SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[ X ] Quarterly Report Pursuant To Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the quarterly period ended March 31, 2001
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OR
[ ] Transition Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the transition period from to
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Commission file number 1-14760
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RAIT INVESTMENT TRUST
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(Exact name of registrant as specified in its charter)
MARYLAND 23-2919819
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(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
1818 MARKET STREET, 28TH FLOOR, PHILADELPHIA, PA 19103
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(Address of principal executive offices) (Zip Code)
(215) 861-7900
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(Registrant's telephone number, including area code)
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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 X No
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As of May 1, 2001, 9,110,701 common shares of beneficial interest, par
value $0.01 per share, were outstanding.
RAIT INVESTMENT TRUST
and Subsidiaries
Index to Quarterly Report
on Form 10-Q
PART I FINANCIAL INFORMATION Page
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Item 1. Financial Statements
Consolidated Balance Sheets at March 31, 2001 (unaudited)
and December 31, 2000 3
Consolidated Statements of Income (unaudited) for the three
months ended March 31, 2001 and 2000 4
Consolidated Statements of Cash Flows (unaudited) for the
three months ended March 31, 2001and 2000 5
Notes to Consolidated Financial Statements-March 31, 2001 (unaudited) 6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 12
Item 3. Quantitative and Qualitative Disclosures About Market Risk 15
PART II. OTHER INFORMATION
Item 5. Other Information 16
Item 6. Exhibits 16
The accompanying notes are an integral part of these
consolidated financial statements
-2-
PART I FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
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RAIT INVESTMENT TRUST
and Subsidiaries
Consolidated Balance Sheets
March 31, 2001
(unaudited) December 31, 2000
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ASSETS
Cash and cash equivalents $ 18,426,377 $ 7,407,988
Restricted cash 6,293,504 7,954,688
Tenant escrows 222,371 222,371
Accrued interest receivable 2,622,493 3,011,496
Investments in real estate loans, net 136,892,140 140,724,787
Investments in real estate, net 105,774,130 107,907,967
Furniture, fixtures and equipment, net 54,220 49,007
Prepaid expenses and other assets 3,390,007 1,862,482
Goodwill, net 936,126 979,667
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Total assets $274,611,368 $270,120,453
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Accounts payable and accrued liabilities $ 678,941 $ 686,760
Accrued interest payable 742,425 1,663,631
Deferred interest payable - 880,347
Tenant security deposits 495,321 493,096
Borrowers' escrows 7,451,234 8,093,099
Dividends payable 3,281,326 -
Deferred income 402,640 492,588
Senior indebtedness secured by real estate
underlying the Company's wraparound loans 59,455,361 54,286,388
Long-term debt secured by real estate owned 72,686,445 94,147,937
Secured line of credit - 20,000,000
------------ ------------
Total liabilities 145,193,693 180,743,846
Minority interest 2,701,729 2,701,493
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
9,110,242 shares and 6,310,242 shares,
respectively 91,102 63,102
Additional paid-in-capital 122,907,601 87,316,637
Retained earnings/(accumulated deficit) 3,717,243 (704,625)
------------ ------------
Total shareholders' equity 126,715,946 86,675,114
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Total liabilities and shareholders' equity $274,611,368 $270,120,453
============ ============
The accompanying notes are an integral part of these
consolidated financial statements
-3-
RAIT INVESTMENT TRUST
and Subsidiaries
Consolidated Statements of Income
(Unaudited)
For the three months ended
March 31,
2001 2000
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REVENUES
Mortgage interest income $ 4,843,825 $ 4,660,726
Rental income 4,782,392 3,850,010
Fee income and other 677,700 141,983
Investment income 75,321 172,189
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Total revenues 10,379,238 8,824,908
COSTS AND EXPENSES
Interest 3,150,075 2,802,296
Property operating expenses 2,323,676 1,959,586
Salaries and related benefits 671,872 248,494
General and administrative 323,389 101,615
Depreciation and amortization 840,250 626,301
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Total costs and expenses 7,309,262 5,738,293
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Net income before minority interest and extraordinary gain $ 3,069,976 $ 3,086,615
Minority interest (236) -
Extraordinary gain--consolidated extinguishment of
indebtedness underlying investment in real estate 4,633,454 -
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Net Income $ 7,703,194 $ 3,086,615
=========== ===========
Net income per common share before minority interest
and extraordinary gain $ .48 $ .50
Extraordinary gain .72 -
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Net income per common share-basic $ 1.20 $ .50
=========== ===========
Weighted average common shares outstanding-basic 6,403,575 6,199,127
=========== ===========
Net income per common share before minority interest
and extraordinary gain $ .48 $ .50
Extraordinary gain .71 -
----------- -----------
Net income per common share-diluted $ 1.19 $ .50
=========== ===========
Weighted average common shares outstanding-diluted 6,462,147 6,199,127
=========== ===========
The accompanying notes are an integral part of these
consolidated financial statements
-4-
RAIT INVESTMENT TRUST
and Subsidiaries
Consolidated Statements of Cash Flows
(Unaudited)
For the three months ended March 31,
2001 2000
---- ----
Cash flows from operating activities
Net Income $ 7,703,194 $ 3,086,615
Adjustments to reconcile net income to net cash provided by
operating activities
Minority interest 236 -
Depreciation and amortization 840,250 626,301
Gain on consolidated extinguishment of indebtedness
underlying investment in real estate (4,633,454) -
Decrease in security deposit escrows - 10,386
Decrease (increase) in accrued interest receivable 389,003 (389,676)
Increase in prepaid expenses and other assets (1,550,091) (1,815,020)
(Decrease) increase in accounts payable and accrued liabilities (7,819) 87,977
(Decrease) increase in accrued interest payable (464,213) 281,667
Decrease in deferred interest payable - (146,938)
Increase in tenant security deposits 2,225 165,387
Decrease in deferred income (89,948) (602,161)
Increase (decrease) in borrowers' escrows 1,019,319 (851,364)
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Net cash provided by operating activities 3,208,702 453,174
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Cash flows from investing activities
Purchase of furniture, fixtures and equipment (8,113) (7,688)
Real estate loans originated (17,957,002) (270,000)
Principal repayments of loans 21,873,899 9,800,911
Purchase of real estate (10,007) (5,646,876)
Utilization of reserves held by mortgagee to pay taxes 1,288,350 1,417,405
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Net cash provided by investing activities 5,187,128 5,293,752
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Cash flows from financing activities
Principal repayments on senior indebtedness (631,027) (96,880)
Principal repayments on long-term debt (191,943) (155,940)
Proceeds of senior indebtedness 5,800,000 -
Proceeds of long-term debt 2,275,000 -
Extinguishment of consolidated indebtedness
underlying investment in real estate (20,248,435) -
Repayment of secured line of credit (20,000,000) -
Issuance of common shares, net 35,618,964 -
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Net cash provided by (used in) financing activities 2,622,559 (252,820)
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Net change in cash and cash equivalents 11,018,389 5,494,106
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Cash and cash equivalents, beginning of period $ 7,407,988 $11,323,301
----------- -----------
Cash and cash equivalents, end of period $18,426,377 $16,817,407
=========== ===========
The accompanying notes are an integral part of these
consolidated financial statements
-5-
RAIT INVESTMENT TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2001
(Unaudited)
NOTE 1 - BASIS OF PRESENTATION
In the opinion of management, these unaudited financial statements
contain all disclosures, which are necessary to present fairly the Company's
consolidated financial position at March 31, 2001, and the results of operations
and the cash flows for the three months ended March 31, 2001 and 2000. 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 operation for the
interim periods. 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, 2000.
NOTE 2 - 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 the loans.
NOTE 3 - INVESTMENTS IN REAL ESTATE LOANS
The Company's portfolio of investments in real estate loans consisted
of the following at March 31, 2001:
Long-term first mortgages and senior loan participations $ 10,677,888
Mezzanine (including wraparound) loans 85,937,949
Short-term bridge loans 40,468,449
Loan costs 34,011
Less: Provision for loan losses (226,157)
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Investments in real estate loans 136,892,140
Less: Senior indebtedness secured by real estate
underlying the Company's wraparound loans (59,455,361)
------------
Net Investments in real estate loans $ 77,436,781
============
The following is a summary description of the Company's real estate
loan portfolio:
Number of Average Yield Range of
Type of Loan Loans Loan-to-Value Range Maturities
------------ ---------- ------------- ----- ----------
Long-term first mortgages and senior loan participations 6 43% 11-16% 3/28/01-7/14/09
Mezzanine (including wraparound) loans 15 81% 10-30% 2/1/02-1/31/09
Short term bridge loans 7 76% 14-35%(1) 5/16/01-1/23/02
(1) Includes loan fees charged.
-6-
Approximately $68.4 million of the loans are secured by multi-family
residential properties and $68.6 million of the loans are secured by commercial
properties.
As of March 31, 2001, nine of the Company's purchased loans were still
subject to forbearance agreements or other contractual restructurings that
existed at the time the Company acquired the loans. During the quarter ended
March 31, 2001, all payments under the agreements were timely and all borrowers
were otherwise in full compliance with the terms of the agreements. The
remaining eighteen loans in the Company's portfolio were performing in
accordance with their terms as originally underwritten by the Company and were
current as to payments as of March 31, 2001.
As of March 31, 2001, senior indebtedness secured by real estate
underlying the Company's wraparound loans consisted of the following:
Senior loan participation, secured by real estate,
interest only at 9.5% due monthly, principal balance
due October 1, 2003 $ 550,000
Senior loan participation, secured by real estate,
interest only at 9.5% due monthly, principal balance
due October 1, 2003 750,000
Loan payable, secured by real estate, interest only
at 9.5% due monthly, principal balance due July 14, 2009 500,000
Loan payable, secured by real estate, monthly
installments of $13,789, including interest at 7.08%,
remaining principal due December 1, 2008 1,872,246
Loan payable, secured by real estate, monthly
installments of $17,051, including interest at 6.83%,
remaining principal due December 1, 2008 2,364,633
Loan payable, secured by real estate, monthly
installments of $10,070, including interest at 6.83%,
remaining principal due December 1, 2008 1,505,186
Loan payable, secured by real estate, monthly
installments of $80,427, including interest at 6.95%,
remaining principal due July 1, 2008 11,797,508
-7-
Loan payable, secured by real estate, monthly
installments of $28,090, including interest at 6.82%,
remaining principal due November 1, 2008 4,188,982
Loan payable, secured by real estate, monthly
installments of $72,005, including interest at 7.55%,
remaining principal due December 1 2008 9,722,685
Loan payable, secured by real estate, monthly
installments of $88,575, including interest at 8.68%,
remaining principal due November 1, 2008 10,935,887
Loan payable, secured by real estate, interest only
at London Inter Bank Offer Rate ("LIBOR") plus
200 basis points, with a ceiling of 10.00% and a
floor of 8.60% (8.62% at September 30, 2000) due
monthly, principal balance due September 30, 2002 337,200
Loan payable, secured by Company's interest in
short-term bridge loan of $14,000,000, interest only
at 9.50% due monthly, principal balance due July
11, 2001 9,000,000
Loan payable, secured by Company's interest in
mezzanine loan of $2,948,276, principal payments
of $34,483 plus interest at 10.00% due monthly,
remaining principal balance due November 1, 2001 1,931,034
Loan payable, secured by Company's interest in
short-term bridge loan of $5,300,000, interest
only at 9.00% due monthly, principal balance due
February 1, 2002 3,000,000
Loan payable, secured by Company's interest in
short-term bridge loan of $1,500,000 interest
only at 11.00% due monthly, principal balance
due June 30, 2001 1,000,000
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$59,455,361
===========
As of March 31, 2001 the senior indebtedness secured by real estate
underlying the Company's wraparound loans maturing in the remainder of 2001,
over the next four years, and the aggregate indebtedness maturing thereafter is
as follows:
-8-
RAIT INVESTMENT TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2001
(Unaudited)
2001 $ 14,085,349
2002 989,745
2003 2,334,282
2004 1,082,294
2005 1,065,090
Thereafter 39,898,601
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$ 59,455,361
============
NOTE 4 - INVESTMENTS IN REAL ESTATE
Investments in real estate are comprised of the following at March 31,
2001:
Land $ 12,162,187
Office buildings and improvements 64,783,998
Apartment buildings 34,917,873
------------
Subtotal 111,864,058
Less: Accumulated depreciation (6,089,928)
------------
Investments in real estate, net $105,774,130
============
As of March 31, 2001, long-term debt secured by the Company's
investments in 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 $ 1,059,393
Loan payable, secured by real estate, monthly
installments of $288,314, including interest at
6.85%, remaining principal due August 1, 2008 42,862,478
Loan payable, secured by real estate, monthly
installments of $107,255, including interest at
7.73%, remaining principal due December 1, 2009(1) 14,833,162
Loan payable, secured by real estate, monthly
installments of $15,396, including interest at
7.17%, remaining principal due March 1, 2012(1) 2,275,000
Loan payable, secured by real estate, monthly
installments of $87,960, including interest at
8.37%, remaining principal due March 11, 2008(2) 11,656,412
-----------
$72,686,445
===========
(1) These loans relate to a single investment in real estate.
(2) As an inducement to pay interest at 8.37% from April 11, 1998 onward,
rather than 7.89%, the lender provided a buy-up premium of $418,482
(balance of $320,358 at March 31, 2001) which is amortized over the term of
the underlying debt.
-9-
RAIT INVESTMENT TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2001
(Unaudited)
As of March 31, 2001 the amount of long-term debt secured by the
Company's investments in real estate maturing in the remainder of 2001, over the
next four years, and the aggregate indebtedness maturing thereafter, is as
follows:
2001 $ 596,193
2002 865,766
2003 930,802
2004 1,000,740
2005 1,075,952
Thereafter 68,216,992
-----------
$72,686,445
===========
NOTE 5 - RELATED PARTY TRANSACTIONS
The Chairman and Chief Executive Officer of the Company is the spouse
of the Chairman, Chief Executive Officer and President of Resource America,
Inc., ("RAI", the sponsor and 13.2% shareholder of the Company) and a parent of
a director of RAI. A trustee of the Company is her son, who is also a director
and Senior Vice President of RAI. The President and Chief Operating Officer of
the Company is a director of RAI.
In March 2001, the Company purchased from RAI two subordinate loans (in
the original principal amounts of $18.3 million and $4.9 million) underlying one
of the Company's property interests. The purchase price for the loans was $20.2
million. The difference between the purchase price and the underlying face value
of the loans resulted in an extraordinary gain of $4.6 million resulting from
the consolidated extinguishment of indebtedness underlying an investment in real
estate.
Also in March 2001, the Company sold its entire interest in two loans
to RAI for an aggregate purchase price of $21.6 million, which was the book
value of the interests.
NOTE 6 - SHAREHOLDERS' EQUITY
The Company filed a registration statement with respect to a public
offering and sale of 2.8 million Common Shares that became effective March 23,
2001. The public offering closed on March 28, 2001 (the Closing Date). The net
proceeds received by the Company in connection with the public offering were
approximately $35.6 million. Total offering costs approximated $2.6 million
including underwriting discounts. 370,000 of the Common Shares sold in the
public offering were purchased by RAI, and 119,450 Common Shares sold in the
public offering were purchased by officers,
-10-
RAIT INVESTMENT TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2001
(Unaudited)
directors and trustees of the Company, and related persons. These shares, along
with the RAI shares, are subject to restrictions on sale or disposal without the
consent of the underwriters for a period of 120 days following the Closing Date.
The remaining Common Shares were purchased separately and were freely tradable
immediately upon issuance. The public offering price of the Common Shares was
$13.75 per share. The 370,000 shares purchased by RAI and related persons were
purchased at $13.22 per share (a price equal to the public offering price less
the selling concession).
-11-
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
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 the Company's Annual Report on Form 10-K for 2000, 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. The Company undertakes 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
The Company commenced investment operations in January 1998. Its
principal business objective is to generate income for distribution to its
shareholders from a combination of interest, rents and distributions from loans
that the Company originates and funds, loans or property interests acquired and
other investments. The Company completed three public offerings of its common
shares (two during 1998 and one in the first quarter of 2001) and utilized these
proceeds, combined with repayment and refinancing of its loans and property
interests and its line of credit, to build its investment portfolio.
Liquidity and Capital Resources
Since commencement of investment operations in January 1998, the
principal source of the Company's capital resources has been the offerings of
its common shares, which, after offering costs and underwriting discounts and
commissions, resulted in net proceeds to the Company of $121.6 million including
net proceeds from the offering completed in March 2001 of $35.6 million.
Secondarily, the Company has obtained capital resources from the repayment,
refinancing, and sale of loans in its portfolio (or principal payments on those
loans), aggregating $29.9 million for the quarter ended March 31, 2001. The
principal use of these funds in the first quarter of 2001 has been the
origination, acquisition and purchase of loans in the amount of $18.0 million,
full repayment of the Company's secured line of credit totaling $20.0 million,
and the extinguishment of debt (as discussed below) in the amount of $20.3
million.
During the quarter the Company completed the purchase of two loans
underlying one of its property interests for $20.2 million. The difference
between the purchase price and the underlying face value of the loans resulted
in an extraordinary gain of $4.6 million resulting from the consolidated
extinguishment of indebtedness underlying an investment in real estate.
The Company also receives funds from interest payments on its loans and
operating income from its property interests. As required by the Internal
Revenue Code of 1986, the Company utilizes these funds (to the extent of not
less than 95% of its taxable income) to pay dividends to its shareholders. For
the quarter ended March 31, 2001, the Company declared dividends of $3.3
million, which were paid on April 12, 2001.
-12-
The infusion of new capital from the March 2001 public offering has
improved the liquidity of the Company. Prior to the closing of the offering, the
Company had pursued a strategy of providing shorter-term financing to its
borrowers (generally in the form of bridge financing) to increase the turnover
of its investments, and pursuing refinancing of the Company's loans through
senior lenders, with the Company retaining junior interests. The Company
anticipates that it will continue to provide shorter-term financing and obtain
senior lien refinancing of its investments in loans and properties, combined
with the utilization of the secured credit line, in order to maintain liquidity.
However, the Company may provide longer-term financings as such opportunities
arise.
At March 31, 2001, the Company had approximately $15.1 million in funds
available for investment, excluding $3.3 million of cash held at March 31, 2001
that was reserved to pay a cash dividend on April 12, 2001. All cash was
temporarily invested in money-market accounts that the Company believes have a
high degree of liquidity and safety.
Results of Operations
The Company had average earning net assets for the three months ended
March 31, 2001 of $114.9 million, including $12.9 million of average earning
assets invested in money-market accounts. For the three months ended March 31,
2000 the Company had average earning net assets of $100.6 million including
$14.1 million of average earning assets invested in money market accounts. The
increase in total average earning net assets from the three months ended March
31, 2000 to the corresponding period in 2001 were due the completion of the
Company's public offering offset by the full repayment of the Company's credit
line, which had $14.0 million outstanding at the time of repayment.
Interest income derived from financings was $4.8 million for the three
months ended March 31, 2001 as compared to $4.7 million for the corresponding
period in 2000. Interest income from the money market accounts was $75,000 for
the three months ended March 31, 2001 compared to $172,000 for the corresponding
period in 2000. The decrease in interest income from the money market accounts
from the three months ended March 31, 2000 to the corresponding period in 2001
was due to the balance of assets invested in the money-market accounts in the
first quarter of 2000 being higher than the balance during most of the first
quarter of 2001, as the proceeds of the public offering were not received until
the end of March 2001. The yield on average earning non-money market net assets
was 22.8% for the three months ended March 31, 2001 and 21.5% for the
corresponding period in 2000. The yield on average earning money market account
assets was 3.9% for the three months ended March 31, 2001 as compared to 4.9%
for the three months ended March 31, 2000.
The Company derived $4.8 million from rents from its property interests
for the quarter ended March 31, 2001 compared to $3.9 million for the quarter
ended March 31, 2000. The increase in rents from the Company's property
interests from the three months ended March 31, 2000 to the same period in 2001
was due to the acquisition of a property interest at the end of March 2000,
resulting in the property being included in total investments in real estate at
March 31, 2000, while its operations were not fully included in the Company's
statement of operations until subsequent quarters.
The Company recognized fee and other income in the amount of $678,000
for the three months ended March 31, 2001 as compared to $142,000 for the three
months ended March 31, 2000. The increases in fee and other income from the
three months ended March 31, 2000 to the same period in 2001 are due to $226,000
of income from the Company's new real estate finance subsidiary, RAIT Capital
Corp., which was acquired in August 2000, and a $300,000 transaction structuring
fee earned in the first quarter of 2001.
-13-
Nine of the Company's purchased loans remained subject to forbearance
agreements or other contractual restructurings that existed at the time the
Company acquired the loans. During the quarter ended March 31, 2001, all
payments under the agreements were timely made and all borrowers were otherwise
in full compliance with the terms of the agreements. The remaining eighteen
loans in the Company's portfolio are performing in accordance with their terms
as originally underwritten by the Company and were current as to payments as of
March 31, 2001.
During the quarter ended March 31, 2001, the Company incurred expenses
of $7.3 million compared to $5.7 million for the three months ended March 31,
2000. The expenses consist of interest expense, operating expenses relating to
the Company's property interests, general and administrative expenses and
depreciation and amortization. Interest expense was $3.1 million for the three
months ended March 31, 2001 as compared to $2.8 million for the corresponding
period in 2000. Interest expense relates to interest payments made on senior
indebtedness encumbering properties underlying the Company's investments in
wraparound loans and properties owned by the Company and interest payments made
on the Company's secured line of credit. The increase in interest expense from
the first quarter of 2000 to the first quarter of 2001 was due to a difference
in the timing of obtaining and repaying several financings underlying the
Company's loans and properties. Following the receipt of the proceeds of its
March 2001 public offering, the Company repaid the outstanding balance under its
line of credit. While this reduces the Company's interest cost on a current
basis, it did not reduce interest cost for the quarter ended March 31, 2001
since the line of credit was not repaid until the end of the quarter. The
Company may draw on its line of credit in the future as appropriate loan or
property acquisition opportunities arise.
Property operating expenses were $2.3 million for the three months
ended March 31, 2001 as compared to $2.0 million for the corresponding period in
2000. Depreciation and amortization was $840,000 for the three months ended
March 31, 2001 as compared to $626,000 for the corresponding period in 2000. The
increases in property operating expenses and depreciation and amortization from
the three months ended March 31, 2000 to the corresponding period in 2001, were
due to the property acquisition in late March 2000 described above. Salaries and
related benefits were $672,000 for the three months ended March 31, 2001 as
compared to $248,000 for the same period in 2000. General and administrative
expenses were $323,000 for the three months ended March 31, 2001 as compared to
$102,000 for the corresponding period in 2000. The increase in salaries and
related benefits and general and administrative expenses from the three months
ended March 31, 2000 to the same period in 2001 was due to the acquisition of
the Company's real estate finance subsidiary, RAIT Capital Corp., in August,
2000 and the salary, related benefits, and general and administrative expenses
incurred by that subsidiary which totaled approximately $190,000. Other factors
contributing to the increase were periodically recurring expenses totaling
approximately $186,000 that were incurred in different periods in 2000 and 2001
and an increase in salaries and related benefits totaling approximately $238,000
primarily due to an increase in personnel and occupany expenses which were
required to support the anticipated increase in the Company's portfolio due to
the availability of new capital.
-14-
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
There has been no material change in the Company's assessment of its
sensitivity to market risk since its presentation in the Company's Annual Report
on Form 10-K for the year ended December 31, 2000.
-15-
PART II - OTHER INFORMATION
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ITEM 5. OTHER INFORMATION
On March 28, 2001, the Company raised $36.0 million, after underwriting
commissions and before offering expenses, in a public offering registered with
the SEC. As part of the offering the underwriters were given a traditional
over-allotment option covering 420,000 shares. This option is provided to permit
the underwriters to sell additional shares in the public offering to meet demand
and to cover the resulting short position with the exercise of the option.
Unfortunately, due to a drafting error by Company counsel, the shares underlying
the option were not included in the registration statement as required by the
underwriting agreement, although the over-allotment option and over-allotment
shares were disclosed in the prospectus which is part of that registration
statement. The Company has filed a new registration statement which includes
these shares.
This error has created a risk that the Company may have a contingent
liability arising out of a possible violation of Section 5 of the Securities Act
with respect to the 420,000 shares sold short by the underwriters, including
contingent liability for refunds on those shares for one year. The Company does
not believe it violated Section 5 and, if any such claim were asserted, the
Company would contest the matter vigorously. Accordingly, the Company does
believe that its exposure, if any, would be material to its results of
operations or financial condition.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Exhibit
Number Description
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4(i)* Amended and Restated Declaration of Trust.
4(ii)** Articles of Amendment of Amended and Restated Declaration of Trust.
4(iii)*** Articles of Amendment of Amended and Restated Declaration of Trust.
4(iv)* Bylaws, as amended.
4(v)*** Form of specimen certificate representing common shares.
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* Incorporated herein by reference to RAIT Investment Trust's Registration
Statement on Form S-11 (File No. 333-35077), as amended.
** Incorporated herein by reference RAIT Investment Trust's Registration
Statement on Form S-11 (File No. 333-53067), as amended.
*** Incorporated herein by reference to RAIT Investment Trust's Regulation
Statement on Form S-2 (File No. 333-55518), as amended.
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the quarter ending March 31,
2001.
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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.
May 15, 2001 /s/ Ellen J. DiStefano
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DATE Ellen J. DiStefano
Chief Financial Officer
(On behalf of the registrant and
as its principal financial officer)
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