LEDGEWOOD A PROFESSIONAL CORPORATION 1900 Market Street, Suite 750, Philadelphia, PA 19103 TEL 215.731.9450 FAX 215.735.2513 www.ledgewood.com
January 24, 2007
RAIT Financial Trust c/o RAIT Partnership, L.P. 1818 Market Street – 28th Floor Philadelphia, PA 19103
Ladies and Gentlemen:
We have acted as counsel to RAIT Financial Trust, a Maryland real estate investment trust (“RAIT”) in connection with the sale of (a) 10,000,000 (the “Firm Shares”) common shares of beneficial interest, $.01 par value per share (“Common Shares”), of RAIT, and (b) an additional 1,500,000 Common Shares (the “Option Shares” and, together with the Firm Shares, the “Shares”) which may be issued and sold pursuant to an underwriters’ over-allotment option, pursuant to the Underwriting Agreement, dated January 18, 2007 (the “Underwriting Agreement”), by and among RAIT, RAIT Partnership, L.P., a Delaware limited partnership for which a wholly-owned subsidiary of the Company acts as the general partner (the “Operating Partnership”), and Friedman, Billings, Ramsey & Co., Inc. and Bear, Stearns & Co. Inc., for themselves and as representatives of the other underwriters listed on Schedule I thereto (collectively, the “Underwriters”). Unless otherwise defined herein, all capitalized terms shall have the meanings given to them in the Underwriting Agreement. You have requested our opinion regarding certain U.S. federal income tax matters.
RAIT conducts its operations through Taberna Realty Finance Trust, a Maryland real estate investment trust (“Taberna”), and the Operating Partnership, which collectively own substantially all of RAIT’s assets.
RAIT owns all of the common shares of beneficial interest and over 80% of the preferred shares of beneficial interest of Taberna. The sole general partner of the Operating Partnership is RAIT General, Inc. (the “General Partner”), and the sole limited partner of the Operating Partnership is RAIT Limited, Inc. (the “Limited Partner”). RAIT owns all of the stock of each of those corporations. As of December 31, 2006, Taberna and the Operating Partnership had interests in a portfolio of loans (the “Loans”) and in real properties (such interest in real properties being held in certain cases through direct ownership, and in other cases through an interest in the pass-through entities that own the properties) (the “Equity Interests”).
Taberna and the Operating Partnership control certain assets through ownership of partnership interests, membership interests and stock ownership as set forth on Schedule I hereto. All of the partnerships and limited liability companies on Schedule I are collectively referred to as the “Partnerships;” all of the corporations on Schedule I are collectively referred to as the “Corporations.”
In connection with the opinions rendered below, we have examined the following:
1.
RAIT Amended and Restated Declaration of Trust, including Articles Supplementary (collectively, the “Declaration of Trust”), and bylaws (“Bylaws”), as amended through the date hereof;
2.
Taberna Declaration of Trust, including Articles Supplementary and Bylaws as amended through the date hereof;
3.
the Registration Statement and the documents incorporated by reference therein;
4.
the organizational documents of each of the Partnerships and Corporations;
5.
documents evidencing the Loans;
6.
documents evidencing the Equity Interests;
7.
such other documents as we have deemed necessary or appropriate for purposes of this opinion.
In connection with the opinions rendered below, we have assumed generally that:
1. Each of the documents referred to above has been duly authorized, executed and delivered; is authentic, if an original, or is accurate, if a copy; and has not been amended.
2. During the taxable years ended December 31, 1998 through December 31, 2006 and subsequent taxable years, RAIT, Taberna, the Partnerships and the Corporations have operated and will continue to operate in such a manner that makes and will continue to make the representations contained in certificates, dated the date hereof and executed by duly appointed officers of RAIT (the “RAIT Officer’s Certificate”) and Taberna (the “Taberna Officer’s Certificate,” and together with the RAIT Officer’s Certificate, the “Officers’ Certificates”), true for such years.
3. Neither RAIT, Taberna, nor the Operating Partnership will make any amendments to their organizational documents after the date of this opinion that would affect RAIT or Tablerna’s qualifications as real estate investment trusts (each a “REIT”) for any taxable year.
4. No action will be taken by RAIT, Taberna, the Partnerships or the Corporations after the date hereof that would have the effect of altering the facts upon which the opinions set forth below are based.
In connection with the opinions rendered below, we also have relied as to factual matters only upon the correctness of the representations contained in the Officers’ Certificates. Where such factual representations contained in the Officers’ Certificates involve the terms defined in the Internal Revenue Code of 1986, as amended (the “Code”), the Treasury regulations thereunder (the “Regulations”), published rulings of the Internal Revenue Service (the “Service”), or other relevant authority, we have explained such terms to RAIT’s, Taberna’s and the Operating Partnership’s representatives and are satisfied that such representatives understand the terms and are capable of making such factual representations.
Based solely on the documents and assumptions set forth above, the representations set forth in the Officers’ Certificates, the discussion in the Prospectus incorporated by reference from exhibit 99.2 of RAIT’s Current Report on Form 8-K filed January 10, 2007, and without further investigation, we are of the opinion that:
(a)
RAIT qualified to be taxed as a REIT pursuant to sections 856 through 860 of the Code for its taxable years ended December 31, 1998 through December 31, 2006, and RAIT’s organization and current and proposed method of operation will enable it to continue to qualify as a REIT for its taxable year ending December 31, 2007, and in the future;
(b)
Taberna qualified to be taxed as a REIT pursuant to sections 856 through 860 of the Code for its taxable years ended December 31, 2005 through December 31, 2006, and Taberna’s organization and current and proposed method of operation will enable it to continue to qualify as a REIT for its taxable year ending December 31, 2007, and in the future;
(c)
the description of the law and the legal conclusions incorporated by reference from exhibit 99.2 of RAIT’s Current Report on Form 8-K filed January 10, 2007 captioned “Material U.S. Federal Income Tax Considerations” are correct in all material respects, and the discussion thereunder fairly summarizes the federal income tax considerations that are likely to be material to a holder of the Common Shares.
The opinion set forth above represents our conclusion based upon the documents, facts and representations referred to above. Any material amendments to such documents, changes in any significant facts or inaccuracy of such representations could affect the opinions referred to herein. We will not review on a continuing basis RAIT’s, Taberna’s nor the Operating Partnership’s compliance with the documents or assumptions set forth above, or the representations set forth in the Officers’ Certificates. Accordingly, no assurance can be given that the actual results of RAIT’s, Taberna’s or Operating Partnership’s operations for its 2006 and subsequent taxable years will satisfy the requirements for qualification and taxation as a REIT. Although we have made such inquiries and performed such investigations as we have deemed necessary for purposes of rendering this opinion, we have not undertaken an independent investigation of all of the facts referred to in this letter and the Officers’ Certificates.
The foregoing opinions are based on current provisions of the Code and the Regulations, published administrative interpretations thereof, and published court decisions. The Service has not issued Regulations or administrative interpretations with respect to various provisions of the Code relating to REIT qualification. No assurance can be given that the law will not change in a way that will prevent RAIT or Taberna from qualifying as a REIT.
The foregoing opinions are limited to the U.S. federal income tax matters addressed herein, and no other opinions are rendered with respect to other federal tax matters or to any issues arising under the tax laws of any other country, or any state or locality. We undertake no obligation to update the opinions expressed herein after the date of this letter.
We hereby consent to the filing of this opinion as an exhibit to the Registration Statement and to the use of our name as it appears under the caption “Legal Opinions.” In giving this consent, we do not admit that we are in the category of persons whose consent is required by Section 7 of the Securities Act, or the rules and regulations promulgated thereunder by the SEC.
Very truly yours,
/s/ LEDGEWOOD
LEDGEWOOD,
a professional corporation
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SCHEDULE I
RAIT General, Inc., a Maryland corporation
RAIT Limited, Inc., a Maryland corporation
RAIT Partnership, L.P., a Delaware limited partnership
Taberna Realty Finance Trust, a Maryland corporation
RAIT 175 Remsen, LLC, a Delaware limited liability company
RAIT-401 Michigan, LLC, a Delaware limited liability company
RAIT 500 Michigan, LLC, a Delaware limited liability company
RAIT Amarillo, LLC, a Delaware limited liability company
RAIT Asset Holdings, LLC, a Delaware limited liability company
RAIT Atria, LLC, a Delaware limited liability company
RAIT Braden Lakes, LLC, a Delaware limited liability company
RAIT Broadstone, Inc., a Delaware corporation
RAIT Buckner, LLC, a Delaware limited liability company RAIT Capital Corp., a Delaware corporation
RAIT Cornerstone, LLC, a Delaware limited liability company
RAIT CRE CDO I, Ltd., a Cayman Island exempted company
RAIT Emerald Pointe, Inc., a Delaware corporation
RAIT Firehouse, LLC, a Delaware limited liability company
RAIT Lincoln Court, LLC, a Delaware limited liability company
RAIT McDowell, LLC, a Delaware limited liability company
RAIT North Park, LLC, a Delaware limited liability company
RAIT Old Town, LLC, a Delaware limited liability company
RAIT Preferred Holdings I, LLC, a Delaware limited liability company
RAIT Rogers Plaza, LLC, a Delaware limited liability company
RAIT Rohrerstown, L.P., a Pennsylvania limited partnership
RAIT SAAR Company, LLC, a Delaware limited liability company
RAIT Towne Square, LLC, a Delaware limited liability company
RAIT Wauwatosa, LLC, a Delaware limited liability company
REM-Cherry Hill, LLC, a New Jersey limited liability company
REM-Willow Grove, L.P., a Pennsylvania limited partnership
REM-Willow Grove, Inc., a Pennsylvania corporation
Taberna Securities, LLC – Delaware limited liability company Taberna Capital Management, LLC – Delaware limited liability company Taberna Capital (Bermuda) Ltd – Bermuda limited company Taberna Loan Holdings I, LLC – Delaware limited liability company Taberna Loan Holdings II, LLC – Delaware limited liability company Taberna Equity Funding, Ltd – Cayman Island exempted company Taberna Realty Holdings Trust – Maryland business trust Taberna Funding LLC – Delaware limited liability company Taberna Preferred Funding II, Ltd – Cayman Island exempted company Taberna Preferred Funding III, Ltd – Cayman Island exempted company Taberna Preferred Funding IV, Ltd – Cayman Island exempted company Taberna Preferred Funding V, Ltd – Cayman Island exempted company Taberna Preferred Funding VI, Ltd – Cayman Island exempted company Taberna Preferred Funding VII, Ltd – Cayman Island exempted company Taberna Real Estate CDO I, Ltd. – Cayman Island exempted company Merrill Lynch Mortgage Investors Trust, Series 2005-A9 – Delaware statutory trust Citigroup Mortgage Loan Trust 2005-11 – Delaware statutory trust CWABS Trust 2005 HYB9 – Delaware statutory trust Bear Stearns ARM Trust 2005-7 – Delaware statutory trust Bear Stearns ARM Trust 2005-9 (QRS) – Delaware statutory trust
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