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

FORM 10-Q

|ý                                                   | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 
|--------------------------------------------------- | ----------------------------------------------------------------------------------------
|For the quarterly period ended March 31, 2008      
|OR                                                 
|o                                                   | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|For the transition period
from                   to

Commission file number: 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.)
|------------------------------------------------------------------------------------------------ |  | ----------------------------------------------
|411 Borel Avenue, Suite 320
San Mateo, California(Address of principal executive offices)        |  | 94402(Zip Code)                               
|(650) 572-6600(Registrant's telephone number, including area code)                              
|Not applicable(Former name, former address and former fiscal year, if changed since last report)

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 o    No 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
definitions of "large accelerated filer," "accelerated filer," and "smaller reporting company" in Rule 12b-2 of the Exchange Act. (Check one):

|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

As of April 30, 2008, 432,744,704 shares of the Registrant's common stock, par value of $.001 per share, were outstanding.



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CAPMARK FINANCIAL GROUP INC.    Table of Contents

|                             |  |                                                                                       |  | Page
|---------------------------- |  | ------------------------------------------------------------------------------------- |  | ----
|PART IFINANCIAL INFORMATION |  |                                                                                      
|Item 1.                      |  | Financial Statements                                                                  |  | 2   
|Item 2.                      |  | Management's Discussion and Analysis of Financial Condition and Results of Operations |  | 35  
|Item 3.                      |  | Quantitative and Qualitative Disclosures about Market Risk                            |  | 62  
|Item 4T.                     |  | Controls and Procedures                                                               |  | 66  
|PART IIOTHER INFORMATION    |  |                                                                                      
|Item 1.                      |  | Legal Proceedings                                                                     |  | 67  
|Item 1A.                     |  | Risk Factors                                                                          |  | 67  
|Item 2.                      |  | Unregistered Sales of Equity Securities and Use of Proceeds                           |  | 67  
|Item 3.                      |  | Defaults Upon Senior Securities                                                       |  | 67  
|Item 4.                      |  | Submission of Matters to a Vote of Security Holders                                   |  | 68  
|Item 5.                      |  | Other Information                                                                     |  | 68  
|Item 6.                      |  | Exhibits                                                                              |  | 68  
|Signatures                   |  | 69                                                                                   
|Exhibit Index                |  | 70                                                                                   

1

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PART IFINANCIAL INFORMATION

Item 1.    Financial Statements

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

|                                                                                                                                                                                                   |                                                                         | March 31,
2008 |            | December 31,
2007
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ----------------------------------------------------------------------- | -------------- | ---------- | -----------------
|Assets                                                                                                                                                                                             |                                                                         |                |            |                  
|Cash, cash equivalents and restricted cash                                                                                                                                                         |                                                                         | $              | 1,110,193  |                  
|Accounts and other receivables                                                                                                                                                                     |                                                                         |                | 347,366    |                  
|Investment securities:                                                                                                                                                                             |                                                                         |                |            |                  
|                                                                                                                                                                                                   | Trading                                                                 |                |            | 194,987          
|                                                                                                                                                                                                   | Available for sale                                                      |                |            | 972,006          
|Loans held for sale                                                                                                                                                                                |                                                                         |                | 7,719,057  |                  
|Loans held for investment, net of allowance for loan losses of $32.1 million and $28.8 million as of March 31, 2008 and December 31, 2007                                                          |                                                                         |                | 7,378,476  |                  
|Real estate investments                                                                                                                                                                            |                                                                         |                | 1,940,177  |                  
|Equity investments                                                                                                                                                                                 |                                                                         |                | 1,940,213  |                  
|Mortgage servicing rights                                                                                                                                                                          |                                                                         |                | 861,433    |                  
|Current taxes receivable                                                                                                                                                                           |                                                                         |                | 343,725    |                  
|Deferred tax assets                                                                                                                                                                                |                                                                         |                | 53,984     |                  
|Goodwill and other intangible assets, net                                                                                                                                                          |                                                                         |                | 179,208    |                  
|Other assets                                                                                                                                                                                       |                                                                         |                | 514,368    |                  
|                                                                                                                                                                                                   |                                                                         |                |            |                  
|Total assets                                                                                                                                                                                       |                                                                         | $              | 23,555,193 |                  
|                                                                                                                                                                                                   |                                                                         |                |            |                  
|Liabilities and Stockholders' Equity                                                                                                                                                               |                                                                         |                |            |                  
|Liabilities:                                                                                                                                                                                       |                                                                         |                |            |                  
|Short-term borrowings                                                                                                                                                                              |                                                                         | $              | 5,069,830  |                  
|Collateralized borrowings in securitization trusts                                                                                                                                                 |                                                                         |                | 261,557    |                  
|Other long-term borrowings                                                                                                                                                                         |                                                                         |                | 8,711,410  |                  
|Deposit liabilities                                                                                                                                                                                |                                                                         |                | 4,512,020  |                  
|Real estate syndication proceeds                                                                                                                                                                   |                                                                         |                | 1,458,854  |                  
|Accounts payable and other liabilities                                                                                                                                                             |                                                                         |                | 821,368    |                  
|                                                                                                                                                                                                   |                                                                         |                |            |                  
|Total liabilities                                                                                                                                                                                  |                                                                         |                | 20,835,039 |                  
|                                                                                                                                                                                                   |                                                                         |                |            |                  
|Commitments and Contingent Liabilities                                                                                                                                                             |                                                                         |                |           |                  
|Minority Interest                                                                                                                                                                                  |                                                                         |                | 339,566    |                  
|Mezzanine Equity                                                                                                                                                                                   |                                                                         |                | 100,624    |                  
|Stockholders' Equity:                                                                                                                                                                              |                                                                         |                |            |                  
|Preferred stock, $.001 par value; 100,000,000 shares authorized; none issued and outstanding as of March 31, 2008 and December 31, 2007                                                            |                                                                         |                |           |                  
|Common stock, $.001 par value; 650,000,000 shares authorized; 412,899,091 shares issued and outstanding as of March 31, 2008 and 412,898,576 shares issued and outstanding as of December 31, 2007 |                                                                         |                | 413        |                  
|Capital paid in excess of par value                                                                                                                                                                |                                                                         |                | 2,056,899  |                  
|Retained earnings                                                                                                                                                                                  |                                                                         |                | 195,706    |                  
|Accumulated other comprehensive income, net of tax:                                                                                                                                                |                                                                         |                |            |                  
|                                                                                                                                                                                                   | Net unrealized gain on investment securities and derivative instruments |                |            | 5,929            
|                                                                                                                                                                                                   | Net foreign currency translation adjustment                             |                |            | 21,017           
|                                                                                                                                                                                                   |                                                                         |                |            |                  
|Total accumulated other comprehensive income, net of tax                                                                                                                                           |                                                                         |                | 26,946     |                  
|                                                                                                                                                                                                   |                                                                         |                |            |                  
|Total stockholders' equity                                                                                                                                                                         |                                                                         |                | 2,279,964  |                  
|                                                                                                                                                                                                   |                                                                         |                |            |                  
|Total liabilities and stockholders' equity                                                                                                                                                         |                                                                         | $              | 23,555,193 |                  
|                                                                                                                                                                                                   |                                                                         |                |            |                  

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

2

---





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

|                                                                          |                                                   | Three
months ended
March 31, 2008   |          | Three
months ended
March 31, 2007 |        
|------------------------------------------------------------------------- | ------------------------------------------------- | ----------------------------------- | -------- | --------------------------------- | -------
|Net Interest Income                                                       |                                                   |                                     |          |                                   |        
|Interest income                                                           |                                                   | $                                   | 276,978  |                                   | $      
|Interest expense                                                          |                                                   |                                     | 215,875  |                                   |        
|                                                                          |                                                   |                                     |          |                                   |        
|Net interest income                                                       |                                                   |                                     | 61,103   |                                   |        
|Provision for loan losses                                                 |                                                   |                                     | 7,629    |                                   |        
|                                                                          |                                                   |                                     |          |                                   |        
|Net interest income after provision for loan losses                       |                                                   |                                     | 53,474   |                                   |        
|                                                                          |                                                   |                                     |          |                                   |        
|Noninterest Income                                                        |                                                   |                                     |          |                                   |        
|Net (losses) gains:                                                       |                                                   |                                     |          |                                   |        
|                                                                          | Net (losses) gains on loans                       |                                     |          | (357,167                          | )      
|                                                                          | Net (losses) gains on investments and real estate |                                     |          | (11,738                           | )      
|                                                                          | Other gains, net                                  |                                     |          | 19,251                            |        
|Mortgage servicing fees                                                   |                                                   |                                     | 54,210   |                                   |        
|Placement fees                                                            |                                                   |                                     | 17,630   |                                   |        
|Investment banking fees and syndication income                            |                                                   |                                     | 13,823   |                                   |        
|Asset management fees                                                     |                                                   |                                     | 18,763   |                                   |        
|Trust fees and document custodial income                                  |                                                   |                                     | 35,382   |                                   |        
|Other fees                                                                |                                                   |                                     | 3,001    |                                   |        
|Equity in (loss) income of joint ventures and partnerships                |                                                   |                                     | (9,993   | )                                 |        
|Net real estate investment and other income                               |                                                   |                                     | 23,614   |                                   |        
|                                                                          |                                                   |                                     |          |                                   |        
|Total noninterest income                                                  |                                                   |                                     | (193,224 | )                                 |        
|                                                                          |                                                   |                                     |          |                                   |        
|Net revenue                                                               |                                                   |                                     | (139,750 | )                                 |        
|                                                                          |                                                   |                                     |          |                                   |        
|Noninterest Expense                                                       |                                                   |                                     |          |                                   |        
|Compensation and benefits                                                 |                                                   |                                     | 89,637   |                                   |        
|Amortization of mortgage servicing rights                                 |                                                   |                                     | 35,232   |                                   |        
|Occupancy and equipment                                                   |                                                   |                                     | 21,750   |                                   |        
|Professional fees                                                         |                                                   |                                     | 24,292   |                                   |        
|Other expenses                                                            |                                                   |                                     | 37,699   |                                   |        
|                                                                          |                                                   |                                     |          |                                   |        
|Total noninterest expense                                                 |                                                   |                                     | 208,610  |                                   |        
|                                                                          |                                                   |                                     |          |                                   |        
|(Loss) income before minority interest and income tax (benefit) provision |                                                   |                                     | (348,360 | )                                 |        
|Minority interest income (expense)                                        |                                                   |                                     | 15,498   |                                   |        
|                                                                          |                                                   |                                     |          |                                   |        
|(Loss) income before income tax (benefit) provision                       |                                                   |                                     | (332,862 | )                                 |        
|Income tax (benefit) provision                                            |                                                   |                                     | (120,003 | )                                 |        
|                                                                          |                                                   |                                     |          |                                   |        
|Net (Loss) Income                                                         |                                                   | $                                   | (212,859 | )                                 | $      
|                                                                          |                                                   |                                     |          |                                   |        
|                                                                          | Basic and diluted net (loss) income per share:    |                                     |          |                                   |        
|                                                                          |                                                   | Net (loss) income per share         |          | $                                 | (0.49  
|                                                                          |                                                   | Weighted average shares outstanding |          |                                   | 432,940

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

3

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

|                                                                                  |  | Three
months ended
March 31, 2008 |           | Three
months ended
March 31, 2007 |  
|--------------------------------------------------------------------------------- |  | --------------------------------- | --------- | --------------------------------- | -
|Common Stock                                                                      |  |                                   |           |                                   |  
|Balance at beginning of period                                                    |  | $                                 | 413       |                                   | $
|                                                                                  |  |                                   |           |                                   |  
|Balance at end of period                                                          |  |                                   | 413       |                                   |  
|                                                                                  |  |                                   |           |                                   |  
|Capital Paid in Excess of Par Value                                               |  |                                   |           |                                   |  
|Balance at beginning of period                                                    |  |                                   | 2,050,361 |                                   |  
|Additional shares issued                                                          |  |                                   | 3         |                                   |  
|Stock-based compensation expense                                                  |  |                                   | 6,693     |                                   |  
|Other                                                                             |  |                                   | (158      | )                                 |  
|                                                                                  |  |                                   |           |                                   |  
|Balance at end of period                                                          |  |                                   | 2,056,899 |                                   |  
|                                                                                  |  |                                   |           |                                   |  
|Retained Earnings                                                                 |  |                                   |           |                                   |  
|Balance at beginning of period                                                    |  |                                   | 418,876   |                                   |  
|Cumulative effect of adopting FASB Interpretation No. 48                          |  |                                   |          |                                   |  
|Cumulative effect of adopting Statement of Financial Accounting Standards No. 159 |  |                                   | (9,805    | )                                 |  
|Net (loss) income                                                                 |  |                                   | (212,859  | )                                 |  
|Other                                                                             |  |                                   | (506      | )                                 |  
|                                                                                  |  |                                   |           |                                   |  
|Balance at end of period                                                          |  |                                   | 195,706   |                                   |  
|                                                                                  |  |                                   |           |                                   |  
|Accumulated Other Comprehensive Income (Loss), Net of Tax                         |  |                                   |           |                                   |  
|Balance at beginning of period                                                    |  |                                   | 36,983    |                                   |  
|Net unrealized loss on investment securities and derivative instruments           |  |                                   | (11,607   | )                                 |  
|Net foreign currency translation adjustment                                       |  |                                   | 1,570     |                                   |  
|                                                                                  |  |                                   |           |                                   |  
|Balance at end of period                                                          |  |                                   | 26,946    |                                   |  
|                                                                                  |  |                                   |           |                                   |  
|Total Stockholders' Equity                                                        |  | $                                 | 2,279,964 |                                   | $
|                                                                                  |  |                                   |           |                                   |  
|Comprehensive (Loss) Income                                                       |  |                                   |           |                                   |  
|Net (loss) income                                                                 |  | $                                 | (212,859  | )                                 | $
|Other comprehensive loss                                                          |  |                                   | (10,037   | )                                 |  
|                                                                                  |  |                                   |           |                                   |  
|Comprehensive (loss) income                                                       |  | $                                 | (222,896  | )                                 | $
|                                                                                  |  |                                   |           |                                   |  

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

4

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

|                                                                              |  | Three
months ended
March 31, 2008 |            | Three
months ended
March 31, 2007 |  
|----------------------------------------------------------------------------- |  | --------------------------------- | ---------- | --------------------------------- | -
|Operating Activities                                                          |  |                                   |            |                                   |  
|Net cash (used in) provided by operating activities                           |  | $                                 | (434,923   | )                                 | $
|                                                                              |  |                                   |            |                                   |  
|Investing Activities                                                          |  |                                   |            |                                   |  
|Net decrease in restricted cash                                               |  |                                   | 5,118      |                                   |  
|Proceeds from sales of investment securities classified as available for sale |  |                                   |           |                                   |  
|Repayments of investment securities classified as available for sale          |  |                                   | 24,350     |                                   |  
|Purchases of investment securities classified as available for sale           |  |                                   | (26,301    | )                                 |  
|Repayments of loans held for investment                                       |  |                                   | 310,553    |                                   |  
|Origination/purchase of loans held for investment                             |  |                                   | (752,188   | )                                 |  
|Net purchases of real estate investments                                      |  |                                   | (29,704    | )                                 |  
|Net purchases of property and equipment                                       |  |                                   | (927       | )                                 |  
|Proceeds from sales of/capital distributions from equity investments          |  |                                   | 14,897     |                                   |  
|Purchases of equity investments                                               |  |                                   | (62,645    | )                                 |  
|Purchases of mortgage servicing rights                                        |  |                                   |           |                                   |  
|Sales of mortgage servicing rights                                            |  |                                   |           |                                   |  
|Other investing activities, net                                               |  |                                   | 37         |                                   |  
|                                                                              |  |                                   |            |                                   |  
|Net cash used in investing activities                                         |  |                                   | (516,810   | )                                 |  
|                                                                              |  |                                   |            |                                   |  
|Financing Activities                                                          |  |                                   |            |                                   |  
|Net increase (decrease) in short-term borrowings                              |  |                                   | 1,092,466  |                                   |  
|Proceeds from issuance of collateralized borrowings in securitization trusts  |  |                                   |           |                                   |  
|Repayments of collateralized borrowings in securitization trusts              |  |                                   |           |                                   |  
|Proceeds from issuance of other long-term borrowings                          |  |                                   | 588,997    |                                   |  
|Repayments of other long-term borrowings.                                     |  |                                   | (68,379    | )                                 |  
|Net (decrease) increase in deposit liabilities.                               |  |                                   | (1,064,433 | )                                 |  
|Real estate syndication proceeds received                                     |  |                                   | 29,917     |                                   |  
|Minority interest proceeds                                                    |  |                                   | 18,275     |                                   |  
|Net repurchases of mezzanine equity and additional common shares              |  |                                   | (2,455     | )                                 |  
|Other financing activities, net                                               |  |                                   | 2,961      |                                   |  
|                                                                              |  |                                   |            |                                   |  
|Net cash provided by financing activities                                     |  |                                   | 597,349    |                                   |  
|                                                                              |  |                                   |            |                                   |  
|Effect of Foreign Exchange Rates on Cash                                      |  |                                   | 32,943     |                                   |  
|                                                                              |  |                                   |            |                                   |  
|Net (Decrease) Increase in Cash and Cash Equivalents                          |  |                                   | (321,441   | )                                 |  
|Cash and Cash Equivalents, Beginning of Period(1)                             |  |                                   | 1,204,477  |                                   |  
|                                                                              |  |                                   |            |                                   |  
|Cash and Cash Equivalents, End of Period(1)                                   |  | $                                 | 883,036    |                                   | $
|                                                                              |  |                                   |            |                                   |  
|Supplemental Disclosures of Cash Flow Information:                            |  |                                   |            |                                   |  
|Income taxes paid                                                             |  | $                                 | 23,316     |                                   | $
|Interest paid                                                                 |  |                                   | 209,995    |                                   |  

---

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

5

---





CAPMARK FINANCIAL GROUP INC.        Notes to Condensed Consolidated Financial Statements (unaudited)

1. Organization and Operations

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

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. In connection with the acquisition, the percentage ownership
interests of both the Sponsors and GMAC were reduced proportionately by the sale of common stock to employees of the Company who acquired an initial aggregate equity interest of approximately four
percent. As a result of subsequent sales of common stock to those and additional employees and non-employee directors (collectively, the "Management Stockholders"), less repurchases of
common stock from employees no longer with the Company, the Sponsors own a majority interest of approximately 74 percent, the Management Stockholders own an equity interest of approximately
five percent and a subsidiary of GMAC owns an equity interest of approximately 21 percent as of March 31, 2008. The aforementioned changes in ownership will be referred to as the
"Sponsor Transactions" in these notes to the condensed consolidated financial statements.

2. Risks and Uncertainties

The Company's primary business risks include: credit risk, liquidity risk, interest rate and other market risks, and operational risk as more fully described in
Note 2 to the Company's 2007 audited consolidated financial statements included in the Company's prospectus filed with the Securities Exchange Commission ("SEC") on March 26, 2008 in
accordance with Rule 424(b)(3) of the Securities Act of 1933, as amended, which is accessible on the SEC's website atwww.sec.gov. Management of
these risks affects both the level and stability of the Company's earnings.

3. Basis of Presentation and Significant Accounting Policies

Basis of Presentation

The accompanying condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States
of America ("GAAP") for interim financial reporting. Accordingly, these interim financial statements do not include all of the information and footnote disclosures required for annual financial
reporting. Therefore, these interim financial statements should be read in conjunction with the Company's 2007 audited consolidated financial statements. 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, including those associated with credit exposure and interest rate and market
spread volatility. Management uses available information in developing estimates and assumptions. 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 condensed consolidated financial statements.

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

6

---



CAPMARK FINANCIAL GROUP INC.

Notes to Condensed Consolidated Financial Statements (unaudited) (Continued)

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

consolidation
criteria that must be applied under GAAP, and in those cases the Company follows the accounting policies more fully disclosed in Note 3 to its 2007 audited consolidated financial
statements. All material intercompany accounts and transactions have been eliminated in consolidation.

In
the opinion of management, the condensed consolidated financial statements include all adjustments, consisting of normal recurring accruals, necessary to present fairly the financial
position of the Company as of March 31, 2008, and the results of its operations and cash flows for the three months ended March 31, 2008 and 2007. The Company's results for any interim
period are not necessarily indicative of results for a full year or any other interim period.



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 approximately $65.3 million and reported
the gain as a component of other gains, net in the condensed 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 condensed consolidated statement of operations and condensed consolidated statement of cash flows for the three months ended March 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 20 for segment information.

Significant Accounting Policies and Recently Issued Accounting Standards

The Company's significant accounting policies are disclosed in Note 3 to its 2007 audited consolidated financial statements. There have been no significant
changes to the Company's significant accounting policies as of March 31, 2008, except that on January 1, 2008, the Company adopted Statement of Financial Accounting Standards ("SFAS")
No. 157, "Fair Value Measurements," or "SFAS No. 157," and 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," as more fully discussed below and in Note 14 to these condensed consolidated financial statements.



The Company adopted SFAS No. 157 on January 1, 2008. SFAS No. 157 defines fair value, establishes a framework for measuring fair value in
GAAP, and expands disclosures about 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. Adoption of this statement did not have a material impact on the method in which the Company determines fair value but did require additional disclosures as discussed in Note 14.

The
Company also adopted 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

7

---



CAPMARK FINANCIAL GROUP INC.

Notes to Condensed Consolidated Financial Statements (unaudited) (Continued)

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

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 requires that the difference between the carrying value of financial assets and financial liabilities elected and the fair value of such instruments 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 adjustment from electing the fair value option for the selected financial instruments decreased retained earnings by
$9.8 million on January 1, 2008. See Note 14 for additional information.



Recently issued accounting standards that may have an impact on the Company's consolidated financial statements are more fully disclosed in Note 3 to the
Company's 2007 audited consolidated financial statements. The following standards have been issued subsequent to the release of the Company's 2007 audited consolidated financial statements.

In
February 2008, the Financial Accounting Standards Board ("FASB") issued FASB Staff Position ("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 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 financial statements issued for fiscal years and interim periods beginning after November 15, 2008, with early adoption
permitted.
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, "Goodwill and Other
Intangible Assets." The FSP affects entities with recognized intangible assets and is effective for financial statements issued for fiscal years beginning after December 15, 2008, and interim
periods within those fiscal years. 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. Management is currently evaluating the potential impact of FSP 142-3 on the Company's consolidated financial statements.

In
May 2008, the FASB issued SFAS No. 162, "The Hierarchy of Generally Accepted Accounting Principles," or "SFAS No. 162," which, when effective, identifies the sources of
accounting principles and the framework for selecting the principles to be used in the preparation of financial statements of nongovernmental entities that are presented in conformity with GAAP. SFAS
No. 162 is effective 60 days following the SEC's approval of the Public Company Accounting Oversight Board amendments to AU Section 411, The Meaning of Present Fairly in
Conformity With Generally Accepted Accounting Principles. Management is currently evaluating the potential impact of SFAS No. 162 on the Company's consolidated financial statements.

8

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CAPMARK FINANCIAL GROUP INC.

Notes to Condensed Consolidated Financial Statements (unaudited) (Continued)

4. Investment Securities

Investment securities include: commercial mortgage-backed securities ("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; certain Japanese bonds ("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.

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

|                                           |  | Amortized
cost |         | Unrealized
gains |   | Unrealized
Losses |  | Fair
value
|------------------------------------------ |  | -------------- | ------- | ---------------- | - | ----------------- |  | ----------
|Beneficial interests in CMBS, ABS and CDOs |  | $              | 98,353  |                  | $ | 19,610            |  | $         
|Tax-exempt securities                      |  |                | 253,137 |                  |   | 688               |  |           
|TMK securities                             |  |                | 349,598 |                  |   | 166               |  |           
|GSE securities                             |  |                | 230,354 |                  |   | 1,277             |  |           
|U.S. Treasury and other securities         |  |                | 39,672  |                  |   | 830               |  |           
|                                           |  |                |         |                  |   |                   |  |           
|Total                                      |  | $              | 971,114 |                  | $ | 22,571            |  | $         
|                                           |  |                |         |                  |   |                   |  |           

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
value
|------------------------------------------ |  | -------------- | ------- | ---------------- | - | ----------------- |  | ----------
|Beneficial interests in CMBS, ABS and CDOs |  | $              | 104,252 |                  | $ | 16,265            |  | $         
|Tax-exempt securities                      |  |                | 247,395 |                  |   | 3,162             |  |           
|TMK securities                             |  |                | 311,827 |                  |   | 821               |  |           
|GSE securities                             |  |                | 235,138 |                  |   | 1,404             |  |           
|U.S. Treasury and other securities         |  |                | 32,346  |                  |   | 679               |  |           
|                                           |  |                |         |                  |   |                   |  |           
|Total                                      |  | $              | 930,958 |                  | $ | 22,331            |  | $         
|                                           |  |                |         |                  |   |                   |  |           

The
Company did not sell any investment securities classified as available for sale during the three months ended March 31, 2008. 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 for the three months ended
March 31, 2007 (in thousands):

Three
months ended
March 31, 2007Gains recognized

$
19,466Losses recognized


Net gains

$
19,466Proceeds received

$
44,211


The
gains were recorded as a component of net (losses) gains on investments and real estate in the condensed consolidated statement of operations. The proceeds received for the three
months ended March 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.

9

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CAPMARK FINANCIAL GROUP INC.

Notes to Condensed Consolidated Financial Statements (unaudited) (Continued)

4. Investment Securities (Continued)

Impairment
charges recognized for declines in value of investment securities classified as available for sale considered other-than-temporary were
$3.8 million and $3.7 million for the three months ended March 31, 2008 and 2007, respectively.

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 March 31, 2008 (in thousands):

|                                           |  | Less than 12 months |         | 12 months or more |   | Total   |  
|------------------------------------------ |  | ------------------- | ------- | ----------------- | - | ------- | -
|
|Beneficial interests in CMBS, ABS and CDOs |  | $                   | 9,165   |                   | $ | (1,556  | )
|Tax-exempt securities                      |  |                     | 200,079 |                   |   | (5,189  | )
|TMK securities                             |  |                     | 302,185 |                   |   | (6,242  | )
|GSE securities                             |  |                     | 110,241 |                   |   | (3,086  | )
|U.S. Treasury and other securities         |  |                     | 10,226  |                   |   | (23     | )
|                                           |  |                     |         |                   |   |         |  
|Total                                      |  | $                   | 631,896 |                   | $ | (16,096 | )
|                                           |  |                     |         |                   |   |         |  

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 |   | Total  |  
|------------------------------------------ |  | ------------------- | ------- | ----------------- | - | ------ | -
|
|Beneficial interests in CMBS, ABS and CDOs |  | $                   | 33,955  |                   | $ | (1,518 | )
|Tax-exempt securities                      |  |                     |        |                   |   |       |  
|TMK securities                             |  |                     | 87,086  |                   |   | (194   | )
|GSE securities                             |  |                     | 49,319  |                   |   | (72    | )
|                                           |  |                     |         |                   |   |        |  
|Total                                      |  | $                   | 170,360 |                   | $ | (1,784 | )
|                                           |  |                     |         |                   |   |        |  

The
unrealized losses in the tables above were temporary declines in fair value due to unfavorable market conditions and were not reflective of credit deterioration of the securities. In
determining that the carrying values are fully recoverable over the expected holding periods, the Company performed credit analyses in relation to these investment securities and has considered the
risks and uncertainties regarding future declines in fair value as well as the potential effects that declines in fair value would have on the Company's liquidity. Management believes the Company has
the ability and intent to hold these securities until they recover in value and therefore concluded the unrealized losses are not other-than-temporary.

10

---



CAPMARK FINANCIAL GROUP INC.

Notes to Condensed Consolidated Financial Statements (unaudited) (Continued)

5. Loans Held for Sale

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

March 31,
2008

December 31,
2007Floating rate mortgage loans

$
6,376,541

$
6,602,555Fixed rate mortgage loans


1,262,382


1,103,446Construction loans


13,617


12,052Loan participations


66,517


65,716Total

$
7,719,057

$
7,783,769


The
Company reviews its loan portfolio to determine whether any changes in classification should be made between "held for sale" and "held for investment." Consideration
is given to the Company's intent and ability to hold such loans for the forseeable future or until the loans mature or are paid in full. In making such a determination, the Company considers, among
other factors, its liquidity needs, capital requirements, prevailing economic conditions, and the availability of distribution channels into
which the Company has historically sold loans. No loans were transferred from "held for sale" to "held for investment" during the three months ended March 31, 2008.

In
connection with the Company's adoption of SFAS No. 159, substantially all of the Company's loans held for sale are accounted for at fair value as of March 31, 2008 and,
accordingly, do not require a valuation allowance. Approximately $41.4 million of loans held for sale in the Philippines continue to be accounted for at the lower of amortized cost or fair
value as of March 31, 2008 due to the highly specialized nature of the underlying loan agreements, which do not readily lend themselves to reliable fair value estimation.

6. Loans Held for Investment

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

March 31,
2008

December 31,
2007Floating rate mortgage loans

$
5,180,451

$
5,167,440Fixed rate mortgage loans


907,818


579,909Acquired non-performing loans


360,825


358,368Construction loans


955,503


809,234Loan participations


5,967


5,515Total


7,410,564


6,920,466Allowance for loan losses


(32,088
)

(28,752
)Net

$
7,378,476

$
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 market valuation adjustments applied to
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
$97.3 million and $106.6 million as of March 31, 2008 and December 31, 2007, respectively.

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

11

---



CAPMARK FINANCIAL GROUP INC.

Notes to Condensed Consolidated Financial Statements (unaudited) (Continued)

6. Loans Held for Investment (Continued)

diversification,
default, loss severity, industry loss experience, economic conditions and trends, and other relevant factors.

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

Three
months ended
March 31, 2008

Three
months ended
March 31, 2007Balance at beginning of period

$
28,752

$
61,715Provision for loan losses


7,629


6,319Loans charged off


(4,000
)

(3,761
)Foreign currency translation adjustment


285


355Transfers and other


(578
)

896Balance at end of period

$
32,088

$
65,524


The
decline in the allowance for loan losses from March 31, 2007 was primarily due to the charge-off of a fully-reserved loan in the fourth quarter of
2007.

The
Company purchased non-performing loans at significant discounts to the loans' unpaid principal balance. At the time of acquisition, these loans evidenced credit quality
deterioration and the probability that not all contractual payments would be collectible. The Company does not maintain an allowance for loan losses on such acquired non-performing loans
because when impairments are identified, the carrying values of the loans are immediately written down. The provision for such impairments totaled $4.0 million and $2.6 million for the
three months ended March 31, 2008 and 2007, respectively.

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
March 31, 2008 and December 31, 2007 (in thousands):

March 31,
2008

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

$
92,974

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


34,395


44,474Total impaired loans


127,369


101,235Allowance for loan losses on impaired loans


(13,430
)

(6,919
)Net impaired loans

$
113,939

$
94,316


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.

7. Real Estate Investments

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

March 31, 2008

December 31, 2007Held for investment, net of depreciation

$
1,754,331

$
1,606,730Held for sale


109,792


67,292Acquired through foreclosure


76,054


74,533Total

$
1,940,177

$
1,748,555


12

---



CAPMARK FINANCIAL GROUP INC.

Notes to Condensed Consolidated Financial Statements (unaudited) (Continued)

8. Equity Investments

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

|                                                                                                      |  | March 31, 2008 |           | December 31, 2007 |    
|----------------------------------------------------------------------------------------------------- |  | -------------- | --------- | ----------------- | ---
|
|Investments in affordable housing partnerships in the United States                                   |  | $              | 858,232   |                   | 44 
|Investments in real estate equity investment funds in the United States                               |  |                | 505,551   |                   | 26 
|Investments in real estate projects, joint ventures and real estate equity investment funds in Europe |  |                | 170,147   |                   | 9  
|Investments in other real estate ventures in the United States                                        |  |                | 141,976   |                   | 7  
|Investments in non-performing commercial loan and real estate joint ventures, principally in Asia     |  |                | 158,468   |                   | 8  
|Investments in CMBS and debt investment funds, with collateral principally in the United States       |  |                | 73,424    |                   | 4  
|Other                                                                                                 |  |                | 32,415    |                   | 2  
|                                                                                                      |  |                |           |                   |    
|Total                                                                                                 |  | $              | 1,940,213 |                   | 100
|                                                                                                      |  |                |           |                   |    

9. Mortgage Servicing Rights

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

Three months
ended March 31,
2008

Three months
ended March 31,
2007Balance at beginning of period

$
890,550

$
829,011Additions


6,222


73,637Amortization


(35,232
)

(31,380
)Other


(107
)

(837
)Balance at end of period

$
861,433

$
870,431


Based
on the Company's impairment analysis, the Company did not record a valuation allowance related to mortgage servicing rights in either period presented.

10. Goodwill and Other Intangible Assets

In connection with the adoption of FASB Interpretation No. 48, "Accounting for Uncertainty in Income Taxesan interpretation of FASB Statement
No. 109,"or "FIN 48," on January 1, 2007, the Company recorded an increase to goodwill of $32.2 million due to the accrual of reserves for uncertain tax positions that
existed as of the close of the Sponsor Transactions.

The
Company recorded scheduled amortization expense on its intangible assets of $3.3 million and $6.0 million for the three months ended March 31, 2008 and 2007,
respectively.

13

---



CAPMARK FINANCIAL GROUP INC.

Notes to Condensed Consolidated Financial Statements (unaudited) (Continued)

11. Short-term and Long-term Borrowings

The following table summarizes the Company's outstanding borrowings as of March 31, 2008 and December 31, 2007 (dollars in thousands):

March 31,
2008

December 31,
2007Short-term borrowings

$
5,069,830

$
3,832,637Collateralized borrowings in securitization trusts


261,557


260,524Other long-term borrowings


8,711,410


8,047,162Total

$
14,042,797

$
12,140,323


Included
in other long-term borrowings is approximately $1.7 billion of indebtedness as of March 31, 2008 and December 31, 2007 associated with the
Company's bridge loan due in March 2009.

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

|                                                                                           |  | March 31,
2008 |           | December 31,
2007
|------------------------------------------------------------------------------------------ |  | -------------- | --------- | -----------------
|Loans held for sale                                                                        |  | $              | 3,713,212 |                  
|Loans held for investment                                                                  |  |                | 3,546,716 |                  
|Investment securities classified as trading                                                |  |                | 102,482   |                  
|Investment securities classified as available for sale                                     |  |                | 229,073   |                  
|Real estate investments                                                                    |  |                | 994,193   |                  
|Other (including cash, cash equivalents, accounts and other receivables, and other assets) |  |                | 8,497     |                  
|                                                                                           |  |                |           |                  
|Total assets pledged as collateral                                                         |  | $              | 8,594,173 |                  
|                                                                                           |  |                |           |                  
|Related secured borrowings                                                                 |  | $              | 3,889,043 |                  
|                                                                                           |  |                |           |                  

The
increase in assets pledged as collateral from December 31, 2007 was primarily due to the increased secured borrowings by Capmark Bank ("Capmark Bank US"), a wholly-owned U.S.
subsidiary of the Company, from the Federal Reserve Bank of San Francisco and the Federal Home Loan Bank of Seattle, as required under the terms of their borrowing programs. The following table
segregates the assets pledged as collateral (substantially consisting of loans) for Capmark Bank US as of March 31, 2008 and December 31, 2007 (in thousands):

March 31,
2008

December 31,
2007Capmark Bank US:Total assets pledged as collateral

$
4,620,044

$
1,297,678Related secured borrowings


1,653,558


550,000Non-Capmark Bank US:Total assets pledged as collateral


3,974,129


3,646,719Related secured borrowings


2,235,485


2,531,723


14

---



CAPMARK FINANCIAL GROUP INC.

Notes to Condensed Consolidated Financial Statements (unaudited) (Continued)

12. Deposit Liabilities

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

March 31,
2008

December 31,
2007Brokered certificates of deposit

$
4,507,282

$
5,545,976All other deposit liabilities


4,738


6,631Total

$
4,512,020

$
5,552,607


In
connection with the Company's adoption of SFAS No. 159, the Company's brokered certificates of deposit ("Brokered CDs") are accounted for at fair value as of March 31,
2008.

The
deposits of Capmark Bank US are primarily interest-bearing, issued in denominations of $100,000 or less and are insured by the Federal Deposit Insurance Corporation ("FDIC").

13. Income Taxes

Prior to the Sponsor Transactions, the Company had operated within the General Motors ("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 tax 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 group 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 close of the Sponsor Transactions.

The
Company recognized approximately $4.7 million and $4.1 million of gross interest and penalties for the three months ended March 31, 2008 and 2007, respectively.
The Company accrued approximately $54.4 million and $49.7 million for the payment of interest and penalties as of March 31, 2008 and December 31, 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

15

---



CAPMARK FINANCIAL GROUP INC.

Notes to Condensed Consolidated Financial Statements (unaudited) (Continued)

13. Income Taxes (Continued)

dates.
The following table summarizes the tax years that remain subject to examination in the Company's major tax jurisdictions as of March 31, 2008:

United StatesFederal

2001 and forwardUnited StatesIndividual States

1994 and forwardJapan

2001 and forwardIreland

2003 and forwardCanada

2005 and forwardTaiwan

2006 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 March 31, 2008 for the items discussed above may decrease by up to $36.6 million within the next 12 months.

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, which is currently under IRS examination for tax years 2001 through the Sponsor Transactions date. 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
March 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 specified amount has been accrued in the Company's consolidated financial statements.

14. Fair Value of Financial Instruments

SFAS No. 157 defines fair value, establishes a framework for measuring fair value, establishes a fair value hierarchy based on the quality of inputs used
to measure fair value, and enhances disclosure requirements for fair value measurements. The Company accounts for a significant portion of its financial instruments at fair value or considers fair
value in their measurement.

Fair Value Hierarchy

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 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.

16

---



CAPMARK FINANCIAL GROUP INC.

Notes to Condensed Consolidated Financial Statements (unaudited) (Continued)

14. Fair Value of Financial Instruments (Continued)

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

Level 1financial
assets and 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, as well as certain U.S. Treasury securities that are highly liquid and are actively traded.

Level 2financial
assets and liabilities whose values are based on quoted prices in markets that are not active or model inputs that are observable either directly or
indirectly for substantially the full term of the asset or liability. Level 2 inputs include the following:



Level 3financial
assets and 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.

Determination of Fair Value

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. Fair value measurements for assets and liabilities where there exists limited or no observable market data and,
therefore are based primarily upon management's own estimates, 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 results 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 valuation hierarchy.

Investment Securities

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

17

---



CAPMARK FINANCIAL GROUP INC.

Notes to Condensed Consolidated Financial Statements (unaudited) (Continued)

14. Fair Value of Financial Instruments (Continued)

classified
within Level 1 of the valuation hierarchy. Level 1 investment securities include highly liquid U.S. Treasury securities, U.S. Government sponsored enterprises, and certain
commercial mortgage products. If quoted market prices are not available, then fair values are estimated by using pricing models, quoted prices of securities with similar characteristics or discounted
cash flows. Examples of such instruments, which would generally be classified within Level 2 of the valuation hierarchy, include certain CMBS, ABS and CDOs. 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 other less liquid investment securities.

Loans Held for Sale

In connection with the adoption of SFAS No. 159, the Company elected to account for substantially all of its loans held for sale at fair value. This 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 stringent
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, interest rates, whole loan spreads for each property type based on loan-to-cost
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 is 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 observable inputs to the
extent possible, the valuations 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. Due to significant use of unobservable pricing inputs, the majority of the Company's loans held for sale as of March 31, 2008 are classified within Level 3 of the
valuation hierarchy.

As
of March 31, 2008, loans held for sale for which the fair value option was elected had an aggregate fair value of $7.7 billion and an aggregate unpaid principal balance
of $8.2 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
$327.5 million resulting from the changes in fair value of these loans were recorded during the three months ended March 31, 2008 and reported as a component of net (losses) gains on
loans in the condensed 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 amount of the loans and recognized as a component of the net gain or loss on sale of such loans.

Equity Investments

Substantially all of the Company's equity investments are accounted for under the equity method. The Company did not elect the fair value option under SFAS
No. 159 for its equity investments. The Company may elect the fair value option for certain new equity investments on an

18

---



CAPMARK FINANCIAL GROUP INC.

Notes to Condensed Consolidated Financial Statements (unaudited) (Continued)

14. Fair Value of Financial Instruments (Continued)

instrument-by-instrument
basis going forward. When such investments are made, the Company will consider facts and circumstances available to estimate the fair value of such
equity investments and employ DCF models. In arriving at the fair value, the Company will obtain observable market data, including data on the underlying investments that highlights competitive market
conditions affecting occupancy projections, current rental rates and growth prospects, current expense rates, capital improvement needs and certain market pricing parameters of similar quality
properties. In addition, the Company will consider access to and need for capital, qualitative assessments of the viability of the investees, evaluation of available financial statements of the
investees and prospects for their future. When appropriate, the changes in the fair value of these investments will be reported as a component of equity in income (loss) of joint ventures and
partnerships in the consolidated statement of operations.

Mortgage Servicing Rights

Mortgage servicing rights ("MSRs") are carried at the lower of amortized cost or fair value. 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. MSRs are classified within Level 3 of the valuation hierarchy because the valuation inputs
are largely unobservable.

Derivative Instruments

Derivative instruments are carried at fair value. Exchange-traded derivative instruments that are valued using quoted prices are classified within Level 1
of the valuation hierarchy. However, few classes of derivative contracts are listed on an exchange; thus, the majority of the Company's derivative positions 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 and are less actively traded, or have trade activity that is one-way, are
classified within Level 3 of the valuation hierarchy. Such derivatives include unfunded fixed-rate loan commitments.

Deposit LiabilitiesBrokered CDs

In connection with the adoption of SFAS No. 159, the Company elected the fair value option for its Brokered CDs. To estimate the fair value of Brokered
CDs, cash flows are evaluated taking into consideration any embedded derivative features and then discounted using the appropriate market rates for the applicable maturities. Brokered 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
without the

19

---



CAPMARK FINANCIAL GROUP INC.

Notes to Condensed Consolidated Financial Statements (unaudited) (Continued)

14. Fair Value of Financial Instruments (Continued)

administrative
burden of complying with the stringent requirements for hedge accounting under SFAS No. 133. Interest expense on these Brokered CDs continues to be recorded as a component of
interest expense in the consolidated statement of operations. For the three months ended March 31, 2008, the Company recorded an $11.2 million net loss resulting from the change in fair
value of these Brokered CDs and reported such change as a component of other gains, net in the condensed consolidated statement of operations.

The
following table summarizes the financial assets and 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
March 31,
2008
|-------------------------------- | ------------------ | -------------------------------------------------------------------------- | ------ | --------------------------------------------- | - | ----------------------------------------- | ------- | ---------------------------------------- | --------- | ----------------------------
|Assets:                          |                    |                                                                            |        |                                               |   |                                           |         |                                          |           |                             
|Investment securities:           |                    |                                                                            |        |                                               |   |                                           |         |                                          |           |                             
|                                 | Trading            |                                                                            | $      |                                              |   | $                                         | 84,008  |                                          | $         | 110,979                     
|                                 | Available for sale |                                                                            |        | 15,835                                        |   |                                           | 254,609 |                                          |           | 701,562                     
|Loans held for sale(1)           |                    |                                                                            |       |                                               |   | 405,490                                   |         |                                          | 7,272,175 |                             
|Derivative assets                |                    |                                                                            |       |                                               |   | 221,743                                   |         |                                          | 6,133     |                             
|                                 |                    |                                                                            |        |                                               |   |                                           |         |                                          |           |                             
|Total assets                     |                    | $                                                                          | 15,835 |                                               | $ | 965,850                                   |         | $                                        | 8,090,849 |                             
|                                 |                    |                                                                            |        |                                               |   |                                           |         |                                          |           |                             
|Liabilities:                     |                    |                                                                            |        |                                               |   |                                           |         |                                          |           |                             
|Deposit liabilitiesBrokered CDs |                    | $                                                                          |       |                                               | $ | 4,507,282                                 |         | $                                        |          |                             
|Derivative liabilities           |                    |                                                                            | 33,279 |                                               |   | 122,765                                   |         |                                          | 169       |                             
|                                 |                    |                                                                            |        |                                               |   |                                           |         |                                          |           |                             
|Total liabilities                |                    | $                                                                          | 33,279 |                                               | $ | 4,630,047                                 |         | $                                        | 169       |                             
|                                 |                    |                                                                            |        |                                               |   |                                           |         |                                          |           |                             

---

20

---



CAPMARK FINANCIAL GROUP INC.

Notes to Condensed Consolidated Financial Statements (unaudited) (Continued)

14. Fair Value of Financial Instruments (Continued)

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

|                                                                                                                                                                                  |                                        | Investment
Securities
Trading |         | Investment
Securities
Available
for Sale |   | Loans Held
for Sale |        | Net
Derivatives |           | Total    |  
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | -------------------------------------- | ------------------------------ | ------- | ----------------------------------------- | - | ------------------- | ------ | --------------- | --------- | -------- | -
|Ending balance as of December 31, 2007                                                                                                                                            |                                        | $                              | 126,878 |                                           | $ | 675,254             |        | $               | 7,508,926 |          | $
|Transition adjustment                                                                                                                                                             |                                        |                                |        |                                           |   |                    |        |                 | 1,911     |          |  
|                                                                                                                                                                                  |                                        |                                |         |                                           |   |                     |        |                 |           |          |  
|Beginning balance as of January 1, 2008                                                                                                                                           |                                        |                                | 126,878 |                                           |   | 675,254             |        |                 | 7,510,837 |          |  
|Purchases, issuances, sales and settlements                                                                                                                                       |                                        |                                | 1,397   |                                           |   | 2,977               |        |                 | (186,991  | )        |  
|Total realized/unrealized gains/(losses):                                                                                                                                         |                                        |                                |         |                                           |   |                     |        |                 |           |          |  
|                                                                                                                                                                                  | Included in earnings                   |                                |         | (17,836                                   | ) |                     | (4,892 | )               |           | (318,514 | )
|                                                                                                                                                                                  | Included in other comprehensive income |                                |         | 540                                       |   |                     | 28,223 |                 |           | 212,453  |  
|Net transfers into Level 3                                                                                                                                                        |                                        |                                |        |                                           |   |                    |        |                 | 54,390    |          |  
|                                                                                                                                                                                  |                                        |                                |         |                                           |   |                     |        |                 |           |          |  
|Ending balance as of March 31, 2008                                                                                                                                               |                                        | $                              | 110,979 |                                           | $ | 701,562             |        | $               | 7,272,175 |          | $
|                                                                                                                                                                                  |                                        |                                |         |                                           |   |                     |        |                 |           |          |  
|The amount of total gains/(losses) for the period included in earnings attributable to the change in unrealized gains/(losses) relating to assets still held as of March 31, 2008 |                                        | $                              | (17,818 | )                                         | $ | (4,892              | )      | $               | (329,100  | )        | $
|                                                                                                                                                                                  |                                        |                                |         |                                           |   |                     |        |                 |           |          |  

The table above summarizes the changes in fair value for all financial assets measured at fair value on a recurring basis using significant
unobservable inputs (Level 3) during the three months ended March 31, 2008. Level 3 financial assets presented in the table 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 incorporated assumptions, which in management's judgment, reflect
the assumptions a marketplace participant would use.

The
following table presents the change in carrying value of those assets measured at fair value on a non-recurring basis, for which impairment was recognized for the three
months ended March 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
March 31,
2008 |        | Total (losses) for the
three months
ended March 31,
2008 |  
|------------------------- |  | -------------------------------------------------------------------------- | - | --------------------------------------------- | - | ----------------------------------------- |  | ---------------------------- | ------ | -------------------------------------------------------- | -
|Loans Held for Investment |  | $                                                                          |  |                                               | $ |                                          |  | $                            | 33,863 |                                                          | $
|                          |  |                                                                            |   |                                               |   |                                           |  |                              |        |                                                          |  

Loans
held for investment with a carrying amount of $38.6 million were written down to their fair value of $33.9 million, less costs to sell of $1.4 million (or
$32.5 million), resulting in a loss of $6.1 million, which was recorded as an increase to the provision for loan losses for the three months ended March 31, 2008.

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

21

---



CAPMARK FINANCIAL GROUP INC.

Notes to Condensed Consolidated Financial Statements (unaudited) (Continued)

14. Fair Value of Financial Instruments (Continued)

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 value of the affected instruments before and after the change in accounting resulting from the adoption of SFAS No. 159 (dollars 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. 159
|------------------------------------------------------------- |  | ---------------------------------------------------- | --------- | ------------------------------------------- | - | ---------------------------------------------------------------------------------
|Loans held for sale(1)                                        |  | $                                                    | 7,744,180 |                                             | $ | 1,911                                                                            
|Deposit liabilities(2)                                        |  |                                                      | 5,540,850 |                                             |   | (17,506                                                                          
|                                                              |  |                                                      |           |                                             |   |                                                                                  
|Pre-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                                                                           
|                                                              |  |                                                      |           |                                             |   |                                                                                  

---

Notes:

15. 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 maintained and managed by Escrow Bank USA ("Escrow Bank"), a wholly-owned U.S.
subsidiary of the Company.

16. Stock-Based Compensation

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

22

---



CAPMARK FINANCIAL GROUP INC.

Notes to Condensed Consolidated Financial Statements (unaudited) (Continued)

16. Stock-Based Compensation (Continued)

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

Three months ended March 31, 2008Number of
Options

Weighted average
exercise price per
shareOptions outstanding as of the beginning of the period

44,731

$
5.04Options granted

299


6.11Options exercised




Options forfeited

(2,127
)

5.04Options cancelled

(150
)

5.00Options expired




Options outstanding as of the end of the period

42,753

$
5.04Options exercisable as of the end of the period

11,480

$
5.00


Time-based
options relating to 3.3 million shares of common stock vested during the three months ended March 31, 2008, of which time-based options
relating to 3.3 million shares were exercisable.

There
were 8.4 million and 6.5 million shares available for future grants of options as of March 31, 2008 and December 31, 2007, respectively.

The
weighted average grant-date fair value of options granted during the three months ended March 31, 2008 was $1.93. 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
Company recorded $4.2 million (net of tax benefit of $2.5 million) and $3.7 million (net of tax benefit of $2.1 million) in compensation expense
associated with the vesting of time-based options for the three months ended March 31, 2008 and 2007, respectively. No compensation expense has been recognized for its
performance-based options because the performance criteria have not been met. There was $40.6 million of unrecognized compensation expense related to non-vested option awards as of
March 31, 2008, including performance-based option awards. This cost is expected to be recognized over a weighted average period of 2.63 years.

23

---



CAPMARK FINANCIAL GROUP INC.

Notes to Condensed Consolidated Financial Statements (unaudited) (Continued)

17. Guarantees

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

|                                       |  | March 31, 2008 |           | December 31, 2007
|-------------------------------------- |  | -------------- | --------- | -----------------
|
|Agency/construction lending guarantees |  | $              | 343,965   |                  
|Agency loans sold with recourse        |  |                | 577,066   |                  
|Other third party guarantees           |  |                | 272,417   |                  
|                                       |  |                |           |                  
|Total                                  |  | $              | 1,193,448 |                  
|                                       |  |                |           |                  

18. Commitments and Contingent Liabilities

The Company holds variable interests in syndicated affordable housing partnerships where the Company provides unaffiliated investors with a guaranteed yield on
their investment. These partnerships 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." The Company's maximum exposure to loss as of March 31, 2008 was $1.7 billion, representing the $1.1 billion financing liability included in the condensed consolidated
balance sheet (i.e., a component of real estate syndication proceeds), $526.8 million of guaranteed yield due to the unaffiliated investors on their initial investment and approximately
$126.2 million of unfunded commitments from unaffiliated investors.

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
March 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 consolidated financial statements.

19. Related Party Transactions

The Company has a number of related party arrangements in conjunction with its business as more fully discussed in Note 23 to the Company's 2007 audited
consolidated financial statements. A number of these arrangements arose in connection with the Sponsor Transactions. Related party arrangements include: annual management fees paid to the Sponsors and
GMAC; transaction fees paid to certain members of the Sponsors related to the issuance of debt; arm's length transactions with members of or affiliates of the Sponsors in the ordinary course of
business; derivative arrangements with an affiliate of one of the Sponsors; debt financing arrangements with equity method investees; servicing of dealership loans owned by an affiliate of GMAC; sale
of businesses to and facility leasing arrangements with former employees; and certain expense reimbursements made to the Chief Executive Officer. The financial impacts related to these arrangements
have been properly reflected in the Company's condensed consolidated financial statements. The Company has not entered into any additional material related party arrangements subsequent to
December 31, 2007.

24

---



CAPMARK FINANCIAL GROUP INC.

Notes to Condensed Consolidated Financial Statements (unaudited) (Continued)

20. Segment Information

The operating results for the Company's six reportable business segments have been determined in accordance with SFAS No. 131, "Disclosures about Segments
of an Enterprise and Related
Information." 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 inter-segment transactions are eliminated in consolidation.

The
Company's business segments are 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.

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

|                                                        |               | Segments |            |        |   |           |       
|------------------------------------------------------- | ------------- | -------- | ---------- | ------ | - | --------- | ------
|
|Net interest income                                     |               | $        | 78,025     |        | $ | 619       |       
|Noninterest income                                      |               |          | (74,737    | )      |   | 17,489    |       
|                                                        |               |          |            |        |   |           |       
|                                                        | Total revenue |          |            | 3,288  |   |           | 18,108
|Provision for loan losses                               |               |          | 4,968      |        |   |          |       
|                                                        |               |          |            |        |   |           |       
|                                                        | Net revenue   |          |            | (1,680 | ) |           | 18,108
|Noninterest expense                                     |               |          | 47,870     |        |   | 13,369    |       
|                                                        |               |          |            |        |   |           |       
|(Loss) income before minority interest and income taxes |               |          | (49,550    | )      |   | 4,739     |       
|Minority interest income (expense)                      |               |          | 8,606      |        |   | (4,235    | )     
|                                                        |               |          |            |        |   |           |       
|(Loss) income before income taxes                       |               | $        | (40,944    | )      | $ | 504       |       
|                                                        |               |          |            |        |   |           |       
|Total assets at end of period                           |               | $        | 12,344,551 |        | $ | 1,081,545 |       
|                                                        |               |          |            |        |   |           |       

25

---





CAPMARK FINANCIAL GROUP INC.

Notes to Condensed Consolidated Financial Statements (unaudited) (Continued)

20. Segment Information (Continued)

The
following table summarizes the financial results for the Company's reportable business segments for the three months ended March 31, 2007 (in thousands):

|                                                        |               | Segments |           |         |   |           |       
|------------------------------------------------------- | ------------- | -------- | --------- | ------- | - | --------- | ------
|
|Net interest income                                     |               | $        | 61,082    |         | $ | 4,921     |       
|Noninterest income                                      |               |          | 111,084   |         |   | 94,122    |       
|                                                        |               |          |           |         |   |           |       
|                                                        | Total revenue |          |           | 172,166 |   |           | 99,043
|Provision for loan losses                               |               |          | 174       |         |   | 552       |       
|                                                        |               |          |           |         |   |           |       
|                                                        | Net revenue   |          |           | 171,992 |   |           | 98,491
|Noninterest expense                                     |               |          | 69,840    |         |   | 29,436    |       
|                                                        |               |          |           |         |   |           |       
|Income (loss) before minority interest and income taxes |               |          | 102,152   |         |   | 69,055    |       
|Minority interest income (expense)                      |               |          | 5,442     |         |   | (5,153    | )     
|                                                        |               |          |           |         |   |           |       
|Income (loss) before income taxes                       |               | $        | 107,594   |         | $ | 63,902    |       
|                                                        |               |          |           |         |   |           |       
|Total assets at end of period                           |               | $        | 9,459,960 |         | $ | 1,141,343 |       
|                                                        |               |          |           |         |   |           |       

21. 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
net worth requirements can result in the initiation of certain actions by these entities that, if undertaken, could have a material adverse effect on the Company's consolidated financial statements.
The Company was in compliance with these minimum net worth requirements as of March 31, 2008.

Capmark
Bank US and Escrow Bank must maintain minimum regulatory capital ratios to be considered "well capitalized" under the capital rules of the FDIC. In addition, both banks have
agreed with the FDIC to maintain a Tier 1 leverage ratio of not less than 8.0%. The following table summarizes the U.S. banks' regulatory capital ratios as of March 31, 2008 and
December 31, 2007:

|                          |  |      |   | March 31, 2008 |   | December 31, 2007 |  
|------------------------- |  | ---- | - | -------------- | - | ----------------- | -
|
|Tier 1 leverage           |  | 5.0  | % | 12.5           | % | 91.0              | %
|Tier 1 risk-based capital |  | 6.0  | % | 11.6           | % | 450.5             | %
|Total risk-based capital  |  | 10.0 | % | 13.9           | % | 450.5             | %

Capmark
Bank Europe, a wholly-owned subsidiary of the Company, 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

26

---



CAPMARK FINANCIAL GROUP INC.

Notes to Condensed Consolidated Financial Statements (unaudited) (Continued)

21. Regulatory Matters (Continued)

applicable
laws and related accounting standards in Ireland. The following table summarizes Capmark Bank Europe's regulatory capital and liquidity ratios as of March 31, 2008 and
December 31, 2007:

Ratio minimum

March 31, 2008

December 31, 2007Capital adequacy

15
%
41
%
64
%Liquidity

100
%
107
%
113
%


Capmark
Securities Inc., a wholly-owned U.S. subsidiary of the Company, is subject to the SEC's minimum net capital requirements. Capmark Securities Inc.'s net capital
requirement was $250,000 as of March 31, 2008 and December 31, 2007. Capmark Securities Inc.'s net capital totaled $20.9 million and $21.3 million as of
March 31, 2008 and December 31, 2007, respectively.

22. Earnings per Share

The tables below demonstrate how the Company has computed basic and diluted earnings per share. The denominator in each of the tables below includes shares of
common stock issued and sold to employees and non-employee directors for the three months ended March 31, 2008 and 2007, respectively, which are reported as mezzanine equity in the
condensed consolidated balance sheet.

The
calculation of diluted earnings per share for the three months ended March 31, 2008 excludes 32.9 million anti-dilutive stock options with
time-based vesting conditions because their effect would reduce the net loss per share. Additionally, the calculation of diluted earnings per share for the three months ended
March 31, 2008 excludes 9.8 million stock options with performance-based vesting conditions because the performance conditions had not been achieved at the end of the reporting period.

The
calculation of diluted earnings per share for the three months ended March 31, 2007 excludes 34.2 million anti-dilutive stock options with
time-based vesting conditions. Additionally, the calculation of diluted earnings per share for the three months ended March 31, 2007 excludes 10.6 million stock options with
performance-based vesting conditions because the performance conditions had not been achieved at the end of the reporting period.

Three months
ended March 31,
2008

Three months
ended March 31,
2007(In thousands, except per share amounts)Basic earnings per shareNumerator:Net (loss) income

$
(212,859
)
$
175,450Denominator:Weighted average shares outstanding


432,940


432,813Basic (loss) income per share

$
(0.49
)
$
0.41


27

---



CAPMARK FINANCIAL GROUP INC.

Notes to Condensed Consolidated Financial Statements (unaudited) (Continued)

22. Earnings per Share (Continued)

|
|

Three months
ended March 31,
2008

Three months
ended March 31,
2007(In thousands, except per share amounts)Diluted earnings per shareNumerator:Net (loss) income

$
(212,859
)
$
175,450Denominator:Weighted average shares outstanding


432,940


432,813Effect of dilutive securities





Weighted average shares outstanding


432,940


432,813Diluted (loss) income per share

$
(0.49
)
$
0.41


23. Subsequent Events

In April 2008, in two separate transactions, certain subsidiaries of the Company completed the sale of significant interests in 39 loans in the Company's European
loan portfolio to a third party institutional buyer for a total aggregate sale price of approximately $1.8 billion. The net proceeds from the two sales were used to repay outstanding debt and
for general corporate purposes. Realized losses related to the loan interests sold as well as unrealized losses related to the loan interests retained were recognized in the first quarter of 2008 and
reported as a component of net (losses) gains on loans in the condensed consolidated statement of operations because the sale prices were indicative of fair value as of March 31, 2008.

24. 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.

28

---



CAPMARK FINANCIAL GROUP INC.

Notes to Condensed Consolidated Financial Statements (unaudited) (Continued)

24. Supplemental Financial Information (Continued)

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.

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

|                                           |  | Parent |            | Guarantor
Subsidiaries |   | Non-Guarantor
Subsidiaries |  | Eliminations |            | Consolidated
|------------------------------------------ |  | ------ | ---------- | ---------------------- | - | -------------------------- |  | ------------ | ---------- | ------------
|Assets                                     |  |        |            |                        |   |                            |  |              |            |             
|Cash                                       |  | $      | 59,010     |                        | $ | 10,056                     |  | $            | 1,041,127  |             
|Investment securitiestrading              |  |        | 15,500     |                        |   | 117,305                    |  |              | 62,182     |             
|Investment securitiesother                |  |        |           |                        |   | 372,434                    |  |              | 658,148    |             
|Loans held for sale                        |  |        |           |                        |   | 2,331,584                  |  |              | 5,882,194  |             
|Loans held for investment                  |  |        |           |                        |   | 1,057,340                  |  |              | 6,580,577  |             
|Real estate                                |  |        |           |                        |   | 49                         |  |              | 1,940,651  |             
|Equity investments                         |  |        | 48,378     |                        |   | 362,715                    |  |              | 1,543,868  |             
|Other assets                               |  |        | 8,107,780  |                        |   | 1,513,153                  |  |              | 2,161,396  |             
|Investment in subsidiaries                 |  |        | 2,925,249  |                        |   | 227,618                    |  |              |           |             
|                                           |  |        |            |                        |   |                            |  |              |            |             
|Total assets                               |  | $      | 11,155,917 |                        | $ | 5,992,254                  |  | $            | 19,870,143 |             
|                                           |  |        |            |                        |   |                            |  |              |            |             
|Liabilities and Stockholders' Equity       |  |        |            |                        |   |                            |  |              |            |             
|Liabilities:                               |  |        |            |                        |   |                            |  |              |            |             
|Short-term borrowings                      |  | $      | 1,110,000  |                        | $ | 764,384                    |  | $            | 3,395,272  |             
|Long-term borrowings                       |  |        | 7,100,948  |                        |   |                           |  |              | 2,106,313  |             
|Deposit liabilities                        |  |        |           |                        |   |                           |  |              | 4,512,020  |             
|Real estate syndication proceeds           |  |        |           |                        |   |                           |  |              | 1,458,854  |             
|Other liabilities                          |  |        | 564,381    |                        |   | 3,759,287                  |  |              | 6,319,506  |             
|                                           |  |        |            |                        |   |                            |  |              |            |             
|Total liabilities                          |  |        | 8,775,329  |                        |   | 4,523,671                  |  |              | 17,791,965 |             
|                                           |  |        |            |                        |   |                            |  |              |            |             
|Commitments and Contingent Liabilities     |  |        |           |                        |   |                           |  |              |           |             
|Minority Interest                          |  |        |           |                        |   | 125,015                    |  |              | 228,198    |             
|Mezzanine Equity                           |  |        | 100,624    |                        |   |                           |  |              |           |             
|Stockholders' Equity:                      |  |        |            |                        |   |                            |  |              |            |             
|Preferred stock                            |  |        |           |                        |   |                           |  |              |           |             
|Common stock                               |  |        | 413        |                        |   | 786                        |  |              | 144,623    |             
|Other stockholders' equity                 |  |        | 2,279,551  |                        |   | 1,342,782                  |  |              | 1,705,357  |             
|                                           |  |        |            |                        |   |                            |  |              |            |             
|Total stockholders' equity                 |  |        | 2,279,964  |                        |   | 1,343,568                  |  |              | 1,849,980  |             
|                                           |  |        |            |                        |   |                            |  |              |            |             
|Total liabilities and stockholders' equity |  | $      | 11,155,917 |                        | $ | 5,992,254                  |  | $            | 19,870,143 |             
|                                           |  |        |            |                        |   |                            |  |              |            |             

29

---





CAPMARK FINANCIAL GROUP INC.

Notes to Condensed Consolidated Financial Statements (unaudited) (Continued)

24. Supplemental Financial Information (Continued)

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

|                                           |  | Parent |            | Guarantor
Subsidiaries |   | Non-Guarantor
Subsidiaries |  | Eliminations |            | Consolidated
|------------------------------------------ |  | ------ | ---------- | ---------------------- | - | -------------------------- |  | ------------ | ---------- | ------------
|Assets                                     |  |        |            |                        |   |                            |  |              |            |             
|Cash                                       |  | $      | 7,421      |                        | $ | 213,661                    |  | $            | 1,215,670  |             
|Investment securitiestrading              |  |        | 21,300     |                        |   | 98,603                     |  |              | 65,789     |             
|Investment securitiesother                |  |        |           |                        |   | 373,590                    |  |              | 635,358    |             
|Loans held for sale                        |  |        |           |                        |   | 2,453,401                  |  |              | 5,582,228  |             
|Loans held for investment                  |  |        |           |                        |   | 981,655                    |  |              | 6,123,644  |             
|Real estate                                |  |        |           |                        |   |                           |  |              | 1,748,555  |             
|Equity investments                         |  |        | 47,443     |                        |   | 369,589                    |  |              | 1,584,782  |             
|Other assets                               |  |        | 8,040,133  |                        |   | 1,505,763                  |  |              | 2,039,532  |             
|Investment in subsidiaries                 |  |        | 3,007,950  |                        |   | 210,375                    |  |              |           |             
|                                           |  |        |            |                        |   |                            |  |              |            |             
|Total assets                               |  | $      | 11,124,247 |                        | $ | 6,206,637                  |  | $            | 18,995,558 |             
|                                           |  |        |            |                        |   |                            |  |              |            |             
|Liabilities and Stockholders' Equity       |  |        |            |                        |   |                            |  |              |            |             
|Liabilities:                               |  |        |            |                        |   |                            |  |              |            |             
|Short-term borrowings                      |  | $      | 408,197    |                        | $ | 842,032                    |  | $            | 2,679,563  |             
|Long-term borrowings                       |  |        | 7,035,619  |                        |   |                           |  |              | 1,467,185  |             
|Deposit liabilities                        |  |        |           |                        |   |                           |  |              | 5,554,607  |             
|Real estate syndication Proceeds           |  |        |           |                        |   |                           |  |              | 1,563,151  |             
|Other liabilities                          |  |        | 1,071,380  |                        |   | 3,801,712                  |  |              | 5,653,202  |             
|                                           |  |        |            |                        |   |                            |  |              |            |             
|Total liabilities                          |  |        | 8,515,196  |                        |   | 4,643,744                  |  |              | 16,917,708 |             
|                                           |  |        |            |                        |   |                            |  |              |            |             
|Commitments and Contingent Liabilities     |  |        |           |                        |   |                           |  |              |           |             
|Minority Interest                          |  |        |           |                        |   | 113,357                    |  |              | 230,437    |             
|Mezzanine Equity                           |  |        | 102,418    |                        |   |                           |  |              |           |             
|Stockholders' Equity:                      |  |        |            |                        |   |                            |  |              |            |             
|Preferred stock                            |  |        |           |                        |   |                           |  |              |           |             
|Common stock                               |  |        | 413        |                        |   | 786                        |  |              | 124,206    |             
|Other stockholders' equity                 |  |        | 2,506,220  |                        |   | 1,448,750                  |  |              | 1,723,207  |             
|                                           |  |        |            |                        |   |                            |  |              |            |             
|Total stockholders' equity                 |  |        | 2,506,633  |                        |   | 1,449,536                  |  |              | 1,847,413  |             
|                                           |  |        |            |                        |   |                            |  |              |            |             
|Total liabilities and stockholders' equity |  | $      | 11,124,247 |                        | $ | 6,206,637                  |  | $            | 18,995,558 |             
|                                           |  |        |            |                        |   |                            |  |              |            |             

30

---



CAPMARK FINANCIAL GROUP INC.

Notes to Condensed Consolidated Financial Statements (unaudited) (Continued)

24. Supplemental Financial Information (Continued)

Condensed Consolidating Statement of Operations    Three months ended March 31, 2008    (in thousands)

|                                                            |                          | Parent |          | Guarantor
Subsidiaries |   | Non-Guarantor
Subsidiaries |        | Eliminations |         | Consolidated |  
|----------------------------------------------------------- | ------------------------ | ------ | -------- | ---------------------- | - | -------------------------- | ------ | ------------ | ------- | ------------ | -
|Net Interest Income                                         |                          |        |          |                        |   |                            |        |              |         |              |  
|Interest income                                             |                          | $      | 77,626   |                        | $ | 108,522                    |        | $            | 203,777 |              | $
|Interest expense                                            |                          |        | 103,363  |                        |   | 66,923                     |        |              | 158,267 |              |  
|                                                            |                          |        |          |                        |   |                            |        |              |         |              |  
|Net interest income                                         |                          |        | (25,737  | )                      |   | 41,599                     |        |              | 45,510  |              |  
|Provision for loan losses                                   |                          |        |         |                        |   | (4,541                     | )      |              | 12,212  |              |  
|                                                            |                          |        |          |                        |   |                            |        |              |         |              |  
|Net interest income after provision for loan losses         |                          |        | (25,737  | )                      |   | 46,140                     |        |              | 33,298  |              |  
|                                                            |                          |        |          |                        |   |                            |        |              |         |              |  
|Noninterest Income                                          |                          |        |          |                        |   |                            |        |              |         |              |  
|Net (losses) gains                                          |                          |        | (228,082 | )                      |   | (63,811                    | )      |              | (57,222 | )            |  
|Fee and investment income                                   |                          |        | 1,182    |                        |   | 67,600                     |        |              | 90,850  |              |  
|                                                            |                          |        |          |                        |   |                            |        |              |         |              |  
|                                                            | Total noninterest income |        |          | (226,900               | ) |                            | 3,789  |              |         | 33,628       |  
|                                                            |                          |        |          |                        |   |                            |        |              |         |              |  
|                                                            | Net revenue              |        |          | (252,637               | ) |                            | 49,929 |              |         | 66,926       |  
|                                                            |                          |        |          |                        |   |                            |        |              |         |              |  
|Noninterest Expense                                         |                          |        |          |                        |   |                            |        |              |         |              |  
|Compensation and benefits                                   |                          |        |         |                        |   | 63,999                     |        |              | 25,638  |              |  
|Other expenses                                              |                          |        | 7,557    |                        |   | 75,367                     |        |              | 44,397  |              |  
|                                                            |                          |        |          |                        |   |                            |        |              |         |              |  
|Total noninterest expense                                   |                          |        | 7,557    |                        |   | 139,366                    |        |              | 70,035  |              |  
|                                                            |                          |        |          |                        |   |                            |        |              |         |              |  
|(Loss) income before minority interest and income taxes     |                          |        | (260,194 | )                      |   | (89,437                    | )      |              | (3,109  | )            |  
|Minority interest income                                    |                          |        |         |                        |   | 8,802                      |        |              | 6,653   |              |  
|                                                            |                          |        |          |                        |   |                            |        |              |         |              |  
|(Loss) income before income taxes                           |                          |        | (260,194 | )                      |   | (80,635                    | )      |              | 3,544   |              |  
|Income taxes                                                |                          |        | (97,126  | )                      |   | (29,838                    | )      |              | (795    | )            |  
|                                                            |                          |        |          |                        |   |                            |        |              |         |              |  
|(Loss) income before equity in net earnings of subsidiaries |                          |        | (163,068 | )                      |   | (50,797                    | )      |              | 4,339   |              |  
|Equity in net loss of subsidiaries                          |                          |        | (49,791  | )                      |   | (21,985                    | )      |              |        |              |  
|                                                            |                          |        |          |                        |   |                            |        |              |         |              |  
|Net (Loss) Income                                           |                          | $      | (212,859 | )                      | $ | (72,782                    | )      | $            | 4,339   |              | $
|                                                            |                          |        |          |                        |   |                            |        |              |         |              |  

31

---





CAPMARK FINANCIAL GROUP INC.

Notes to Condensed Consolidated Financial Statements (unaudited) (Continued)

24. Supplemental Financial Information (Continued)

Condensed Consolidating Statement of Operations    Three months ended March 31, 2007    (in thousands)

|                                                     |                                                     | Parent |         | Guarantor
Subsidiaries |   | Non-Guarantor
Subsidiaries |         | Eliminations |         | Consolidated |  
|---------------------------------------------------- | --------------------------------------------------- | ------ | ------- | ---------------------- | - | -------------------------- | ------- | ------------ | ------- | ------------ | -
|Net Interest Income                                  |                                                     |        |         |                        |   |                            |         |              |         |              |  
|Interest income                                      |                                                     | $      | 112,876 |                        | $ | 140,038                    |         | $            | 185,846 |              | $
|Interest expense                                     |                                                     |        | 107,115 |                        |   | 117,147                    |         |              | 126,206 |              |  
|                                                     |                                                     |        |         |                        |   |                            |         |              |         |              |  
|                                                     | Net interest income                                 |        |         | 5,761                  |   |                            | 22,891  |              |         | 59,640       |  
|Provision for loan losses                            |                                                     |        |        |                        |   | 1,746                      |         |              | 4,899   |              |  
|                                                     |                                                     |        |         |                        |   |                            |         |              |         |              |  
|                                                     | Net interest income after provision for loan losses |        |         | 5,761                  |   |                            | 21,145  |              |         | 54,741       |  
|                                                     |                                                     |        |         |                        |   |                            |         |              |         |              |  
|Noninterest Income                                   |                                                     |        |         |                        |   |                            |         |              |         |              |  
|Net (losses) gains                                   |                                                     |        | (4,432  | )                      |   | 100,413                    |         |              | 66,514  |              |  
|Fee and investment income                            |                                                     |        | 6,835   |                        |   | 113,213                    |         |              | 155,156 |              |  
|                                                     |                                                     |        |         |                        |   |                            |         |              |         |              |  
|                                                     | Total noninterest income                            |        |         | 2,403                  |   |                            | 213,626 |              |         | 221,670      |  
|                                                     |                                                     |        |         |                        |   |                            |         |              |         |              |  
|                                                     | Net revenue                                         |        |         | 8,164                  |   |                            | 234,771 |              |         | 276,411      |  
|                                                     |                                                     |        |         |                        |   |                            |         |              |         |              |  
|Noninterest Expense                                  |                                                     |        |         |                        |   |                            |         |              |         |              |  
|Compensation and benefits                            |                                                     |        | (72     | )                      |   | 93,384                     |         |              | 26,776  |              |  
|Other expenses                                       |                                                     |        | 6,862   |                        |   | 67,750                     |         |              | 62,942  |              |  
|                                                     |                                                     |        |         |                        |   |                            |         |              |         |              |  
|                                                     | Total noninterest expense                           |        |         | 6,790                  |   |                            | 161,134 |              |         | 89,718       |  
|                                                     |                                                     |        |         |                        |   |                            |         |              |         |              |  
|Income before minority interest and income taxes     |                                                     |        | 1,374   |                        |   | 73,637                     |         |              | 186,693 |              |  
|Minority interest (expense)                          |                                                     |        |        |                        |   |                           |         |              | (14,235 | )            |  
|                                                     |                                                     |        |         |                        |   |                            |         |              |         |              |  
|Income before income taxes                           |                                                     |        | 1,374   |                        |   | 73,637                     |         |              | 172,458 |              |  
|Income taxes                                         |                                                     |        | (1,854  | )                      |   | 26,700                     |         |              | 65,127  |              |  
|                                                     |                                                     |        |         |                        |   |                            |         |              |         |              |  
|Income before equity in net earnings of subsidiaries |                                                     |        | 3,228   |                        |   | 46,937                     |         |              | 107,331 |              |  
|Equity in net earnings of subsidiaries               |                                                     |        | 172,222 |                        |   | 47,725                     |         |              |        |              |  
|                                                     |                                                     |        |         |                        |   |                            |         |              |         |              |  
|Net Income                                           |                                                     | $      | 175,450 |                        | $ | 94,662                     |         | $            | 107,331 |              | $
|                                                     |                                                     |        |         |                        |   |                            |         |              |         |              |  

32

---



CAPMARK FINANCIAL GROUP INC.

Notes to Condensed Consolidated Financial Statements (unaudited) (Continued)

24. Supplemental Financial Information (Continued)

Condensed Consolidating Statement of Cash Flows    Three months ended March 31, 2008    (in thousands)

|                                                       |  | Parent |          | Guarantor
Subsidiaries |   | Non-Guarantor
Subsidiaries |   | Eliminations |            | Consolidated |  
|------------------------------------------------------ |  | ------ | -------- | ---------------------- | - | -------------------------- | - | ------------ | ---------- | ------------ | -
|Operating Activities                                   |  |        |          |                        |   |                            |   |              |            |              |  
|Net cash (used in) provided by operating activities    |  | $      | (635,545 | )                      | $ | 81,393                     |   | $            | 161,835    |              | $
|                                                       |  |        |          |                        |   |                            |   |              |            |              |  
|Investing Activities                                   |  |        |          |                        |   |                            |   |              |            |              |  
|Net (increase) decrease in restricted cash             |  |        |         |                        |   | (387                       | ) |              | 5,505      |              |  
|Net (increase) decrease in investment securitiesother |  |        |         |                        |   | (10,821                    | ) |              | 8,934      |              |  
|Net (increase) in mortgage loans held for investment   |  |        |         |                        |   | (77,651                    | ) |              | (398,329   | )            |  
|Net (increase) in real estate                          |  |        |         |                        |   | (49                        | ) |              | (29,655    | )            |  
|Net (increase) in equity investments                   |  |        | (2       | )                      |   | (15,781                    | ) |              | (38,253    | )            |  
|Other investing activities, net                        |  |        |         |                        |   | (702                       | ) |              | (188       | )            |  
|                                                       |  |        |          |                        |   |                            |   |              |            |              |  
|Net cash (used in) investing activities                |  |        | (2       | )                      |   | (105,391                   | ) |              | (451,986   | )            |  
|                                                       |  |        |          |                        |   |                            |   |              |            |              |  
|Financing Activities                                   |  |        |          |                        |   |                            |   |              |            |              |  
|Net increase (decrease) in short-term borrowings       |  |        | 696,915  |                        |   | (180,358                   | ) |              | 575,909    |              |  
|Net (decrease) increase in long-term borrowings        |  |        | (830     | )                      |   |                           |   |              | 521,405    |              |  
|Net (decrease) in deposit liabilities                  |  |        |         |                        |   |                           |   |              | (1,066,433 | )            |  
|Net increase in real estate syndication proceeds       |  |        |         |                        |   |                           |   |              | 29,917     |              |  
|Other financing activities, net                        |  |        | (8,951   | )                      |   | 158                        |   |              | 27,580     |              |  
|                                                       |  |        |          |                        |   |                            |   |              |            |              |  
|Net cash provided by (used in) financing activities    |  |        | 687,134  |                        |   | (180,200                   | ) |              | 88,378     |              |  
|                                                       |  |        |          |                        |   |                            |   |              |            |              |  
|Effect of Foreign Exchange Rates on Cash               |  |        | 2        |                        |   | 206                        |   |              | 32,735     |              |  
|                                                       |  |        |          |                        |   |                            |   |              |            |              |  
|Net Increase (Decrease) in Cash and Cash Equivalents   |  |        | 51,589   |                        |   | (203,992                   | ) |              | (169,038   | )            |  
|Cash and Cash Equivalents, Beginning of Period         |  |        | 7,421    |                        |   | 205,785                    |   |              | 991,271    |              |  
|                                                       |  |        |          |                        |   |                            |   |              |            |              |  
|Cash and Cash Equivalents, End of Period               |  | $      | 59,010   |                        | $ | 1,793                      |   | $            | 822,233    |              | $
|                                                       |  |        |          |                        |   |                            |   |              |            |              |  

33

---





CAPMARK FINANCIAL GROUP INC.

Notes to Condensed Consolidated Financial Statements (unaudited) (Continued)

24. Supplemental Financial Information (Continued)

Condensed Consolidating Statement of Cash Flows        Three months ended March 31, 2007        (in thousands)

|                                                              |  | Parent |          | Guarantor
Subsidiaries |   | Non-Guarantor
Subsidiaries |   | Eliminations |            | Consolidated |  
|------------------------------------------------------------- |  | ------ | -------- | ---------------------- | - | -------------------------- | - | ------------ | ---------- | ------------ | -
|Operating Activities                                          |  |        |          |                        |   |                            |   |              |            |              |  
|Net cash provided by (used in) operating activities           |  | $      | 302,850  |                        | $ | 1,402,545                  |   | $            | (1,175,779 | )            | $
|                                                              |  |        |          |                        |   |                            |   |              |            |              |  
|Investing Activities                                          |  |        |          |                        |   |                            |   |              |            |              |  
|Net decrease (increase) in restricted cash                    |  |        |         |                        |   | 26,540                     |   |              | (13,719    | )            |  
|Net decrease (increase) in investment securitiesother        |  |        | 3,163    |                        |   | (325,434                   | ) |              | 515,925    |              |  
|Net decrease (increase) in mortgage loans held for investment |  |        |         |                        |   | 110,763                    |   |              | (208,142   | )            |  
|Net decrease (increase) in real estate                        |  |        |         |                        |   | 494                        |   |              | (163,821   | )            |  
|Net decrease (increase) in equity investments                 |  |        | 15,568   |                        |   | (107,278                   | ) |              | (162,535   | )            |  
|Other investing activities, net                               |  |        |         |                        |   | (12,252                    | ) |              | (3,841     | )            |  
|                                                              |  |        |          |                        |   |                            |   |              |            |              |  
|Net cash provided by (used in) investing activities           |  |        | 18,731   |                        |   | (307,167                   | ) |              | (36,133    | )            |  
|                                                              |  |        |          |                        |   |                            |   |              |            |              |  
|Financing Activities                                          |  |        |          |                        |   |                            |   |              |            |              |  
|Net (decrease) increase in short-term borrowings              |  |        | (388,118 | )                      |   | (11,039                    | ) |              | 15,062     |              |  
|Net (decrease) in long-term borrowings                        |  |        | (1,982   | )                      |   | (714,571                   | ) |              | (84,677    | )            |  
|Net increase in deposit liabilities                           |  |        |         |                        |   |                           |   |              | 1,073,558  |              |  
|Net increase in real estate syndication proceeds              |  |        |         |                        |   |                           |   |              | 78,443     |              |  
|Other financing activities, net                               |  |        | (37,178  | )                      |   | (365,235                   | ) |              | 441,179    |              |  
|                                                              |  |        |          |                        |   |                            |   |              |            |              |  
|Net cash (used in) provided by financing activities           |  |        | (427,278 | )                      |   | (1,090,845                 | ) |              | 1,523,565  |              |  
|                                                              |  |        |          |                        |   |                            |   |              |            |              |  
|Effect of Foreign Exchange Rates on Cash                      |  |        |         |                        |   | 104                        |   |              | 2,561      |              |  
|                                                              |  |        |          |                        |   |                            |   |              |            |              |  
|Net (Decrease) Increase in Cash and Cash Equivalents          |  |        | (105,697 | )                      |   | 4,637                      |   |              | 314,214    |              |  
|Cash and Cash Equivalents, Beginning of Period                |  |        | 125,228  |                        |   | 6,765                      |   |              | 318,939    |              |  
|                                                              |  |        |          |                        |   |                            |   |              |            |              |  
|Cash and Cash Equivalents, End of Period                      |  | $      | 19,531   |                        | $ | 11,402                     |   | $            | 633,153    |              | $
|                                                              |  |        |          |                        |   |                            |   |              |            |              |  

34

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Item 2.    Management's Discussion and Analysis of Financial Condition and Results of Operations

Our "Management's Discussion and Analysis of Financial Condition and Results of Operations" is organized as follows:



Forward-Looking Statements

This report contains forward-looking statements within the meaning of the federal securities laws. Forward-looking statements relate to expectations, beliefs,
projections, future plans and strategies, anticipated events or trends and similar expressions concerning matters that are not historical facts. In some cases, you can identify these statements by our
use of forward-looking words such as "may," "will," "should," "anticipate," "estimate," "expect," "plan," "believe," "predict," "potential," "project," "intend," "could" or similar expressions. In
particular, statements regarding our plans, strategies, prospects and expectations regarding our business are forward-looking statements. These statements are based on management's current
expectations and beliefs but are subject to a number of factors and uncertainties that could cause actual results to differ materially from those described in the forward-looking statements. These
risks and uncertainties include, among others, adverse changes in debt and capital markets conditions, which may adversely impact our access to capital on acceptable terms or the value or salability
of our real estate related investments; interest rate and credit spread fluctuations; adverse changes in commercial real estate markets; changes in general economic and business conditions, which
will, among other things, affect the amount we may earn on products and services and the availability and credit worthiness of its customers; changes in applicable laws and regulations; risks posed by
competition; currency risks and other risks associated with international markets. In addition, other risks and uncertainties that could cause our actual results to be materially different from our
expectations include the risks and uncertainties set forth under "Risk Factors" in our

35

---



prospectus
dated March 26, 2008, filed with the SEC in accordance with Rule 424(b)(3) of the Securities Act on March 28, 2008.

Such
forward-looking statements are made only as of the date of this report. We expressly disclaim any obligation or undertaking to release publicly any updates or revisions to any
forward-looking statements contained herein to reflect any change in our expectations with regard thereto or changes in events, conditions, or circumstances on which any such statement is based.

Overview

We are a diversified company that provides a broad range of financial services to investors in commercial real estate-related assets. We have three core
businesses: lending and mortgage banking, investments and funds management, and loan servicing. Capmark operates in North America, Europe and Asia. As used herein, the terms "we," "us" and "our" refer
to Capmark Financial Group Inc. and its subsidiaries as a consolidated group, except where it is clear that the term means only Capmark Financial Group Inc. As of March 31, 2008,
we had more than 2,000 employees located in 55 offices worldwide.

We
originated $2.7 billion and $8.8 billion in aggregate principal amount of financing during the three months ended March 31, 2008 and 2007, respectively. Our
global primary, master and special servicing portfolio included more than 54,000 loans with an aggregate outstanding principal balance of $380.2 billion as of March 31, 2008 compared to
$371.7 billion as of December 31, 2007. Real estate related assets under management were approximately $10.2 billion as of March 31, 2008 compared to $10.3 billion
as of December 31, 2007. During the three months ended March 31, 2008, we incurred a net loss of $212.9 million primarily due to significant changes in fair value on our portfolio
of loans held for sale. During the three months ended March 31, 2007, we earned net revenue of $521.2 million and net income of $175.5 million. As of March 31, 2008, our
total assets were $23.6 billion and our stockholders' equity was $2.3 billion. Originated assets that have become non-performing (which we refer to as originated
non-performing assets) were 0.9% of total assets as of March 31, 2008 and December 31, 2007.

For
management reporting purposes, we conduct our commercial real estate lending and mortgage banking, investments and funds management, and servicing businesses through six business
segments. These business segments, which are organized based on geography and the type of business conducted, are as follows:



Presentation of Our Segment Results

We present the results of operations for our six business segments in accordance with SFAS No. 131, "Disclosures about Segments of an Enterprise and
Related Information," or "SFAS No. 131." This standard is based on a management approach, which requires presentation of our segments based upon our organization and internal reporting of
results of operations.

36

---



Our
segment results have been prepared using a reporting methodology that is different from the reporting methodology used in our consolidated financial statements and, as a result, are
not directly comparable to our consolidated results. In particular:



The
following tables present summary financial information for each of our six business segments for the periods indicated. The table also presents reconciling amounts that were included
in "Corporate

37

---



and
Other" to reconcile management's reporting of our segment financial information to amounts included in our consolidated financial statements (in thousands):

|                                                |                                               | Three months ended March, 31 |         
|----------------------------------------------- | --------------------------------------------- | ---------------------------- | --------
|
|Net Revenue(1):                                 |                                               |                              |         
|North American Lending and Mortgage Banking     |                                               | $                            | (1,680  
|North American Investments and Funds Management |                                               |                              | 18,108  
|North American Servicing                        |                                               |                              | 75,026  
|Asian Operations                                |                                               |                              | 7,898   
|European Operations                             |                                               |                              | (238,688
|North American Affordable Housing               |                                               |                              | 2,826   
|                                                |                                               |                              |         
|                                                | Subtotal                                      |                              |         
|Corporate and Other:                            |                                               |                              |         
|                                                | Corporate functions and immaterial businesses |                              |         
|                                                | Consolidated affordable housing partnerships  |                              |         
|                                                | Push down accounting adjustments              |                              |         
|                                                | Eliminations and other adjustments            |                              |         
|                                                | Deferral of placement fees                    |                              |         
|                                                |                                               |                              |         
|Total Corporate and Other                       |                                               |                              | (3,240  
|                                                |                                               |                              |         
|Consolidated amount                             |                                               | $                            | (139,750
|                                                |                                               |                              |         
|(Loss) Income Before Income Taxes:              |                                               |                              |         
|North American Lending and Mortgage Banking     |                                               | $                            | (40,944 
|North American Investments and Funds Management |                                               |                              | 504     
|North American Servicing                        |                                               |                              | 23,253  
|Asian Operations                                |                                               |                              | (19,119 
|European Operations                             |                                               |                              | (246,602
|North American Affordable Housing               |                                               |                              | (5,795  
|                                                |                                               |                              |         
|                                                | Subtotal                                      |                              |         
|Corporate and Other:                            |                                               |                              |         
|                                                | Corporate functions and immaterial businesses |                              |         
|                                                | Push down accounting adjustments              |                              |         
|                                                |                                               |                              |         
|Total Corporate and Other                       |                                               |                              | (44,159 
|                                                |                                               |                              |         
|Consolidated amount                             |                                               | $                            | (332,862
|                                                |                                               |                              |         

38

---



|
|

|                                                |                                               | March 31,
2008 |            | December 31,
2007
|----------------------------------------------- | --------------------------------------------- | -------------- | ---------- | -----------------
|Total Assets:                                   |                                               |                |            |                  
|North American Lending and Mortgage Banking     |                                               | $              | 12,344,551 |                  
|North American Investments and Funds Management |                                               |                | 1,081,545  |                  
|North American Servicing                        |                                               |                | 862,514    |                  
|Asian Operations                                |                                               |                | 3,087,171  |                  
|European Operations                             |                                               |                | 3,063,943  |                  
|North American Affordable Housing               |                                               |                | 1,027,740  |                  
|                                                |                                               |                |            |                  
|                                                | Subtotal                                      |                |            | 21,467,464       
|Corporate and Other:                            |                                               |                |            |                  
|                                                | Corporate functions and immaterial businesses |                |            | 474,297          
|                                                | Consolidated affordable housing partnerships  |                |            | 1,402,099        
|                                                | Push down accounting adjustments              |                |            | 211,333          
|                                                |                                               |                |            |                  
|Total Corporate and Other                       |                                               |                | 2,087,729  |                  
|                                                |                                               |                |            |                  
|Consolidated amount                             |                                               | $              | 23,555,193 |                  
|                                                |                                               |                |            |                  

---

Note:

Outlook and Recent Trends

In the first quarter of 2008, conditions in the credit and debt markets continued to deteriorate. Credit spreads (which relate to our cost of funds) have
continued to widen. Banks and other lending institutions have tightened lending standards and restricted credit. The structured credit markets, including the CMBS and CDO markets, have remained
severely limited. Although delinquencies in the commercial real estate markets have not significantly increased in the first quarter, the lack of liquidity in the CMBS and other commercial mortgage
markets has continued to negatively affect origination, sales and financing activity.

In
the United States, the U.S. Federal Reserve has responded to these market conditions by lowering the federal funds rate from a high of 5.25% in September 2007 to 2.00% in April 2008
and by providing liquidity to financial institutions through various funding programs. Notwithstanding the Federal Reserve's measures, from which Capmark Bank US has benefited, capital markets
conditions remain challenging. Our expectation is that the commercial real estate market will continue to be stressed throughout 2008 due to weaker economic conditions and reduced liquidity.

As
a result of the current market conditions, we have experienced reduced origination and sales activity. We have also recognized downward changes in fair value on our portfolio of loans
held for sale and investment securities. Although our loans and investments may be performing in accordance with their underlying agreements, and the expected underlying collateral performance has not
changed, the fair values of these loans and investments have been negatively affected by the market valuation of such instruments.

Despite
the obstacles presented in the current environment, we believe the long-term outlook for our three core businesses; lending and mortgage banking, investments and
funds management, and loan servicing, remains generally positive. We will continue to manage our originations, changing mix of among product types to emphasize products with better liquidity and lower
funding costs, including GSE and third party originations, and commercial mortgage loans funded by Capmark Bank US. We

39

---



will
also continue to focus on our recurring fee businesses, such as servicing and investments and funds management.

Results of Operations

Consolidated

The following table summarizes our consolidated results of operations for the three months ended March 31, 2008 and 2007 (in thousands):

Three months ended
March 31,2008

2007Net interest income

$
61,103

$
83,554Noninterest income


(193,224
)

443,996Total revenue


(132,121
)

527,550Provision for loan losses


7,629


6,319Net revenue


(139,750
)

521,231Noninterest expense


208,610


235,853(Loss) income before minority interest and income taxes


(348,360
)

285,378Minority interest income (expense)


15,498


(8,534
)(Loss) income before income taxes


(332,862
)

276,844Income taxes


(120,003
)

101,394Net (loss) income

$
(212,859
)
$
175,450


We
incurred a net loss of $212.9 million for the three months ended March 31, 2008 compared to net income of $175.5 million for the three months ended
March 31, 2007. The current quarter loss was attributable to pre-tax net losses on loans of $357.2 million primarily resulting from changes in fair value on our portfolio of loans held
for sale, compared to pre-tax net gains on loans of $77.2 million for the three months ended March 31, 2007. In addition, last year included a $65.3 million
non-recurring gain on the sale of a majority of our affordable housing debt platform. In total, net gains declined $529.0 million in the first quarter of 2008 compared to the first
quarter of 2007. Our fee and investment income also declined $108.2 million largely due to declines in our equity in net income of joint ventures and partnerships due to adverse market
conditions in 2008 and performance-based asset management fees earned in the first quarter of 2007 that were not achieved in the first quarter of 2008. These unfavorable variances were partly offset
by a $27.3 million decrease in noninterest expense primarily attributable to lower fixed and variable compensation expense related to the decline in operating results.

Net Interest Income

The following table summarizes our net interest income for the three months ended March 31, 2008 and 2007 (in thousands):

Three Months Ended
March 31,Net Interest Income

2008

2007Interest income

$
276,978

$
297,417Interest expense


215,875


213,863Net interest income

$
61,103

$
83,554


40

---



Net interest income was $61.1 million in the first quarter of 2008 as compared to $83.6 million in the same period in 2007. The decline was primarily due to lower average
spreads on interest-earning assets and a reduction of accretion income on acquired non-performing loans year over year. The decline in spread income was largely offset by gains on interest
rate hedges included in noninterest income in the first quarter of 2008. The reduction in accretion income on acquired non-performing loans was driven by resolutions or sales of such loans
and fewer acquisitions.



We earn interest income primarily from the loans that we originate and hold for sale or investment, from the accretion of income on non-performing
loans that we acquire at a discount to their face value and from the investment securities that we carry on our consolidated balance sheet. The investment securities that we carry on our consolidated
balance sheet consist of beneficial interests in CMBS, ABS and CDOs; tax-exempt securities; certain Japanese bonds backed by commercial mortgage whole loans that we refer to as TMK
securities; securities backed by Ginnie Mae, Fannie Mae and Freddie Mac; U.S. Treasury and other securities; and securities that we acquire for short-term trading purposes. In connection
with the sale of the majority of our affordable housing debt platform in February 2007, we sold a significant portion of the tax-exempt housing bonds that we owned. Unrelated to the sale
of the majority of the affordable housing debt platform, we also sold $746.1 million of tax-exempt bonds related to the tender option bond program and repaid the outstanding related
financing of $731.6 million.

We
hold both fixed and floating rate assets on our consolidated balance sheet. Because our interest-bearing liabilities are predominately floating rate, our policy is to hedge the
interest rate risk associated with our fixed rate assets through the use of derivative instruments and other risk mitigation strategies. However, because the net gains and losses associated with these
derivative instruments generally are not classified as interest income, we may experience volatility in our reported amounts of net interest income.

The
following table summarizes our sources of interest income for the three months ended March 31, 2008 and 2007 (in thousands):

Three Months Ended
March 31,Interest Income2008

2007Loans(1)

$
226,904

$
213,489Investment securities


21,126


26,476Acquired non-performing loans


8,336


15,055Assets collateralized in securitization trusts


3,794


24,391Escrow balances


8,086


11,726Other


8,732


6,280Total

$
276,978

$
297,417






Our interest expense consists primarily of amounts we pay third parties under our debt financing arrangements including our notes, interest that accrues on our
deposit liabilities and interest that we are required to pay on a portion of the escrow balances with respect to which we earn trust fees or other types of income. Interest expense relating to our
deposit liabilities has grown significantly in

41

---



recent
years as a result of an increase in the amount of interest-bearing deposit liabilities maintained by third parties at Capmark Bank US.

We
issue both fixed and floating rate borrowings and fixed rate deposit liabilities on our consolidated balance sheet. Our policy is to generally convert our fixed rate borrowings and
deposit liabilities to floating rate borrowings and deposit liabilities through the use of derivative instruments and other risk mitigation strategies. However, because the net gains and losses
associated with these derivatives instruments generally are not classified as interest expense, we may experience volatility in our reported amounts of net interest income.

The
following table summarizes our sources of interest expense for the three months ended March 31, 2008 and 2007 (in thousands):

Three Months Ended March 31,Interest Expense2008

2007Long-term borrowings

$
107,301

$
110,964Short-term borrowings


35,480


43,242Deposit liabilities


63,658


38,610Collateralized borrowings in securitization trusts


3,870


22,529Other(1)


5,566


(1,482
)Total

$
215,875

$
213,863




Noninterest Income



Our noninterest income includes net realized and unrealized gains and losses on loans, trading derivatives, investment securities, real estate investments and
equity investments. Effective January 1, 2008, we carry substantially all of our loans held for sale at fair value in accordance with SFAS No. 159. Prior to January 1, 2008, we
carried our loans held for sale at the lower of cost or fair value in accordance with SFAS No. 65. If we are required to write down the value of a loan that we hold for sale as a result of a
decrease in the loan's fair value, we reduce our noninterest income by an amount equal to the write-down in the carrying value of the loan. This change in fair value is reported as a
component of net (losses) gains on loans in our consolidated statement of operations. For the
three months ended March 31, 2008, we recorded net losses on loans of $357.2 million primarily due to changes in fair value related to our portfolio of loans held for sale driven by
adverse market conditions.

Historically
we generated net gains in connection with our sales of loans through securitization and syndication activities. In recent periods, market conditions have adversely affected
our ability to securitize and syndicate loans and other assets. As a result, our level of net gains resulting from these activities has declined, and we expect our net losses and gains to continue to
fluctuate from period to period.

42

---



The
following table presents information concerning our net (losses) gains for the three months ended March 31, 2008 and 2007 (in thousands):

Three Months Ended March 31,Net (Losses) Gains2008

2007Net (losses) gains on loans

$
(357,167
)
$
77,207Net (losses) gains on investments and real estate(1)


(11,738
)

43,075Other gains, net(2)


19,251


59,060Total

$
(349,654
)
$
179,342






The majority of our noninterest income is fee-based income that we earn from our three core business lines. Additionally, our noninterest income
includes our allocable share of the earnings generated by our interests in joint ventures and partnerships that we account for under the equity method, which primarily consists of our investments in
affordable housing partnerships in the U.S., investments in real estate equity investment funds in the U.S., investments in real estate projects, joint ventures and real estate equity investment funds
in Europe, and investments in non-performing commercial loan and real estate joint ventures principally in Asia, and real estate investment income (generally net rental income) that is
generated by investments in real property that we carry as assets on our consolidated balance sheet. Substantially all of these properties are located in Asia or are owned by our consolidated
lower-tier LIHTC partnerships.

43

---



The
following table summarizes our sources of fee and investment income for the three months ended March 31, 2008 and March 31, 2007 (in thousands):

Three Months Ended March 31,Fee and Investment Income2008

2007Mortgage servicing fees

$
54,210

$
55,214Placement fees


17,630


22,933Investment banking fees(1)


6,547


11,509Structuring fees and investment syndication income(1)


7,276


4,719Asset management fees


18,763


44,329Trust fees and document custodial income


35,382


41,720Other fees


3,001


17,834Equity in (loss) income of joint ventures and partnerships


(9,993
)

43,054Net real estate investment income(2)


19,344


20,702Other(2)


4,270


2,640Total

$
156,430

$
264,654




Our
fee and investment income totaled $156.4 million for the three months ended March 31, 2008 compared to $264.7 million for the three months ended March 31,
2007. The $108.3 million decrease was due primarily to a reduction in our asset management fees and equity in income of joint ventures and partnerships. Asset management fees declined
$25.6 million primarily due to fees earned in the first quarter of 2007 related to achieving certain performance criteria that were not achieved in the first quarter of 2008. Equity in income
of joint ventures and partnerships declined $53.0 million primarily due to changes in fair value on investment funds and losses recognized by the underlying joint venture investments.

Provision for Loan Losses

We maintain an allowance for loan losses on our loans held for investment in order to provide for the risk of loan losses inherent in the lending process. To
recognize increases in this allowance, we record a provision for loan losses in our consolidated statement of operations. These provisions are estimates and involve judgment and consideration of a
number of factors including: our 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.

Our
provision for loan losses was $7.6 million for the three months ended March 31, 2008 compared to $6.3 million for the three months ended March 31, 2007.

Noninterest Expense

Our noninterest expense consists primarily of the compensation and benefits that we pay our employees; amortization charges that we record with respect to our
mortgage servicing rights; costs relating to our office space and equipment; professional fees that we pay our legal, accounting and other service providers; and other various expenses.

44

---



The following table summarizes our sources of noninterest expense for the three months ended March 31, 2008 and 2007 (in thousands):

Three Months Ended March 31,Noninterest Expense2008

2007Compensation and benefits

$
89,637

$
120,029Amortization of mortgage servicing rights


35,232


31,380Occupancy and equipment


21,750


22,053Professional fees


24,292


21,307Other expenses(1)


37,699


41,084Total

$
208,610

$
235,853




Our
noninterest expense totaled $208.6 million for the three months ended March 31, 2008 compared to $235.9 million for the three months ended March 31, 2007.
The $27.3 million decrease in noninterest expense was due primarily to a $30.4 million reduction in our compensation and benefits expense and a $3.4 million decrease in other
expenses. The reduction in compensation and benefits was primarily attributable to lower incentive compensation expense related to the decline in operating results.

Minority Interest

Our consolidated financial statements include the results of entities in which third parties own an interest. These entities consist primarily of joint ventures
that our Asian Operations segment has established for purposes of making investments in non-performing loans as well as our upper-tier and lower-tier LIHTC
partnerships. The consolidation of these entities in our financial statements requires us to recognize all of the income and all of the expenses that these entities record during an accounting period.
When calculating our net income, the portion of the income and expenses of consolidated entities that are attributable to minority investors in those entities is reflected as minority interest income
or expense, as appropriate, in our consolidated statement of operations.

Our
minority interest income totaled $15.5 million for the three months ended March 31, 2008, compared to minority interest expense of $8.5 million for the three
months ended March 31, 2007, due to losses incurred in the first quarter of 2008 by joint ventures and other investments in which third parties held a minority interest compared to income
earned by such entities in the first quarter of 2007.

Income Taxes

We account for income taxes under the asset and liability method in accordance with SFAS No. 109, "Accounting for Income Taxes," or "SFAS No. 109."
On January 1, 2007, we 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

45

---



"more-likely-than-not"
to be sustained based solely on its technical merits, no benefits of the tax position are to be recognized.

We
recorded an income tax benefit of $120.0 million for the three months ended March 31, 2008, compared to an income tax provision of $101.4 million for the three
months ended March 31, 2007, due to the change in pre-tax earnings between the periods.



To reconcile our management reporting of our segment financial information to amounts included in our consolidated financial statements, we have excluded certain
items and categorized them as "Corporate and Other." As described more fully in "Management's Discussion and Analysis of Financial Condition and Results of
OperationsPresentation of Our Segment Results,"our six reportable business segments do not include certain corporate overhead expenses, certain immaterial
businesses, allocation of income taxes, adjustments required by push down accounting, or any other eliminations, reclassifications or other adjustments that are made to conform our management
reporting to our consolidated financial statements.

The
loss before income taxes remained relatively constant at $44.2 million and $44.5 million for the three months ended March 31, 2008 and 2007, respectively. These
amounts include unallocated personnel-related expenses for corporate departments such as accounting, tax, treasury, legal, information technology, human resources and internal audit. An increase in
the loss before income taxes of $7.8 million associated with corporate functions and immaterial businesses was offset by a decrease in the loss before income taxes of $8.1 million
associated with push down accounting.

Segments

North American Lending and Mortgage Banking Segment

The following table summarizes the results of operations of our North American Lending and Mortgage Banking segment for the three months ended March 31,
2008 and 2007 (in thousands):

Three Months Ended March 31,2008

2007Net interest income

$
78,025

$
61,082Noninterest income


(74,737
)

111,084Total revenue


3,288


172,166Provision for loan losses


4,968


174Net revenue


(1,680
)

171,992Noninterest expense


47,870


69,840(Loss) income before minority interest and income taxes


(49,550
)

102,152Minority interest income


8,606


5,442(Loss) income before income taxes

$
(40,944
)
$
107,594


Our
North American Lending and Mortgage Banking segment incurred a loss before income taxes of $40.9 million for the three months ended March 31, 2008 compared to income
before income taxes of $107.6 million for the three months ended March 31, 2007. The $148.5 million decrease was driven primarily by changes in fair value due to continued adverse
market conditions in the first quarter of 2008 partially offset by lower noninterest expense and higher net interest income.

Net
interest income totaled $78.0 million for the three months ended March 31, 2008 compared to $61.1 million for the three months ended March 31, 2007. The
$16.9 million increase was primarily the

46

---



result
of an increase in interest-earning assets. Total assets as of March 31, 2008 were $12.3 billion compared to $9.5 billion as of March 31, 2007.

Noninterest
income was a negative $74.7 million for the three months ended March 31, 2008 compared to $111.1 million of income for the three months ended
March 31, 2007. The $185.8 million decline was driven by a decrease in net gains and placement fees. Net gains decreased $153.8 million for the three months ended March 31,
2008 compared to the same period in 2007. Losses attributed to the valuation of loans held for sale increased by $81.7 million as a result of market volatility in credit spreads. Gains
recognized from the sale of loans decreased $36.4 million due to the absence of securitization transactions during the three months ended March 31, 2008. Losses attributed to hedging
activity increased $34.8 million in the comparison. All other gains decreased $0.9 million. Placement fees decreased $27.3 million due to a decrease in origination volume of
$5.2 billion or 67% compared to last year. All other noninterest income decreased $4.7 million primarily due to lower exit fees and other miscellaneous income.

The
provision for loan losses totaled $5.0 million for the three months ended March 31, 2008 compared to $0.2 million for the three months ended March 31,
2007. The $4.8 million increase in provision was primarily due to the addition of a specific reserve for a single large loan.

Noninterest
expense totaled $47.9 million for the three months ended March 31, 2008 compared to $69.8 million for the three months ended March 31, 2007. The
$21.9 million decrease was primarily driven by a $28.5 million decline in compensation and benefits due to a reduction in incentive compensation related to a decline in operating
results. All other noninterest expense increased $6.5 million primarily due to an increase in professional fees and occupancy expense.

Minority
interest income totaled $8.6 million for the three months ended March 31, 2008 compared to $5.4 million for the three months ended March 31, 2007.
The $3.2 million increase was due to an increase in minority interest income associated with certain new markets tax credit ("NMTC") partnerships that are consolidated under applicable
accounting guidance. The majority of the increase was due to a provision for loan losses in our consolidated statement of operations that is allocated to the minority interest holders of such NMTC
partnerships. The increase in provision for loan losses resulted in an increase in minority interest income equal to the third-party investors' allocation of such provision.

North American Investments and Funds Management Segment

The following table summarizes the results of operations of our North American Investments and Funds Management segment for the three months ended
March 31, 2008 and 2007 (in thousands):

Three Months Ended
March 31,2008

2007Net interest income

$
619

$
4,921Noninterest income


17,489


94,122Total revenue


18,108


99,043Provision for loan losses





552Net revenue


18,108


98,491Noninterest expense


13,369


29,436Income before minority interest and income taxes


4,739


69,055Minority interest expense


(4,235
)

(5,153
)Income before income taxes

$
504

$
63,902


47

---



Income
before income taxes totaled $0.5 million for the three months ended March 31, 2008 compared to $63.9 million for the three months ended March 31, 2007.
The $63.4 million decrease resulted primarily from a reduction in equity in income of joint ventures and partnerships partly offset by a lower noninterest expense.

Net
interest income totaled $0.6 million for the three months ended March 31, 2008 compared to $4.9 million for the three months ended March 31, 2007. The
$4.3 million decrease was primarily due to a decrease in interest-earning assets, particularly CMBS, for the three months ended March 31, 2008 compared to the prior year.

Noninterest
income totaled $17.5 million for the three months ended March 31, 2008 compared to $94.1 million for the three months ended March 31, 2007. The
$76.6 million decrease was driven by a $28.5 million reduction in equity in income of joint ventures and partnerships related to the flow-through impact of lower gains from
real estate equity and debt funds, a $26.2 million decrease in net gains on investment securities primarily due to non-recurring realized gains in 2007 on the sale of CMBS, a
decrease in placement fees of $10.5 million due to fewer transactions that we earn such fees on, and a decrease in asset management fees of $8.9 million due to non-recurring
fees earned in 2007 related to achieving certain performance criteria.

Noninterest
expense totaled $13.4 million for the three months ended March 31, 2008 compared to $29.4 million for the three months ended March 31, 2007. The
$16.0 million decrease was primarily due to a reduction in incentive compensation expense of $17.4 million related to the decline in operating results.

North American Servicing Segment

The following table summarizes the results of operations of our North American Servicing segment for the three months ended March 31, 2008 and 2007 (in
thousands):

Three Months Ended
March 31,2008

2007Net interest income

$
(4,087
)
$
(3,462
)Noninterest income


79,113


99,598Total revenue


75,026


96,136Provision for loan losses





(125
)Net revenue


75,026


96,261Noninterest expense


51,773


52,239Income before minority interest and income taxes


23,253


44,022Minority interest income





Income before income taxes

$
23,253

$
44,022


Income
before income taxes totaled $23.3 million for the three months ended March 31, 2008 compared to $44.0 million for the three months ended March 31,
2007. The $20.7 million decrease was primarily driven by lower noninterest income.

Noninterest
income totaled $79.1 million for the three months ended March 31, 2008 compared to $99.6 million for the three months ended March 31, 2007. The
$20.5 million decrease was driven by lower trust fees and document custodial income, mortgage servicing fees, and other fees. Trust fees and document custodial income decreased
$12.0 million due to the lower interest rate environment. Trust fees, although a component of noninterest income, are interest rate sensitive. Mortgage servicing fees decreased
$4.7 million primarily as a result of a lower weighted average service fee on our North American servicing portfolio. Other fees declined $4.2 million due to lower transaction volume in
the

48

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commercial
mortgage market and the absence of revenues from our former technology subsidiary, EnableUS, Inc., sold in April 2007.

Asian Operations Segment

The following table summarizes the results of operations of our Asian Operations segment for the three months ended March 31, 2008 and 2007 (in thousands):

Three Months Ended
March 31,2008

2007Net interest income

$
7,364

$
13,088Noninterest income


3,359


67,188Total revenue


10,723


80,276Provision for loan losses


2,825


4,479Net revenue


7,898


75,797Noninterest expense


27,091


22,739(Loss) income before minority interest and income taxes


(19,193
)

53,058Minority interest income (expense)


74


(3,755
)(Loss) income before income taxes

$
(19,119
)
$
49,303


Our
Asian Operations segment incurred a loss before income taxes of $19.1 million for the three months ended March 31, 2008 compared to income before income taxes of
$49.3 million for the three months ended March 31, 2007. The $68.4 million decrease was primarily driven by a reduction in noninterest income due to lower net gains in 2008
compared to 2007 and real estate impairments recorded in 2008.

Net
interest income totaled $7.4 million for the three months ended March 31, 2008 compared to $13.1 million for the three months ended March 31, 2007. The
$5.7 million decrease was attributable to a reduction in the balance of acquired non-performing loans and an increase in real estate investments that are not interest-earning
assets. The decrease in the portfolio of acquired non-performing loans was driven by resolutions or sales of such loans and fewer acquisitions, with certain proceeds reinvested in
noninterest-earning real estate investments.

Noninterest
income totaled $3.4 million for the three months ended March 31, 2008 compared to $67.2 million for the three months ended March 31, 2007. The
$63.8 million decrease was driven primarily by lower net gains and lower equity in income of joint ventures and partnerships. Net gains decreased $55.1 million due to real estate
impairments of $20.4 million and changes in fair value of loans totaling $3.2 million in 2008, and non-recurring opportunistic sales of certain real estate investments in
2007. Equity in income of joint ventures and partnerships declined $4.2 million due to certain real estate joint ventures terminating in 2007 upon asset disposition.

The
provision for loan losses totaled $2.8 million for the three months ended March 31, 2008 compared to $4.5 million for the three months ended March 31,
2007 due to the decrease in the portfolio of acquired non-performing loans.

Noninterest
expense totaled $27.1 million for the three months ended March 31, 2008 compared to $22.7 million for the three months ended March 31, 2007. The
$4.4 million increase was mainly attributable to miscellaneous expenses of $6.5 million from a real estate investment consolidated in 2008 partly offset by lower loan processing fees (a
component of other expenses) of $3.3 million. The decrease in loan processing fees was mainly due to lower brokerage fees driven by fewer real estate acquisitions.

49

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European Operations Segment

The following table summarizes the results of operations of our European Operations segment for the three months ended March 31, 2008 and 2007 (in
thousands):

Three Months Ended
March 31,2008

2007Net interest income

$
4,852

$
9,129Noninterest income


(243,582
)

28,694Total revenue


(238,730
)

37,823Provision for loan losses


(42
)

(317
)Net revenue


(238,688
)

38,140Noninterest expense


7,914


9,853(Loss) income before minority interest and income taxes


(246,602
)

28,287Minority interest income





(Loss) income before income taxes

$
(246,602
)
$
28,287


Our
European Operations segment incurred a loss before income taxes of $246.6 million for the three months ended March 31, 2008 compared to income before
income taxes of $28.3 million for the three months ended March 31, 2007. The $274.9 million decrease was primarily due to significant changes in fair value recognized on our
portfolio of loans held for sale.

Net
interest income totaled $4.9 million for the three months ended March 31, 2008 compared to $9.1 million for the three months ended March 31, 2007. The
$4.2 million decrease was primarily driven by an increase in the cost of funds.

Noninterest
income was a negative $243.6 million for the three months ended March 31, 2008 compared to a positive $28.7 million for the three months ended
March 31, 2007. The $272.3 million decrease was primarily due to decreased net gains, equity in income of joint ventures and partnerships, and fee income. Net gains decreased
$253.9 million due to changes in fair value totaling $235.4 million recognized on our portfolio of loans held for sale as of March 31, 2008. We completed the sale of significant
interests in 39 loans in April 2008 to a third party institutional buyer for a total aggregate sale price of approximately $1.8 billion. The loss associated with the sale was recognized in the
first quarter of 2008 because the sale price was indicative of fair value as of March 31, 2008. Equity in income of joint ventures and partnerships decreased $9.8 million due to losses
recognized by the underlying joint venture investments. Mortgage servicing fees decreased $4.2 million primarily as a result of non-recurring income earned on the resolution of a
specially serviced CMBS investment in 2007. Placement fees and other fees decreased by $4.5 million primarily due to decreased market activity.

50

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North American Affordable Housing Segment

The following table summarizes the results of operations of our North American Affordable Housing Operations segment for the three months ended March 31,
2008 and 2007 (in thousands):

Three Months Ended March 31,2008

2007Net interest income

$
(2,293
)
$
(3,604
)Noninterest income


5,119


48,804Total revenue


2,826


45,200Provision for loan losses





1,500Net revenue


2,826


43,700Noninterest expense


8,621


15,475(Loss) income before minority interest and income taxes


(5,795
)

28,225Minority interest income





(Loss) income before income taxes

$
(5,795
)
$
28,225


Our
North American Affordable Housing segment incurred a loss before income taxes of $5.8 million for the three months ended March 31, 2008 compared to
income before income taxes of $28.2 million for the three months ended March 31, 2007. The $34.0 million decrease was primarily attributable to a non-recurring gain
realized in 2007 partially offset by a decrease in noninterest expense.

Noninterest
income totaled $5.1 million for the three months ended March 31, 2008 compared to $48.8 million for the three months ended March 31, 2007. The
decrease of $43.7 million was primarily attributable to a gain on the sale of the majority of the affordable housing debt platform of approximately $71.5 million (partially offset in our
consolidated financial statements by the impact of push down accounting reflected in "Corporate and Other") offset in part by an increase in net gains on the disposition of real estate investments
totaling $12.3 million, and a $14.0 million reduction in losses relating to LIHTC yield guarantees.

There
is no current year provision for loan losses compared to $1.5 million for the three months ended March 31, 2007. The $1.5 million provision in 2007 related to
a property acquired in a loan foreclosure.

Non-interest
expense totaled $8.6 million for the three months ended March 31, 2008 compared to $15.5 million for the three months ended March 31,
2007. The $6.9 million decrease was driven primarily by staff reductions and an overall reduction in operating expenses due to the sale of the majority of the affordable housing debt platform
in February 2007.

Critical Accounting Estimates

The preparation of our consolidated financial statements in accordance with GAAP requires our management to make estimates, judgments and assumptions that affect
the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities, and reported amounts of income and expense. Our management regularly evaluates these estimates,
judgments and assumptions based on available information and experience. Because the use of estimates, judgments and assumptions is inherent in the financial reporting process, actual results may
differ from these estimates under different assumptions or conditions. Certain of our accounting policies require higher degrees of judgment and are more complex than others in their application. Our
significant accounting policies are disclosed in Note 3 to our 2007 audited consolidated financial statements. There have been no significant changes to the Company's critical accounting
estimates and significant accounting policies in 2008, except that the Company adopted SFAS No. 157 and SFAS No. 159 on January 1, 2008 as

51

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discussed
below. For a discussion of our critical accounting estimates, see the information under the heading "Management's Discussion and Analysis of Financial Condition and Results of Operations" in
our prospectus filed with the SEC on March 26, 2008 in accordance with Rule 424(b)(3) of the Securities Act of 1933, as amended, which is accessible on the SEC's website at www.sec.gov.

We
adopted SFAS No. 157 on January 1, 2008. SFAS No. 157 defines fair value, establishes a framework for measuring fair value in GAAP, and expands disclosures about
fair value measurements. The adoption of SFAS No. 157 is discussed in Notes 3 and 14 to our condensed consolidated financial
statements. The adoption of this statement did not have a material impact as to the manner in which we determine fair value but does require additional disclosures as discussed in Note 14 to
our condensed financial statements.

We
also adopted SFAS No. 159 on January 1, 2008. SFAS No. 159 permits the Company to irrevocably elect fair value of the initial and subsequent measurement of
certain financial assets and financial liabilities on an instrument-by-instrument basis. Subsequent changes in the fair value of these instruments are recognized in earnings
when they occur. SFAS No. 159 required that the difference between the carrying value of financial assets and financial liabilities elected and the fair value of such instruments 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 adjustment 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, we categorize our 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 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
of March 31, 2008, approximately $9.0 billion of our total assets consisted of financial instruments measured at fair value on a recurring basis, including financial
instruments for which we elected the fair value option. Approximately $874.8 million of these financial instruments, net of counterparty and cash collateral balances, were measured using
valuation methodologies involving market-based or market-derived information, collectively Level 1 and 2 inputs. Approximately $8.1 billion of these financial instruments were measured
using model-based techniques, or Level 3 inputs, and represented 34% of our total consolidated assets.

Note 14
to our condensed financial statements contains a description of the valuation methodologies that we use 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 valuation hierarchy.

Fair Value Control Processes

Given the prevalence of fair value measurement in our financial statements, the control functions related to the valuation process are a critical component of our
business operations. We employ control processes to validate the fair value of our financial instruments, including those derived from pricing models. These control processes are designed to assure
that the values used for financial reporting are based on observable inputs wherever possible. In the event that observable inputs are not available, we review the valuation approach utilized to
assure it is appropriate and consistently applied and that the assumptions are reasonable. Our reviews of the pricing models' theoretical soundness and appropriateness are performed by Company
personnel with relevant expertise who are independent from the persons responsible for the lending and investment functions. The heads of our credit, market risk management and accounting departments
are responsible for the oversight and valuation control

52

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processes
and policies and for reporting the results of these processes and policies to our Audit Committee.

Liquidity and Capital Resources

We require substantial amounts of capital to support our operations and growth plans. Members of our senior management, in consultation with our board of
directors, establish our overall liquidity and capital allocation strategies. A key objective of these strategies is to support the successful execution of our business strategy while ensuring that we
have sufficient ongoing liquidity throughout the business cycle to service our financial obligations as they become due. When making funding and capital allocation determinations, our management
considers business performance; the availability, costs and benefits associated with different funding sources; current and expected market and general economic conditions; our balance sheet and
capital structure; and our targeted liquidity profile and risks relating to our funding needs. In carrying out these activities, our management monitors, evaluates and seeks to control the impact that
our business activities have on our balance sheet, liquidity and capital structure, thereby helping to ensure that our operations are aligned with our liquidity and capital allocation strategies.

We
require short-term liquidity to fund loans that we originate and hold on our consolidated balance sheet pending sale, including through syndication, participation or
securitization. We generally require longer-term funding to finance the loans, real estate and investment securities that we hold for investment.

As
of March 31, 2008, we had approximately $1.1 billion in total cash, of which $227.2 million was restricted under current regulatory and other contractual
arrangements. This represented a net decrease in total cash of approximately $326.6 million from December 31, 2007. Readily available cash
and borrowing capacity under our revolving credit facility, as of March 31, 2008, totaled $0.9 billion (excluding cash held by Capmark Bank). Included in this total is
$766.3 million of borrowing capacity.

Our
primary sources of liquidity are (1) proceeds from the sale, syndication or securitization of loans and payments from our loan portfolio, (2) proceeds from the issuance
of short-term and long-term borrowings/deposits, (3) proceeds from the sale of real estate equity investments and other real estate related investments and
(4) net cash from our operations. Our principal debt financing sources have consisted of (1) committed unsecured funding provided by banks, including our senior credit facility, our
bridge loan and other bank loans; (2) our senior unsecured notes; (3) other committed unsecured debt, including our junior subordinated debentures; (4) secured funding facilities,
including borrowings from the Federal Reserve Bank and the Federal Home Loan Bank made by Capmark Bank US, repurchase agreements and other secured funding facilities; and (5) other uncommitted
funding sources, including time deposits and certificates of deposit maintained with our banking subsidiaries. These financing arrangements provide us with diverse sources of short-term
and long-term funding and allow us to borrow amounts on a secured and unsecured basis, in a variety of currencies and at interest rates that are fixed or floating, in the geographical
locations in which we operate.

During
the three months ended March 31, 2008, we used net cash of $434.9 million in operating activities, including $1.7 billion for the origination of loans held
for sale and $625.9 million due to the net change in certain assets and liabilities. These cash outlays were largely offset by $1.7 billion of proceeds from sales of and payments from
loans held for sale and $175.8 million generated by other operations in the quarter. In April 2008, we sold interests in loans in our European portfolio for approximately $1.8 billion in
cash and used a majority of the proceeds to repay indebtedness.

Our
primary uses of liquidity are for (1) the origination and purchases of loans, (2) the repayment of short-term and long-term borrowings and
related interest, (3) the purchase of real estate equity and other real estate related investments, and (4) the funding of our operating expenses.

53

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We
used net cash of $516.8 million in investing activities for the three months ended March 31, 2008, due primarily to the origination or purchase of loans held for
investment totaling $752.2 million; purchases of equity investments totaling $62.6 million; net purchases of real estate investments totaling $29.7 million; offset in part by the
receipt of approximately $334.9 million from the repayment of loans held for investment and investment securities.

Within
our financing activities for the three months ended March 31, 2008, we obtained approximately $597.3 million in net cash primarily from a net increase of
$1.6 billion in our short-term
and long-term borrowings that were partly offset by a net decrease of $1.1 billion in our deposit liabilities. During the quarter, we increased our utilization of our revolving
credit facility and increased our secured borrowings from the Federal Reserve Bank of San Francisco and the Federal Home Loan Bank of Seattle.

Starting
in the third quarter of 2007, the markets for real estate related credit experienced a high degree of volatility, and this condition has restricted the availability and
increased the costs of debt financing for real estate related assets such as those that we originate and finance. Although these developments have been most acute with regard to subprime residential
mortgage assets, the overall reduction in liquidity and increase of cost of funds across all areas of the debt capital markets has continued, including with respect to certain types of financing that
we utilize, such as repurchase financing for commercial mortgage related assets, CMBS, CDOs, brokered deposits and unsecured corporate debt. Due to current credit market conditions, the cost of funds
for certain of our financing facilities has increased and several of our financing agreements were not renewed.

Since
the downturn in the second half of 2007, we have continued to take actions to maintain sufficient liquidity to support our business operations in the current difficult credit
environment, including the following:



Management
believes that the Company's current financing sources and cash flows are adequate to meet our liquidity needs for a reasonable period including the next 12 months.

Asset Sale Capabilities

We have traditionally generated liquidity and reduced our principal risk associated with loans that we fund by monetizing a significant portion of those assets
through asset sales, including syndications, participations and securitizations. As a result of these efforts, we have had a greater degree of control over the risk associated with our loan portfolio,
even during periods of strong origination volume. We have established relationships with banks, insurance companies, GSEs, federal agencies, investment funds, opportunity funds and third-party
conduits that provide us with substantial asset sale capabilities, which we believe can provide us with an important source of liquidity. However, our ability to sell loans and other assets has been
negatively impacted by the overall disruption in the credit markets.

54

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Credit Ratings

Our reliance on debt financing to fund a portion of our operations makes access to sources of short-term and long-term unsecured financing
important. The cost and availability of unsecured debt financing generally are dependent on our short-term and long-term credit ratings. Factors that are significant to the
determination of our credit ratings or that otherwise affect our ability to raise short-term and long-term financing include the level and volatility of our earnings, our
relative competitive position, our risk management policies, our access to sources of liquidity, our capital adequacy, our level of leverage, the credit quality of our balance sheet, our ability to
retain key personnel and legal, regulatory and tax developments.

The
following table presents the credit ratings and ratings outlook assigned to our unsecured indebtedness by S&P, Moody's and Fitch as of the date of this quarterly report. Credit
ratings are opinions of a rated entity's ability to meet its ongoing obligations. Credit ratings are not recommendations to buy, sell or hold securities and are subject to revision or withdrawal at
any time by the assigning rating agency. Each agency's rating should be evaluated independently of any other agency's rating.

Short-Term

Long-TermRating AgencyRating

Outlook

Rating

OutlookS&P

A3

Stable

BBB-

StableMoody's





Baa3

StableFitch

F3

Stable

BBB

Stable




We have access to short-term and long-term funding under a broad range of secured and unsecured financing arrangements. These arrangements
allow us to borrow funds in U.S. dollars, pounds sterling, euro, Japanese yen, Canadian dollars, Taiwanese dollars and other currencies, depending on our financing requirements. Interest is payable
under these financing arrangements primarily at floating rates that are determined by reference to a benchmark rate, such as LIBOR or EURIBOR, and, in some cases, at fixed rates. When making
determinations as to which sources of funds to access, we generally seek to finance our assets with borrowings that are denominated in the same currency and that bear interest based on the same
benchmark rates. When we are unable to match the currency and interest rates that are applicable to our assets and liabilities, we seek to enter into derivative transactions to achieve a similar
result.

The
availability of financing arrangements and other funding sources has recently been impacted as concerns pertaining to the deterioration of the residential mortgage market have
expanded to almost all areas of the debt capital markets, including corporate debt, asset-backed securities and commercial real estate finance. This has resulted in a general reduction of liquidity in
the commercial real estate sector. It has also caused a significant widening of the credit spreads on asset sales, including syndications and securitizations, in recent months generating reduced
proceeds and a delay in the ability to execute such transactions.

We
will continue to monitor conditions in the debt capital markets and to adjust the use of our various financing sources according to availability, term and cost, as well as to adjust
the level and mix of our loan originations, ownership and real estate investment activities in order to maintain sufficient liquidity in light of market conditions. If adverse conditions in the credit
markets continue or worsen, our primary sources of liquidity may be adversely affected.

55

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The
following table presents information concerning the financing arrangements and other funding sources that we had in place as of March 31, 2008 (in thousands):

|Financing Arrangements and Funding Sources |                                                                      | Amount Outstanding                 |            | Funding Limit(8) |           | Weighted Average Maturity
|------------------------------------------ | -------------------------------------------------------------------- | ---------------------------------- | ---------- | ---------------- | --------- | -------------------------
|
|Primary long-term funding:                 |                                                                      |                                    |            |                  |           |                          
|                                           | Senior credit facility                                               |                                    |            |                  |           |                          
|                                           |                                                                      | Term loan(1)                       |            | $                | 2,809,525 |                          
|                                           |                                                                      | Revolving credit facility(1)       |            |                  | 1,923,596 |                          
|                                           |                                                                      |                                    |            |                  |           |                          
|                                           |                                                                      |                                    | Total      |                  |           | 4,733,121                
|                                           |                                                                      |                                    |            |                  |           |                          
|                                           | Bridge loan(2)                                                       |                                    |            | 1,733,000        |           |                          
|                                           | Senior Notes                                                         |                                    |            | 2,661,212        |           |                          
|                                           |                                                                      |                                    |            |                  |           |                          
|                                           | Total                                                                |                                    |            | 9,127,333        |           |                          
|                                           |                                                                      |                                    |            |                  |           |                          
|Secured funding(3):                        |                                                                      |                                    |            |                  |           |                          
|                                           | Repurchase agreements(4)                                             |                                    |            | 191,838          |           |                          
|                                           | Other secured funding facilities(5)                                  |                                    |            | 3,019,637        |           |                          
|                                           | Bank and third-party funding                                         |                                    |            | 85,646           |           |                          
|                                           |                                                                      |                                    |            |                  |           |                          
|                                           |                                                                      | Total                              |            |                  | 3,297,121 |                          
|                                           |                                                                      |                                    |            |                  |           |                          
|Unsecured funding:                         |                                                                      |                                    |            |                  |           |                          
|                                           | Other unsecured fundinguncommitted                                  |                                    |            | 673,787          |           |                          
|                                           | Other bank and third party loans(5)                                  |                                    |            | 102,542          |           |                          
|                                           |                                                                      |                                    |            |                  |           |                          
|Total unsecured funding                    |                                                                      |                                    | 776,329    |                  |           | 896,694                  
|                                           |                                                                      |                                    |            |                  |           |                          
|Subtotal                                   |                                                                      |                                    | 13,200,783 |                  |           | 16,355,550               
|Bank deposit liabilities(6)                |                                                                      |                                    | 4,512,020  |                  |           | 4,512,020                
|                                           |                                                                      |                                    |            |                  |           |                          
|                                           | Total funding and bank deposit liabilities                           |                                    |            | 17,712,803       |           |                          
|                                           |                                                                      |                                    |            |                  |           |                          
|Consolidated debt agreements(7)            |                                                                      |                                    |            |                  |           |                          
|                                           | Secured debt attributable to the consolidation of securitizations    |                                    |            | 261,557          |           |                          
|                                           | Secured debt attributable to the consolidation of real estate owned  |                                    |            | 28,778           |           |                          
|                                           | Secured debt attributable to the consolidation of LIHTC partnerships |                                    |            | 301,678          |           |                          
|                                           |                                                                      |                                    |            |                  |           |                          
|                                           |                                                                      | Total consolidated debt agreements |            |                  | 592,013   |                          
|                                           |                                                                      |                                    |            |                  |           |                          
|Junior subordinated debentures             |                                                                      |                                    | 250,001    |                  |           | 250,001                  
|                                           |                                                                      |                                    |            |                  |           |                          
|Total borrowings and deposit liabilities   |                                                                      | $                                  | 18,554,817 |                  | $         | 21,709,584               
|                                           |                                                                      |                                    |            |                  |           |                          

---

Notes:

56

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In
addition to the outstanding funding reflected in the above table, at March 31, 2008, we had $2.3 billion of stockholders' equity and $100.6 million of common
stock classified as mezzanine equity. As of March 31, 2008, approximately $1.9 billion was outstanding under our revolving credit facility and approximately $766.3 million
remained available and we held $1.1 billion of total cash, including $695.6 million of cash held at Capmark Bank US.

Of
the total deposit liabilities reflected in the above table, $4.5 billion consisted of federally insured Brokered CDs issued by Capmark Bank US, as compared to
$5.6 billion outstanding as of December 31, 2007.

Capmark
Bank US also has access to funding in the form of escrow deposits provided by our U.S. servicing operations. Although undrawn as of March 31, 2008, the amount of servicing
deposits available to Capmark Bank US was $983.2 million.

As
of March 31, 2008, we also maintained a number of other committed and uncommitted secured and other unsecured funding programs sponsored by a variety of lenders with an
aggregate principal amount totaling $4.1 billion. Of that amount, $2.9 billion is considered to be uncommitted and/or is maturing in the near term.

Commitments and Contractual Obligations



In connection with our business activities, we enter into commitments that may give rise to future cash funding requirements. As of March 31, 2008, these
commitments consisted of commitments to originate or purchase mortgage loans or securities, commitments to fund loans and commitments to provide equity to equity method investees. The future cash
payments that were associated with these obligations as of March 31, 2008 are summarized in the table below. Because these commitments may

57

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expire
unused, the amounts shown do not necessarily reflect our actual future cash funding requirements.

|                                                         |       | Years to Maturity |         |        
|-------------------------------------------------------- | ----- | ----------------- | ------- | -------
|
|
|Commitments to originate or purchase loans or securities |       | $                 | 349,559 |        
|Commitments to fund construction and other loans         |       |                   | 444,931 |        
|Commitments to provide equity to equity method investees |       |                   | 50,259  |        
|                                                         |       |                   |         |        
|                                                         | Total |                   | $       | 844,749
|                                                         |       |                   |         |        
|Commitments to sell loans or securities                  |       | $                 | 458,873 |        
|                                                         |       |                   |         |        

As
an approved multifamily seller/servicer under Fannie Mae's DUS program, we are responsible for assuming a portion of the losses that may result from a borrower's payment
default on the loans that we have sold to Fannie Mae. Our loss sharing obligations are determined based on agreed loss sharing formulas. We generally are required to assume responsibility for the
first 5% of the unpaid principal and a portion of any additional losses up to a maximum of 20% of the original principal balance. Any significant losses under this program would have an adverse effect
on our results of operations and financial condition.



In the ordinary course of our business, we enter into contractual arrangements that may require future cash payments. As of March 31, 2008, our contractual
obligations primarily consisted of long-term borrowings and deposit liabilities, derivatives instruments, FIN 48 obligations
and operating leases. The future cash payments that were associated with these obligations as of March 31, 2008 are summarized in the table below.

|                                      |  | Payments due by Period |           | 
|------------------------------------- |  | ---------------------- | --------- | 
|
|
|Borrowings and deposit liabilities(1) |  | $                      | 4,502,910 | 
|Derivative instruments(2)             |  |                        | 452,815   | 
|FIN 48 obligations(3)                 |  |                        | 62,805    | 
|Operating leases and other(4)         |  |                        | 39,012    | 
|                                      |  |                        |           | 
|Total                                 |  | $                      | 5,057,542 | 
|                                      |  |                        |           | 

---

Notes:

58

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Guarantees and Off-Balance Sheet Transactions



We enter into guarantees in the ordinary course of our business, including, among others, guarantees in support of some of our securitization transactions and
guarantees of payment of some of the agency and construction loans that we originate.



We did not enter into any securitization transactions for the three months ended March 31, 2008.



The instruments governing some of our securitization transactions and other off-balance sheet transactions contain customary provisions that require
us to purchase specific assets from our securitization trusts. In connection with certain asset sales and securitization transactions, we typically make customary representations and warranties to the
purchaser of our assets that relate to the characteristics of the assets transferred. These clauses are intended to ensure that the terms and conditions of the sales contracts are met upon transfer of
the assets. Prior to any sale or securitization transaction, we perform due diligence with respect to the assets to be included in the sale to ensure that they meet the purchaser's requirements, as
described in the representations and warranties. Due to
these procedures, we believe that the potential for loss under these arrangements is remote. Accordingly, we have not recorded a liability in our consolidated balance sheet relating to these potential
obligations. The maximum potential amount of future payments that we could be required to make would be equal to the current balances of all assets subject to these securitization or sale activities.
We do not monitor the total value of assets historically transferred to securitization vehicles or through other asset sales and, as a result, we are unable to develop an estimate of the maximum
payout under these representations and warranties. As of March 31, 2008, we had not been required to repurchase any assets under these provisions.



We sponsor NMTC funds that make investments in qualifying Community Development Entities ("CDEs) that receive new markets tax credit allocations under a federal
program that is designed to

59

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increase
the availability of investment capital in low-income communities. We have determined that our NMTC funds are variable interest entities under FIN 46(R) and that we were the
primary beneficiary of all but ten of the NMTC funds that we had sponsored as of March 31, 2008. The NMTC funds of which we were not the primary beneficiary had total assets of
$222.4 million as of March 31, 2008. Our exposure to a loss relating to those NMTC funds was $147.8 million as of that date, representing the amount of financing we have provided
to the funds.



We sponsor CDOs in which we may retain a subordinated or equity interest and for which we serve as the collateral manager. When we sponsor a CDO, we establish a
bankruptcy-remote special purpose entity that purchases a portfolio of assets that may consist of commercial mortgage loans and other real estate related securities and issues debt and equity
certificates, representing interests in the special purpose entity. Certain of the CDOs that we have sponsored were initially structured, or have been restructured, as QSPEs under SFAS No. 140
and, accordingly, are not consolidated in our financial statements.

The
CDOs that we have sponsored that have not been structured as QSPEs are variable interest entities under FIN 46(R). We have determined that we were not the primary beneficiary
of any of these entities as of March 31, 2008 and, accordingly, have not consolidated them in our financial statements. These CDOs had total assets of $4.4 billion as of March 31,
2008. Our exposure to a loss relating to those CDOs was $8.0 million as of that date, representing the value of our retained interests in those entities.

Credit Risk Management

Credit risk represents the risk that a financial loss will result from the failure of a borrower, obligor or counterparty to perform its obligations. We have
developed and implemented formal, systematic credit risk management policies and processes for our lending activities that are designed to preserve the independence and integrity of credit-related
decisions and to ensure that credit risks are accurately assessed, properly approved, monitored and actively managed at both the transaction and portfolio levels. These policies and processes employ
specific limits on credit approval authorities, the use of a programmatic risk-rating methodology, certain concentration limitations and independent credit risk monitoring and asset
management procedures. In order to meet our credit risk management objectives, we seek to maintain a risk profile that is diverse in terms of property type, geographical location and single asset
exposure. We manage this diversification through the use of asset sales, including syndications, participations and securitizations and other risk reduction techniques.



The following table summarizes the composition of our loans held for sale and held for investment as of March 31, 2008 and December 31, 2007, in
aggregate by property type (in thousands):

|                       |  | March 31, 2008 |            | December 31, 2007 |    
|---------------------- |  | -------------- | ---------- | ----------------- | ---
|
|
|Multifamily            |  | $              | 3,069,340  |                   | 20 
|Office                 |  |                | 2,984,301  |                   | 20 
|Retail                 |  |                | 2,847,789  |                   | 19 
|Healthcare             |  |                | 1,637,599  |                   | 11 
|Hospitality            |  |                | 1,576,407  |                   | 10 
|Mixed-use and other(1) |  |                | 3,014,185  |                   | 20 
|                       |  |                |            |                   |    
|Total                  |  | $              | 15,129,621 |                   | 100
|                       |  |                |            |                   |    

60

---



---

Note:

The
above table sets forth our exposure to these property types in the loan portfolio. We maintain additional direct and indirect exposure to these property types through our interests
in funds, securities, equity investments and other non-loan exposures.



We seek to minimize the size of our exposure to losses on a single loan by using credit approval limits and by developing loan distribution strategies before we
commit to provide financing. As of March 31, 2008 we had 54 loan commitments that exceeded $50.0 million. Our aggregate commitments with respect to these 54 loans totaled
$5.3 billion, of which $4.3 billion had been funded. Two of these loans are non-performing and maintained on non-accrual status. The gross commitment and funded
amount related to these non-performing loans totaled $116.8 million as of March 31, 2008. The remaining 52 loans are performing loans.



The following table presents information concerning our originated non-performing assets as of March 31, 2008 and December 31, 2007 (in
thousands):

March 31, 2008

December 31, 2007Gross principal balance

$
288,842

$
259,338Basis adjustments before allowance for loan losses(1)


(74,135
)

(50,898
)Specifically assigned allowance for loan losses


(13,431
)

(6,919
)Carrying value

$
201,276

$
201,521Carrying value as a percentage of total assets


0.9
%

0.9
%


---

Note:



We have acquired non-performing loans for investment purposes at substantial discounts to par. At the time of acquisition, these non-performing loans evidenced
credit quality deterioration and the probability that not all contractually required payments were collectible. The carrying amount of these loans totaled $360.8 million and
$358.4 million as of March 31, 2008 and December 31, 2007, respectively. We recognize an estimate of the accretable yield on these loans. The accretable yield is limited to the
excess of the estimated undiscounted principal, interest and other expected cash flows over the acquisition price of the loans.

We
seek to maximize recovery on our acquired non-performing loans. However, the time and amount of our expected cash flows from such 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. We record an impairment loss if we determine
there is a decrease in the expected cash flows for such acquired non-performing loans. For the three months ended March 31, 2008 and 2007, we recorded impairment losses of $4.0 million
and $2.6 million, respectively.

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Item 3.    Quantitative and Qualitative Disclosures about Market Risk

Market risk represents the risk that a change in the level of one or more market prices, rates, indices, implied volatilities, correlations or other market
factors will result in a financial loss. The primary market risks that we face are interest rate risk, credit spread risk and foreign currency risk. These risks include the risks that changes in
prevailing interest rates, credit spreads or foreign currency exchange rates will impact the fair value of our assets and liabilities, decrease our levels of revenue or increase our expenses. We seek
to control these risks by selling United States Treasury securities and entering into a number of derivative instruments, including total rate of return swaps, CMBS index swaps, interest rate or
foreign exchange swaps, interest rate caps and floors, and options to purchase the foregoing instruments. We seek to further control our exposure to fluctuations in foreign currency exchange rates by
securing multi-currency funding sources that we may use when funding foreign currency denominated assets.

We
have implemented centralized risk management policies and processes that are intended to ensure that our market risk exposure is accurately measured, regularly monitored and
appropriately managed on a company-wide basis and within individual market positions. Our market risk limits are established by our market risk management department. These limits are
approved by our Asset/Liability Management Committee. Our market risk exposure is measured using a variety of quantitative and qualitative risk measures and analyses, performed either daily or
monthly, including value-at-risk measurements and sensitivity analyses. Price sensitivity metrics, portfolio valuations and correlation analyses are performed on a daily basis,
while stress testing is performed on a monthly basis using the value-at-risk methodology explained below. Value-at-risk measures the impact on the value
of existing portfolios of specified changes in market factors for all of our interest rate sensitive assets and liabilities. We also conduct a net interest income analysis, which estimates our net
interest income sensitivity to immediate increases or decreases in interest rates of 100 and 200 basis points.

Interest Rate and CMBS Spread Risk

The predominant type of interest rate risk that we face is the risk that the value of our assets and liabilities (including the value of our loans, debt
obligations and investment portfolios) will change due
to changes in interest rates, shape of the yield curve or interest rate spreads between two different financial instruments. We are also exposed to the risk that changes in interest rates will impact
the levels of revenue that are generated by our lending, servicing and investments and funds management businesses, including trust fees that we earn on escrow balances, or give rise to mismatches
between the values of our assets and the liabilities that we incur when funding those assets. Because we have floating rate debt outstanding, changes in interest rates may impact our debt servicing
costs, which may lead to changes in the levels of net income and cash flows that we report from time to time.

As
part of our effort to manage interest rate exposure in our lending business, we also enter into forward rate lock commitments that guarantee the interest rates that will be charged on
the loans that we originate from time to time. During the guaranteed rate period, a forward rate lock commitment exposes us to the possibility that the value of the forward rate lock commitment and
related loan will decrease due to a rise in interest rates. To protect against this risk, we generally enter into a hedging transaction when we enter into a forward rate lock commitment and require
the borrower to reimburse any costs to us of unwinding the related hedge in the event that the related loan fails to close. While this risk management strategy helps protect us against risks
associated with movements in interest rates, it exposes us to the risk that a borrower will be unable to reimburse us for our costs if we are required to unwind the related hedge. To limit our
exposure to this risk, when entering into a hedging transaction for a forward rate lock commitment, we require a borrower to collateralize its obligations to us with cash collateral maintained in a
margin account. We monitor our exposure under forward rate commitments and related hedging transactions on a daily basis. If our collateralized coverage falls below a specified level, we require a
borrower to post additional cash collateral.

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A
portion of our fixed rate loans are originated with a defined exit strategy of a CMBS securitization. For these loans, we are exposed to the risk that CMBS spreads will widen between
the time that we commit to extend a loan at a specified rate and the time the loan is sold. If left un-hedged, a widening of CMBS spreads would result in our company receiving lower
proceeds upon the sale of a loan. We actively monitor our exposure to changes in CMBS spreads and, when appropriate, we may enter into CMBS total return swaps to moderate our exposure against losses
associated with a widening of CMBS spreads, although such swaps may not result in a reduction of losses in certain instances. However, by entering into the swaps, we reduce the potential to benefit
from gains associated with the narrowing of CMBS spreads. The use of CMBS total return swaps to manage our exposure to CMBS spread risks also exposes us to risks that our swap counterparties will
default on their obligations to us.

Foreign Currency Risk

We are exposed to market risks associated with changes in foreign currency exchange rates because we generate a portion of our revenue and incur a portion of our
expenses in currencies other than the
U.S. dollar. We are also exposed to risks associated with foreign currency exchange rates because we have various assets and liabilities that are denominated in foreign currencies, including
borrowings under our senior credit facility and other borrowing facilities, and because we have subsidiaries and investments in other entities with retained earnings that are denominated in foreign
currencies. As of March 31, 2008, our foreign currency exposure consisted primarily of exposure to changes in exchange rates between the U.S. dollar and the Euro in addition to the Japanese
yen. We were to a lesser extent subject to risks associated with movements in exchange rates between the U.S. dollar and pounds sterling, Taiwanese dollars, Chinese renminbi, Indian rupees and
Filipino pesos.

To
manage foreign currency exposure in our business, we seek to finance assets that are denominated in foreign currencies with funding sources denominated in the same currency. When
assets denominated in foreign currencies are not funded with liabilities denominated in the same currencies, we actively use foreign exchange swaps and forward transactions that are designed to
mitigate the risks associated with adverse movements in the applicable foreign currency exchange rates. We similarly use foreign exchange forward contracts to manage our foreign currency exposure
related to income streams and expenses that are denominated in foreign currencies when the amount and timing of the income streams and expenses are known. To manage the effect that fluctuations in
exchange rates may have on the value of foreign currency denominated retained earnings in our subsidiaries and the entities in which we have made investments, we have developed an active hedging
policy that manages and adjusts our exposure using one-month foreign exchange swaps and forward contracts.

Derivative Counterparty Exposure

The use of derivative instruments to manage and mitigate our exposure to market risks exposes us to the risk that a counterparty to a derivative transaction will
fail to perform its obligations under the derivative instrument. Because obligations under our derivative instruments are determined by reference to interest rates, CMBS spreads and foreign currency
exchange rates, our exposure to a risk of loss from defaults by counterparties to our derivative transactions is impacted by movements in interest rates, CMBS spreads and foreign currency exchange
rates. To manage our credit exposures to counterparties to our derivative transactions, before we enter into a derivative transaction, we negotiate and execute industry standard agreements that govern
the maximum credit exposure that we will assume with respect to a counterparty in a derivative transaction. We measure our credit exposure to counterparties under our derivative instruments on a daily
basis. If an exposure with respect to a counterparty exceeds an agreed threshold, we make a margin call under which the counterparty is required to post collateral in order to bring our credit
exposure to it within the agreed-upon range.

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Value-at-Risk Analysis

We use a statistical methodology known as value-at-risk, which we refer to as "VaR," as one of our tools for measuring, monitoring and
reviewing our market risk exposure. VaR measures the dollar amount of potential losses in fair value from adverse movements in interest rates and credit spreads in an ordinary market. Our VaR model
uses a distribution of historical changes in key market indices or other market factors to assess the potential for future losses. Our VaR model also takes into account correlations between risks and
the potential for movements in one portfolio to offset movements in another. We measure VaR using a 95% confidence interval and an assumed one-month holding period, meaning that we would
expect to incur changes in fair value greater than those predicted by our VaR model in only one out of every 20 months. We believe that our VaR analysis captures all of our significant market
risk exposures resulting from our interest rate and credit spread sensitive positions. The following table represents the maximum, average and minimum potential VaR losses measured for the three
months ended March 31, 2008 and 2007. This analysis has been presented for illustrative purposes only and does not represent our current views as to future movements in interest rates and
credit spreads. The table shows a greater variation in our potential VaR losses for the three months ended March 31, 2008 compared to the three months ended March 31, 2007 as a result of
adverse market conditions experienced during the first quarter of fiscal year 2008. In addition, the unwinding of a mortgage escrow balance hedging strategy further increased this disparity.

Three Months Ended March 31,Value-at-Risk2008

2007(in thousands of U.S. dollars)Maximum

$
60,868

$
17,287Average

$
55,685

$
14,602Minimum

$
45,844

$
11,963


Net Interest Income Sensitivity Analysis

While VaR measures the risk of loss due to unlikely events in an ordinary market, a sensitivity analysis measures exposure to an isolated hypothetical movement in
one or more specific market prices, rates or indices. To measure our exposure to volatility in net interest income, we perform a sensitivity analysis on a monthly basis that considers isolated
hypothetical movements in specific market rates for each currency in which we transact business. The first table reflects our sensitivity to sudden shifts in short-term rates in all
currencies in which we transact business, taking into consideration our asset and liability positions on our consolidated balance sheet and the derivative instruments that we use to mitigate market
risk as of March 31, 2008. The second table reflects our sensitivity to similar movements in U.S. interest rates on the trust fee income earned on escrow balances as of March 31, 2008.
Both tables measure the impact on net interest income over the next 12 months. These analyses

64

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have
been presented for illustrative purposes only and do not represent our current views as to future interest rate movements.

|                  |  | Annualized Impact on Net Interest Income |       
|----------------- |  | ---------------------------------------- | ------
|
|
|U.S. dollars      |  | $                                        | 702   
|Japanese yen(1)   |  |                                          | 5,894 
|Pounds sterling   |  |                                          | 749   
|Euro              |  |                                          | (5,609
|Canadian dollars  |  |                                          | (545  
|Mexican pesos     |  |                                          | 1,125 
|Taiwanese dollars |  |                                          | 965   
|Filipino pesos    |  |                                          | 175   
|Chinese renminbi  |  |                                          | (179  
|Indian rupees     |  |                                          | (16   
|Swiss francs      |  |                                          | 209   
|                  |  |                                          |       
|All currencies    |  | $                                        | 3,470 
|                  |  |                                          |       

---

Note:

|                |  | Annualized Impact on Net Interest Income
|--------------- |  | ----------------------------------------
|
|
|Escrow balances |  | $                                       

Although
we believe that the above sensitivity data measurements provide an estimate of interest rate sensitivity, there are limitations inherent in those measurements. For example, they
do not take into account potential changes in credit quality, size or composition of our asset portfolios, potential changes in our funding mix or other possible business developments. They are also
limited in that they are performed at a particular point in time and only contemplate certain movements in market rates or indices. Accordingly, we can give no assurance that our actual results would
not differ materially from the estimated outcomes of the above simulations. We are aware of the foregoing limitations on the use of sensitivity analyses for measuring and monitoring risks and,
accordingly, employ our sensitivity analysis as only one tool for identifying, measuring, monitoring, managing and reporting our exposure market risks.

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Item 4T.    Controls and Procedures

Disclosure controls and procedures

We maintain disclosure controls and procedures (as that term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities
Exchange Act of 1934, as amended ("Exchange Act")) that are designed to ensure that information required to be disclosed in our reports under the Exchange Act are recorded, processed, summarized and
reported within the time periods specified in the Securities and Exchange Commission's rules and forms, and that such information is accumulated and communicated to our management, including the Chief
Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosures. Any controls and procedures, no matter how well designed and operated, can
provide only reasonable assurance of achieving the desired control objectives.

Our
management, with the participation of the Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of the design and operation of our disclosure controls
and procedures as of March 31, 2008. Based upon that evaluation and subject to the foregoing, our Chief Executive Officer and Chief Financial Officer concluded that, as of March 31,
2008, the design and operation of our disclosure controls and procedures provided reasonable assurance that the disclosure controls and procedures are effective to accomplish their objectives.

Internal Controls over Financial Reporting

We are not yet required to report on our internal controls over financial reporting due to a transition period established by the rules of the Securities and
Exchange Commission for newly public companies. Both we and our independent registered public accounting firm, however, identified material weaknesses, as well as significant deficiencies, with
respect to our internal controls over financial reporting in connection with the audits of our consolidated financial statements for the years ended
December 31, 2007 and 2006. Beginning in 2007, we have taken, and continue to take, specific actions to remediate these weaknesses and deficiencies.

As
part of our efforts to address the identified weaknesses and deficiencies, emphasis has been placed upon recruiting for key financial positions. Several of these key positions were
filled during 2007 and the first quarter of 2008. The Company expects to continue recruiting for additional roles during the remainder of 2008. We also initiated projects in the second half of 2007 to
improve financial processes, information flows and controls. Additional projects are being developed to improve accounting policies designed to ensure company-wide compliance with
interpretation of accounting rules.

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PART IIOTHER INFORMATION

Item 1.    Legal Proceedings

None

Item 1A.    Risk Factors

For a discussion of our potential risks and uncertainties, see the information under the heading "Risk Factors" in our prospectus filed with the SEC on
March 26, 2008 in accordance with Rule 424(b)(3) of the Securities Act of 1933, as amended, which is accessible on the SEC's website at www.sec.gov.

Item 2.    Unregistered Sales of Equity Securities and Use of Proceeds

During the first quarter of 2008, we sold 86,650 shares of our common stock, par value $0.001 per share, or "Shares," granted non-qualified stock
options, or "Options," to purchase 299,415 additional Shares, and issued 235,248 hypothetical shares, or "Hypothetical Shares," or 621,313 equity securities in the aggregate, in the transactions
described below. The Options include a combination of time-based options and performance-based options having an exercise
price of $6.11 per Share. The time-based options generally vest and become exercisable ratably on each of the first five anniversaries of the option grant date, except as otherwise
determined by our board of directors. The performance-based options vest and become exercisable ratably at the end of each of the five fiscal years occurring after the option grant date, only if we
achieve certain return on equity performance targets. If a performance target is missed in any one year, but in a subsequent year the cumulative actual performance for prior years equals or exceeds
the annual performance targets for those years, all performance-based options that did not vest will vest and become exercisable, as if all prior annual targets had been met. The Hypothetical Shares
are held in separate accounts by the Company and are valued to be equal to the fair value of a share of our common stock. Hypothetical Shares are paid out at fair market value upon termination or a
change of control and may be paid in cash or current shares at the Company's election. The Shares were sold, the Options were granted and the Hypothetical Shares were issued in the following
transactions, which were exempt from the registration requirements of the Securities Act of 1933, as amended, and, in particular pursuant to Rule 701 thereunder, relating to offerings to
employees, directors and consultants. No underwriters were employed in any of these transactions.



Item 3.    Defaults upon Senior Securities

None

67

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Item 4.    Submission of Matters to a Vote of Security Holders

On March 6, 2008, pursuant to Section 78.320 of the Nevada Revised Statutes, we received the written consent of our stockholders to act by written
consent in lieu of an annual meeting to elect William F. Aldinger III, Dennis D. Dammerman, Steven P. Baum, Peter F. Bechen, Saturnino S. Fanlo, Eric A. Feldstein, Edward A. Fox, John F. Grundhofer,
Robert Glenn Hubbard, Stuart A. Katz, Thomas A. Kendall, Konrad R. Kruger, Daniel M. Neidich, Scott C. Nuttal, Tagar C. Olson and David C. Walker to serve as members of our board of directors. We
received the consent of our stockholders holding 412,803,348 shares with respect to the election of the members of our board of directors.

Item 5.    Other Information

Our board of directors has authorized a debt repurchase program pursuant to which we may from time to time repurchase (through open market repurchases or private
transactions) and retire, up to $100 million of our outstanding Floating Rate Senior Notes due 2010 (of which $830 million in principal is outstanding), 5.875% Senior Notes Due 2012 (of
which $1.2 billion in principal is outstanding) and 6.300% Senior Notes due 2017 (of which $500 million in principal is outstanding).

The
timing and the amount of any repurchases will be determined by management based on our evaluation of the prices of the securities and other factors. The repurchase program may be
suspended or discontinued at any time.

Item 6.    Exhibits

The exhibits filed as a part of this report are as follows:

|3.1  |  | Amended and Restated Articles of Incorporation of Capmark Financial Group Inc., incorporated by reference to Exhibit 3.1 to our registration statement on Form S-4/A filed with the SEC on March 14, 2008.                                                                                                                                                      
|---- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|3.2  |  | Amended and Restated By-laws of Capmark Financial Group Inc., incorporated by reference to Exhibit 3.2 to our registration statement on Form S-4/A filed with the SEC on March 14, 2008.                                                                                                                                                                        
|10.1 |  | Seventh Amending Deed Relating to the £750,000,000 Revolving Credit Agreement among Capmark AB No. 2 Limited, Natixis, London Branch, Capmark Financial Group Inc. and the Bank of New York, as security trustee, dated as of
March 31, 2008, incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed by the Company on April 4, 2008.
|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.                                                                                                                                                                                                                                                                                                                                    

68

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SIGNATURES

Pursuant to the requirements 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.                                                        
|------------------ | ------------------------------------------------------------------------------------
|                   | /s/WILLIAM F. ALDINGER III                                                          
|                   |                                                                                     
|Date: May 14, 2008 | Name:  William F. Aldinger III
Title:President and Chief Executive Officer          
|                   | Capmark Financial Group Inc.                                                        
|                   | /s/GREGORY J. MCMANUS                                                               
|                   |                                                                                     
|Date: May 14, 2008 | Name:  Gregory J. McManus
Title:Executive Vice President and Chief Financial Officer

69

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EXHIBIT INDEX

|Exhibit
Numbers |  | Description and Method of Filing                                                                                                                                                                                                                                                                                                                                
|--------------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|3.1             |  | Amended and Restated Articles of Incorporation of Capmark Financial Group Inc., incorporated by reference to Exhibit 3.1 to our registration statement on Form S-4/A filed with the SEC on March 14,
2008.                                                                                                                                                      
|3.2             |  | Amended and Restated By-laws of Capmark Financial Group Inc., incorporated by reference to Exhibit 3.2 to our registration statement on Form S-4/A filed with the SEC on March 14, 2008.                                                                                                                                                                        
|10.1            |  | Seventh Amending Deed Relating to the £750,000,000 Revolving Credit Agreement among Capmark AB No. 2 Limited, Natixis, London Branch, Capmark Financial Group Inc. and the Bank of New York, as security trustee, dated as of
March 31, 2008, incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed by the Company on April 4, 2008.
|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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