May 4, 2005
Mail Stop 0409
Daniel T. Ward
Secretary
JER Investors Trust Inc.
1650 Tysons Blvd., Suite 1600
McLean, Virginia 22102
Re: JER Investors Trust Inc.
Amendment No. 3 to Form S-11 filed April 15, 2005
Registration No. 333-122802
Dear Mr. Ward:
We have reviewed your filing and have the following
comments.
Where indicated, we think you should revise your document in
response
to these comments. If you disagree, we will consider your
explanation as to why our comment is inapplicable or a revision is
unnecessary. Please be as detailed as necessary in your
explanation.
In some of our comments, we may ask you to provide us with
supplemental information so we may better understand your
disclosure.
After reviewing this information, we may or may not raise
additional
comments.
Please understand that the purpose of our review process is
to
assist you in your compliance with the applicable disclosure
requirements and to enhance the overall disclosure in your filing.
We look forward to working with you in these respects. We welcome
any questions you may have about our comments or on any other
aspect
of our review. Feel free to call us at the telephone numbers
listed
at the end of this letter.
Form S-11
Prospectus Summary, page 1
Risk Factors, page 11
1. We note your response to comment 7. However, since the
incentive
fee may be increased by a decrease in the weighted average price
per
share of your common stock offerings, assuming FFO per share
remains
unchanged, please supplementally advise us whether you believe the
company can downwardly pressure its stock price without impacting
its
FFO by, for example, increasing its FFO payout ratio. If so,
please
disclose this potential conflict of interest between the manager
and
your stockholders.
2. We note your response to prior comment 8; however, we reissue
our
previous comment. We note that FBR is a significant principal
stockholder, was the initial purchaser and placement agent for the
private placement, and may potentially be a selling stockholder in
this offering. Further, we note that you have added disclosure
that
a significant portion of this offering, currently $186.7 million,
will be used to repay your indebtedness to Banc of America
Securities
LLC, another underwriter in this offering.
The JER Fund III partnership agreement limits our ability to
invest
in certain real estate structured finance products, page 12
3. The definition disclosed for "JER CMBS Fund" appears to be
inconsistent with the definition provided in the copy of the
agreement provided to us. In particular, the definition in the
agreement does not refer to "residential mortgages and related
securities." Please revise, here and on page 61, to make the
disclosure consistent with the agreement.
4. We note your response to prior comment 9. Please disclose how
you
quantify the term "primarily."
5. Please include a brief description of the three mezzanine loans
purchased with the JER Fund III in accordance with the JER Fund
III
conflicts policy.
Maintenance of our exemption from the requirements of the
Investment
Company Act imposes limits on our operations, page 26.
6. Please revise the header to reflect the risk that your current
operations may not be exempt from the Investment Company Act.
7. Please revise the risk factor to reflect each exemption from
the
Investment Company Act that you are relying upon. In addition,
please disclose that neither the SEC nor the Staff has issued a
no-
action letter or interpretive guidance that specifically addresses
your current portfolio and your exemption analyses. Please also
disclose that the Staff has issued no-action letters and
interpretive
guidance that arguably could be inferred to suggest that certain
subordinated CMBS investments are not qualifying interests for
purposes of the Section 3(c)(5)(C) exemption. Lastly, please
disclose that any decision by the SEC or the Staff which advances
a
position contrary to your analysis would require you to no longer
treat these investments in subordinate CMBS as qualifying
interests
and could deem you an unregistered investment company.
Use of Proceeds, page 35
8. Please confirm that if you use proceeds to pay down amounts
outstanding on your $100 million repurchase agreement, you will
include the interest rate of the agreement.
9. Please revise to briefly describe the "additional investments"
that you acquired from your borrowings.
Management`s Discussion and Analysis of Financial Condition and
Results of Operations
Liquidity and Capital Resources, page 45
10. We have reviewed your response to our prior comment 17. We
are
still unsure how you have considered your commitments to acquire
loans subsequent to year end, as disclosed in Note 13 to your
financial statements, in your discussion of contractual
obligations.
Explain to us how you have met the requirements of Item 303 of
Regulation S-K and FR-72 to disclose material commitments and its
impact on your financial condition and liquidity.
Our Company, page 50
Our Investments, page 55
11. We have considered your response to our prior comment 19. In
a
supplemental response to us please cite the sections of any
relevant
agreements which describe the voting rights of the Re-remic trust.
In addition, please provide an explanation as to how you arrived
at
the conclusion that each of the rights enumerated is non-
substantive.
12. Please revise the disclosure to clarify whether you have an
obligation to fund amounts in addition to those already funded in
connection with the garden condominium conversion "program"
discussed
on page 57.
Our Manager and the Management Agreement, page 67
Conflicts of Interest in Our Relationship with Our Manager,
page
73
13. Please supplementally advise us why you do not believe
Sections
4.6(e) and 5.3(b) of the JER Fund III partnership agreement have
an
impact on your operations.
Financial Statements
3. CMBS, page F-11
14. We have considered your response to our prior comment 31 and
have
the following additional comments:
* We are unsure how you have determined that the disclosures in
paragraph 21a.(2) are not required. Why do you believe that you
do
not meet the requirement to disclose information regarding
investments that have been in a continuous net loss position for
less
than 12 months?
* We are unsure how you have disclosed the number of investments
that
are in a net loss position as you have represented. Please
explain
to us how you have met this requirement or revise accordingly.
* We are unsure how you have disclosed the severity and duration
of
the unrealized losses as you have represented. Please explain to
us
how you have met this requirement or revise accordingly.
* Expand your disclosures to include the cause of the decline in
fair
value and your basis for determining these amounts are not other
than
temporarily impaired.
* * * *
As appropriate, please amend your registration statement in
response to these comments. You may wish to provide us with
marked
copies of the amendment to expedite our review. Please furnish a
cover letter with your amendment that keys your responses to our
comments and provides any requested supplemental information.
Detailed cover letters greatly facilitate our review. Please
understand that we may have additional comments after reviewing
your
amendment and responses to our comments.
We urge all persons who are responsible for the accuracy and
adequacy of the disclosure in the filings reviewed by the staff to
be
certain that they have provided all information investors require
for
an informed decision. Since the company and its management are in
possession of all facts relating to a company`s disclosure, they
are
responsible for the accuracy and adequacy of the disclosures they
have made.
We will consider a written request for acceleration of the
effective date of the registration statement as a confirmation of
the
fact that those requesting acceleration are aware of their
respective
responsibilities under the Securities Act of 1933 and the
Securities
Exchange Act of 1934 as they relate to the proposed public
offering
of the securities specified in the above registration statement.
We
will act on the request and, pursuant to delegated authority,
grant
acceleration of the effective date.
We direct your attention to Rules 460 and 461 regarding
requesting acceleration of a registration statement. Please allow
adequate time after the filing of any amendment for further review
before submitting a request for acceleration. Please provide this
request at least two business days in advance of the requested
effective date.
You may contact Robert Telewicz at (202) 551-3438 or Cicely
Luckey, Accounting Branch Chief, at (202) 551-3413 if you have
questions regarding comments on the financial statements and
related
matters. Please contact Michael McTiernan, Attorney-Advisor, at
(202) 551-3852, or me at (202) 551-3411 with any other questions.
Sincerely,
Peggy Kim
Senior Counsel
cc: David J. Goldschmidt, Esq. (via facsimile)
Skadden, Arps, Slate, Meagher & Flom LLP
??
??
??
??
JER Investors Trust Inc.
Page 1