SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2003
OR
[ ] 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 1-14760
RAIT INVESTMENT TRUST
------------------------------------------
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
MARYLAND 23-2919819
-------- ----------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1818 MARKET STREET, 28TH FLOOR, PHILADELPHIA, PA 19103
------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(215) 861-7900
---------------
(Registrant's telephone number, including area code)
- --------------------------------------------------------------------------------
(Former name, former address and former fiscal year, if changed since last
report)
Indicate by check 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 [ X ] No [ ]
Indicate by check whether the registrant is an accelerated filer (as defined in
Rule 12b-2 of the Exchange Act).
Yes [ X ] No [ ]
As of May 13, 2003, 20,846,663 common shares of beneficial interest, par value
$0.01 per share, of the registrant were outstanding.
RAIT INVESTMENT TRUST
AND SUBSIDIARIES
INDEX TO QUARTERLY REPORT
ON FORM 10-Q
PAGE
----
PART I. FINANCIAL INFORMATION 1
ITEM 1. FINANCIAL STATEMENTS 1
Consolidated Balance Sheets at March 31, 2003 (unaudited) and December 31, 2002 1
Consolidated Statements of Income (unaudited) for the three months ended March 31, 2003 and 2002 2
Consolidated Statements of Cash Flows (unaudited) for the three months ended March 31, 2003
and 2002 3
Notes to Consolidated Financial Statements - March 31, 2003 (unaudited) 4
Report of Independent Certified Public Accountants 11
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 12
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 16
ITEM 4. CONTROLS AND PROCEDURES 16
PART II. OTHER INFORMATION 17
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 17
SIGNATURES 18
CERTIFICATIONS 19
EXHIBIT INDEX 21
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
RAIT INVESTMENT TRUST
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
MARCH 31, 2003
(UNAUDITED) DECEMBER 31, 2002
----------- -----------------
ASSETS
Cash and cash equivalents $ 7,608,886 $ 19,666,189
Restricted cash 10,592,220 5,484,342
Tenant escrows 164,206 428,346
Accrued interest receivable 10,782,539 7,421,907
Investments in real estate loans, net 292,055,021 258,921,926
Investments in real estate, net 111,568,285 139,518,051
Furniture, fixtures and equipment, net 659,036 611,224
Prepaid expenses and other assets 8,372,379 5,911,495
Goodwill, net 887,143 887,143
------------- -------------
Total assets $ 442,689,715 $ 438,850,623
============= =============
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Accounts payable and accrued liabilities $ 964,459 $ 421,149
Accrued interest payable 513,147 677,309
Tenant security deposits 399,838 657,921
Borrowers' escrows 10,343,283 10,150,938
Dividends payable 12,920,473 --
Senior indebtedness secured by real estate underlying the
Company's loans 30,030,107 30,430,916
Long-term debt secured by real estate underlying
equity interests 67,116,070 84,160,993
Secured lines of credit -- 30,243,155
------------- -------------
Total liabilities $ 122,287,377 $ 156,742,381
Minority interest 3,239,785 4,513,579
Shareholders' equity:
Preferred Shares, $.01 par value; 25,000,000 authorized -- --
shares
Common Shares, $.01 par value; 200,000,000 authorized
shares; issued and outstanding 20,839,472 and
18,803,471 shares, respectively 208,395 188,035
Additional paid-in-capital 314,595,220 274,606,899
Retained earnings 4,580,170 5,079,319
Loans for stock options exercised (1,068,972) (1,068,972)
Deferred compensation (1,152,260) (1,210,618)
------------- -------------
Total shareholders' equity 317,162,553 277,594,663
------------- -------------
Total liabilities and shareholders' equity $ 442,689,715 $ 438,850,623
============= =============
The accompanying notes are an integral part of these consolidated financial
statements
1
RAIT INVESTMENT TRUST
and Subsidiaries
Consolidated Statements of Income
(unaudited)
For the three months
ended March 31,
2003 2002
---- ----
REVENUES
Interest income $ 8,540,657 $ 8,091,844
Rental income 6,846,335 6,663,244
Fee income and other 532,180 338,044
Investment income 2,356,871 106,123
Gain on sale of loan -- 947,974
Gain on sale of property interest 2,372,220 --
------------ ------------
Total revenues 20,648,263 16,147,229
------------ ------------
COSTS AND EXPENSES
Interest 2,217,996 2,146,602
Property operating expenses 3,801,344 2,879,244
Salaries and related benefits 704,186 453,591
General and administrative 549,744 313,046
Depreciation and amortization 977,379 854,520
------------ ------------
Total costs and expenses 8,250,649 6,647,003
------------ ------------
Net income before minority interest 12,397,614 9,500,226
Minority interest 23,712 (70,983)
------------ ------------
Net income $ 12,421,326 $ 9,429,243
============ ============
Net income before minority interest $ .62 $ .61
Minority interest -- --
------------ ------------
Net income per common share-basic $ .62 $ .61
============ ============
Net income before minority interest $ .62 $ .61
Minority interest -- (.01)
------------ ------------
Net income per common share-diluted $ .62 $ .60
============ ============
The accompanying notes are an integral part of these consolidated financial
statements
2
RAIT INVESTMENT TRUST
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
FOR THE THREE MONTHS ENDED MARCH 31,
2003 2002
---- ----
Cash flows from operating activities
Net income $ 12,421,324 $ 9,429,243
Adjustments to reconcile net income to net cash provided by
operating activities:
Minority interest (23,712) 70,983
Depreciation and amortization 977,379 854,520
Accretion of loan discounts (286,371) (246,837)
Deferred compensation 58,358 --
Decrease (increase) in tenant escrows 264,140 (120,178)
Increase in accrued interest receivable (3,360,632) (870,077)
Increase in prepaid expenses and other assets (557,448) (2,866,537)
Increase (decrease) in accounts payable and accrued liabilities 543,105 (1,071,722)
(Decrease) increase in accrued interest payable (164,162) 32,424
Decrease in tenant security deposits (258,083) (168,358)
Decrease in borrowers' escrows (4,574,264) (1,131,518)
------------ ------------
Net cash provided by operating activities 5,039,634 3,911,943
Cash flows from investing activities
Purchase of furniture, fixtures and equipment (69,147) (4,285)
Real estate loans purchased (8,000,000) --
Real estate loans originated (32,770,953) (50,106,107)
Principal repayments from real estate loans 9,194,812 9,805,966
Investment in real estate and improvements (448,912) (3,537,016)
Proceeds from sale of loan -- 1,237,167
Proceeds from disposition of interests in real estate 5,871,812 --
------------ ------------
Net cash used in investing activities (26,222,388) (42,604,275)
Cash flows from financing activities
(Repayments) advances on secured lines of credit (30,243,155) 3,000,000
Issuance of common shares, net 40,008,681 29,473,713
Principal repayments on senior indebtedness (3,600,809) (5,196,528)
Principal repayments on long-term debt (239,266) (223,307)
Proceeds of senior indebtedness underlying real estate loans 3,200,000 2,950,000
------------ ------------
Net cash provided by financing activities 9,125,451 30,003,878
------------ ------------
Net change in cash and cash equivalents (12,057,303) (8,688,454)
------------ ------------
Cash and cash equivalents, beginning of period 19,666,189 18,064,909
------------ ------------
Cash and cash equivalents, end of period $ 7,608,886 $ 9,376,455
============ ============
The accompanying notes are an integral part of these consolidated financial
statements
3
RAIT INVESTMENT TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2003
(UNAUDITED)
NOTE 1 - BASIS OF PRESENTATION
In the opinion of management, these unaudited financial statements contain
all disclosures which are necessary to present fairly RAIT Investment
Trust's (the "Company") consolidated financial position at March 31, 2003 and
the results of operations and cash flows for the three months ended March 31,
2003 and 2002. The financial statements include all adjustments (consisting
only of normal recurring adjustments) which in the opinion of management are
necessary in order to present fairly the financial position and results of
operations for the interim periods presented. Certain information and footnote
disclosures normally included in financial statements under accounting
principles generally accepted in the United States of America have been
condensed or omitted pursuant to the rules and regulations of the Securities
and Exchange Commission. These financial statements should be read in
conjunction with the financial statements and notes thereto included in the
Company's Annual Report on Form 10-K for the year ended December 31, 2002.
STOCK BASED COMPENSATION
The Company accounts for its stock-based employee compensation plan under
the recognition and measurement principles of APB No. 25, "Accounting for Stock
Issued to Employees," and related interpretations. Stock-based employee
compensation costs are not reflected in net income, as all options granted under
the plan had an exercise price equal to the market value of the underlying
common stock on the date of grant. The following table illustrates the effect on
net income and earnings per share if the Company had applied the fair value
recognition provisions of SFAS No. 123, "Accounting for Stock-Based
Compensation," to stock-based employee compensation:
FOR THE THREE MONTHS ENDED
MARCH 31,
2003 2002
---- ----
Net income as reported $12,421,000 $9,429,000
Less: stock based compensation determined
under fair value based method for all awards (26,000) (247,000)
-------- ---------
Pro forma net income $12,395,000 $9,182,000
=========== ==========
Net income per share-basic as reported $0.62 $0.61
pro forma $0.62 $0.59
Net income per share-diluted as reported $0.62 $0.60
pro forma $0.62 $0.58
The Company granted options to purchase 24,850 and 49,100 common shares
during the quarters ended March 31, 2003 and 2002, respectively. The fair value
of each option grant is estimated on the date of grant using the Black-Scholes
options-pricing model with the following weighted average assumptions used for
grants in 2003 and 2002, respectively: dividend yield of 10.7% and 11.0%;
expected volatility of 22.0% and 22.0%; risk-free interest rate of 4.0% and 4.8%
and expected lives of five years and five years.
VARIABLE INTEREST ENTITIES
In January 2003, the FASB issued FASB Interpretation 46, or FIN 46,
"Consolidation of Variable Interest Entities." FIN 46 clarifies the application
of Accounting Research Bulletin 51, "Consolidated Financial Statements," for
certain entities that do not have sufficient equity at risk for the entity to
finance its activities without additional subordinated financial support from
other parties or in which equity investors do not have the characteristics of a
controlling financial interest. The Company refers to these entities as variable
interest entities. Variable interest entities within the scope of FIN 46 will be
required to be consolidated by their primary beneficiary. The primary
beneficiary of a variable interest entity is determined to be the party that
absorbs a majority of the entity's expected losses, receives a majority of its
expected returns, or both. FIN 46 applies immediately to variable interest
entities created after January 31, 2003 and to variable interest entities in
which an enterprise obtains an interest after that date. It applies in the first
fiscal year or interim period beginning after June 15, 2003 to variable
interest entities in
4
RAIT INVESTMENT TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2003
(UNAUDITED)
which an enterprise holds a variable interest that it acquired before February
1, 2003.
Some of the financing structures that the Company offers to its borrowers
involve the creation of entities that could be deemed variable interest entities
and, therefore, could be subject to FIN 46. These entities would include certain
majority-owned subsidiaries reported in the Company's consolidated financial
statements. The Company is assessing the impact of FIN 46 on all variable
interest entities with which it is involved and whether or not such entities
would be required to be consolidated on the Company's balance sheet. At this
time, the Company does not believe that the implementation of FIN 46 will have
a material impact with respect to its current portfolio of real estate
investments on its consolidated balance sheet, earnings or capital resources,
however, the complexity of the new consolidation rules and their evolving
clarification make forecasting their effect impracticable.
Certain reclassifications have been made to the consolidated financial
statements as of and for the three months ended March 31, 2002 to conform to the
presentation for the three months ended March 31, 2003.
NOTE 2 - CONSOLIDATED STATEMENT OF CASH FLOWS
Investments in real estate received in conjunction with the Company's
disposition of certain investments in real estate totaled $1.9 million for the
three months ended March 31, 2003.
NOTE 3 - RESTRICTED CASH AND BORROWERS' ESCROWS
Restricted cash and borrowers' escrows represent borrowers' funds held by
the Company to fund certain expenditures or to be released at the Company's
discretion upon the occurrence of certain pre-specified events and to serve as
additional collateral for borrowers' loans.
NOTE 4 - INVESTMENTS IN REAL ESTATE LOANS
The Company's portfolio of real estate loans consisted of the following at
March 31, 2003:
First mortgages and senior loan participations $132,510,822
Mezzanine loans 158,967,371
Unearned (fees) costs 802,985
Less: Allowance for loan losses (226,157)
---------
Investments in real estate loans 292,055,021
Less: Senior indebtedness secured by real estate
underlying the Company's loans (30,030,107)
------------
Net investments in real estate loans $ 262,024,914
=============
The following is a summary description of the Company's portfolio of real
estate loans as of March 31, 2003:
AVERAGE
NUMBER LOAN
TYPE OF LOAN OF LOANS TO VALUE YIELD RANGE RANGE OF MATURITIES
------------ -------- -------- ----------- -------------------
First mortgages and senior loan
participations 17 77.0% 7.8%-12.8% 6/22/03-6/28/13
Mezzanine loans 37 82.0% 9.0%-21.4%(1) 7/29/03-5/1/21
(1) Includes points charged.
As of March 31, 2003, approximately $137.0 million in principal amount of
the loans were secured by multi-family properties, $106.2 million in principal
amount of the loans were secured by office buildings and $48.2 million in
principal amount of the loans were secured by retail and other properties.
5
RAIT INVESTMENT TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2003
(UNAUDITED)
As of March 31, 2003, senior indebtedness secured by real estate
underlying the Company's loans consisted of the following:
Loan payable, secured by real estate, monthly installments of $28,090,
including interest at 6.82%, remaining principal due November 1, 2008 $4,079,294
Loan payable, secured by real estate, monthly installments of $72,005,
including interest at 7.55%, remaining principal due December 1, 2008 9,455,536
Loan payable, secured by real estate, monthly installments of principal
and interest based on an amortization schedule of 25 years, including
interest at a specified London interbank offered rate ("LIBOR") plus 135
basis points (2.66% at March 31, 2003), remaining principal due
September 15, 2007; the interest rate is subject to an interest rate
swap agreement entered into by the borrower which provides for a fixed
rate of 8.68% 10,655,277
Senior loan participation, secured by Company's interest in a first mortgage
loan with a principal balance of $3,300,000, payable interest only at LIBOR
plus 275 basis points (4.06% at March 31, 2003) due monthly, principal
balance due March 29, 2005 2,640,000
Senior loan participation, secured by Company's interest in a first mortgage
loan with a principal balance of $6,440,000, payable interest only at 5.75%
due monthly, principal balance due August 12, 2003 3,200,000
-----------
$30,030,107
===========
As of March 31, 2003, the senior indebtedness secured by real estate
underlying the Company's loans maturing in the remainder of 2003, over the next
four years, and the aggregate indebtedness maturing thereafter is as follows:
2003 $3,483,410
2004 404,915
2005 3,078,152
2006 474,139
2007 10,266,262
Thereafter 12,323,229
-----------
$30,030,107
===========
6
RAIT INVESTMENT TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2003
(UNAUDITED)
NOTE 5 - INVESTMENTS IN REAL ESTATE
Investments in real estate are comprised of the following at March 31,
2003:
Multi-family (1) $ 38,010,331
Office (2) 83,455,420
Land 613,519
-------------
Subtotal 122,079,270
Less: Accumulated depreciation (10,510,985)
-------------
Investment in real estate, net $ 111,568,285
=============
(1) Includes $7.4 million invested in three limited liability companies that
each own apartment buildings and a $1.8 million investment in an entity
which is the beneficiary of a trust that owns an apartment building. Also
includes escrow balances totaling $198,000 at March 31, 2003 which are
held for payment of real estate taxes, insurance premiums and repair and
replacement costs.
(2) Includes a $1.6 million investment in a limited partnership that owns an
office building. Also includes escrows totaling $778,000 at March 31, 2003
which are held for payment of real estate taxes, insurance premiums,
repair and replacement costs, tenant improvements and leasing commissions.
As of March 31, 2003, long-term debt secured by real estate underlying the
Company's equity interests in entities owning real estate consisted of the
following:
Loan payable, secured by real estate, monthly installments of
$8,008, including interest at 7.33%, remaining principal due
August 1, 2008. $ 1,022,069
Loan payable, secured by real estate, monthly installments of
$288,314, including interest at 6.85%, remaining principal due
August 1, 2008. 41,830,997
Loan payable, secured by real estate, monthly payments of
$87,960, including interest at 8.36%, remaining principal due
March 11, 2028; as an inducement to pay interest at 8.36% from
April 11, 1998 onward, rather than 7.89%, the Company received a
buy-up premium of $418,482 (balance of $256,704 at March 31,
2003) which is amortized over the term of the underlying debt. 11,381,908
Loan payable, secured by real estate, monthly installments of
$37,697, including interest at 7.27%, remaining principal due
January 1, 2010. 5,327,123
Loan payable, secured by real estate, monthly installments of
$47,720, including interest at 5.73%, remaining principal due
November 1, 2012. 7,553,973
-----------
$67,116,070
===========
7
RAIT INVESTMENT TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2003
(UNAUDITED)
As of March 31, 2003, the amount of long-term debt secured by the
Company's real estate investments that matures over remainder of 2003, over the
next four years and the aggregate indebtedness maturing thereafter, is as
follows:
2003 $695,362
2004 1,000,441
2005 1,073,605
2006 1,150,815
2007 1,233,617
Thereafter 61,962,231
------------
$ 67,116,070
============
Expenditures for repairs and maintenance are charged to operations as
incurred. Significant renovations are capitalized. Fees and costs incurred in
the successful negotiation of leases are deferred and amortized on a
straight-line basis over the terms of the respective leases. Unamortized fees as
of March 31, 2003 were $671,000. Rental revenue is reported on a straight-line
basis over the terms of the respective leases. Depreciation expense relating to
the Company's real estate investments for the three months ended March 31, 2003
was $915,000.
NOTE 6 - LINES OF CREDIT
As of March 31, 2003 there were no amounts outstanding on the Company's
secured lines of credit. The following is a description of the available credit
facilities:
$20.0 million line of credit which bears interest at either 30-day LIBOR
plus 2.5% or the prime rate as published in the "Money Rates" section of The
Wall Street Journal, at the Company's election. The minimum interest rate is
4.75%. Each draw on this line must be secured by a pledge of a loan or loans in
the Company's portfolio. Absent any renewal, this line will terminate in October
2003 and any principal then outstanding must be paid by October 2004.
$5 million line of credit which bears interest at either 30-day LIBOR
plus 2.5% or The Wall Street Journal prime rate, as described above, at the
Company's election, with a minimum interest rate of 5.5%. The line is secured by
a pledge of a $7.5 million first priority mortgage loan in the Company's
portfolio and terminates in September 2003.
$20.0 million line of credit which bears interest at The Wall Street
Journal prime rate described above. Each draw on this line must be secured by a
pledge of a loan or loans in the Company's portfolio. The facility has a
two-year term with annual one-year extension options, and an 11-month
non-renewal notice requirement.
NOTE 7 - RELATED PARTY TRANSACTIONS
In the ordinary course of its business operations, the Company has ongoing
relationships with several related entities. Certain of these transactions with
these related entities in the three months ended March 31, 2003 are described
below.
Resource America, Inc. ("Resource America"), which was the sponsor of the
Company, owned 5.2% of the Company's outstanding common shares of beneficial
interest as of April 4, 2003. Resource America has the right to nominate one
person for election to the Board of Trustees until such time as its ownership of
outstanding common shares is less than 5%. Currently, Jonathan Z. Cohen is
serving as Resource America's nominee. The Chairman and Chief Executive Officer
of the Company, Betsy Z. Cohen, is (i) the spouse of Edward E. Cohen, the
Chairman, Chief Executive Officer and President of Resource America, (ii) the
parent of Daniel G. Cohen, who was, until October 2002, a director of Resource
America and (iii) the parent of Jonathan Z. Cohen, the Chief Operating Officer
and a director of Resource America. Jonathan Cohen is also a Trustee and the
Secretary of the Company. The
8
RAIT INVESTMENT TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2003
(UNAUDITED)
President and Chief Operating Officer of the Company, Scott F. Schaeffer, was,
until October 2002, a director of Resource America.
Brandywine Construction & Management, Inc. ("Brandywine"), an affiliate of
Resource America, provided real estate management services to fifteen properties
underlying the Company's investments in real estate at March 31, 2003.
Management fees in the amount of $289,000 were paid to Brandywine for the three
months ended March 31, 2003 relating to these properties. The Company believes
that the management fees charged by Brandywine are comparable to those that
could be obtained from unaffiliated third parties. The Company continues to use
Brandywine to provide real estate management services to properties underlying
the Company's investments.
Betsy Z. Cohen is the Chief Executive Officer and a director of The
Bancorp, Inc. ("Bancorp"), the holding company for The Bancorp Bank, an Internet
bank. Daniel G. Cohen is the Chairman of the Board of Bancorp. The Company
maintains most of its checking and demand deposit accounts at Bancorp. As of
March 31, 2003, the Company had $3.6 million on deposit, of which approximately
$3.5 million is over the FDIC insurance limit. The Company pays a fee of $5,000
per month to Bancorp for information system technical support services. The
Company paid fees aggregating $15,000 for these services for the three months
ended March 31, 2003.
The Company sub-leases a portion of its downtown Philadelphia office space
under an operating lease from Bancorp. The sub-lease expires in August 2010 with
two five-year renewal options. Rent paid to Bancorp was approximately $61,000
for the three months ended March 31, 2003. The Company sub-leases the remainder
of its downtown Philadelphia office space under an operating lease from The
Richardson Group, Inc. ("Richardson"), a sales consulting company, whose
Chairman is Jonathan Z. Cohen. The Senior Vice President and Chief Operating
Officer of Richardson is the spouse of Ellen J. DiStefano, the Executive Vice
President and Chief Financial Officer of the Company. The sub-lease expires in
August 2010 with two five-year renewal options. Rent paid to Richardson was
approximately $13,000 for the three months ended March 31, 2003. With respect to
both sub-leases, the Company pays rent based upon the square footage it occupies
at the amount paid per square foot by each of Bancorp and Richardson under their
respective leases with an unaffiliated lessor.
Daniel G. Cohen is the principal owner of the corporate parent of Cohen
Brothers & Company ("Cohen Brothers"), a registered broker-dealer. In March
2003, Jonathan Z. Cohen sold his 50% equity interest in this corporate parent to
Daniel G. Cohen. Cohen Brothers acted as a dealer in a public offering the
Company made of its common shares in February 2003 wherein Cohen Brothers was
allocated 150,000 common shares at the public offering price less a concession
of $0.48 per share.
NOTE 8 - SHAREHOLDERS' EQUITY
On February 10, 2003, the Company issued 1.75 million common shares in a
public offering at an offering price of $20.75 per share. After offering costs,
including the underwriter's discount and expenses, of approximately $1.7
million, the Company received approximately $34.6 million of net proceeds. On
March 4, 2003, the Company issued an additional 262,500 common shares pursuant
to the underwriter's exercise of its over-allotment option in connection with
this offering. The exercise price was $20.75 per share, resulting in receipt by
the Company of net proceeds of approximately $5.2 million.
On March 21, 2003 the Board of Trustees of the Company declared a cash
dividend of $0.62 per common share payable on April 16, 2003 to shareholders of
record on April 3, 2003.
9
RAIT INVESTMENT TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2003
(UNAUDITED)
NOTE 9 - EARNINGS PER SHARE
The Company's calculation of earnings per share for the quarters ended
March 31, 2003 and 2002 in accordance with SFAS No. 128 is as follows:
Quarter ended March 31, 2003
----------------------------------------------
Income Shares Per share
(numerator) (denominator) Amount
----------- ------------- ---------
Basic earnings per share
Net income available to common
shareholders $12,421,326 19,970,949 $ 0.62
Effect of dilutive securities
Options -- 136,298 --
Warrants -- 3,581 --
----------- ----------- ------
Net income available to common shareholders
plus assumed conversions $12,421,326 20,110,828 $ 0.62
=========== =========== ======
Options to purchase 24,850 common shares at $21.51 per share were
outstanding as of March 31, 2003. These options were not included in the
computation of diluted earnings per share because the option exercise price was
greater than the average market price.
Quarter ended March 31, 2002
----------------------------------------------
Income Shares Per share
(numerator) (denominator) amount
----------- ------------- ---------
Basic earnings per share
Net income available to common
shareholders $9,429,244 15,556,698 $ 0.61
Effect of dilutive securities
Options -- 121,173 (.01)
Warrants -- 18,905 --
---------- ---------- ------
Net income available to common shareholders
plus assumed conversions $9,429,244 15,696,776 $ 0.60
========== ========== ======
10
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Board of Trustees and Shareholders
RAIT Investment Trust
We have reviewed the accompanying consolidated balance sheet of RAIT
Investment Trust and Subsidiaries as of March 31, 2003 and the related
consolidated statements of income and cash flows for the three-month periods
ended March 31, 2003 and 2002. These financial statements are the responsibility
of the Company's management.
We conducted our review in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures to
financial data and making inquiries of persons responsible for financial and
accounting matters. It is substantially less in scope than an audit conducted in
accordance with auditing standards generally accepted in the United States of
America, the objective of which is the expression of an opinion regarding the
financial statements taken as a whole. Accordingly, we do not express such an
opinion. Based on our review, we are not aware of any material modifications
that should be made to the accompanying financial statements for them to be in
conformity with accounting principles generally accepted in the United States of
America.
We have previously audited, in accordance with auditing standards
generally accepted in the United States of America, the consolidated balance
sheet as of December 31, 2002, and the related consolidated statements of
income, shareholders' equity and cash flows for the year then ended (not
presented herein); and in our report dated January 23, 2003 (except for note 16
as to which the dates are February 10, 2003 and March 4, 2003). We expressed
an unqualified opinion on those consolidated financial statements. In our
opinion, the information set forth in the accompanying consolidated balance
sheet as of December 31, 2002 is fairly stated, in all material respects, in
relation to the consolidated balance sheet from which it has been derived.
/s/ Grant Thornton LLP
Philadelphia, Pennsylvania
May 15, 2003
11
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
FORWARD-LOOKING STATEMENTS
In addition to historical information, this discussion and analysis
contains forward-looking statements. These statements can be identified by the
use of forward-looking terminology including "may," "believe," "will," "expect,"
"anticipate," "estimate," "continue" or similar words. These forward-looking
statements are subject to risks and uncertainties, as more particularly set
forth in our Annual Report on Form 10-K for the year ended December 31, 2002,
that could cause actual results to differ materially from those projected in the
forward-looking statements. Readers are cautioned not to place undue reliance on
these forward-looking statements, which reflect management's analysis only as of
the date hereof. We undertake no obligation to publicly revise or update these
forward-looking statements to reflect events or circumstances that arise after
the date of this report.
OVERVIEW
We began investment operations in January 1998. Our principal business
objective is to generate income for distribution to our shareholders from a
combination of interest and fees on loans, rents and other income from our
interests in real estate, and proceeds from the sale of portfolio investments.
Through March 31, 2003, we completed nine public offerings of our common shares:
two during 1998, three in 2001, three in 2002 and one in February 2003. We have
used the proceeds of these offerings, combined with amounts collected from the
repayment, sale and refinancing of our loans and interests in real estate and
amounts drawn from our lines of credit, to build our investment portfolio.
LIQUIDITY AND CAPITAL RESOURCES
The principal sources of our liquidity and capital resources from our
commencement through March 31, 2003 were the nine public offerings of our common
shares. After offering costs and underwriting discounts and commissions, we
obtained net offering proceeds of $312.9 million. In March 2003, we filed a
shelf registration statement to allow us to sell any combination of our common
or preferred shares, warrants for our preferred or common shares or one or more
series of debt securities up to a total amount of $300 million.
We also maintain our liquidity and capital resources through our lines of
credit. As of March 31, 2003, we had obtained a $5.0 million line of credit and
two $20.0 million lines of credit. The $5.0 million line of credit bears
interest either at 30-day LIBOR plus 2.5% or at the prime rate as published in
the "Money Rates" section of the Wall Street Journal, at our election. The
minimum interest rate is 5.5% and the line terminates in September 2003. One
$20.0 million line of credit bears interest at the Wall Street Journal prime
rate as described above. Its current term runs through April 2004 with annual
one-year extension options and an 11-month non-renewal notice requirement. The
second $20.0 million line of credit bears interest at either 30-day LIBOR plus
2.5% or The Wall Street Journal prime rate described above, at our election.
The minimum interest rate is 4.75%. Absent any renewal, this line will
terminate in October 2003 and any principal then outstanding must be repaid by
October 2004. All draws on our lines must be secured by a pledge of a loan(s)
or interest(s) in real estate held in our portfolio. We used most of the
proceeds from our February 2003 public offering of our common shares, which
totaled approximately $39.8 million, to repay $30.2 million on our lines of
credit. Accordingly, at March 31, 2003, there were no amounts outstanding under
our lines of credit.
Our other sources of liquidity and capital resources include principal
payments on, refinancings of, and sales of loans in our portfolio as well as
refinancings and the proceeds of sales of our interests in real estate. These
resources aggregated $18.2 million and $14.0 million for the quarters ended
March 31, 2003 and 2002, respectively. We use our capital resources principally
for originating and purchasing loans and acquiring interests in real estate.
For the quarter ended March 31, 2003, we originated or purchased five loans in
the amount of $40.8 million, as compared to seven loans in the amount of $50.1
million for the quarter ended March 31, 2002. For the quarter ended March 31,
2003, we did not acquire any interests in real estate as compared to the quarter
ended March 31, 2002 when we acquired one interest in real estate for $3.5
million (net of $5.4 million of long-term debt assumed).
We also receive funds from a combination of interest and fees on our
loans, rents and income from our interests in real estate. As required by the
Internal Revenue Code, we used this income, to the extent of not less than
12
90% of our taxable income, to pay distributions to our shareholders. For the
quarters ended March 31, 2003 and 2002, we declared dividends of $12.9 million
(paid April 16, 2003) and $9.7 million (paid April 16, 2002), respectively. We
expect to continue to use funds from these sources to meet these needs.
In order to maintain our liquidity, we pursue the following strategies:
- providing shorter-term financing to our borrowers to increase
the turnover of our investments, and
- pursuing borrower refinancing of our loans through senior
lenders, while we retain junior interests.
We anticipate that we will continue to provide shorter-term financing and
obtain senior lien refinancing of our investments in loans and properties, in
order to maintain liquidity. However, we anticipate that from time to time we
may provide longer-term financings as such opportunities arise. We do not
currently experience material difficulties in originating shorter-term
financings or obtaining senior loan refinancings on acceptable terms. However,
we could encounter difficulties in the future, depending upon the development of
conditions in the credit markets and other risks and uncertainties described in
our Annual Report on Form 10-K for the year ended December 31, 2002.
At March 31, 2003, we had approximately $7.6 million in funds available
for investment and payment of our dividend. Shortly after the close of the first
quarter, we received approximately $32.0 million of loan repayments and proceeds
of dispositions of real estate interests, as well as $15.0 million of proceeds
from the refinancing of loans in our portfolio, partially offset by the
repayment of approximately $4.1 million of senior debt underlying one of these
loans. These net proceeds of $42.9 million combined with cash on hand of $7.6
million at March 31, 2003 provided for payment of our $12.9 million dividend on
April 16, 2003 and additional funds available for investment of $37.6 million.
Our accrued interest receivable increased from $7.4 million at December 31,
2002 to $10.8 million at March 31, 2003. Of this increase, $1.8 million
represented cash collected but not posted until shortly after the close of the
first quarter.
We believe that our existing sources of funds will be adequate for
purposes of meeting our liquidity and capital needs. We may also seek to develop
other sources of capital, including, without limitation, long-term borrowings,
offerings of our preferred shares and warrants and issuances of our debt
securities. Our ability to meet our liquidity and capital resources requirements
beyond one year is subject to obtaining additional debt and equity financing.
Any decision by our lenders to extend debt financing to us or by investors to
purchase our equity securities will depend upon a number of factors, such as our
financial performance, compliance with the terms of our existing credit
arrangements, industry or market trends, the general availability of and rates
applicable to financing transactions, such lenders' and investors' resources and
policies concerning the terms under which they make such capital commitments and
the relative attractiveness of alternative investment or lending opportunities.
Our financial performance and the relative attractiveness of our securities to
investors are subject to a number of risks described in our Annual Report on
Form 10-K for the year ended December 31, 2002. In addition, as a REIT, we must
distribute at least 90% of our annual taxable income, which limits the amount of
cash we can accumulate for other business purposes, including amounts to fund
our capital needs.
The following schedule summarizes our currently anticipated contractual
obligations and commercial commitments as of March 31, 2003:
LESS THAN ONE TO THREE FOUR TO FIVE AFTER FIVE
ONE YEAR YEARS YEARS YEARS TOTAL
----------- ----------- ----------- ----------- -------------
Operating leases $ 305,221 $ 622,671 $ 967,836 $ 458,282 $ 2,354,010
Long-term debt 4,178,772 5,557,112 13,124,833 74,285,460 97,146,177
Deferred compensation 258,571 689,522 344,761 -- 1,292,854
----------- ----------- ----------- ----------- -------------
Total $ 4,742,564 $ 6,869,305 $14,437,430 $74,743,742 $ 100,793.041
=========== =========== =========== =========== =============
VARIABLE INTEREST ENTITIES
In January 2003, the FASB issued FASB Interpretation 46, or FIN 46,
"Consolidation of Variable Interest Entities." FIN 46 clarifies the application
of Accounting Research Bulletin 51, "Consolidated Financial Statements," for
certain entities that do not have sufficient equity at risk for the entity to
finance its activities without additional subordinated financial support from
other parties or in which equity investors do not have the characteristics of a
controlling financial interest. We refer to these entities as variable interest
entities. Variable interest entities within the scope of FIN 46 will be required
to be consolidated by their primary beneficiary. The primary beneficiary of a
13
variable interest entity is determined to be the party that absorbs a majority
of the entity's expected losses, receives a majority of its expected returns, or
both. FIN 46 applies immediately to variable interest entities created after
January 31, 2003 and to variable interest entities in which an enterprise
obtains an interest after that date. It applies in the first fiscal year or
interim period beginning after June 15, 2003 to variable interest entities in
which an enterprise holds a variable interest that it acquired before February
1, 2003.
Some of the financing structures that we offer to our borrowers involve
the creation of entities that could be deemed variable interest entities and,
therefore, could be subject to FIN 46. These entities would include certain
majority-owned subsidiaries reported in our consolidated financial statements.
We are assessing the impact of FIN 46 on all variable interest entities with
which we are involved and whether or not such entities would be required to be
consolidated on our balance sheet. At this time, we do not believe that the
implementation of FIN 46 with respect to our current portfolio of real estate
investments will have a material impact on our consolidated balance sheet,
earnings or capital resources, however, the complexity of the new consolidation
rules and their evolving clarification make forecasting their effect
impracticable.
RESULTS OF OPERATIONS
Our mortgage interest income was $8.5 million for the quarter ended March
31, 2003 compared to $8.1 million for the quarter ended March 31, 2002. The
$400,000 increase was due to an additional $3.9 million of interest generated by
29 loans totaling $182.0 million that were purchased or originated between
January 1, 2002 and March 31, 2003, partially offset by a $3.5 million reduction
of interest due to the repayment of 18 loans during the same period totaling
$117.9 million.
We received rental income of $6.8 million for the quarter ended March 31,
2003 compared to $6.7 million for the quarter ended March 31, 2002. The $183,000
rent increase was primarily due to $378,000 generated by two property interests
acquired; one in the first quarter of 2002 and the other in the fourth quarter
of 2002, partially offset by a decrease in rental income of $238,000 due to the
timing of the recognition of deferred rent at one property.
We earned fee and other income of $532,000 for the quarter ended March 31,
2003 as compared to $338,000 for the quarter ended March 31, 2002. The $194,000
increase was primarily due to an increase in fees earned by our wholly owned
subsidiary, RAIT Capital Corp. d/b/a Pinnacle Capital Group.
We received investment income of $2.4 million for the quarter ended March
31, 2003 compared to $106,000 for the quarter ended March 31, 2002. The $2.3
million increase was primarily due to $1.7 million realized (cash collected)
from participation interests we held in three of our investments and $600,000 of
investment income generated by two investments totaling $1.3 million that were
made subsequent to the end of the first quarter of 2002.
In March 2002, we sold our entire interest in one loan with a book value
of $1.2 million to a partnership whose general partner is a son of our chairman
and chief executive officer. The buyer paid $2.2 million in cash and we
recognized a gain on the sale of approximately $948,000.
In March 2003, we sold a 40% limited partnership interest and sole general
partnership interest in a limited partnership that owns a property to an
unrelated party. We retained an 11% limited partnership interest. The
partnership interests we sold had a negative book value of $1.4 million. The
buyer paid $900,000 and we recognized a gain of $2.4 million.
Interest expense was $2.2 million for the quarter ended March 31, 2003 as
compared to $2.1 million for the quarter ended March 31, 2002. Interest expense
consists of interest payments made on senior indebtedness on properties
underlying our loans and property interests, and interest payments made on our
lines of credit. The $100,000 increase in interest expense resulted from the
increase in amounts outstanding from time to time pursuant to our lines of
credit, partially offset by a decrease in general market interest rates during
2002.
Property operating expenses were $3.8 million for the quarter ended March
31, 2003, compared to $2.9 million for the quarter ended March 31, 2002. The
$900,000 increase in property operating expenses was due to
14
$300,000 in additional operating expenses from two property interests acquired
after the first quarter of 2002, a $300,000 non-recurring adjustment relating
to 2001 which reduced expenses in the first quarter of 2002 and $300,000 of
increased expenses resulting from the unusually severe winter of 2002-2003.
Included in property operating expenses are management fees of $179,000 paid
to Brandywine Construction & Management, Inc., an affiliate of Resource
America, for providing real estate management services to five properties
underlying our investments in real estate at March 31, 2003. Brandywine also
provides real estate management services to ten properties underlying our
investments in real estate loans at March 31, 2003 where Brandywine's
management fees are paid by the borrower on the relevant loan. We anticipate
that we will continue to use Brandywine to provide real estate management
services. See Note 7 to our financial statements, Item 1 of this quarterly
report on Form 10-Q.
Depreciation and amortization was $977,000 for the quarter ended March 31,
2003 compared to $855,000 for the quarter ended March 31, 2002. The increase was
due to two property interests acquired subsequent to the first quarter of 2002.
Salaries and related benefits were $704,000 for the quarter ended March
31, 2003, as compared to $454,000 for the quarter ended March 31, 2002. General
and administrative expenses were $550,000 for the quarter ended March 31, 2003,
as compared to $313,000 for the quarter ended March 31, 2002. The increases in
salaries and related benefits and general and administrative expenses were due
to (i) increased personnel and occupancy expenses which reflect the expansion
of our staff to support the increased size of our portfolio, due to the
significant infusion of new capital, primarily from our public offerings, (ii)
increased compliance costs relating to new regulatory requirements and (iii)
increased costs for directors' and officers' liability insurance. The major
portion of these increases took place in the second and third quarters of
fiscal 2002.
Included in general and administrative expense is rental expense relating
to our downtown Philadelphia office space. We sublease these offices pursuant
to two operating leases. The sub-leases expire in August 2010 and both contain
two five-year renewal options. One sub-lease is with Bancorp; rent paid to
Bancorp was approximately $61,000 and $38,000 for the three months ended March
31, 2003 and 2002, respectively. The other sublease is with The Richardson
Group, Inc. whose chairman is our secretary and a member of our board of
trustees, and is also a son of our chairman and chief executive officer. The
senior vice president and chief operating officer of Richardson is the spouse
of our executive vice president and chief financial officer. Rent paid to
Richardson was approximately $13,000 and $0 for the three months ended March
31, 2003 and 2002, respectively. The increase in the amount of rent we paid was
due to the increase in the square footage we occupied over those periods. With
respect to both sub-leases, we pay rent based upon the square footage we occupy
at the amount paid per square foot by each of Bancorp and Richardson under their
respective leases with an unaffiliated lessor. See Note 7 to our financial
statements, Item 1 of this quarterly report on Form 10-Q.
Also included in general and administrative expenses is $15,000 that we
paid in both the three months ended March 31, 2003 and 2002 to Bancorp for
technical support services provided to us. See Note 7 to our financial
statements, Item 1 of this quarterly report on Form 10-Q.
We have a reserve for loan losses of $226,000. This reserve is a general
reserve and is not related to any individual loan or to an anticipated loss. In
accordance with our policy, we determined that this reserve was adequate as of
March 31, 2003. We will continue to analyze the adequacy of this reserve on a
quarterly basis.
CRITICAL ACCOUNTING POLICIES
Refer to our Annual Report on Form 10-K for the year ended December 31,
2002 for a discussion of our critical accounting policies. During the three
months ended March 31, 2003, there were no material changes to these policies.
15
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
There has been no material change in our assessment of our sensitivity to
market risk since our presentation in our Annual Report on Form 10-K for the
year ended December 31, 2002.
ITEM 4. CONTROLS AND PROCEDURES
We maintain disclosure controls and procedures that are designed to ensure
that information required to be disclosed in our Securities Exchange Act of 1934
reports is recorded, processed, summarized and reported within the time periods
specified in the SEC's rules and forms, and that such information is accumulated
and communicated to our management, including our Chief Executive Officer and
our Chief Financial Officer, as appropriate, to allow timely decisions regarding
required disclosure. In designing and evaluating the disclosure controls and
procedures, our management recognized that any controls and procedures, no
matter how well designed and operated, can provide only reasonable assurance of
achieving the desired control objectives, and our management necessarily was
required to apply its judgment in evaluating the cost-benefit relationship of
possible controls and procedures.
Within 90 days prior to the filing date of this report, we carried out an
evaluation under the supervision of our chief executive officer and chief
financial officer and with the participation of our disclosure committee
appointed by such officers of the effectiveness of our disclosure controls and
procedures. As a result of that evaluation, our chief executive officer and
chief financial officer concluded that our disclosure controls and procedures
are effective. There have been no significant changes in our internal controls
or in other factors that could significantly affect these controls subsequent to
the date of this evaluation.
16
PART II OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
The Exhibits furnished as part of this Quarterly Report on Form 10-Q are
identified in the Exhibit Index immediately following the signature page of this
Report. Such Exhibit Index is incorporated herein by reference.
(b) Reports on Form 8-K
We filed two reports on Form 8-K during the quarter ending March 31, 2003.
A report on Form 8-K was dated February 4, 2003 and was filed as of
February 11, 2003. Pursuant to Item 5- Other Events and Required FD Disclosure,
we disclosed that we had entered into an underwriting agreement with an
underwriter on February 4, 2003 for the sale of 1,750,000 common shares of
beneficial interest plus up to 262,500 additional shares to cover over
allotments and that we had filed a prospectus supplement on February 5, 2003
relating to this sale. This underwriting agreement and certain related opinions
were filed as exhibits to this report on Form 8-K.
A report on Form 8-K was dated January 24, 2003 and was filed as of
January 24, 2003. Pursuant to Item 5 - Other Events and Required FD Disclosure,
we disclosed that we had issued a press release regarding our earnings for the
fourth quarter of fiscal 2002 and for fiscal 2002.
17
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.
May 15, 2003 /s/ Ellen J. DiStefano
- ------------ ----------------------
DATE Ellen J. DiStefano
Chief Financial Officer
(On behalf of the registrant and
as its principal financial officer)
18
CERTIFICATIONS
I, Betsy Z. Cohen, certify that:
1. I have reviewed this quarterly report on Form 10-Q of RAIT Investment
Trust;
2. Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by this
quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) Designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly
during the period in which this quarterly report is being prepared;
b) Evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to the filing date of
this quarterly report (the "Evaluation Date"); and
c) Presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our evaluation
as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent function):
a) All significant deficiencies in the design or operation of
internal controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have identified for the
registrant's auditors any material weaknesses in internal controls; and
b) Any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's internal
controls; and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.
Date: May 15, 2003
/s/ Betsy Z. Cohen
- --------------------------------------------
Title: Chief Executive Officer
19
CERTIFICATIONS
I, Ellen J. DiStefano, certify that:
1. I have reviewed this quarterly report on Form 10-Q of RAIT Investment
Trust;
2. Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by this
quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) Designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly
during the period in which this quarterly report is being prepared;
b) Evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to the filing date of
this quarterly report (the "Evaluation Date"); and
c) Presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our evaluation
as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent function):
a) All significant deficiencies in the design or operation of
internal controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have identified for the
registrant's auditors any material weaknesses in internal controls; and
b) Any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's internal
controls; and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.
Date: May 15, 2003
/s/ Ellen J. DiStefano
- ---------------------------------------------
Title: Chief Financial Officer
20
EXHIBIT INDEX
Exhibit
Number Description
- ------ -----------
3.i.1(1) Amended and Restated Declaration of Trust.
3.i.2(2) Articles of Amendment of Amended and Restated Declaration of Trust.
3.i.3(3) Articles of Amendment of Amended and Restated Declaration of Trust.
3.i.4(4) Certificate of Correction to the Amended and Restated Declaration of Trust
3.ii.1(1) Bylaws, as amended.
15.1 Awareness Letter from Independent Accountants.
99.1 Certification by the Chief Executive Officer of RAIT Investment Trust Pursuant to 18
U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.
99.2 Certification by the Chief Financial Officer of RAIT Investment Trust Pursuant to 18
U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.
(1) Incorporated herein by reference to RAIT Investment Trust's Registration
Statement on Form S-11 (File No. 333-35077), as amended.
(2) Incorporated herein by reference RAIT Investment Trust's Registration
Statement on Form S-11 (File No. 333-53067), as amended.
(3) Incorporated herein by reference to RAIT Investment Trust's Registration
Statement on Form S-2 (File No. 333-55518), as amended.
(4) Incorporated herein by reference to RAIT Investment Trust's Form 10-Q for
the Quarterly Period ended March 31, 2002 (File No. 1-14760).
21