of secured borrowings may vary based on the payment activity of the related secured assets (in thousands):

2009

$
1,228,8062010


1,124,0972011


3,080,8832012


1,529,4852013


291,3872014 and thereafter


1,028,177Total long-term borrowings

$
8,282,835


The
following table summarizes the Company's assets that are pledged as collateral for the payment of related secured borrowings as of December 31, 2008 and 2007 (in thousands):

December 31,
2008

December 31,
2007Loans held for sale

$
1,244,189

$
2,648,612Loans held for investment


4,488,466


1,435,105Investment securities classified as trading


53,945


57,074Investment securities classified as available for sale


209,503


239,195Real estate investments


769,249


555,934Equity investments(1)


48,858


Other


39,561


8,477Total assets pledged as collateral

$
6,853,771

$
4,944,397Related secured borrowings

$
2,417,987

$
3,081,723


---

The
increase in assets pledged as collateral was primarily due to the increased secured borrowings by Capmark Bank US from the Federal Reserve Bank of San Francisco ("FRB of San
Francisco") and the FHLB of Seattle, as determined under the terms of their borrowing programs. The following table

53

---



CAPMARK FINANCIAL GROUP INC.

Notes to Consolidated Financial Statements (Continued)

12. Short-term and Long-term Borrowings (Continued)

bifurcates
the assets pledged as collateral (substantially consisting of loans) for Capmark Bank US and for the rest of the Company as of December 31, 2008 and 2007 (in thousands):

December 31,
2008

December 31,
2007Capmark Bank US:Total assets

$
8,469,619

$
7,341,108Total assets pledged as collateral


5,390,891


1,297,678Related secured borrowings


1,363,504


550,000Remaining secured borrowing capacity


2,174,340


350,000Non-Capmark Bank US:Total assets


12,168,556


15,923,288Total assets pledged as collateral


1,462,880


3,646,719Related secured borrowings


1,054,483


2,531,723Remaining secured borrowing capacity


12,683


1,098,600


Capmark
Bank US's total borrowing capacity with both the FHLB of Seattle and the FRB of San Francisco is reported as of December 31, 2008 and 2007. Actual borrowing capacity on
any business day is subject to change as individual qualifying loans are routinely pledged and de-pledged by Capmark Bank US in the normal course of business. Additionally, changes in loan
performance and other collateral-specific criteria may serve to affect whether an individual loan continues to qualify as collateral for Capmark Bank US's outstanding borrowings at either the FHLB of
Seattle or the FRB of San Francisco.

The
amounts shown above for Non-Capmark Bank US include total assets pledged as collateral related to the consolidation of certain LIHTC partnerships and assets
collateralized in securitization trusts, in the aggregate, of $300.1 million and $701.0 million as of December 31, 2008 and 2007, respectively, and related secured borrowings in
the aggregate of $180.4 million and $596.4 million as December 31, 2008 and 2007, respectively.

13. Variable Interest Entities

The Company is involved with various entities in the normal course of business that may be deemed to be VIEs. The Company consolidated certain VIEs as of December 31, 2008 and
2007 for which it was determined to be the primary beneficiary. The Company holds significant variable interests in VIEs that have not been consolidated because it is not considered the primary
beneficiary. In addition, the Company is a sponsor and holds a variable interest in numerous VIEs but is not considered to be the primary beneficiary. The Company initially determines if it is the
primary beneficiary of a VIE using a qualitative approach based on the estimated economics of the VIE. Otherwise, the Company uses a quantitative approach to determine if it is the primary
beneficiary, allocating estimated cash flows to each variable interest holder based on seniority of each of the cash flow scenarios that are probability weighted and used to determine the VIE's
expected losses and expected residual returns. The significant judgments and assumptions made by the Company in determining whether to consolidate a VIE, including a description of the Company's
involvement in the VIE, are discussed below. The Company reviews and determines quarterly whether a reconsideration event has occurred which could change the status of a VIE or primary beneficiary of
a VIE. There

54

---



CAPMARK FINANCIAL GROUP INC.

Notes to Consolidated Financial Statements (Continued)

13. Variable Interest Entities (Continued)

were
no material reconsideration events in the fourth quarter of 2008. Other than the distributions discussed under real estate investments below, the Company has not provided any financial support
that it was not contractually obligated to provide during the years ended December 31, 2008 and 2007.

The
following table set forth the total assets and liabilities, and sources of maximum exposure of non-consolidated VIEs, including significant variable interests as well as
sponsored entities with a variable interest: (in thousands):

Maximum exposure to loss(3)Size of
VIEs(1)

Carrying
amount of
assets(2)

Carrying
amount of
liabilities(2)

Purchased
and
retained
interests

Commitments,
guarantees and
collateral

Loans
and
investments

Other

TotalAs of December 31, 2008Lower-tier operating partnerships

$
6,466,230

$
112,502

$


$


$
270,384

$


$


$
270,384Non-guaranteed upper-tier tax credit funds


352,972




















New markets tax credit funds


376,706


238,418











248,258





248,258Collateralized debt obligations


4,122,931


32,027





32,027











32,027Real estate investments


241,471


118,321


71,380











46,483


46,483CMBS securitization trusts


3,209,640


204,222


184,086


19,956











19,956Trust preferred securities


250,001


1


250,000


1


250,000








250,001Total

$
15,019,951

$
705,491

$
505,466

$
51,984

$
520,384

$
248,258

$
46,483

$
867,109As of December 31, 2007Lower-tier operating partnerships

$
7,373,193

$
100,937

$


$


$
281,990

$


$


$
281,990Non-guaranteed upper-tier tax credit funds


174,835




















New markets tax credit funds


222,406


145,416











205,416





205,416Collateralized debt obligations


4,410,204


66,853





66,853











66,853Real estate investments


383,047


149,036


64,673











85,003


85,003CMBS securitization trusts


4,254,072


310,946


260,524


50,199











50,199Trust preferred securities


250,001


1


250,000


1


250,000








250,001Total

$
17,067,758

$
773,189

$
575,197

$
117,053

$
531,990

$
205,416

$
85,003

$
939,462


---

55

---



CAPMARK FINANCIAL GROUP INC.

Notes to Consolidated Financial Statements (Continued)

13. Variable Interest Entities (Continued)

The following table set forth the total assets and liabilities of consolidated VIEs for which the Company is the primary beneficiary: (in
thousands)

Total assets(1)

Carrying amount
of assets(2)

Carrying amount
of liabilities(2)As of December 31, 2008Guaranteed upper-tier tax credit funds

$
1,117,150

$
808,371

$
940,176Lower-tier operating partnerships


445,383


445,383


336,962New markets tax credit funds


696,828


547,702


Real estate investments


24,293


24,293


37,735Total

$
2,283,654

$
1,825,749

$
1,314,873As of December 31, 2007Guaranteed upper-tier tax credit funds

$
1,214,997

$
1,123,146

$
1,123,146Non-guaranteed upper-tier tax credit funds


54,619


38,003


38,003Lower-tier operating partnerships


584,832


471,202


437,986New markets tax credit funds


637,716


540,601


Real estate investments


57,124


57,124


57,405Total

$
2,549,288

$
2,230,076

$
1,656,540


---

Notes:

The
Company has evaluated its investments and other interests in entities that may be considered VIEs under the provisions of FIN 46R. The following describes the VIEs in which
the Company has a significant variable interest.

Guaranteed and Non-guaranteed Tax Credit Funds and Operating Partnershipsas discussed in Note 8, the Company invests in and
syndicated investments in real estate partnerships to unaffiliated investors and, in certain partnerships, has guaranteed the timely payment of a specified return to those investors. The investors'
return is principally generated from each partnership's share of affordable housing tax credits and tax losses derived from the partnership's investments in entities which develop, own, and operate
affordable housing properties throughout the United States. These entities are considered VIEs under FIN 46R. The determination of whether the Company is the primary beneficiary of a given tax
credit fund depends on many factors, including the number of limited partners and the rights and obligations of the general and limited partners in that fund.

The
Company holds a significant variable interest or is the sponsor that holds a variable interest in upper-tier syndicated affordable housing partnerships where the Company
is the primary beneficiary and provides unaffiliated investors with a guaranteed yield on their investment. These partnerships are reported as a component of equity investments in the Company's
consolidated financial statements under the financing method in accordance with SFAS No. 66. As of December 31, 2008, the Company's

56

---



CAPMARK FINANCIAL GROUP INC.

Notes to Consolidated Financial Statements (Continued)

13. Variable Interest Entities (Continued)

maximum
exposure to loss under the yield guarantees was approximately $1.6 billion and includes the maximum exposure for the related lower-tier operating partnerships. This maximum
exposure is extinguished over the lives of the guaranteed syndicated affordable housing partnerships as annual tax benefits are delivered to investors. Investment securities classified as available
for sale totaling $247.1 million and $252.2 million as of December 31, 2008 and 2007, respectively, were provided as collateral as contractually required to satisfy the yield
guarantee of the VIE.

The
Company also holds variable interests in upper-tier syndicated affordable housing partnerships where the Company has not provided the unaffiliated investors with a
guaranteed yield on their investment. These entities are also considered VIEs under FIN 46R. The Company has determined it is not the primary beneficiary of such upper-tier
partnerships. The Company's interest in the upper-tier funds that do not provide a guaranteed yield is limited to 0.01% and consequently no exposure to loss is associated with these
partnerships. The Company generally considered itself the primary beneficiary if none of the unaffiliated investors had a majority ownership interest in these partnerships. In 2008, the Company
disposed of its interest in such assets where it was considered the primary beneficiary.

Through
its financial interests in syndicated affordable housing partnerships, the Company holds variable interests in underlying lower-tier operating partnerships which are
also considered VIEs under FIN 46R. The Company has determined, in certain instances, it is the primary beneficiary of the lower-tier operating partnerships. Substantially all of
the assets of the lower-tier operating partnerships are reported as a component of real estate investments on the Company's consolidated balance sheet.

The
Company has determined it is not the primary beneficiary of certain other lower-tier operating partnerships and therefore has not included the assets of these entities in
the Company's consolidated balance sheet. Assets held in these specific partnerships are reported as a component of equity investments on the Company's consolidated balance sheet. In updating the
Company's estimates of exposure to loss under these agreements, it gathers information quarterly relating to the performance of lower-tier partnerships and underlying real estate projects,
including compliance with relevant regulations governing low-income housing tax credits.

New Markets Tax Credit Fundsthe Company syndicates and manages investments in partnerships that make investments, typically mortgage loans that, in
turn, qualify the partnerships to earn new markets tax credits. New markets tax credits permit taxpayers to receive a federal income tax credit for making qualified equity investments in community
development entities. The Company has determined that these partnerships are considered VIEs under FIN 46R.

For
certain of these partnerships, the Company is considered the primary beneficiary and has therefore consolidated the partnerships under FIN 46R. The assets in these
consolidated partnerships are reported as a component of loans held for investment on the Company's consolidated balance sheet. Neither the creditors nor equity investors in the new market tax credit
funds have any recourse to the general credit of the Company.

For
certain of these partnerships, the Company is not considered the primary beneficiary based upon an analysis of expected cash flows of the partnerships but holds a significant
interest in the VIE or is considered to be the sponsor of the VIE and holds a variable interest. The Company's portion of the assets of these partnerships is reported as a component of loans held for
investment on the Company's consolidated balance sheet. The Company's maximum exposure to loss in these partnerships is primarily attributable to loans originated at the inception of the fund.

57

---



CAPMARK FINANCIAL GROUP INC.

Notes to Consolidated Financial Statements (Continued)

13. Variable Interest Entities (Continued)

Collateralized Debt Obligationsthe Company sponsors, purchases subordinated and equity interests in, and serves as collateral manager for CDOs. In
CDO transactions, a bankruptcy-remote SPE is established that purchases a portfolio of securities and loans and issues debt and equity certificates, representing interests in the portfolio of assets.
Once the CDO transaction is completed and the securities are issued by the CDO, the Company has no further obligation to provide financial support to the CDO. In addition to receiving variable
compensation for managing the portfolio, the Company sometimes retains equity investments in the CDOs. Certain of the CDOs sponsored by the Company were initially structured, or have been restructured
(with approval by the senior beneficial interest holders) as qualifying special purpose entities ("QSPEs"), and are therefore exempt from the consolidation requirements of FIN 46R.

For
the remaining CDOs, the results of the primary beneficiary analysis support the conclusion that the Company is not the primary beneficiary under FIN 46R because the Company is
not expected to receive a majority of the expected losses or residual returns. The Company's maximum exposure to loss for CDOs where the Company is not the primary beneficiary represents the Company's
retained interests
in these variable interest entities reported as a component of investment securities classified as available for sale in the consolidated balance sheet. CDOs are discussed in further detail in
Note 16.

Real Estate Investmentsthe Company invests in real estate partnerships in North America and Asia. The Company has determined certain of these
partnerships are considered VIEs under FIN 46R. For a limited number of these partnerships, the Company is considered the primary beneficiary and has therefore consolidated the partnerships
under FIN 46R. The investors in these real estate partnerships do not have any recourse to the general credit of the Company. Assets in these partnerships are reported as a component of loans
held for investments and other assets on the Company's consolidated balance sheet. Liabilities of these partnerships are reported as components of other liabilities on the Company's consolidated
balance sheet. The maximum exposure to loss was approximately $31.4 million and $25.1 million as of December 31, 2008 and 2007, respectively. The Company provided
$1.5 million and $2.0 million of financial support that it was not contractually required to provide during the years ended December 31, 2008 and 2007, respectively. This support
was provided to satisfy the VIE's working capital requirements.

For
some of these partnerships, the Company is not considered the primary beneficiary based upon cash flow analyses of the partnerships. The Company's portion of the assets in these
partnerships is reported as a component of equity investments on the consolidated balance sheet.

CMBS Securitization Trustsas discussed in Note 16, the Company sells commercial mortgage loans to special purpose trusts in exchange for the
proceeds from the sale of securities issued by the trusts. The trusts' activities are generally limited to acquiring the assets, issuing securities, collecting payments on assets and making payments
on the securities. The holders of the securities issued under these trusts do not have any recourse to the general credit of the Company. Certain of the trusts are structured as QSPEs and are
therefore exempt from the consolidation requirements of FIN 46R. Certain of these trusts do not qualify as QSPEs under SFAS No. 140 and are considered VIEs under FIN 46R. The
Company is not considered the primary beneficiary of these trusts based upon an analysis of the expected cash flows, however, the Company may hold a significant variable interest in on or more of
these trusts or may be considered the sponsor of one or more of these trusts and hold a variable interest in that particular trust. The Company's maximum exposure to loss for these entities is limited
to the Company's retained interests in the trusts. The Company's portion of these assets is

58

---



CAPMARK FINANCIAL GROUP INC.

Notes to Consolidated Financial Statements (Continued)

13. Variable Interest Entities (Continued)

reported
as a component of investment securities classified as available for sale and loans held for investment on the Company's consolidated balance sheet.

Trust Preferred Securitiesas discussed in Note 12, the Company created the Trust and issued interests to GMAC in the form of preferred
securities. The Trust also issued common securities, which all have been purchased by the Company. The Company is not considered the primary beneficiary of the Trust, but is the sponsor of the Trust
and holds a variable interest in the Trust. The Company's portion of the total assets of the Trust is reported as a component of investment securities classified as available for sale and the total
liabilities of the Trust are reported as a component of other long term borrowings on the Company's consolidated balance sheet.

14. Deposit Liabilities

The following table summarizes the Company's deposit liabilities as of December 31, 2008 and 2007, primarily carried at fair value as of December 31, 2008 and at amortized
cost as of December 31, 2007 (in thousands):

December 31,
2008

December 31,
2007Brokered CDs at fair value

$
5,405,331

$
Brokered CDs at amortized cost


285,599


5,545,976Other





6,631Total

$
5,690,930

$
5,552,607


Prior
to the adoption of SFAS No. 159, the Company accounted for Brokered CDs at amortized cost. In connection with the adoption of SFAS No. 159, the Company elected to
account for all Brokered CDs at fair value. Beginning October 1, 2008, the Company elected to account for newly issued Brokered CDs with original maturities greater than one year at amortized
cost and simultaneously enter into interest rate swaps to hedge the deposit liabilities against changes in fair value due to changes in the benchmark interest rate. The Company has accounted for
newly-issued Brokered CDs issued with original maturities of one year or less at fair value.

The
deposits of Capmark Bank US are primarily interest-bearing and insured by the FDIC, subject to current insurance program limits.

The
weighted average interest rate for total deposits was 3.88% and 5.09% as of December 31, 2008 and 2007, respectively.

59

---



CAPMARK FINANCIAL GROUP INC.

Notes to Consolidated Financial Statements (Continued)

14. Deposit Liabilities (Continued)

The
following table summarizes the scheduled maturity of the Company's Brokered CDs as of December 31, 2008 (in thousands):

2009

$
3,466,8992010


580,0062011


367,8582012


312,8832013


857,9422014 and thereafter


105,342Total Brokered CDs

$
5,690,930


15. Income Taxes

Prior to the Sponsor Transactions, the Company operated within the GM-controlled tax group under the principles of a tax-sharing arrangement. Under this
arrangement, the Company was generally treated as a standalone taxpayer, except with regard to tax credits and net operating losses. The Company would receive credit for such tax attributes only if
the GM group as a whole could utilize such benefits.

Upon
the closing of the Sponsor Transactions, the Company deconsolidated from the GM-controlled tax group and is no longer eligible to be a member of the GM consolidated tax
return for any periods after the date of the Sponsor Transactions. The Company is now liable for worldwide taxes based solely on its consolidated operations as a standalone taxpayer. Moreover, based
on applicable tax rules, certain tax attributes represented by net operating losses and foreign tax credits were specifically allocated by GM to the Company. These amounts were reclassified as
deferred tax assets in the consolidated balance sheet as of the Sponsor Transactions date.

As
discussed in Note 3, the Company adopted FIN 48 on January 1, 2007. The following table summarizes the impact of adopting FIN 48 on the Company's
consolidated balance sheet (in thousands):

Historical
balances as of
December 31, 2006

FIN 48
adjustments

Adjusted
balances as of
January 1, 2007Deferred tax assets

$
1,834

$
59,938

$
61,772Goodwill


58,913


32,231


91,144Other liabilities


878,753


155,714


1,034,467Current taxes payable


99,226


(54,010
)

45,216Retained earnings


144,144


(9,535
)

134,609


60

---



CAPMARK FINANCIAL GROUP INC.

Notes to Consolidated Financial Statements (Continued)

15. Income Taxes (Continued)

A
reconciliation of the beginning and ending balance of unrecognized tax benefits as of December 31, 2008 and 2007 is as follows (in thousands):

December 31,
2008

December 31,
2007Balance as of beginning of year

$
146,416

$
118,902Additions based on tax position related to the current year


6,155


10,537Additions based on tax position related to prior years


4,237


21,567Reductions for tax position related to prior years


(21,475
)

(3,054
)Reductions due to expiration of statue of limitations


(2,829
)

Settlements with taxing authorities


(35,404
)

(1,536
)Balance as of end of year

$
97,100

$
146,416


Included
in December 31, 2008 unrecognized tax benefits above are $27.0 million of tax positions for which the ultimate deductibility is highly certain but for which there
is uncertainty about the timing of such deductibility. Because of the impact of deferred tax accounting, other than interest and penalties, the disallowance of the shorter deductibility period would
not affect the annual effective tax rate but would accelerate the payment of cash to the taxing authority to an earlier period.

The
Company recognizes interest and penalties related to unrecognized tax benefits as a component of income tax expense. Related to the unrecognized tax benefits noted above, the Company
recognized a reduction of $14.1 million and an increase of approximately $16.3 million of gross interest and penalties during 2008 and 2007, respectively. The Company recognized a
liability of approximately $35.6 million and $49.7 million attributable to interest and penalties, as of December 31, 2008 and 2007, respectively.

The
Company operates in multiple tax jurisdictions, both within and outside the United States. Accordingly, the Company is, from time to time, under examination in certain tax
jurisdictions and remains subject to examination until the statute of limitations expires for the respective tax jurisdiction. Within specific countries, the Company may be subject to audit by various
tax authorities, or subsidiaries operating within the country may be subject to different statute of limitations expiration dates. The following table summarizes the tax years that remain subject to
examination in the Company's major tax jurisdictions as of December 31, 2008:

United Statesfederal

2004 and forwardUnited Statesstates

2001 and forwardJapan

2004 and forwardIreland

2003 and forwardCanada

2005 and forwardTaiwan

2004 and forward


Based
upon the expiration of statutes of limitations and/or conclusion of tax examinations in several jurisdictions, management believes it is reasonably possible that the total amount
of previously unrecognized tax benefits as of December 31, 2008 for the items discussed above may decrease by up to $20.6 million within the next 12 months.

61

---



CAPMARK FINANCIAL GROUP INC.

Notes to Consolidated Financial Statements (Continued)

15. Income Taxes (Continued)

The
Internal Revenue Service ("IRS") has a policy to examine the income tax returns of large corporate taxpayers, including GM and its subsidiaries. Prior to the Sponsor Transactions,
the Company was included in the GM consolidated tax group. Subsequent to the Sponsor Transactions, the Company may be audited by federal, state, foreign and local taxing authorities. Management
believes that an adequate provision for contingencies related to all income taxes and interest as of December 31, 2008 has been established in accordance with FIN 48. Pursuant to the
legal agreements entered into in connection with the Sponsor Transactions, GMAC has agreed to indemnify the Company for any and all taxes with respect to the Company and its subsidiaries relating to
pre-closing tax periods to the extent the aggregate of such taxes exceed a specified amount. Under these agreements, the Company has agreed to indemnify GMAC for any and all tax
liabilities of the Company and its subsidiaries related to pre-closing tax periods in an amount not to exceed the specified amount, which has been accrued in the Company's consolidated
financial statements.

The
following table summarizes the Company's income tax provision (benefit) (in thousands):

Successor

PredecessorYear ended
December 31,
2008

Year ended
December 31,
2007

Period from
March 23, 2006 to
December 31, 2006

Period from
January 1, 2006 to
March 22, 2006Current income tax (benefit) provision:Federal

$
(45,889
)
$
42,308

$
(7,773
)
$
11,845State


9,753


14,423


14,603


874Foreign


(919
)

44,236


35,650


9,721Total current income tax (benefit) provision


(37,055
)

100,967


42,480


22,440Deferred income tax provision (benefit):Federal


471


53,872


25,135


(22,137
)State


18,100


(4,471
)

(5,439
)

(4,821
)Foreign


25,712


1,292


981


546Total deferred income tax provision (benefit)


44,283


50,693


20,677


(26,412
)Interest, penalties and taxes recognized under FIN 48:Federal


(806
)

8,698





State


1,878


6,420





Total interest, penalties and taxes recognized under FIN 48


1,072


15,118





Total income tax provision (benefit)

$
8,300

$
166,778

$
63,157

$
(3,972
)


62

---



CAPMARK FINANCIAL GROUP INC.

Notes to Consolidated Financial Statements (Continued)

15. Income Taxes (Continued)

The following table summarizes the components of the Company's deferred tax assets and liabilities as of December 31, 2008 and 2007 (in thousands):

December 31,
2008

December 31,
2007Assets:Net operating loss carryforwards (federal, state and foreign)

$
367,263

$
27,882Tax credit carryforwards


193,436


49,369Reserves


163,031


134,221Loan loss reserves


101,244


150,511Equity investments


40,873


Basis difference in subsidiaries





16,083Other deferred tax asset


60,737


48,816Total deferred tax assets


926,584


426,882Valuation allowance


(469,055
)

(63,587
)Total deferred tax assets, net


457,529


363,295Liabilities:Basis difference in securities


265,192


22,252Mortgage servicing rights


125,196


132,059Hedging activities


33,876


30,233Basis difference in subsidiaries


26,555


Amortization of intangible assets


14,239


50,223Equity-based tax adjustments (other comprehensive income)


2,034


23,570Deferred income





51,738Equity investments





16,269Other deferred tax liability


5,876


4,922Total deferred tax liabilities


472,968


331,266Net deferred tax (liabilities) assets

$
(15,439
)
$
32,029


After
taking into account a federal net operating loss carryback, the Company has federal income tax net operating loss carryforwards of approximately $787.3 million as of
December 31, 2008. The Company has recorded a deferred tax asset of $275.6 million reflecting the benefit of the loss carryforward, which expires in 2028. In addition, the Company has
general business credit carryforwards of $64.0 million and $17.9 million as of December 31, 2008 and 2007, respectively. The Company has foreign tax credit carryforwards of
$144.6 million and $53.8 million as of December 31, 2008 and 2007, respectively. The general business credits carryforwards will expire in years beginning after 2025 and the
foreign tax credit carryforwards will expire in years beginning after 2013.

The
Company has state net operating loss carryforwards of $1.1 billion and $339.2 million as of December 31, 2008 and 2007, respectively. The Company has foreign net
operating loss carryforwards of $71.6 million and $17.8 million as of December 31, 2008 and 2007, respectively. The state net operating loss carryforwards expire in various years
beginning after 2008. The foreign net operating loss carryforwards begin expiring in various years after 2009.

63

---



CAPMARK FINANCIAL GROUP INC.

Notes to Consolidated Financial Statements (Continued)

15. Income Taxes (Continued)

Realization
of the deferred tax assets is dependent on generating sufficient taxable income prior to the expiration of the loss and credit carryforwards. The Company does not believe it
is more likely than not that the deferred tax assets related to loss carryforwards and credits will be realized. In recognition of this conclusion, the Company has established a valuation allowance as
of December 31, 2008 on the federal, state, and foreign deferred tax assets; including federal, state, and foreign net operating loss, tax credit carryforwards, and temporary tax differences,
net of any deferred tax liabilities. If or when recognized, the tax benefit relating to any reversal of the valuation allowance on deferred tax assets as of December 31, 2008 will be accounted
for as a reduction of income tax expense.

The
following table reconciles the income tax (benefit) provision at the Federal statutory rate and the actual income tax provision (benefit) recorded (in thousands):

Successor

PredecessorYear ended
December 31, 2008

Year ended
December 31, 2007

Period from
March 23, 2006 to
December 31, 2006

Period from
January 1, 2006 to
March 22, 2006Amount

Percent

Amount

Percent

Amount

Percent

Amount

PercentIncome tax (benefit) provision at statutory rate

$
(470,565
)

35.00
%
$
156,486


35.00
%
$
72,555


35.00
%
$
2,966


35.00
%State income taxes, net of federal tax benefit


(10,164
)

0.76


7,595


1.70


5,956


2.87


(2,565
)

(30.27
)Valuation allowance on tax benefits


389,715


(28.99
)

5,920


1.32











Tax-exempt municipal interest, net


(431
)

0.03


(983
)

(0.22
)

(5,453
)

(2.63
)

(2,015
)

(23.77
)Impact of foreign investments


113,765


(8.46
)







3,049


1.47


(3,049
)

(35.98
)Tax credits


(28,244
)

2.10


(18,306
)

(4.09
)

(8,032
)

(3.87
)

(1,708
)

(20.15
)Tax expense under FIN 48


196


(0.01
)

5,408


1.21











Interest and penalties under FIN 48


876


(0.07
)

9,710


2.17











Other, net


13,152


(0.98
)

948


0.21


(4,918
)

(2.37
)

2,399


28.30Total income tax provision (benefit)

$
8,300


(0.62
)%
$
166,778


37.30
%
$
63,157


30.47
%
$
(3,972
)

(46.87
)%


16. Securitization of Assets

The Company originates and purchases commercial mortgage loans and investment securities, with the intent to earn interest income, origination fees and servicing income. Those loans and
investment securities which are considered held/available for sale are sold to third party investors, when market conditions allow, directly or through a variety of SPEs, including QSPEs, and other
structured facilities in order to provide funding for the continued origination and purchase of loans. The beneficial interests in the underlying pools of loans are typically sold to institutional
investors. These securitization activities were severely limited throughout 2008 due to the unfavorable market conditions.

Prior
to the current market disruptions, the Company also operated its own securitization programs. Under the Company's term securitization programs, commercial mortgage loans and
investment securities are sold to limited purpose bankruptcy-remote subsidiaries of the Company. In turn, these subsidiaries generally establish separate trusts to which they transfer the assets in
exchange

64

---



CAPMARK FINANCIAL GROUP INC.

Notes to Consolidated Financial Statements (Continued)

16. Securitization of Assets (Continued)

for
the proceeds from the sale of securities issued by the trusts. The activities of the trusts are generally limited to acquiring the assets, issuing securities, collecting payments on assets and
making payments on the securities. Due to the nature of the assets held by the trusts and the limited nature of the activities of the trusts, they are typically classified as QSPEs under SFAS
No. 140. In accordance with SFAS No. 140, assets and liabilities of the trusts that meet all of the conditions to qualify as QSPEs are not included in the Company's consolidated balance
sheet. Assets and liabilities of the trusts that do not meet all of the conditions to qualify as QSPEs are analyzed for consolidation under FIN 46R. See Note 13 for related disclosures.
In either case, the investors in the debt securities issued by the trusts have no further recourse against the Company if cash flows generated by the securitized assets are inadequate to service the
obligations of the trusts. The Company has not provided any financial support that it was not contractually obligated to provide during the years ended December 31, 2008 and 2007.

The
Company agrees to service the mortgage loans transferred to the trusts with respect to CMBS for an annual fee averaging approximately 0.1% of the outstanding balance and may earn
other related ongoing income. The Company may also retain senior and subordinated interests in the QSPEs, and these interests are reported as investment securities classified as available for sale in
the Company's consolidated balance sheet. Generally, the Company's retained interests are subordinated to investors' interests (excluding mortgage servicing rights). See Note 3 for the
Company's policy for initially and subsequently measuring retained interests in securitization transactions.

The
Company's past securitization activities have also included the securitization of commercial mortgage securities, real estate investment trust debt, and commercial mortgage loans
using SPEs that issue CDOs. With respect to such transactions, the Company and other unaffiliated parties each contribute a portion of the total collateral underlying the CDO investments. The Company
holds subordinated interests, including first loss positions, and also acts as collateral manager for these SPEs. The assets in these CDOs totaled $5.1 billion and $5.4 billion as of
December 31, 2008 and 2007, respectively, of which the Company's exposure to loss was $32.0 million and $66.9 million as of December 31, 2008 and 2007, respectively,
representing the Company's retained interests in these entities and are reported as a component of investment securities classified as available for sale in the consolidated balance sheet. As
discussed in Note 13, certain of these CDOs are also considered VIEs under FIN 46R.

The
Company recognized a pre-tax loss of $2.7 million and $1.0 million for the years ended December 31, 2008 and 2007, respectively, pre-tax
gains of $43.7 million for the period from March 23, 2006 to December 31, 2006 and pre-tax gains of $16.7 million for the period from January 1, 2006 to
March 22, 2006, on the securitization of financial assets, inclusive of gains and losses related to hedging activities. The Company did not retain interests in securitized commercial mortgage
loans in the year ended December 31, 2008. The Company has not retained interests in securitized investment securities since 2005. The key economic assumptions used in measuring the retained
interests at the date of the commercial mortgage loan securitizations are summarized below. The weighted average values for

65

---



CAPMARK FINANCIAL GROUP INC.

Notes to Consolidated Financial Statements (Continued)

16. Securitization of Assets (Continued)

prepayment
rate and expected credit losses only include those retained interests that have prepayment and expected credit loss exposure.

Commercial Mortgage LoansYear ended
December 31, 2007

Year ended
December 31, 2006Range

Weighted
average

Range

Weighted
averageLife (in years)


3.1 - 5.6


4.2


1.4 - 4.2


2.1Annual prepayment rate


40.0
%

40.0
%

50.0
%

50.0
%Expected credit losses


0.0
%

0.0
%

0.0
%

0.0
%Discount rate


9.0
%

9.0
%

4.7 - 5.9
%

5.8
%


Cash
flows received from (and paid to) securitization trusts consisted of the following (in thousands):

Successor

PredecessorYear ended
December 31,
2008

Year ended
December 31,
2007

Period from
March 23, 2006 to
December 31, 2006

Period from
January 1, 2006 to
March 22, 2006Proceeds from new securitizations

$
31,796

$
3,312,148

$
1,745,500

$
3,269,402Servicing fees received(1)


21,260


22,199


5,470


13,393Other cash flows received on retained interests


24,259


29,618


26,901


18,930Servicing advances


(170,387
)

(199,470
)

(54,793
)

(156,840
)Repayments of servicing advances


163,681


190,235


52,360


166,067


---

The
key economic assumptions used in measuring the estimated fair value of retained interests including mortgage servicing rights as of December 31, 2008 and 2007, and the
sensitivity of such retained interests to immediate 10% and 20% adverse changes in those assumptions, are summarized below (in thousands):

Commercial Mortgage LoansDecember 31, 2008

December 31, 2007Fair value of retained interests

$
26,810

$
65,078


66

---



CAPMARK FINANCIAL GROUP INC.

Notes to Consolidated Financial Statements (Continued)

16. Securitization of Assets (Continued)



December 31, 2008

December 31, 2007Range

Weighted
average

Range

Weighted
averageLife (in years)


0.1 - 4.7


1.9


0.2 - 5.7


2.5Annual prepayment rate


0.0 - 50.0
%

10.3
%

0.0 - 50.0
%

11.0
%Impact on fair value of 10% adverse change

$
(955
)



$
(1,147
)Impact on fair value of 20% adverse change

$
(1,786
)



$
(2,307
)Expected credit losses


0.0 - 36.0
%

6.8
%

0.0 - 10.6
%

5.1
%Impact on fair value of 10% adverse change

$
(491
)



$
(3,043
)Impact on fair value of 20% adverse change

$
(663
)



$
(4,792
)Discount rate


6.3 - 40
%

21.7
%

4.3 - 15.0
%

8.4
%Impact on fair value of 10% adverse change

$
(706
)



$
(1,141
)Impact on fair value of 20% adverse change

$
(1,380
)



$
(2,235
)




Taxable Investment SecuritiesDecember 31, 2008

December 31, 2007Fair value of retained interests

$
32,407

$
66,852




December 31, 2008

December 31, 2007Range

Weighted
average

Range

Weighted
averageLife (in years)


0.3 - 12.5


3.8


0.9 - 13.9


5.6Annual prepayment rate


0.0
%

0.0
%

0.0
%

0.0
%Impact on fair value of 10% adverse change


N/A





N/AImpact on fair value of 20% adverse change


N/A





N/AExpected credit losses


0.0 - 1.0
%

0.1
%

0 - 10.7
%

3.8
%Impact on fair value of 10% adverse change

$
(97
)



$
(172
)Impact on fair value of 20% adverse change

$
(194
)



$
(375
)Discount rate


20.0% - 40.0
%

35.2
%

10.3 - 62.4
%

18.4
%Impact on fair value of 10% adverse change

$
(2,785
)



$
(4,409
)Impact on fair value of 20% adverse change

$
(5,234
)



$
(7,215
)


---

Mortgage Servicing RightsDecember 31, 2008

December 31, 2007Fair value of retained interests

$
81,683

$
101,760


67

---



CAPMARK FINANCIAL GROUP INC.

Notes to Consolidated Financial Statements (Continued)

16. Securitization of Assets (Continued)



December 31, 2008

December 31, 2007Range

Weighted
average

Range

Weighted
averageLife (in years)


0.0 - 21.58


5.6


0.0 - 22.6


6.5Annual prepayment rate


0.0 - 25
%

**


0.0 - 25
%

**Impact on fair value of 10% adversechange

$
(404
)



$
(555
)Impact on fair value of 20% adversechange

$
(804
)



$
(1,102
)Discount rate


8.1
%

8.1
%

9.8
%

9.8
%Impact on fair value of 10% adversechange

$
(2,081
)



$
(3,342
)Impact on fair value of 20% adversechange

$
(4,080
)



$
(6,516
)


---

These
sensitivities are hypothetical and should be considered with caution. Changes in fair value based on a 10 percent change in assumptions generally cannot be extrapolated,
because the relationship of the changes in assumptions to the change in fair value may not be linear. Also, the effect of a change in one particular assumption on the fair value of the retained
interest is calculated without changing any other assumption. In reality, changes in one factor may result in changes in another, which might magnify or counteract the sensitivities. The discount rate
presented represents post-loss yields.

Managed
assets include assets recognized in the Company's consolidated balance sheet and assets that have been derecognized in a securitization. Information pertaining to the Company's
managed loans and securities as of December 31, 2008 and 2007 consisted of the following (in thousands):

Loans

Investment SecuritiesDecember 31,
2008

December 31,
2007

December 31,
2008

December 31,
2007Balance sheet loans/securities

$
12,178,663

$
14,675,483

$
2,301,351

$
1,162,714Plus: Securitized loans/securities


14,594,550


11,645,474


4,571,706


4,792,773Managed loans/securities

$
26,773,213

$
26,320,957

$
6,873,057

$
5,955,487Loans 60 days or more delinquent:Owned

$
915,198

$
277,740Securitized


604,171


171,491Total managed

$
1,519,369

$
449,231Net principal charge-offs for the year ended December 31:Owned

$
101,046

$
89,298Securitized


308,215


142,635Total managed

$
409,261

$
231,933


68

---



CAPMARK FINANCIAL GROUP INC.

Notes to Consolidated Financial Statements (Continued)

17. Fair Value of Financial Instruments (SFAS No. 107 Disclosure)

SFAS No. 107 requires the disclosure of the estimated fair values of certain financial instruments and the methods and significant assumptions used to estimate their fair value.
Financial instruments within the scope of SFAS No. 107 that are not carried at fair value on the consolidated balance sheet are discussed below. Additionally, certain financial instruments and
all non-financial instruments are excluded from the scope of SFAS No. 107.

Fair
value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The Company
estimates fair value amounts through the use of available market information and appropriate valuation methodologies.

Considerable
judgment is required in interpreting market data to develop estimates of fair value; therefore, the estimates may not necessarily be indicative of the amounts that could be
realized or would be paid in a current market exchange. Different assumptions or changes in future market conditions could significantly affect estimates of fair value and, therefore, the net
realizable value of the Company's financial instruments could differ from the estimates presented below. Fair value information presented herein is based on information available as of
December 31, 2008 and 2007. Such amounts have not been updated since these respective dates and, therefore, estimates of fair value at dates subsequent to December 31, 2008 and 2007 may
differ significantly from amounts presented herein. In addition, the estimates presented below are indicative of individual financial instruments and should not be considered an indication of fair
value of any groupings of financial instruments or of the Company as a whole.

The
following table presents the carrying value and estimated fair value of financial assets and liabilities as required by SFAS No. 107, as of December 31, 2008 and 2007
(in thousands):

December 31, 2008

December 31, 2007Carrying
amount

Fair
value

Carrying
amount

Fair
valueFinancial Assets:Cash, cash equivalents and restricted cash

$
874,390

$
874,390

$
1,436,752

$
1,436,752Accounts and other receivables


343,780


343,780


470,669


470,669Investment securities:Trading


1,457,384


1,457,384


185,692


185,692Available for sale


843,967


843,967


949,682


949,682Loans held for sale


3,970,683


3,970,683


7,783,769


7,785,680Loans held for investment, net


8,207,980


7,275,335


6,891,714


6,939,000Derivative assets


103,405


103,405


145,640


145,640Financial Liabilities:Short-term borrowings


3,310,758


3,310,758


3,832,637


3,832,637Collateralized borrowings in securitization trusts


184,086


183,367


260,524


260,524Other long-term borrowings


8,098,749


5,012,792


8,047,162


6,802,429Deposit liabilities


5,690,930


5,689,967


5,552,607


5,564,987Derivative liabilities


9,119


9,119


67,862


67,862


69

---



CAPMARK FINANCIAL GROUP INC.

Notes to Consolidated Financial Statements (Continued)

17. Fair Value of Financial Instruments (SFAS No. 107 Disclosure) (Continued)

The
following methods and assumptions were used to estimate the fair value of financial instruments not previously discussed in Note 3:

Cash, cash equivalents and restricted cashthe carrying value approximates fair value due to the short-term nature of the instruments.

Accounts and other receivablesthe carrying value approximates fair value due to the short-term nature of the receivables.

Loans held for investment, netthe fair value of loans held for investment is generally determined using a pricing model based upon current market
information obtained from origination data including credit spreads. Credit spreads are based upon the loan-to-value ratios of underlying collateral with cash flows adjusted
for loans for which the loan-to value ratio was above 100%. In addition, the impact of potential extensions, interest rate floors and unfunded commitments were taken into consideration
when determining the fair value for each loan. The fair value of certain impaired loans held for investment is primarily based on the appraised value of the underlying collateral less estimated
selling costs.

Borrowingsthe fair value of borrowings is based upon rates currently available to the Company for obligations with similar terms and maturities,
including current market rates on the Company's senior unsecured notes.

18. Fair Value of Financial Instruments (SFAS No. 157 Disclosure)

The Company accounts for a significant portion of its financial instruments at fair value or considers fair value in their measurement. The following table summarizes the financial
assets and

70

---



CAPMARK FINANCIAL GROUP INC.

Notes to Consolidated Financial Statements (Continued)

18. Fair Value of Financial Instruments (SFAS No. 157 Disclosure) (Continued)

financial
liabilities measured at fair value on a recurring basis, including financial instruments for which the Company has elected the fair value option (in thousands):

Description

Quoted Prices In
Active Markets
For Identical
Assets/Liabilities
(Level 1)

Significant
Other
Observable
Inputs
(Level 2)

Significant
Unobservable
Inputs
(Level 3)

Counterparty
and Cash
Collateral
Netting

Balance as of
December 31,
2008Assets:Investment securities:Trading

$
1,302,945

$
58,578

$
95,861

$


$
1,457,384Available for sale


7,053


262,571


574,343





843,967Loans held for sale(1)





208,400


3,740,452





3,948,852Derivative assets


(19,440
)

116,397


348


6,100


103,405Total assets

$
1,290,558

$
645,946

$
4,411,004

$
6,100

$
6,353,608Liabilities:Deposit liabilitiesBrokered CDs(2)

$


$
5,405,331

$


$


$
5,405,331Derivative liabilities





35,638


1,284


(27,803
)

9,119Total liabilities

$


$
5,440,969

$
1,284

$
(27,803
)
$
5,414,450


---

With
respect to the Company's loans held for sale as of December 31, 2008 for which the fair value option has been elected, the aggregate fair value of loans that were
90 days or more past due totaled $70.7 million and the aggregate unpaid principal balance of such loans exceeded fair value by $14.4 million; and the aggregate fair value of loans
in nonaccrual status totaled $262.6 million and the aggregate unpaid principal balance of such loans exceeded fair value by $93.7 million.

71

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CAPMARK FINANCIAL GROUP INC.

Notes to Consolidated Financial Statements (Continued)

18. Fair Value of Financial Instruments (SFAS No. 157 Disclosure) (Continued)

The
following table summarizes the changes in fair value of the Company's Level 3 financial assets and financial liabilities for the year ended December 31, 2008 (in
thousands):

Investment
Securities
Trading

Investment
Securities
Available
for Sale

Loans Held
for Sale

Net
Derivatives

TotalEnding balance as of December 31, 2007

$
126,878

$
675,254

$
7,508,926

$
3,567

$
8,314,625Transition adjustment








1,911





1,911Beginning balance as of January 1, 2008


126,878


675,254


7,510,837


3,567


8,316,536Purchases, issuances, sales and settlements


(476
)

(51,376
)

(2,850,200
)




(2,902,052
)Total net realized/unrealized (losses) gains:Included in earnings


(33,551
)

(96,676
)

(1,048,485
)

(4,322
)

(1,183,034
)Included in other comprehensive income


(137
)

45,537


139,356





184,756Net transfers in to/(out of) Level 3


3,147


1,604


(11,056
)

(181
)

(6,486
)Ending balance as of December 31, 2008

$
95,861

$
574,343

$
3,740,452

$
(936
)
$
4,409,720The amount of total (losses) gains for the period included in earnings attributable to the change in unrealized (losses) gains relating to assets still
held as of December 31, 2008

$
(30,464
)
$
5,478

$
(740,179
)
$
(430
)
$
(765,595
)


Level 3
financial assets presented in the table above include investment securities classified as trading and available for sale, loans held for sale, and net derivatives. These
instruments were valued using pricing models and DCF models that incorporate assumptions, which in management's judgment, reflect the assumptions a marketplace participant would use including discount
rates, spreads and collateral values as well as internal risk ratings, anticipated credit losses.

Certain
financial assets are measured at fair value on a non-recurring basis. The carrying value of certain impaired loans held for investment is primarily based on the
appraised value of the underlying collateral less estimated selling costs. The following table presents the changes in carrying value of those assets measured at fair value on a
non-recurring basis, for which impairment was recognized for the year ended December 31, 2008 (in thousands):

Quoted Prices In
Active Markets
For Identical
Assets/Liabilities
(Level 1)

Significant
Other
Observable
Inputs
(Level 2)

Significant
Unobservable
Inputs
(Level 3)

Balance as of
December 31,
2008

Total losses for the
year ended
December 31, 2008Loans held for investment

$


$


$
169,167

$
169,167

$
(79,270
)


SFAS
No. 159 requires that the difference between the carrying value of the financial instrument before the election of the fair value option and the fair value of the instrument
be recorded as an adjustment to beginning retained earnings in the period of adoption. The following table summarizes the impact of adopting the fair value option on January 1, 2008. Amounts
shown represent the carrying

72

---



CAPMARK FINANCIAL GROUP INC.

Notes to Consolidated Financial Statements (Continued)

18. Fair Value of Financial Instruments (SFAS No. 157 Disclosure) (Continued)

value
of the affected financial instruments before and after the change in accounting resulting from the adoption of SFAS No. 159 (in thousands):

Description

Carrying Value of
Instrument as of
December 31, 2007

Cumulative
Effect
Adjustment
Gain or (Loss)

Carrying Value of
Instrument as of
January 1, 2008
After Adoption of
SFAS No. 159Loans held for sale(1)(2)

$
7,744,180

$
1,911

$
7,746,091Deposit liabilities(3)


5,540,850


(17,506
)

5,558,356Pre-tax cumulative effect of adopting the fair value option





(15,595
)Benefit for deferred income taxes





(5,790
)After-tax cumulative effect of adopting the fair value option




$
(9,805
)


---

19. Derivative Instruments

The Company primarily uses derivative instruments in connection with its risk management activities. The Company's primary objective in utilizing these derivative instruments is to
minimize market risk volatility associated with interest rate and foreign currency risks related to the Company's assets and liabilities. Minimizing this volatility enables the Company to mitigate the
impact of market risk on earnings.

The
derivative instruments that the Company uses include swaps, caps, forwards, options, swaptions, spread locks, loan commitments and treasury-related derivative instruments, and may be
exchange-traded or contracted in the over-the-counter market.

In
contemplation of the adoption of SFAS No. 159, the Company discontinued fair value hedge accounting for its pools of fixed rate loans held for sale in late 2007. Also in 2007,
the Company terminated its interest rate swaps (cash flow hedges) associated with a portion of the escrow funds that were at that time maintained and managed by Escrow Bank. In late 2008, the Company
effectively terminated its interest rate swaps (fair value hedges) associated with its fixed rate senior unsecured notes. Also in late 2008, the Company entered into interest rate swaps (fair value
hedges) associated with Brokered CDs with original maturities greater than one year.

Fair value hedgesas of December 31, 2008, the Company's fair value hedges consist of interest rate swaps associated with Brokered CDs with
original maturities greater than one year. The hedging relationship is expected to be highly effective in achieving offsetting changes in fair value attributable to

73

---



CAPMARK FINANCIAL GROUP INC.

Notes to Consolidated Financial Statements (Continued)

19. Derivative Instruments (Continued)

the
designated hedge risk during the hedge period. The fair value change in the Brokered CDs is included as a basis adjustment of the Brokered CDs' carrying value, and the fair value change of the
interest rate swaps is recorded in other assets or other liabilities, as appropriate. The difference between the change in fair value of the Brokered CDs and the change in fair value of the related
interest rate swaps represents hedge ineffectiveness and is recognized in current period earnings as a component of other gains (losses), net in the consolidated statement of operations.

Net investment hedgesthe Company makes investments in foreign operations that have functional currencies other than the U.S. dollar, which is the
functional currency of the Company. The change in the carrying value of these operations, translated at month-end exchange rates, is recorded in accumulated other comprehensive income, net
of tax. The translation of the change in the carrying value of these operations over future periods exposes the Company to fluctuations in currency exchange rates. In order to manage this exposure,
the Company has entered into a portfolio of derivative instruments to minimize the impact of foreign currency exchange movements on stockholders' equity. The portion of the change in estimated fair
value of the related derivative instruments due to changes in month-end foreign exchange rates is recorded in other assets or other liabilities, as appropriate, in the consolidated balance
sheet with an offset to accumulated other comprehensive income, net of tax, to the extent the derivative instrument is effective. The remainder is recorded in current period earnings as a component of
other gains (losses), net in the consolidated statement of operations.

The
Company assesses the effectiveness of the hedges based upon the changes in exchange rates of the hedging instrument. The Company expects that the derivative instruments used in these
hedging relationships will be highly effective as economic hedges of foreign currency exchange risk associated with its hedged net investments because the critical risks of the hedging instruments are
structured to mirror the critical risks of the hedged net investments. The Company recognizes hedge ineffectiveness in earnings if the notional amount of the derivatives exceeds the portion of the net
investment that has been designated as being hedged or if the derivatives' underlying exchange rate is not the exchange rate between the functional currency of the hedged net investment and the
Company's functional currency.

Derivatives classified as tradingderivative instruments that do not qualify for hedge accounting under SFAS No. 133 are reported at their
estimated fair value in either other assets or other liabilities, as appropriate. The resulting gains and losses are included in current period earnings as a
component of net gains (losses) on investments and real estate in the consolidated statement of operations. The net interest settlement periodically recognized for these derivative instruments is
included as a component of other (losses) gains, net in the consolidated statement of operations.

The
Company enters into derivative instruments to mitigate the risk associated with changes in the estimated fair value of investment securities classified as trading,
fixed-rate loans held for sale and fixed-rate Brokered CDs with original maturities less than one year. The Company also enters into interest rate swaps to mitigate the
volatility in cash flows of certain of its variable rate liabilities. In addition, the Company enters into forward currency contracts to mitigate the foreign exchange risk on its foreign denominated
borrowings. Certain of these contracts are classified as trading derivatives.

74

---



CAPMARK FINANCIAL GROUP INC.

Notes to Consolidated Financial Statements (Continued)

19. Derivative Instruments (Continued)

The following table summarizes the pre-tax gain (loss) recognized for hedge ineffectiveness associated with each type of accounting hedge (in thousands):

Successor

PredecessorYear ended
December 31, 2008

Year ended
December 31, 2007

Period from
March 23, 2006 to
December 31, 2006

Period from
January 1, 2006 to
March 22, 2006Fair value hedges

$
(4
)
$
(12,433
)
$
(6,936
)
$
5,976Cash flow hedges





227


(275
)

Total

$
(4
)
$
(12,206
)
$
(7,211
)
$
5,976


The
Company is required to deposit cash in collateral and margin accounts maintained by counterparties related to certain derivative positions. Collateral in the amount of
$135.6 million and $44.0 million was deposited by the Company related to these arrangements as of December 31, 2008 and 2007, respectively. These amounts are netted against
unrealized losses on derivative positions. The Company held $101.7 million and $111.8 million in collateral and margin accounts on behalf of counterparties as of December 31, 2008
and 2007, respectively. These amounts are netted against unrealized gains on derivative positions. Net unrealized losses are reported as a component of other liabilities in the consolidated balance
sheet. Net unrealized gains are reported as a component of other assets in the consolidated balance sheet.

20. Stock-Based Compensation

In connection with the Sponsor Transactions, the Company implemented a stock option award program
which authorizes the board of directors to grant employees and non-employee directors the option to purchase shares of common stock at a specified price, once certain
time-based or performance-based vesting conditions are met. These stock options are generally granted on five-year graded vesting schedules with certain requisite service
conditions. The stock options expire ten years after the grant date. Certain of these stock options become vested if the Company achieves specific annual performance targets.

The
following table summarizes stock option activity and related information for the year ended December 31, 2008 (number of options in thousands):

Year ended December 31, 2008Number of
Options

Weighted average
exercise price
per share

Weighted average
remaining
contractual lifeOutstanding as of the beginning of the period


44,731

$
5.04Granted


420


6.09Exercised





Forfeited


9,535


5.04Cancelled


1,481


5.01Expired





Outstanding as of the end of the period


34,135

$
5.05

7.4 yearsExercisable as of the end of the period


15,057

$
5.01

7.4 years


75

---



CAPMARK FINANCIAL GROUP INC.

Notes to Consolidated Financial Statements (Continued)

20. Stock-Based Compensation (Continued)

There
were 16.9 million and 6.5 million shares available for future grants of stock options as of December 31, 2008 and December 31, 2007, respectively.

No
stock options have been exercised to date. The Company recorded $13.2 million (with no tax benefit), $9.9 million (net of tax benefit of $5.9 million) and
$4.5 million (net of tax benefit of $1.9 million) in compensation expense associated with its vesting of time-based options for the years ended December 31, 2008 and
2007 and the period from March 23, 2006 to December 31, 2006, respectively. No compensation expense was recognized for the years ended December 31, 2008 and 2007 and the period
from March 23, 2006 to December 31, 2006 for performance-based options because the performance criteria have not been met. There was $18.0 million of unrecognized compensation
expense related to outstanding option awards as of December 31, 2008, including performance-based option awards. This cost is expected to be recognized over a weighted average period of
2.4 years.

In
December 2008 in conjunction with the former Chief Executive Officer's separation agreement, the Company will allow 8 million vested stock options to remain exercisable until
the original expiration date of such stock options despite the executive's departure. No incremental compensation cost was incurred due to the modification of these vested stock options.

The
weighted average grant date fair value of stock options granted during the years ended December 31, 2008 and 2007 was $1.96 and $1.83, respectively, and $1.80 for the period
from March 23, 2006 to December 31, 2006. The fair value of the option awards was measured as of the grant date and estimated through a Black-Scholes option-pricing model. Because the
Company's common stock is not traded publicly, certain assumptions were determined using appropriate industry sector benchmarks. The following table summarizes the assumptions used to value the
options granted during the years ended December 31, 2008 and 2007 and the period from March 23, 2006 to December 31, 2006:

Year ended
December 31, 2008

Year ended
December 31, 2007

Period from
March 23, 2006 to
December 31, 2006Expected term of the option (in years)


5.0


5.5


6.5Annual risk-free interest rate


2.36% - 3.23
%

4.02% - 5.10
%

4.69% - 5.08
%Expected annual dividend yield


0.00
%

0.00
%

0.00
%Expected stock price volatility


31.22
%

23.35
%

23.25
%


In
October 2006, the Company adopted a Dividend Equivalent Rights Plan ("DER Plan") that provides dividend equivalent rights to employees who are eligible participants of the stock
option award program described above. The DER Plan provides that if the Company declares and pays an ordinary dividend on issued and outstanding shares of its common stock, then the DER Plan
participant's notional account will be credited in an amount equal to the value of the dividend in respect of one share of common stock issued and outstanding on the record date of the dividend,
multiplied by the number of the participant's then outstanding and vested, unexercised options under the stock option award program on the record date for such dividend. Generally, the DER Plan
provides that a participant shall vest in this program to the same extent and at the same time as the participant exercises their options under the stock option awards program. No dividends have been
declared or paid by the Company since adoption of the DER Plan and therefore no compensation expense has been recognized.

76

---



CAPMARK FINANCIAL GROUP INC.

Notes to Consolidated Financial Statements (Continued)

21. Employee Benefit Plans

Prior to the Sponsor Transactions, eligible employees of the Company participated in a defined contribution savings plan, or a 401(k) plan, sponsored by GMAC Mortgage. In addition,
eligible employees participated in a GMAC Mortgage retirement plan that provided for pension payments to eligible employees upon retirement based upon factors such as length of service and salary.
Under the pension plan, GMAC Mortgage allocated pension expense to the Company for all participating employees. The 401(k) and pension plans were terminated for employees of the Company in connection
with the Sponsor Transactions. Further, GMAC Mortgage retained liability for all existing unfunded pension commitments of the Company.

In
connection with the Sponsor Transactions, a new retirement benefit plan ("the Plan") became effective for eligible employees of the Company. The Plan is a 401(k) plan and has a
matching contribution provision in which employees who have completed a requisite service period and who contribute to the Plan receive a dollar-for-dollar match up to a
maximum amount. The match is subject to a five-year vesting schedule. Further, an additional company retirement contribution is made by the Company for every eligible employee who
completes a stated requisite service period. Employees of the Company had the option to rollover their balances in the GMAC Mortgage 401(k) plan into the new Plan of the Company.

There
was no pension expense for years ended December 31, 2008 and 2007 and the period from March 23, 2006 to December 31, 2006. Pension expense totaled
$1.8 million for the period from January 1, 2006 to March 22, 2006.

401(k)
expense totaled $7.2 million and $9.5 million for the years ended December 31, 2008 and 2007, respectively, $7.7 million for the period from
March 23, 2006 to December 31, 2006 and $3.3 million for the period from January 1, 2006 to March 22, 2006.

In
2006, the Company adopted the Executive Deferred Compensation and Stock Award Plan (the "Deferred Award Plan") for executive officers. The Deferred Award Plan provided executive
officers
with the opportunity to defer receipt of all or a portion of their 2007 performance year annual bonus payable in 2008 to the purchase of hypothetical shares of common stock based on an irrevocable
election to do so. For each hypothetical share of common stock issued under the Deferred Award Plan, the executive officer received an option to purchase one additional share of common stock. In 2008,
212,765 hypothetical shares of common stock were issued and 212,765 stock options were granted in consideration of $1.3 million of deferred compensation.

77

---



CAPMARK FINANCIAL GROUP INC.

Notes to Consolidated Financial Statements (Continued)

22. Guarantees

In the ordinary course of business, the Company issues various guarantees. The Company's outstanding guarantees as of December 31, 2008 and 2007 consisted of the following (in
thousands):

December 31, 2008

December 31, 2007Maximum
liability

Carrying
value of
liability

Maximum
liability

Carrying
value of
liabilityAgency/construction lending guarantees

$
269,025

$
675

$
407,738

$
2,089Agency loans sold with recourse


693,935


20,907


543,462


13,917Other third party guarantees


268,825





272,771


Total

$
1,231,785

$
21,582

$
1,223,971

$
16,006


Agency/construction lending guaranteesthe Company has guaranteed repayment of principal and interest on certain construction loans. Additionally,
guarantees are issued on long term fixed rate agency loans. Losses would be incurred in the event of default of the underlying loans. These guarantees have expiration dates in 2009. No collateral was
pledged with respect to these guarantees as of December 31, 2008 and 2007.

Agency loans sold with recourseguarantees have been issued in connection with the exposure on loans sold with recourse and subject to a first loss
under the Fannie Mae DUS agreement and other similar agreements. Losses would be incurred in the event of default of the underlying loans. These guarantees have expiration dates that
range from 2009 through 2038. No collateral was pledged with respect to these guarantees as of December 31, 2008 and 2007.

Other third party guaranteesthe Company has issued guarantees relating to other lending
and investment activities. The other third party guarantees have expiration dates that range from 2014 through 2046. No collateral was pledged with respect to these guarantees as of
December 31, 2008 and 2007.

23. Commitments and Contingent Liabilities

Commitmentsthe Company's outstanding commitments as of December 31, 2008 and 2007 consisted of the following (in thousands):

December 31,
2008

December 31,
2007Commitments to originate or purchase loans

$
16,290

$
538,434Commitments to fund construction loans


817,804


2,107,438Commitments to fund other loans


1,146,002


1,445,321Commitments to purchase investments


44,966


Commitments to provide equity to equity method investees


161,555


242,328Total

$
2,186,617

$
4,333,521Commitments to sell loans

$
229,572

$
219,583


78

---



CAPMARK FINANCIAL GROUP INC.

Notes to Consolidated Financial Statements (Continued)

23. Commitments and Contingent Liabilities (Continued)

The
following table summarizes the remaining maturity of the Company's commitments as of December 31, 2008 (in thousands):

Years to MaturityType of Commitment

Less than
1 Year

1 to 3 Years

3 to 5 Years

More than
5 Years

Total(in thousands)Commitments to originate or purchase loans

$
16,290

$


$


$


$
16,290Commitments to fund construction loans


109,553


354,923


323,262


30,066


817,804Commitments to fund other loans


130,544


718,434


91,508


205,516


1,146,002Commitments to purchase investments


44,966











44,966Commitments to provide equity to equity method investees


7,136


77,993


2,896


73,530


161,555Total

$
308,489

$
1,151,350

$
417,666

$
309,112

$
2,186,617Commitments to sell loans

$
229,572

$


$


$


$
229,572


Leases and rentalsthe Company is obligated under non-cancelable operating leases primarily for office facilities. These leases have
conventional terms and conditions. The future minimum rental payments under operating leases having initial or remaining non-cancelable lease terms in excess of one year as of
December 31, 2008 were as follows (in thousands):

2009

$
17,2532010


12,7112011


9,8722012


6,6582013


4,0242014 and thereafter


9,150Total

$
59,668


Net
rental expense, primarily for office facilities, totaled $20.2 million and $22.9 million for years ended December 31, 2008 and 2007, respectively,
$17.7 million for the period from March 23, 2006 to December 31, 2006 and $5.4 million for the period from January 1, 2006 to March 22, 2006.

Contingencies related to affordable housing partnershipsthe Company holds variable interests in syndicated affordable housing partnerships where the
Company provides unaffiliated investors with a guaranteed yield on their investment. As discussed in Note 13, as of December 31, 2008, the Company's maximum exposure to loss under the
yield guarantees was $1.6 billion. As of December 31, 2008, the Company's estimate of actual loss under these yield guarantees was $264.8 million and is reported as a component of
real estate syndication proceeds and related liabilities in the consolidated balance sheet.

Litigationthe Company is subject to potential liability under laws and government regulations, and various claims and legal actions that are pending
or may be asserted against it. As of December 31, 2008, after consultation with counsel, it is the opinion of management that potential liability arising from pending litigation is not expected
to have a material adverse effect on the Company's

79

---



CAPMARK FINANCIAL GROUP INC.

Notes to Consolidated Financial Statements (Continued)

23. Commitments and Contingent Liabilities (Continued)

consolidated
financial condition, results of operations or cash flows. However, due to the inherent uncertainty in litigation and since the ultimate resolution of the Company's litigation, claims and
other legal proceedings are influenced by factors outside of the Company's control, it is reasonably possible that actual results will differ from management's estimates.

24. Related Party Transactions

Management Agreement

In connection with the Sponsor Transactions, the Company entered into a management agreement, under which the Sponsors and GMAC are
entitled to receive an aggregate annual management fee and reimbursement for any out-of-pocket expenses that they or their affiliates incur in connection with management and
advisory services provided under the agreement. The management fee is equal to $20.0 million during the first year of the agreement and thereafter increases at a rate of 5% per annum. The
Company recognized $21.8 million and $20.8 million for the years ended December 31, 2008 and 2007, respectively, and $15.5 million for the period from March 23, 2006
to December 31, 2006, in management fees which are reported as a component of other expenses in the consolidated statement of operations. Although the
Company is currently accruing such fees, the Sponsors and GMAC have recently agreed to suspend payments under the agreement.

Transaction Fees

In connection with the Sponsor Transactions, the Company paid an aggregate of $66.2 million of transaction-related fees to
members of the Sponsors. Approximately $40.3 million of these fees were related to the issuance of debt and capitalized as a component of other assets in the consolidated balance sheet. These
fees are amortized over the life of the related debt. The remaining portion of these fees, approximately $25.9 million, were recognized as part of the recapitalization of the Company and
included in stockholders' equity in the consolidated balance sheet.

Senior Credit Facility and Bridge Loan

In connection with the Sponsor Transactions, the Company entered into a senior credit facility with a syndicate of financial
institutions for which Goldman Sachs Credit Partners, L.P., an affiliate of Goldman Sachs Capital Partners, a member of the Sponsors, served as a documentation agent. In addition, the Company
entered into a bridge loan with a syndicate of financial institutions for which Goldman Sachs Credit Partners, L.P. served as a sponsor. Additionally, affiliates of Goldman Sachs Capital
Partners, a member of the Sponsors, also act as lenders under the senior credit facility and bridge loan.

As
of December 31, 2008 and 2007, the Company had borrowed an aggregate of $5.3 billion and $3.9 billion, respectively, under the senior credit facility and an
aggregate of $833.0 million and $1.7 billion, respectively, under the bridge loan. For the years ended December 31, 2008 and 2007 and during the period from March 23, 2006
to December 31, 2006, the Company recognized approximately $218.9 million, $354.6 million and $387.5 million, respectively, of interest on these borrowings, including fees,
which is reported as a component of interest expense in the consolidated statement of operations. See Note 2 for a discussion of the Company's negotiations regarding potential modification of
terms to the senior credit facility and bridge loan.

80

---



CAPMARK FINANCIAL GROUP INC.

Notes to Consolidated Financial Statements (Continued)

24. Related Party Transactions (Continued)

Issuance of Junior Subordinated Debentures and Sale of Trust Preferred Securities to GMAC

In connection with the Sponsor Transactions, the Company issued $250.0 million in aggregate principal amount of junior
subordinated debentures to the Trust, a wholly-owned Delaware statutory Trust. One of the Company's officers acts as the regular trustees of the Trust. Contemporaneously with the issuance of the
junior subordinated debentures, the Trust entered into a purchase agreement with GMAC pursuant to which GMAC purchased $250.0 million in aggregate liquidation amount of floating rate trust
preferred securities issued by the Trust in exchange for the reduction of an equivalent amount of indebtedness owed to GMAC and one of its affiliates at the time. For the years ended
December 31, 2008 and 2007 and for the period from March 23, 2006 to December 31, 2006, the Company recognized approximately $15.2 million, $19.4 million and
$11.3 million, respectively, of interest associated with these debentures which is reported as a component of interest expense in the consolidated statement of operations. As a result of two
consecutive fiscal quarters of negative adjusted earnings before taxes and an average four quarter fixed charge ratio of less than 1.20, a mandatory deferral event was in effect beginning in early
2008 and is continuing.

Financing Previously Provided by GMAC and its Affiliates

In connection with the Sponsor Transactions, the Company used borrowings drawn under the senior credit facility and bridge loan and the
trust preferred securities referred to above to repay an aggregate of approximately $7.1 billion of indebtedness owed to GMAC and its affiliates, representing all indebtedness that was owed
them as of the Sponsor Transactions date. The Company had previously incurred the indebtedness owed to GMAC and its affiliates under a number of inter-company loan agreements as an indirect,
wholly-owned subsidiary of GMAC. For the period from January 1, 2006 to March 22, 2006, the Company recorded an aggregate of $75.7 million of interest under the inter-company
loans, which is reported as a component of interest expense in the consolidated statement of operations.

GMAC Guarantees

Prior to the Sponsor Transactions, certain obligations of the Company were guaranteed by GMAC and GMAC Mortgage. In connection with the
Sponsor Transactions, the Company discharged its obligations under a number of obligations that were guaranteed by GMAC and GMAC Mortgage and removed GMAC and GMAC Mortgage as guarantors on a number
of other obligations. Certain of these guarantees remain as of December 31, 2008. Obligations of the Company totaling $194.9 million and $210.2 million were guaranteed by GMAC and
GMAC Mortgage as of December 31, 2008 and 2007, respectively.

In
addition, GMAC has agreed to indemnify the Company for certain tax liabilities of the Company and its subsidiaries relating to periods prior to the closing of the Sponsor
Transactions. See Note 15 for further discussion.

GM Automotive Dealership Loan Servicing

The Company serviced approximately 3,100 and 3,400 GM automotive dealership loans on behalf of GMAC with an unpaid principal balance of
$2.8 billion and $2.9 billion as of December 31, 2008 and 2007, respectively. The Company recognized $3.1 million and $2.5 million of fee income on these GM
automotive dealership loans for the years ended December 31, 2008 and 2007, respectively,

81

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CAPMARK FINANCIAL GROUP INC.

Notes to Consolidated Financial Statements (Continued)

24. Related Party Transactions (Continued)

$1.8 million
for the period from March 23, 2006 to December 31, 2006 and $0.7 million for the period from January 1, 2006 to March 22, 2006. This fee income
is reported as a component of mortgage servicing fees in the consolidated statement of operations.

Carried Interest Program

Certain of Capmark Investments' sponsored investment funds allocate a portion of the income generated by such sponsored funds (such
allocation is referred to as the "Carried Interest"), generally to the general partner of such funds. The Carried Interest is generally 20% of the profits generated by these sponsored funds after
return of the investors' capital and achieving a required rate of return to the investors specified in the sponsored funds' agreements. Limited partners and members in the general partner and managing
member, as applicable, may participate in the Carried Interest (such limited partners and members are referred to as "Incentive Vehicles"). Certain of the Company's portfolio managers and other
employees who have provided value to these sponsored funds ("Participating Employees") have been granted limited partnership and/or membership interests in the Incentive Vehicles and, as a result,
will be entitled to distributions of a portion of the Carried Interest, if any, as limited partners of the respective Incentive Vehicles. Generally, the Participating Employees, on an aggregate basis
will receive from 25% to 50% of the total Carried Interest generated from third party investments in the sponsored investment funds for which the Incentive Vehicles were established. These grants of
participation in the Carried Interest are intended to offer tax-advantaged compensation expense to the Participating Employees and are intended to align the interests of the Participating
Employees with the interests of the investors whose funds are managed by Capmark Investments. Although the program was implemented in 2006, no compensation has been accrued or paid as of
December 31, 2008 and 2007.

Reimbursements Made to the Former Chief Executive Officer

Under the terms of his employment agreement, the Company was obligated to reimburse the former Chief Executive Officer for certain
expenses associated with the use of his personal aircraft for Company business. The Company reimbursed the former Chief Executive Officer $0.9 million, $0.8 million and
$0.8 million for such expenses for the years ended December 31, 2008 and 2007 and the period from March 23, 2006 to December 31, 2006, respectively. This reimbursement is
reported as a component of other expenses in the consolidated statement of operations.

Debt Financing Arrangements with Equity Method Investees

As more fully described in Note 8, the Company makes equity investments in entities that acquire, maintain and develop
multifamily housing, office, warehouse, and retail properties which are accounted for under the equity method. In some cases, the Company also provides the debt financing to these entities. This debt
financing consists of both fixed rate and floating rate loans.

The
carrying value of loans to these entities totaled approximately $548.4 million and $726.8 million as of December 31, 2008 and 2007, respectively, and was
classified as loans held for investment or loans held for sale as appropriate.

Certain
of these loans were non-interest bearing loans, totaling $41.9 million and $58.6 million as of December 31, 2008 and 2007, respectively. For
those loans that bear interest at a fixed rate, the average interest rate was 9.34% and 6.03% as of December 31, 2008 and 2007, respectively. The

82

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CAPMARK FINANCIAL GROUP INC.

Notes to Consolidated Financial Statements (Continued)

24. Related Party Transactions (Continued)

floating
rate loans carry a rate of interest that is based upon a benchmark interest rate plus a stated margin. Interest earned on these loans is reported as a component of interest income in the
consolidated statement of operations. The lives of these loans range from one year to five years.

In
addition to providing debt financing, the Company also makes advances to and collects fees from entities owned by its consolidated affordable housing partnerships. Advances to these
entities totaled $38.1 million and $59.8 million as of December 31, 2008 and 2007, respectively. These advances are reported as a component of accounts and other receivables in
the consolidated balance sheet. Fees charged to these entities totaled $9.1 million and $7.6 million for the years ended December 31, 2008 and 2007, respectively,
$5.2 million for the period from March 23, 2006 to December 31, 2006 and $1.8 million for the period from January 1, 2006 to March 22, 2006. These fees are
reported as a component of asset management fees in the consolidated statement of operations.

Sale of Businesses to Employees

In December 2007, the Company sold all of the stock of two of its wholly-owned Mexican subsidiaries, which comprised the Company's
asset management and servicing business in Mexico, to a newly formed company owned by the management team of the Company's business operations in Mexico. The sale of these two subsidiaries resulted in
an immaterial loss. The Company retained the newly formed company to manage its remaining asset portfolio in Mexico.

In
August 2007, the Company sold substantially all of the assets and transferred substantially all of the liabilities related to its commercial real estate research division, Realpoint,
to a company formed by a group of Realpoint employees for approximately $9.7 million. The Company recorded a gain on sale of approximately $7.1 million related to the transaction. The
Company purchased services from the newly formed company subsequent to the sale.

In
February 2007, the Company sold its mortgage banking business in Florida to a company formed by a group of former employees. Proceeds from the sale totaled approximately
$0.8 million. An immaterial gain on sale was deferred until May 2007 upon the repayment of financing provided to the buyers to facilitate the sale.

In
October 2006, the Company sold one of its technology subsidiaries to an employee of the Company. Proceeds from the sale totaled approximately $6.9 million and the Company
recorded a gain on sale of approximately $1.8 million, which is reported as a component of other gains (losses), net in the consolidated statement of operations.

Transactions with Members of the Sponsors

In the ordinary course of business, the Company enters into transactions with members of the Sponsors and their affiliates. These
transactions include, but are not limited to, various arrangements to sell or acquire real estate related investments, such as loan syndications, participations, derivatives, joint ventures or other
similar transactions. These transactions are conducted on an arm's length basis.

As
discussed in Note 12, the Company issued $2.55 billion of senior unsecured notes on May 10, 2007. Goldman, Sachs & Co., an affiliate of a member of
the Sponsors, served as one of the three global coordinators and joint bookrunners for the offering. The Company used certain of the proceeds of the senior notes to repay approximately
$2.0 billion of indebtedness outstanding under the Company's bridge loan agreement. Goldman Sachs Credit Partners L.P., an affiliate of a member of the

83

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CAPMARK FINANCIAL GROUP INC.

Notes to Consolidated Financial Statements (Continued)

24. Related Party Transactions (Continued)

Sponsors,
served as a documentation agent for the bridge loan agreement. Other affiliates of Goldman Sachs Capital Partners, a member of the Sponsors, are lenders under the bridge loan agreement.

Administrative Services Previously Provided by GMAC and their Affiliates

Prior to the Sponsor Transactions, the Company incurred expenses for certain administrative services provided by GMAC and their
affiliates. A $0.4 million benefit was recorded for the period from January 1, 2006 to March 22, 2006 as a result of the settlement process in connection with closing the Sponsor
Transactions. Such expenses were reported as a component of other expenses in the consolidated statement of operations.

25. Comprehensive Income

SFAS No. 130, "Reporting Comprehensive Income," established accounting standards for reporting comprehensive income and its components and required that all revenues, expenses,
gains and losses recognized during the period be included in comprehensive income, regardless of whether these items are considered to be results of operations for the period. The following table
summarizes the components of other comprehensive income (loss), net of tax (in thousands):

Successor

PredecessorYear Ended
December 31, 2008

Year Ended
December 31, 2007

Period from
March 23, 2006 to
December 31, 2006

Period from
January 1, 2006 to
March 22, 2006Gain
(loss)

Tax
provision
(benefit)

Net
amount

Gain
(loss)

Tax
provision
(benefit)

Net
amount

Gain
(loss)

Tax
provision
(benefit)

Net
amount

Gain
(loss)

Tax
provision
(benefit)

Net
amountNet unrealized (loss) gain on investment securities and derivative instruments:Net unrealized holding (losses) gains arising during the period

$
(147,157
)
$
(6,659
)
$
(140,498
)
$
(28,851
)
$
(7,241
)
$
(21,610
)
$
57,628

$
20,586

$
37,042

$
(5,574
)
$
(2,262
)
$
(3,312
)Less: reclassification adjustment for net (losses) gains included in net income


(104,494
)

0


(104,494
)

(10,651
)

(2,803
)

(7,848
)

8,838


3,094


5,744


997


349


648Net unrealized (loss) gain on investment securities and derivative instruments


(42,663
)

(6,659
)

(36,004
)

(18,200
)

(4,438
)

(13,762
)

48,790


17,492


31,298


(6,571
)

(2,611
)

(3,960
)Net foreign currency translation adjustment


22,885


125


22,760


1,620


668


952


29,422


10,927


18,495


36,730


14,737


21,993Total

$
(19,778
)
$
(6,534
)
$
(13,244
)
$
(16,580
)
$
(3,770
)
$
(12,810
)
$
78,212

$
28,419

$
49,793

$
30,159

$
12,126

$
18,033


84

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CAPMARK FINANCIAL GROUP INC.

Notes to Consolidated Financial Statements (Continued)

26. Segment Information

The operating results for the Company's six reportable business segments have been determined in accordance with SFAS No. 131. This standard is based on a management approach,
which requires presentation of business segments based upon a company's organization and internal reporting of operating results to the company's chief operating decision maker. The Company's chief
operating decision maker is its Chief Executive Officer. The accounting policies of the Company's business segments are the same as those described in Note 3, except that disaggregated results
have been prepared using a management approach, which is substantially consistent with the basis and manner in which management internally disaggregates financial information for the purpose of
assisting in the operating-decision process. Material intersegment transactions have been eliminated in consolidation.

The
Company's business segments are separately managed and organized based on geography and the type of business conducted. The Company has six reportable business segments: North
American Lending and Mortgage Banking, North American Investments and Funds Management, North American Servicing, Asian Operations, European Operations and North American Affordable Housing.

North American Lending and Mortgage Banking

The Company's North American Lending and Mortgage Banking segment provides borrowers with financial products that may be used to
finance most types of commercial properties. The Company is one of the largest commercial real estate lenders in North America in terms of principal amount of financing arranged. The Company sources
new lending opportunities through its commercial mortgage banking network in North America, which has more than 26 offices located in 18 states, and through its existing relationships with property
owners and developers and other third parties in the United States.

The
Company originates loans and arranges other forms of financing covering a broad spectrum of asset classes both for its own account and for sale to GSEs and other third parties, such
as insurance companies and major financial institutions, for whom it acts as a correspondent lender. When market conditions allow, the Company reduces the principal risk associated with its North
American proprietary lending activities by monetizing a significant portion of the financing that it originates through securitizations, syndications, participations and other sales. Due to the
current market disruptions, starting in the second half of 2008 the Company has significantly reduced its proprietary lending and focused its efforts on originating loans for sale to GSEs and other
third parties through Capmark Bank US.

North American Investments and Funds Management

The Company's North American Investments and Funds Management segment focuses on the sponsorship and management of real estate debt and
equity funds, as well as the management of its own real estate debt and equity investments. Capmark Investments manages private funds, separate accounts and commercial real estate CDOs. Capmark
Investments earns recurring management fees based, in part, on the amount of third-party assets under its management, or in the case of certain funds that it manages, on the amount of capital
commitments from fund investors during the commitment period. In addition, Capmark Investments is entitled to receive incentive fees that are calculated based on returns generated by those investments
if certain thresholds are achieved.

North American Servicing

The Company's North American Servicing segment carries out primary, master and special servicing activities for commercial real estate
loans that are originated by the Company or by third

85

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CAPMARK FINANCIAL GROUP INC.

Notes to Consolidated Financial Statements (Continued)

26. Segment Information (Continued)

parties
and for securitized loan pools in North America. Capmark Finance is also an approved servicer of loans for Fannie Mae, Freddie Mac, Ginnie Mae and the FHA. Capmark Finance's servicing
activities also provide recurring fee-based income, including servicing fees and trust fees that it earns on escrow balances for loans that it services.

Asian Operations

The Company's Asian Operations segment has historically carried out commercial real estate finance activities in Japan, Taiwan, the
Philippines and China, including making real estate equity investments, acquiring portfolios of non-performing commercial and residential real estate loans and originating and servicing
commercial real estate loans. In 2008, the Company curtailed its lending and investing activities in Asia and focused its efforts on managing its existing loan, investment and
fee-for-services businesses.

European Operations

The Company's European Operations segment has historically conducted commercial real estate finance activities in the United Kingdom,
Ireland and selected countries in Continental Europe, primarily through Capmark Bank Europe, an Irish bank with lending authority throughout Europe. In 2008, the Company curtailed its lending and
investing activities in Europe and focused its efforts on managing the Company's existing loan, investment and fee-for-services businesses. In connection with the curtailment
of lending in Europe, in June 2008 Capmark Bank Europe notified the Irish banking regulatory authority that Capmark Bank Europe is commencing cessation of its banking operations as further described
in Note 1.

North American Affordable Housing

The Company's North American Affordable Housing segment manages LIHTC equity investments on behalf of third-party investors. LIHTC
investments have been aggregated by the Company into funds and equity in those funds has been sold to tax credit investors. These funds generate a return or yield to the investors based on their
purchase price over the life of the tax credits and the Company provides a guaranteed yield to the third-party investors on many of these funds. The Company no longer syndicates funds. Previously, the
Company operated an affordable housing debt platform that specialized in the origination of tax advantaged debt supporting the development of low-income housing under a variety of
proprietary and GSE-supported underwriting programs. In February 2007, the Company sold a majority of this platform to an unaffiliated buyer as further discussed in Note 3.

Consistent
with the Company's management reporting, the business segments do not include corporate administrative and support functions or certain immaterial businesses. The Company also
does not allocate income taxes to its business segments or include in its segment reporting the adjustments required by push down accounting or any other eliminations, reclassifications or other
adjustments that are made to conform the Company's management reporting to the consolidated financial statements. These items are included in the tables that follow under the heading "Corporate and
other" as further explained below:



86

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CAPMARK FINANCIAL GROUP INC.

Notes to Consolidated Financial Statements (Continued)

26. Segment Information (Continued)



Because
management's segment level reporting does not include the push down accounting adjustments related to the change in basis between Predecessor and Successor periods, the amounts
in such Predecessor and Successor periods for 2006 are prepared on a consistent basis and have therefore been combined for comparability purposes. This presentation is consistent with the form in
which the chief operating decision maker has reviewed such information during the year.

The
following table summarizes the financial results for the Company's reportable business segments for the year ended December 31, 2008 (in thousands):

SegmentsNorth
American
Lending and
Mortgage
Banking

North
American
Investments and
Funds
Management

North
American
Servicing

Asian
Operations

European
Operations

North
American
Affordable
Housing

Corporate &
other

ConsolidatedNet interest income

$
320,595

$
2,651

$
(18,355
)
$
13,380

$
20,528

$
2,378

$
(142,610
)
$
198,567Noninterest income


(413,205
)

(196,420
)

306,290


(144,787
)

(391,646
)

(34,523
)

183,692


(690,599
)Total revenue


(92,610
)

(193,769
)

287,935


(131,407
)

(371,118
)

(32,145
)

41,082


(492,032
)Provision for loan losses


101,783








76,322


2,702





(1,142
)

179,665Net revenue


(194,393
)

(193,769
)

287,935


(207,729
)

(373,820
)

(32,145
)

42,224


(671,697
)Noninterest expense


215,193


35,433


188,610


84,520


34,695


34,444


190,357


783,252(Loss) income before minority interest and income taxes


(409,586
)

(229,202
)

99,325


(292,249
)

(408,515
)

(66,589
)

(148,133
)

(1,454,949
)Minority interest income


36,026


42,965





2,709








28,780


110,480(Loss) income before income taxes

$
(373,560
)
$
(186,237
)
$
99,325

$
(289,540
)
$
(408,515
)
$
(66,589
)
$
(119,353
)
$
(1,344,469
)Total assets at end of period

$
11,597,285

$
772,285

$
901,151

$
2,886,256

$
538,675

$
891,907

$
3,050,616

$
20,638,175


87

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CAPMARK FINANCIAL GROUP INC.

Notes to Consolidated Financial Statements (Continued)

26. Segment Information (Continued)

The composition of "Corporate and other" for the year ended December 31, 2008 was as follows (in thousands):

Immaterial
businesses

Corporate
activity

Consolidated
affordable
housing
partnerships

Deferral of
placement
fees

Eliminations
and other
adjustments

Push down
accounting
adjustments

Total
Corporate &
otherNet interest income

$
(2,221
)
$
(116,851
)
$
(32,421
)
$
8,575

$
1,027

$
(719
)
$
(142,610
)Noninterest income


4,915


157,321


50,727


(18,516
)

(23,422
)

12,667


183,692Total revenue


2,694


40,470


18,306


(9,941
)

(22,395
)

11,948


41,082Provision for loan losses


1,153














(2,295
)

(1,142
)Net revenue


1,541


40,470


18,306


(9,941
)

(22,395
)

14,243


42,224Noninterest expense


460


140,514


43,933


(9,941
)

(22,395
)

37,786


190,357Income (loss) before minority interest and income taxes


1,081


(100,044
)

(25,627
)







(23,543
)

(148,133
)Minority interest income








25,627








3,153


28,780Income (loss) before income taxes

$
1,081

$
(100,044
)
$


$


$


$
20,390

$
(119,353
)Total assets at end of period

$
38,279

$
1,596,475

$
1,144,794

$


$


$
271,068

$
3,050,616


Financial results for the Company's business segments for the year ended December 31, 2007 were as follows (in thousands):

North
American
Lending and
Mortgage
Banking

North
American
Investments and
Funds
Management

North
American
Servicing

Asian
Operations

European
Operations

North
American
Affordable
Housing

Corporate &
other

ConsolidatedNet interest income

$
287,500

$
8,333

$
(6,634
)
$
55,073

$
36,908

$
(5,423
)
$
(39,025
)
$
336,732Noninterest income


155,382


209,905


403,756


156,576


52,006


51,392


(120,938
)

908,079Total revenue


442,882


218,238


397,122


211,649


88,914


45,969


(159,963
)

1,244,811Provision for loan losses


18,757


278


(87
)

11,934


(362
)

(2,416
)

4,562


32,666Net revenue


424,125


217,960


397,209


199,715


89,276


48,385


(164,525
)

1,212,145Noninterest expense


298,671


75,896


205,176


90,892


53,787


45,981


118,971


889,374Income (loss) before minority interest and income taxes


125,454


142,064


192,033


108,823


35,489


2,404


(283,496
)

322,771Minority interest income (expense)


44,951


7,488





(2,476
)







74,368


124,331Income (loss) before income taxes

$
170,405

$
149,552

$
192,033

$
106,347

$
35,489

$
2,404

$
(209,128
)
$
447,102Total assets at end of period

$
12,159,800

$
1,050,576

$
894,259

$
2,789,044

$
3 ,068,097

$
1,084,783

$
2,217,837

$
23,264,396


88

---



CAPMARK FINANCIAL GROUP INC.

Notes to Consolidated Financial Statements (Continued)

26. Segment Information (Continued)

The composition of "Corporate and other" for the year ended December 31, 2007 was as follows (in thousands):

Immaterial
businesses

Corporate
activity

Consolidated
affordable
housing
partnerships

Deferral of
placement
fees

Eliminations
and other
adjustments

Push down
accounting
adjustments

Total
Corporate &
otherNet interest income

$
(2,681
)
$
(30,430
)
$
(35,062
)
$
7,803

$
18,257

$
3,088

$
(39,025
)Noninterest income


12,803


32,179


35,197


(150,620
)

(36,086
)

(14,411
)

(120,938
)Total revenue


10,122


1,749


135


(142,817
)

(17,829
)

(11,323
)

(159,963
)Provision for loan losses


3











(245
)

4,804


4,562Net revenue


10,119


1,749


135


(142,817
)

(17,584
)

(16,127
)

(164,525
)Noninterest expense


6,795


159,240


72,640


(142,817
)

(17,584
)

40,697


118,971Income (loss) before minority interest and income taxes


3,324


(157,491
)

(72,505
)







(56,824
)

(283,496
)Minority interest income








72,505








1,863


74,368Income (loss) before income taxes

$
3,324

$
(157,491
)
$


$


$


$
(54,961
)
$
(209,128
)Total assets at end of period

$
42,167

$
446,926

$
1,508,608

$


$


$
220,136

$
2,217,837


Financial results for the Company's business segments for the year ended December 31, 2006 were as follows (in thousands):

North
American
Lending and
Mortgage
Banking

North
American
Investments and
Funds
Management

North
American
Servicing

Asian
Operations

European
Operations

North
American
Affordable
Housing

Corporate &
other

ConsolidatedNet interest income

$
231,647

$
14,179

$
(7,935
)
$
79,502

$
27,584

$
7,213

$
(28,436
)
$
323,754Noninterest income


403,387


236,414


406,653


168,917


64,643


(185,680
)

(202,148
)

892,186Total revenue


635,034


250,593


398,718


248,419


92,227


(178,467
)

(230,584
)

1,215,940Provision for loan losses


8,588


(788
)

1,038


15,635


46,588


15,503


(11,948
)

74,616Net revenue


626,446


251,381


397,680


232,784


45,639


(193,970
)

(218,636
)

1,141,324Noninterest expense


295,819


102,664


243,156


82,361


67,485


78,146


121,489


991,120Income (loss) before minority interest and income taxes


330,627


148,717


154,524


150,423


(21,846
)

(272,116
)

(340,125
)

150,204Minority interest income (expense)


12,534


(5,075
)




(46,164
)

(1,338
)




105,615


65,572Income (loss) before income taxes

$
343,161

$
143,642

$
154,524

$
104,259

$
(23,184
)
$
(272,116
)
$
(234,510
)
$
215,776Total assets at end of period

$
9,223,844

$
870,847

$
854,697

$
1,972,717

$
2,904,587

$
2,285,308

$
2,844,480

$
20,956,480


89

---



CAPMARK FINANCIAL GROUP INC.

Notes to Consolidated Financial Statements (Continued)

26. Segment Information (Continued)

The composition of "Corporate and other" for the year ended December 31, 2006 was as follows (in thousands):

Immaterial
businesses

Corporate
activity

Consolidated
affordable
housing
partnerships

Deferral of
placement
fees

Eliminations
and other
adjustments

Push down
accounting
adjustments

Total
Corporate &
otherNet interest income

$
(3,868
)
$
5,975

$
(30,509
)
$
5,646

$
18,722

$
(24,402
)
$
(28,436
)Noninterest income


17,028


(24,868
)

13,983


(129,623
)

(34,596
)

(44,072
)

(202,148
)Total revenue


13,160


(18,893
)

(16,526
)

(123,977
)

(15,874
)

(68,474
)

(230,584
)Provision for loan losses


1,281


1,500








(23,578
)

8,849


(11,948
)Net revenue


11,879


(20,393
)

(16,526
)

(123,977
)

7,704


(77,323
)

(218,636
)Noninterest expense


6,248


172,548


55,119


(123,977
)

7,747


3,804


121,489Income (loss) before minority interest and income taxes


5,631


(192,941
)

(71,645
)




(43
)

(81,127
)

(340,125
)Minority interest income








71,645








33,970


105,615Income (loss) before income taxes

$
5,631

$
(192,941
)
$


$


$
(43
)
$
(47,157
)
$
(234,510
)Total assets at end of period

$
86,285

$
490,428

$
1,964,736

$


$


$
303,031

$
2,844,480


Information concerning principal geographic areas is presented in the following table (in thousands):

December 31, 2008

December 31, 2007

December 31, 2006Net revenue

Long-lived
assets

Net revenue

Long-lived
assets

Net revenue

Long-lived
assetsIreland

$
(341,562
)
$
90

$
144,590

$
39

$
106,731

$
(165
)Japan


(183,239
)

3,334


152,253


3,305


113,015


3,949Other


(88,755
)

1,191


44,382


2,422


62,709


2,918Total foreign


(613,556
)

4,615


341,225


5,766


282,455


6,702Total domestic


(58,141
)

133,201


870,920


217,713


858,869


269,524Total

$
(671,697
)
$
137,816

$
1,212,145

$
223,479

$
1,141,324

$
276,226


Net
revenue for the year ended December 31, 2006 represents the mathematical combination of the Predecessor and Successor periods for comparative purposes.

Net
revenue consists of net interest income after provision for loan losses plus noninterest income. Long-lived assets consist of property and equipment, goodwill and
intangible assets (including such assets classified as held for sale as of December 31, 2006). These items are attributed to geographic areas based on the location of the assets.

27. Regulatory Matters

Certain subsidiaries of the Company are subject to GSE and the Department of Housing and Urban Development minimum net worth requirements. Failure to meet minimum the net worth
requirements can result in the initiation of certain actions by these entities that, if undertaken, could

90

---



CAPMARK FINANCIAL GROUP INC.

Notes to Consolidated Financial Statements (Continued)

27. Regulatory Matters (Continued)

have
a material adverse effect on the Company's consolidated financial statements. Management believes the Company was in compliance with these minimum net worth requirements as of December 31,
2008.

Fannie
Mae has established certain eligibility requirements that Capmark Finance must comply with as a condition of being a Fannie Mae DUS seller/servicer. Capmark Finance
is exempt from complying with certain of these eligibility requirements for so long as the Company maintains an "Investment Grade Credit Rating," which means that its senior long-term
unsecured debt rating is (i) BBB- or higher from S&P; or (ii) Baa3 or above from Moody's Investors Service or (iii) BBB- or above from Fitch Ratings (with
the lowest rating prevailing if there is a split among the rating agencies). As of December 31, 2008, the Company maintained an Investment Grade Credit Rating with all three rating agencies. As
a result of downgrades below an Investment Grade Credit Rating in the first quarter of 2009, the Company was required to seek Fannie Mae's consent to maintain its status as an approved
DUS seller/servicer. The Company is in the process of seeking that consent but it is possible that the consent will not be granted and that Fannie Mae will terminate that status.

Capmark
Bank US and Escrow Bank must maintain minimum regulatory capital ratios to qualify as "well capitalized" under the capital rules of the FDIC. In addition, in connection with the
Sponsor Transactions, the Company and both banks entered into capital maintenance agreements with the FDIC pursuant to which they have agreed to maintain a Tier 1 leverage ratio of not less
than 8.0%. In June 2008, Escrow Bank ceased its trust operations and the trust customers of Escrow Bank appointed Capmark Bank US as their new trustee. Following the cessation of trust operations,
Escrow Bank no longer has any daily operations and has received notice from the FDIC of termination of deposit
insurance effective June 30, 2009. Until the termination of deposit insurance is effective, Escrow Bank remains subject to the FDIC capital rules. The following table summarizes the FDIC's
regulatory capital ratio requirements for well-capitalized banks and regulatory capital ratios as of December 31, 2008 and 2007 for Capmark Bank US and Escrow Bank:

December 31, 2008

December 31, 2007Ratios to qualify as
"Well-Capitalized"

Capmark
Bank US(1)

Escrow
Bank

Capmark
Bank US

Escrow
BankTier 1 leverage ratio


5.0%
(2)

12.5
%

16.0
%

11.6
%

61.9
%Tier 1 risk-based capital ratio


6.0
%

13.3
%

405.4
%

12.2
%

387.5
%Total risk-based capital ratio


10.0
%

15.9
%

405.4
%

14.6
%

387.5
%


---

91

---



CAPMARK FINANCIAL GROUP INC.

Notes to Consolidated Financial Statements (Continued)

27. Regulatory Matters (Continued)

Capmark
Bank Europe is required to comply with various laws, rules and regulations in Ireland. These requirements, among others, require Capmark Bank Europe to maintain certain capital
adequacy and liquidity ratios calculated in accordance with applicable laws and related accounting standards in Ireland. In July 2008, Capmark Bank Europe notified the Irish banking regulatory
authority that, in connection with the Company's decision to end proprietary lending in Europe, Capmark Bank Europe is commencing cessation of its banking operations. In connection with the
wind-down of banking activities, Capmark Bank Europe will voluntarily surrender its banking license once it has repaid all of its deposits and unwound or transferred to a third party all
of the obligations under which it is required to hold a banking license. The Company expects that the process of winding down Capmark Bank Europe's banking activities will be completed and the banking
license will be relinquished prior to June 30, 2009. Until it relinquishes its license, Capmark Bank Europe is required to comply with the capital adequacy and liquidity ratios described above.

The
following table summarizes Capmark Bank Europe's regulatory capital adequacy and liquidity ratios as of December 31, 2008 and 2007:

Ratio minimum

December 31, 2008

December 31, 2007Capital adequacy


15
%

46.5
%

63.5
%Liquidity(1)


100
%

18,235.0
%

113.0
%






Capmark
Securities Inc. is subject to the SEC's broker-dealer minimum net capital requirements. Capmark Securities net capital requirement was $250,000 as of December 31,
2008 and 2007. Capmark Securities net capital totaled $11.1 million and $21.3 million as of December 31, 2008 and 2007, respectively.

28. Earnings per Share

The table below demonstrates how the Company has computed basic and diluted earnings per share. The denominator in the calculation below includes shares of common stock issued and sold
to employees and non-employee directors, for the years ended December 31, 2008 and 2007 and for the period from March 23, 2006 to December 31, 2006, which are reported
as mezzanine equity in the consolidated balance sheet. In connection with the Sponsor Transactions, each outstanding share of the

92

---



CAPMARK FINANCIAL GROUP INC.

Notes to Consolidated Financial Statements (Continued)

28. Earnings per Share (Continued)

Company's
common stock was split into 412,803.348 shares. For comparative purposes, all periods presented have been adjusted to reflect this stock split.

Successor

PredecessorYear ended
December 31,
2008

Year ended
December 31,
2007

Period from
March 23, 2006 to
December 31, 2006

Period from
January 1, 2006 to
March 22, 2006(In thousands, except per share amounts)Net (loss) income

$
(1,352,769
)
$
280,324

$
144,144

$
12,447Basic (loss) income per share

$
(3.13
)
$
0.65

$
0.33

$
0.03Diluted (loss) income per share

$
(3.13
)
$
0.65

$
0.33

$
0.03Basic weighted average shares outstanding


431,672


433,071


431,899


412,803Effect of dilutive shares





1,244


138


Diluted weighted average shares outstanding


431,672


434,315


432,037


412,803Antidilutive shares(1)Time-based stock options


25,800


23,084


37,211Performance-based stock options


8,336


10,965


12,106Total antidilutive shares


34,136


34,049


49,317


---

29. Summarized Financial Information of Unconsolidated Investments

Summarized financial information underlying the Company's equity investments in affordable housing partnerships in the United States was as follows (in thousands):

December 31,
2008

December 31,
2007Total assets

$
6,466,230

$
7,455,872Total liabilities


5,331,934


6,069,650Total equity


1,134,296


1,386,222Company's equity investment


786,512


942,176




Year ended
December 31,
2008

Year ended
December 31,
2007

Year ended
December 31,
2006Total revenue

$
703,298

$
809,950

$
727,571Net loss


(232,775
)

(274,235
)

(293,303
)Company's equity in net loss


(15,858
)

(46,712
)

(55,012
)


93

---





CAPMARK FINANCIAL GROUP INC.

Notes to Consolidated Financial Statements (Continued)

29. Summarized Financial Information of Unconsolidated Investments (Continued)

Summarized financial information underlying the Company's other equity-method investments was as follows (in thousands):

December 31,
2008

December 31,
2007Total assets

$
6,036,937

$
7,201,618Total liabilities


2,362,415


2,811,983Total equity


3,674,522


4,389,635Company's equity investment


781,545


1,041,964




Year ended
December 31,
2008

Year ended
December 31,
2007

Year ended
December 31,
2006Total revenue

$
524,549

$
1,091,999

$
1,205,738Net income (loss)


(726,839
)

807,866


430,581Company's equity in net income (loss)


(190,369
)

102,730


122,854


The
summarized financial information presented above regarding the investees' total assets, total liabilities, total equity, total revenue and net income (loss) is derived from the
latest financial statements available as of the Company's respective reporting dates. The latest available financial information generally lags the Company's reporting dates and periods. The Company
estimates its equity income for the lag periods; therefore, there is not a direct correlation between the Company's recorded equity investment as of the reporting dates and the investees' total equity
at their respective reporting dates. Also, the equity income recorded by the Company, as presented above and in the consolidated statement of operations (equity in (loss) income of joint ventures and
partnerships), includes gains and losses on the disposition of equity investments.

94

---



CAPMARK FINANCIAL GROUP INC.

Notes to Consolidated Financial Statements (Continued)

30. Quarterly Financial Data (unaudited)

Quarterly financial data for the years ended December 31, 2008 and 2007 (in thousands)

2008Fourth

Third

Second

FirstInterest income

$
217,909

$
227,861

$
236,837

$
276,978Interest expense


172,523


188,360


184,260


215,875Net interest income


45,386


39,501


52,577


61,103Provision for loan losses


122,003


39,643


10,390


7,629Net interest income after provision for loan losses


(76,617
)

(142
)

42,187


53,474Noninterest income


(652,565
)

39,175


116,015


(193,224
)Net revenue


(729,182
)

39,033


158,202


(139,750
)Noninterest expense


200,755


173,952


199,935


208,610(Loss) before minority interest and income tax provision (benefit)


(929,937
)

(134,919
)

(41,733
)

(348,360
)Minority interest income


56,225


14,580


24,177


15,498(Loss) income before income tax provision (benefit)


(873,712
)

(120,339
)

(17,556
)

(332,862
)Income tax provision (benefit)


188,238


(30,890
)

(29,045
)

(120,003
)Net (loss) income

$
(1,061,950
)
$
(89,449
)
$
11,489

$
(212,859
)Basic net (loss) income per share

$
(2.47
)
$
(0.21
)
$
0.03

$
(0.49
)Diluted net (loss) income per share


(2.47
)

(0.21
)

0.03


(0.49
)




2007Fourth

Third

Second

FirstInterest income

$
343,363

$
329,137

$
281,275

$
297,417Interest expense


247,282


247,034


206,281


213,863Net interest income


96,081


82,103


74,994


83,554Provision for loan losses


9,235


11,721


5,391


6,319Net interest income after provision for loan losses


86,846


70,382


69,603


77,235Noninterest income


64,060


156,447


243,576


443,996Net revenue


150,906


226,829


313,179


521,231Noninterest expense


242,839


221,547


189,135


235,853(Loss) income before minority interest and income tax (benefit) provision


(91,933
)

5,282


124,044


285,378Minority interest income (expense)


79,956


29,569


23,340


(8,534
)(Loss) income before income tax (benefit) provision


(11,977
)

34,851


147,384


276,844Income tax (benefit) provision


(786
)

8,270


57,900


101,394Net (loss) income

$
(11,191
)
$
26,581

$
89,484

$
175,450Basic net (loss) income per share

$
(0.03
)
$
0.06

$
0.21

$
0.41Diluted net (loss) income per share


(0.03
)

0.06


0.21


0.41


95

---



CAPMARK FINANCIAL GROUP INC.

Notes to Consolidated Financial Statements (Continued)

31. Subsequent Events

On February 26, 2009, Fitch Ratings downgraded the Company's long-term senior unsecured debt rating to B- from BBB- and maintained a negative
rating outlook. On February 26, 2009, Moody's Investors Service downgraded the Company's long-term senior unsecured debt rating to Ba2 from Baa3 and placed the rating under review for further
possible downgrade. On March 2, 2009 Standard & Poor's Ratings Services downgraded the Company's long-term senior unsecured debt rating to B+ from BBB- and
maintained a negative rating outlook. On April 7, 2009, Moody's Investors Service downgraded the Company's long-term senior unsecured debt rating to B2 from Ba2 and kept the rating
under review for further possible downgrade.

Working
with the majority of its bridge lenders, the Company has extended the maturity date of approximately 94% of its outstanding bridge loan from March 23, 2009 to
April 9, 2009 and then to April 20, 2009. In connection with the bridge loan extensions, the Company paid the extending lenders a fee equal to 0.25% and 0.15% of the extended amount,
respectively. The one non-extending bridge lender filed a complaint against the Company on April 3, 2009 in connection with the nonrepayment of the $48 million principal
amount of the bridge loan held by such lender. The complaint alleges breach of contract, breach of the covenant of good faith and fair dealing and conversion by the Company in connection with the
non-repayment. The lender is seeking repayment of principal and interest due to it under the bridge loan agreement, damages and attorneys' fees and costs.

The
Company is currently in discussions with the lenders under its bridge loan agreement and senior credit facility regarding negotiating modifications to certain terms of both the
senior credit facility and bridge loan agreement. As of April 20, 2009, lenders representing approximately 94% of the outstanding loans under the bridge loan agreement have agreed to extend the
maturity date of the bridge loan to May 8, 2009. Additionally, the required lenders under the senior credit facility and the bridge loan agreement have agreed to waive the Company's compliance
with the leverage ratio covenant as of the quarters ended December 31, 2008 and March 31, 2009 and the requirement to deliver its annual audited financial statements within
110 days after year end. These waivers are effective through May 8, 2009. The Company paid the extending lenders a fee equal to 0.05% of the extended and waived amount.

The
Company has received correspondence from certain of the holders of its senior notes stating that they believe that the Company has defaulted under the terms of the indentures
governing the senior notes by failing to timely file its Form 10-K for the year ended December 31, 2008. The Company has also received correspondence from certain of the
holders of its senior notes and certain of the lenders under the senior credit facility that are not lenders under the bridge loan agreement requesting that the Company provide them with the
information that it has provided to the bridge lenders and urging the Company to undertake a comprehensive debt restructuring.

32. Supplemental Financial Information

Certain wholly-owned subsidiaries of the Company have guaranteed the Company's borrowings under its senior unsecured credit facilities. The guarantees are full and unconditional, joint
and several. The following supplemental financial information presents the condensed consolidating balance sheet, statement of operations and statement of cash flows for the parent company, the
guarantor subsidiaries and the non-guarantor subsidiaries.

96

---



CAPMARK FINANCIAL GROUP INC.

Notes to Consolidated Financial Statements (Continued)

32. Supplemental Financial Information (Continued)

Condensed Consolidating Balance Sheet  December 31, 2008  (in thousands)

Parent

Guarantor
Subsidiaries

Non-Guarantor
Subsidiaries

Eliminations

ConsolidatedAssetsCash, cash equivalents and restricted cash

$
179,592

$
2,718

$
726,723

$
(34,643
)
$
874,390Investment securitiestrading


1,302,945


119,987


34,452





1,457,384Investment securitiesavailable for sale





336,943


599,792


(92,768
)

843,967Loans held for sale





1,390,789


2,567,695


12,199


3,970,683Loans held for investment





1,081,978


7,569,807


(443,805
)

8,207,980Real estate investments





18,415


1,827,032


(523
)

1,844,924Equity investments


33,985


276,191


1,271,807


(13,926
)

1,568,057Other assets


5,814,640


1,547,936


965,632


(6,457,418
)

1,870,790Investments in subsidiaries


2,352,985


(189,325
)




(2,163,660
)

Total assets

$
9,684,147

$
4,585,632

$
15,562,940

$
(9,194,544
)
$
20,638,175Liabilities and Stockholders' EquityLiabilities:Short-term borrowings

$
2,273,125

$
319,512

$
849,518

$
(131,397
)
$
3,310,758Long-term borrowings


5,934,480


239,107


2,356,315


(247,067
)

8,282,835Deposit liabilities








5,690,930





5,690,930Real estate syndication proceeds and related liabilities








1,258,743





1,258,743Other liabilities


257,657


3,293,653


3,763,772


(6,625,458
)

689,624Total liabilities


8,465,262


3,852,272


13,919,278


(7,003,922
)

19,232,890Commitments and Contingent Liabilities














Minority Interest





89,144


121,331


(24,075
)

186,400Mezzanine Equity


72,851











72,851Stockholders' Equity:Preferred stock














Common stock


413


786


187,943


(188,729
)

413Other stockholders' equity


1,145,621


643,430


1,334,388


(1,977,818
)

1,145,621Total stockholders' equity


1,146,034


644,216


1,522,331


(2,166,547
)

1,146,034Total liabilities and stockholders' equity

$
9,684,147

$
4,585,632

$
15,562,940

$
(9,194,544
)
$
20,638,175


97

---



CAPMARK FINANCIAL GROUP INC.

Notes to Consolidated Financial Statements (Continued)

32. Supplemental Financial Information (Continued)

Condensed Consolidating Balance Sheet  December 31, 2007  (in thousands)

Parent

Guarantor
Subsidiaries

Non-Guarantor
Subsidiaries

Eliminations

ConsolidatedAssetsCash, cash equivalents and restricted cash

$
7,421

$
213,661

$
1,215,670

$


$
1,436,752Investment securitiestrading


21,300


98,603


65,789





185,692Investment securitiesavailable for sale





373,590


635,358


(59,266
)

949,682Loans held for sale





2,453,401


5,582,228


(251,860
)

7,783,769Loans held for investment





981,655


6,123,644


(213,585
)

6,891,714Real estate investments








1,748,555





1,748,555Equity investments


47,443


369,589


1,584,782


(17,674
)

1,984,140Other assets


8,040,133


1,505,763


2,039,532


(9,301,336
)

2,284,092Investments in subsidiaries


3,007,950


210,375





(3,218,325
)

Total assets

$
11,124,247

$
6,206,637

$
18,995,558

$
(13,062,046
)
$
23,264,396Liabilities and Stockholders' EquityLiabilities:Short-term borrowings

$
408,197

$
842,032

$
2,679,563

$
(97,155
)
$
3,832,637Long-term borrowings


7,035,619





1,467,185


(195,118
)

8,307,686Deposit liabilities








5,554,607


(2,000
)

5,552,607Real estate syndication proceeds and related liabilities








1,563,151





1,563,151Other liabilities


1,071,380


3,801,712


5,653,202


(9,457,226
)

1,069,068Total liabilities


8,515,196


4,643,744


16,917,708


(9,751,499
)

20,325,149Commitments and Contingent Liabilities














Minority Interest





113,357


230,437


(13,598
)

330,196Mezzanine Equity


102,418











102,418Stockholders' Equity:Preferred stock














Common stock


413


786


124,206


(124,992
)

413Other stockholders' equity


2,506,220


1,448,750


1,723,207


(3,171,957
)

2,506,220Total stockholders' equity


2,506,633


1,449,536


1,847,413


(3,296,949
)

2,506,633Total liabilities and stockholders' equity

$
11,124,247

$
6,206,637

$
18,995,558

$
(13,062,046
)
$
23,264,396


98

---





CAPMARK FINANCIAL GROUP INC.

Notes to Consolidated Financial Statements (Continued)

32. Supplemental Financial Information (Continued)

Condensed Consolidating Statement of Operations  Year ended December 31, 2008  (in thousands)

Parent

Guarantor
Subsidiaries

Non-Guarantor
Subsidiaries

Eliminations

ConsolidatedNet Interest IncomeInterest income

$
244,099

$
333,370

$
721,792

$
(339,676
)
$
959,585Interest expense


325,700


232,139


539,230


(336,051
)

761,018Net interest income


(81,601
)

101,231


182,562


(3,625
)

198,567Provision for loan losses





10,626


180,271


(11,232
)

179,665Net interest income after provision for loan losses


(81,601
)

90,605


2,291


7,607


18,902Noninterest IncomeNet (losses) gains


(263,242
)

(405,580
)

(487,595
)

(2,519
)

(1,158,936
)Other income


3,717


291,315


252,173


(78,868
)

468,337Total noninterest income


(259,525
)

(114,265
)

(235,422
)

(81,387
)

(690,599
)Net revenue


(341,126
)

(23,660
)

(233,131
)

(73,780
)

(671,697
)Noninterest ExpenseCompensation and benefits


(52
)

229,914


90,399


(16,394
)

303,867Other expenses


45,430


309,916


182,620


(58,581
)

479,385Total noninterest expense


45,378


539,830


273,019


(74,975
)

783,252(Loss) income before minority interest and income tax provision (benefit)


(386,504
)

(563,490
)

(506,150
)

1,195


(1,454,949
)Minority interest income





36,434


74,788


(742
)

110,480(Loss) income before income tax provision (benefit)


(386,504
)

(527,056
)

(431,362
)

453


(1,344,469
)Income tax provision (benefit)


85,491


(158,879
)

105,655


(23,967
)

8,300(Loss) income before equity in net (losses) of subsidiaries


(471,995
)

(368,177
)

(537,017
)

24,420


(1,352,769
)Equity in net (losses) of subsidiaries


(880,774
)

(512,977
)




1,393,751


Net (Loss) Income

$
(1,352,769
)
$
(881,154
)
$
(537,017
)
$
1,418,171

$
(1,352,769
)


99

---



CAPMARK FINANCIAL GROUP INC.

Notes to Consolidated Financial Statements (Continued)

32. Supplemental Financial Information (Continued)

Condensed Consolidating Statement of Operations  Year ended December 31, 2007  (in thousands)

Parent

Guarantor
Subsidiaries

Non-Guarantor
Subsidiaries

Eliminations

ConsolidatedNet Interest IncomeInterest income

$
420,674

$
530,931

$
865,528

$
(565,941
)
$
1,251,192Interest expense


456,463


377,302


630,485


(549,790
)

914,460Net interest income


(35,789
)

153,629


235,043


(16,151
)

336,732Provision for loan losses





9,136


22,826


704


32,666Net interest income after provision for loan losses


(35,789
)

144,493


212,217


(16,855
)

304,066Noninterest IncomeNet (losses) gains


(72,652
)

98,437


(32,818
)

19,668


12,635Other income


32,266


442,720


456,858


(36,400
)

895,444Total noninterest income


(40,386
)

541,157


424,040


(16,732
)

908,079Net revenue


(76,175
)

685,650


636,257


(33,587
)

1,212,145Noninterest ExpenseCompensation and benefits


16


290,836


123,727


(100
)

414,479Other expenses


47,493


291,638


203,401


(67,637
)

474,895Total noninterest expense


47,509


582,474


327,128


(67,737
)

889,374(Loss) income before minority interest and income tax (benefit) provision


(123,684
)

103,176


309,129


34,150


322,771Minority interest income





30,549


72,676


21,106


124,331(Loss) income before income tax (benefit) provision


(123,684
)

133,725


381,805


55,256


447,102Income tax (benefit) provision


(46,134
)

45,189


123,001


44,722


166,778(Loss) income before equity in net earnings in subsidiaries


(77,550
)

88,536


258,804


10,534


280,324Equity in net earnings of subsidiaries


357,874


68,668





(426,542
)

Net Income

$
280,324

$
157,204

$
258,804

$
(416,008
)
$
280,324


100

---





CAPMARK FINANCIAL GROUP INC.

Notes to Consolidated Financial Statements (Continued)

32. Supplemental Financial Information (Continued)

Condensed Consolidating Statement of Income  Period from March 23, 2006 to December 31, 2006  (in thousands)

Parent

Guarantor
Subsidiaries

Non-Guarantor
Subsidiaries

Eliminations

ConsolidatedNet Interest IncomeInterest income

$
388,093

$
429,157

$
558,119

$
(473,616
)
$
901,753Interest expense


463,200


302,363


368,191


(474,240
)

659,514Net interest income


(75,107
)

126,794


189,928


624


242,239Provision for loan losses


45,937


18,026


9,106


516


73,585Net interest income after provision for loan losses


(121,044
)

108,768


180,822


108


168,654Noninterest IncomeNet (losses) gains


1,028


6,870


59,475


1,482


68,855Other income


3,997


410,379


301,948


(29,659
)

686,665Total noninterest income


5,025


417,249


361,423


(28,177
)

755,520Net revenue


(116,019
)

526,017


542,245


(28,069
)

924,174Noninterest ExpenseCompensation and benefits


60


242,128


124,707





366,895Other expenses


40,787


252,340


105,611


4,548


403,286Total noninterest expense


40,847


494,468


230,318


4,548


770,181(Loss) income before minority interest and income tax (benefit) provision


(156,866
)

31,549


311,927


(32,617
)

153,993Minority interest (expense) income





(1,017
)

40,235


14,090


53,308(Loss) income before income tax (benefit) provision


(156,866
)

30,532


352,162


(18,527
)

207,301Income tax (benefit) provision


(47,912
)

6,804


97,733


6,532


63,157(Loss) income before equity in net earnings in subsidiaries


(108,954
)

23,728


254,429


(25,059
)

144,144Equity in net earnings of subsidiaries


253,098


68,196





(321,294
)

Net Income

$
144,144

$
91,924

$
254,429

$
(346,353
)
$
144,144


101

---



CAPMARK FINANCIAL GROUP INC.

Notes to Consolidated Financial Statements (Continued)

32. Supplemental Financial Information (Continued)

Condensed Consolidating Statement of Income  Period from January 1, 2006 to March 22, 2006  (in thousands)

Parent

Guarantor
Subsidiaries

Non-Guarantor
Subsidiaries

Eliminations

ConsolidatedNet Interest IncomeInterest income

$
91,279

$
98,744

$
174,297

$
(110,629
)
$
253,691Interest expense


69,816


115,040


97,711


(110,391
)

172,176Net interest income


21,463


(16,296
)

76,586


(238
)

81,515Provision for loan losses





1,325


(294
)




1,031Net interest income after provision for loan losses


21,463


(17,621
)

76,880


(238
)

80,484Noninterest IncomeNet (losses) gains


(68
)

1,819


47,812


(1,118
)

48,445Other income


(10,069
)

91,780


18,230


(11,720
)

88,221Total noninterest income


(10,137
)

93,599


66,042


(12,838
)

136,666Net revenue


11,326


75,978


142,922


(13,076
)

217,150Noninterest ExpenseCompensation and benefits





104,596


24,420





129,016Other expenses


11,244


64,122


32,837


(16,280
)

91,923Total noninterest expense


11,244


168,718


57,257


(16,280
)

220,939Income (loss) before minority interest and income tax provision (benefit)


82


(92,740
)

85,665


3,204


(3,789
)Minority interest income








9,293


2,971


12,264Income (loss) before income tax provision (benefit)


82


(92,740
)

94,958


6,175


8,475Income tax provision (benefit)


10


(37,281
)

31,430


1,869


(3,972
)Income (loss) before equity in net earnings (losses) in subsidiaries


72


(55,459
)

63,528


4,306


12,447Equity in net earnings (losses) of subsidiaries


12,375


(5,012
)




(7,363
)

Net Income (Loss)

$
12,447

$
(60,471
)
$
63,528

$
(3,057
)
$
12,447


102

---





CAPMARK FINANCIAL GROUP INC.

Notes to Consolidated Financial Statements (Continued)

32. Supplemental Financial Information (Continued)

Condensed Consolidating Statement of Cash Flows  Year ended December 31, 2008  (in thousands)

Parent

Guarantor
Subsidiaries

Non-Guarantor
Subsidiaries

Eliminations

ConsolidatedOperating ActivitiesNet cash (used in) provided by operating activities

$
(306,367
)
$
225,325

$
1,478,608

$
(179,609
)
$
1,217,957Investing ActivitiesNet decrease in restricted cash





7,876


74,780





82,656Net (increase) decrease in investment securitiesother





(21,135
)

33,359


17,659


29,883Net (increase) decrease in mortgage loans held for investment





(190,741
)

(1,450,469
)

166,981


(1,474,229
)Net decrease (increase) in real estate investments





4,015


17,487


(1,334
)

20,168Net decrease (increase) in equity investments


4,259


30,778


(10,611
)

5,955


30,381Other investing activities, net





(24,027
)

(4,029
)

(150
)

(28,206
)Net cash provided by (used in) investing activities


4,259


(193,234
)

(1,339,483
)

189,111


(1,339,347
)Financing ActivitiesNet increase (decrease) in short-term borrowings


1,860,040


(333,971
)

(1,889,965
)

(34,243
)

(398,139
)Net (decrease) increase in long-term borrowings


(1,031,103
)

129,628


883,959


1,100


(16,416
)Net increase in deposit liabilities








1,607


2,000


3,607Real estate syndication proceeds received








46,492





46,492Other financing activities, net


(354,632
)

(31,222
)

386,379


(13,002
)

(12,477
)Net cash provided by (used in) financing activities


474,305


(235,565
)

(571,528
)

(44,145
)

(376,933
)Effect of Foreign Exchange Rates on Cash


(26
)

407


18,235





18,616Net Increase (Decrease) in Cash and Cash Equivalents


172,171


(203,067
)

(414,168
)

(34,643
)

(479,707
)Cash and Cash Equivalents, Beginning of Period


7,421


205,785


991,271





1,204,477Cash and Cash Equivalents, End of Period

$
179,592

$
2,718

$
577,103

$
(34,643
)
$
724,770


103

---



CAPMARK FINANCIAL GROUP INC.

Notes to Consolidated Financial Statements (Continued)

32. Supplemental Financial Information (Continued)

Condensed Consolidating Statement of Cash Flows  Year ended December 31, 2007  (in thousands)

Parent

Guarantor
Subsidiaries

Non-Guarantor
Subsidiaries

Eliminations

ConsolidatedOperating ActivitiesNet cash (used in) provided by operating activities

$
(242,068
)
$
510,099

$
(2,873,163
)
$
375,611

$
(2,229,521
)Investing ActivitiesNet (increase) decrease in restricted cash





21,068


(378
)




20,690Net (increase) decrease in investment securitiesother


31,384


(293,409
)

450,230


52,447


240,652Net (increase) decrease in loans held for investment





197,420


146,562


(5,151
)

338,831Net (increase) decrease in real estate investments





56,321


(412,682
)

(343
)

(356,704
)Net (increase) decrease in equity investments


45,265


(53,142
)

(184,772
)

15,757


(176,892
)Other investing activities, net


19,251


(107,741
)

806


(71
)

(87,755
)Net cash provided by (used in) investing activities


95,900


(179,483
)

(234
)

62,639


(21,178
)Financing ActivitiesNet (decrease) increase in short-term borrowings


(163,360
)

292,094


620,330


(68,730
)

680,334Net (decrease) increase in long-term borrowings


469,793


(740,995
)

107,304


(374,725
)

(538,623
)Net (decrease) increase in deposit liabilities








2,516,650


125,000


2,641,650Net (decrease) increase in real estate syndication proceeds








262,485





262,485Other financing activities, net


(281,177
)

319,655


13,995


5,333


57,806Net cash provided by (used in) financing activities


25,256


(129,246
)

3,520,764


(313,122
)

3,103,652Effect of Foreign Exchange Rates on Cash


3,105


(2,350
)

24,965





25,720Net (Decrease) Increase in Cash and Cash Equivalents


(117,807
)

199,020


672,332


125,128


878,673Cash and Cash Equivalents, Beginning of Period


125,228


6,765


318,939


(125,128
)

325,804Cash and Cash Equivalents, End of Period

$
7,421

$
205,785

$
991,271

$


$
1,204,477


104

---



CAPMARK FINANCIAL GROUP INC.

Notes to Consolidated Financial Statements (Continued)

32. Supplemental Financial Information (Continued)

Condensed Consolidating Statement of Cash Flows  Period from March 23, 2006 to December 31, 2006  (in thousands)

Parent

Guarantor
Subsidiaries

Non-Guarantor
Subsidiaries

Eliminations

ConsolidatedOperating ActivitiesNet cash provided by (used in) operating activities

$
367,081

$
(934,536
)
$
170

$
224,373

$
(342,912
)Investing ActivitiesNet (increase) decrease in restricted cash





(4,777
)

(69,699
)




(74,476
)Net (increase) decrease in investment securitiesother





(3,905
)

(260,786
)

(17,587
)

(282,278
)Net (increase) decrease in loans held for investment


(7,787
)

627,657


(1,871
)

1


618,000Net (increase) decrease in real estate investments





6,500


(98,560
)




(92,060
)Net (increase) decrease in equity investments


9,979


147,038


(66,786
)

(74,758
)

15,473Other investing activities, net





(84,978
)

55,381


(2,158
)

(31,755
)Net cash provided by (used in) investing activities


2,192


687,535


(442,321
)

(94,502
)

152,904Financing ActivitiesNet (decrease) increase in short-term borrowings


(6,747,640
)

(516,290
)

727,677


(175,230
)

(6,711,483
)Net (decrease) increase in long-term borrowings


6,335,302


14,566


305,265


(446
)

6,654,687Net (decrease) increase in deposit liabilities








(310,438
)




(310,438
)Net (decrease) increase in real estate syndication proceeds








240,387





240,387Other financing activities, net


170,058


728,031


(762,941
)

(78,680
)

56,468Net cash (used in) provided by financing activities


(242,280
)

226,307


199,950


(254,356
)

(70,379
)Effect of Foreign Exchange Rates on Cash


77


(85
)

3,586


(643
)

2,935Net Increase (Decrease) in Cash and Cash Equivalents


127,070


(20,779
)

(238,615
)

(125,128
)

(257,452
)Cash and Cash Equivalents, Beginning of Period


(1,842
)

27,544


557,554





583,256Cash and Cash Equivalents, End of Period

$
125,228

$
6,765

$
318,939

$
(125,128
)
$
325,804


105

---



CAPMARK FINANCIAL GROUP INC.

Notes to Consolidated Financial Statements (Continued)

32. Supplemental Financial Information (Continued)

Condensed Consolidating Statement of Cash Flows  Period from January 1, 2006 to March 22, 2006  (in thousands)

Parent

Guarantor
Subsidiaries

Non-Guarantor
Subsidiaries

Eliminations

ConsolidatedOperating ActivitiesNet cash (used in) provided by operating activities

$
(688,356
)
$
(29,919
)
$
1,335,802

$
(19,106
)
$
598,421Investing ActivitiesNet (increase) decrease in restricted cash





(23,478
)

(6,477
)




(29,955
)Net (increase) decrease in investment securitiesother


7


8,155


(24,856
)

(3,042
)

(19,736
)Net (increase) decrease in loans held for investment





140,492


112,688


712


253,892Net (increase) decrease in real estate investments





606


29,750





30,356Net (increase) decrease in equity investments


(16,995
)

(8,446
)

(74,433
)

69,791


(30,083
)Other investing activities, net


(2,913
)

(34,569
)

15,122





(22,360
)Net cash (used in) provided by investing activities


(19,901
)

82,760


51,794


67,461


182,114Financing ActivitiesNet (decrease) increase in short-term borrowings


1,280,211


(111,195
)

(409,925
)

(169,999
)

589,092Net (decrease) increase in long-term borrowings





(60,228
)

(354,420
)

111,167


(303,481
)Net (decrease) increase in deposit liabilities








(832,766
)




(832,766
)Net (decrease) increase in real estate syndication proceeds








73,927





73,927Other financing activities, net


(574,369
)

138,595


347,677


17,468


(70,629
)Net cash provided by (used in) financing activities


705,842


(32,828
)

(1,175,507
)

(41,364
)

(543,857
)Effect of Foreign Exchange Rates on Cash


11


(174
)

1,163





1,000Net (Decrease) Increase in Cash and Cash Equivalents


(2,404
)

19,839


213,252


6,991


237,678Cash and Cash Equivalents, Beginning of Period


562


7,705


344,302


(6,991
)

345,578Cash and Cash Equivalents, End of Period

$
(1,842
)
$
27,544

$
557,554

$


$
583,256


106

---





SIGNATURES

Pursuant to the requirements of Section 13 or 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.

Capmark Financial Group Inc.Date: April 28, 2009By:

/s/ GREGORY J. MCMANUS Name: Gregory J. McManus
Title:Executive Vice President and
Chief Financial Officer


---





EXHIBIT INDEX

Exhibit
Number

Description of Exhibits2.1

Amended & Restated Stock Purchase Agreement, dated August 2, 2005, among General Motors Acceptance Corporation, GMAC Mortgage Group, Inc., Capmark Financial Group Inc. (formerly known as GMAC
Commercial Holding Corp.) and GMACCH Investor LLC*2.2

Amendment Letter, dated March 23, 2006, to the Amended & Restated Stock Purchase Agreement, dated August 2, 2005, among General Motors Acceptance Corporation, GMAC Mortgage Inc. and GMACCH
Investor LLC*3.1

Amended and Restated Articles of Incorporation of Capmark Financial Group Inc.*3.2

Amended and Restated By-laws of Capmark Financial Group Inc. (incorporated by reference to Exhibit 3.2 to the Company's Quarterly Report on Form 10-Q filed on August 13, 2008).4.1

Indenture, dated May 10, 2007, by Capmark Financial Group Inc., as issuer, the guarantors named therein and Deutsche Bank Trust Company Americas, as trustee, for the Floating Rate Senior Notes due
2010.*4.3

Indenture, dated May 10, 2007, by Capmark Financial Group Inc., as issuer, the guarantors named therein and Deutsche Bank Trust Company Americas, as trustee, for the 6.300% Senior Notes due
2017.*4.4

Registration Rights Agreement, dated May 10, 2007, among Capmark Financial Group Inc., the guarantors named therein, Credit Suisse Securities (USA) LLC, Citigroup Global Markets Inc. and Goldman,
Sachs & Co.*10.1

$5,500,000,000 Credit Agreement, dated as of March 23, 2006, among Capmark Financial Group Inc., the designated borrowers named therein, the several lenders from time to time parties thereto, J.P. Morgan
Securities Inc., as syndication agent, Credit Suisse, Deutsche Bank Securities Inc., Goldman Sachs Credit Partners, L.P. and The Royal Bank of Scotland plc, as documentation agents, and Citibank, N.A., as administrative
agent.*10.2

Amendment No. 1 to the Credit Agreement dated as of April 17, 2007, among Capmark Financial Group Inc., certain subsidiaries of Capmark Financial Group Inc., the financial institutions and other
institutional lenders party thereto, and Citibank, N.A., as administrative agent.*10.3

Bridge Loan Agreement, dated as of March 23, 2006, among Capmark Financial Group Inc., the designated borrowers named therein, the several lenders from time to time parties thereto, J.P. Morgan
Securities Inc., as syndication agent, Credit Suisse, Deutsche Bank Securities Inc., Goldman Sachs Credit Partners, L.P. and The Royal Bank of Scotland plc, as documentation agents, and Citicorp North America Inc., as
administrative agent.*10.4

Amendment No. 1 to the Bridge Loan Agreement, dated as of December 7, 2006, among Capmark Financial Group Inc., the financial institutions and other institutional lenders party thereto, and Citicorp
North America Inc., as administrative agent.*10.5

Amended and Restated Declaration of Trust dated and effective as of March 23, 2006, by and among Capmark Financial Group Inc., the initial regular trustees named therein, the initial property trustee and
Deutsche Bank Trust Company Delaware, as the initial Delaware trustee, not in their individual capacities but solely as trustees, Deutsche Bank Trust Company Americas, as agent, and by the holders, from time to time, of undivided beneficial ownership
interests in the Trust to be issued pursuant to the Declaration of Trust.*


---



Exhibit
Number

Description of Exhibits10.6

Floating Rate Trust Preferred Securities Purchase Agreement, dated March 23, 2006, between Capmark Trust and General Motors Acceptance Corporation.*10.7

Floating Rate Junior Subordinated Indenture, dated March 23, 2006, among Capmark Financial Group Inc., Law Debenture Trust Company of New York, a New York banking corporation, as trustee, and Deutsche Bank
Trust Company Americas, a New York banking corporation, as agent.*10.8

Trust Guarantee Agreement, dated as of March 23, 2006, executed and delivered by Capmark Financial Group Inc., and Law Debenture Trust Company of New York, as trustee, for the benefit of the holders from
time to time of the Trust Securities of Capmark Trust, a Delaware statutory trust.*10.9

Registration Rights Agreement, dated as of March 23, 2006, by and among Capmark Financial Group Inc., Capmark Trust, a Delaware statutory trust and General Motors Acceptance Corporation.*10.10

Stockholders Agreement, dated March 23, 2006, among GMAC Mortgage Group Inc., GMACCH Investor LLC and Capmark Financial Group Inc.*10.11

Letter Agreement, dated October 23, 2006, among GMAC Mortgage Group Inc., GMACCH Investor LLC and Capmark Financial Group Inc.*10.12

Transitional Trademark License Agreement, dated March 23, 2006, between General Motors Acceptance Corporation and Capmark Financial Group Inc.*10.13

Management Agreement, dated March 23, 2006, among Capmark Financial Group Inc., Kohlberg Kravis Roberts & Co L.P., Goldman, Sachs & Co., Five Mile Capital Partners LLC, Dune
Capital Management LP and GMAC Mortgage Group Inc.*10.14

Exclusivity Agreement, dated August 30, 2006, between Capmark Finance Inc. and Capmark Structured Real Estate Partners, L.P.*10.15

Purchase Agreement, dated December 20, 2006, by and among Capmark Financial Group Inc., Capmark Capital Inc., Capmark Securities Inc., Capmark Finance Inc., Citigroup Global Markets Inc.
and Citibank, N.A.*10.16

2006 Equity Plan for Key Employees of Capmark Financial Group Inc. and affiliates*10.17

Capmark Financial Group Inc.'s Dividend Equivalent Rights Plan*10.18

Form of Amended and Restated Management Stockholder's Agreement*10.19

Form of Stock Option Agreement*10.20

Form of Sale Participation Agreement*10.21

Form of Independent Director Stockholder's Agreement*10.22

Form of Independent Director Sale Participation Agreement*10.23

Capmark Financial Group Inc. Non-Employee Directors' Amended and Restated Deferred Compensation and Stock Award Plan*****10.24

Capmark Financial Group Inc. Executive Amended and Restated Deferred Compensation and Stock Award Plan*****10.25

Capmark Structured Real Estate Fund Incentive Vehicle, L.P. Limited Partnership Agreement*10.26

Employment Agreement of William F. Aldinger, III*10.27

Memorandum of Understanding with D. Steven Lin, dated January 9, 2007*


---



Exhibit
Number

Description of Exhibits10.28

Capmark Financial Group Inc. Discretionary Bonus Plan***10.29

Capmark UK Realty Incentive Vehicle, LLC Limited Liability Company Agreement***10.30

Advances, Security and Deposit Agreement, dated December 1, 2004, between Federal Home Loan Bank of Seattle and Capmark Bank.***10.31

ASP Agreement, dated April 26, 2007, between EnableUs, Inc. and Capmark Finance Inc.***10.32

Confidential Release and Waiver of Claims by and among Brian R. DiDonato, Capmark Investments LP and Capmark Financial Group Inc. (incorporated by reference to Exhibit 10.1 to the Company's Current
Report on Form 8-K filed by the Company on May 22, 2008)10.33

Capmark Financial Group Inc. Severance Pay Plan, as amended and restated as of March 23, 2006****10.34

Amendment to the Capmark Financial Group Inc. Severance Pay Plan, effective December 20, 2006****10.35

Capmark Financial Group Inc. Severance Pay Plan Amendment effective February 29, 2008****10.36

GMAC Commercial Mortgage Pooled Incentive Compensation Plan for the Proprietary Lending Group, dated January 1, 2004 through December 31, 2004.****10.37

Amendment No. 2 to the Credit Agreement, dated as of June 30, 2008, among Capmark Financial Group Inc., a Nevada corporation, the subsidiaries of the Company, certain financial institutions and other
institutional lenders party thereto, and Citibank, N.A., as administrative agent for the Lenders (incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed on July 3, 2008).10.38

Amendment No. 2 to the Bridge Loan Agreement, dated as of June 30, 2008, among the Company, the financial institutions and other institutional lenders party thereto, and Citicorp North America, Inc., as
administrative agent for the Bridge Lenders (incorporated by reference to Exhibit 10.2 to the Company's Current Report on Form 8-K filed on July 3, 2008).10.39

Confidential Release and Waiver of Claims by and between D. Steven Lin, Capmark Financial Group Inc. and Capmark Finance Inc. (incorporated by reference to Exhibit 10.1 to the Company's Current Report
on Form 8-K filed on October 6, 2008).10.40

Transfer Agreement, made November 7, 2008, by and between Capmark Financial Group Inc. and D. Steven Lin (incorporated by reference to Exhibit 10.2 to the Company's Quarterly Report on Form 10-Q
filed on November 10, 2008).10.41

Separation Agreement, dated December 4, 2008, by and between Capmark Financial Group Inc. and William F. Aldinger III (incorporated by reference to Exhibit 10.1 to the Company's Current Report on
Form 8-K filed on December 10, 2008).10.42

Letter Agreement, dated December 18, 2008, by and between Capmark Financial Group Inc. and Jay N. Levine (incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K/A
filed on December 23, 2008).10.43

Capmark Financial Group Inc. Severance Pay Plan Amendment, dated December 22, 2008.*****10.44

Capmark Financial Group Inc. Severance Pay Plan Amendment, effective March 24, 2009 (incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed on March 27,
2009).


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Exhibit
Number

Description of Exhibits10.45

Amendment No. 3 to the Bridge Loan Agreement, dated as of March 23, 2009, among Capmark Financial Group Inc., the financial institutions and other institutional lenders party thereto, and Citicorp North
America, Inc., as administrative agent (incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed on March 25, 2009).10.46

Amendment No. 4 to the Bridge Loan Agreement, dated as of March 24, 2009, among Capmark Financial Group Inc., the financial institutions and other institutional lenders party thereto, and Citicorp North
America, Inc., as administrative agent (incorporated by reference to Exhibit 10.2 to the Company's Current Report on Form 8-K filed on March 25, 2009).10.47

Amendment No. 5 to the Bridge Loan Agreement, dated as of April 9, 2009, among the Company, the financial institutions and other institutional lenders party thereto, and Citicorp North America, Inc., as
administrative agent (incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed on April 10, 2009).10.48

Amendment No. 6 to the Bridge Loan Agreement, dated as of April 20, 2009, among the Company, the financial institutions and other institutional lenders party thereto, and Citicorp North America, Inc.,
as administrative agent (incorporated by reference to the Company's Current Report on Form 8-K filed on April 22, 2009).10.49

Waiver to the Credit Agreement, dated as of April 20, 2009, among the Company, certain subsidiaries of the Company, the financial institutions and other institutional lenders party thereto, and Citibank N.A., as
administrative agent (incorporated by reference to the Company's Current Report on Form 8-K filed on April 22, 2009).10.50

Bonus Award under the Capmark Financial Group Inc. Discretionary Bonus Plan, dated as of April 23, 2009, between Capmark Financial Group Inc. and Gregory J. McManus.*****10.51

Consulting Agreement, dated as of April 24, 2009, between Capmark Finance Inc. and Barry S. Gersten.*****10.52

Confidential Release and Waiver of Claims, dated as of April 23, 2009, by and between Barry S. Gersten, Capmark Financial Group Inc. and Capmark Finance Inc.*****14.1

Capmark Financial Group Inc. Code of Ethics for Directors, Officers and Employees.*****14.2

Capmark Financial Group Inc. Code of Ethics for CEO and Senior Financial Officers.*****21.1

Subsidiaries of Capmark Financial Group Inc.*****31.1

CEO Certification pursuant to Rule 13a-14(a)/15d-14(a).31.2

CFO Certification pursuant to Rule 13a-14(a)/15d-14(a).32.1

Section 1350 Certifications.


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