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 September 30, 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 November 2, 2001, 12,445,135 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
----
Item 1. Financial Statements
Consolidated Balance Sheets at September 30, 2001 (unaudited)
and December 31, 2000 3
Consolidated Statements of Income (unaudited) for the three
and nine months ended September 30, 2001 and 2000 4
Consolidated Statements of Cash Flows (unaudited) for the
nine months ended September 30, 2001 and 2000 5
Notes to Consolidated Financial Statements-September 30, 2001 (unaudited) 6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 11
Item 3. Quantitative and Qualitative Disclosures About Market Risk 14
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 15
2
PART I FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
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RAIT INVESTMENT TRUST
and Subsidiaries
Consolidated Balance Sheets
September 30, 2001
(unaudited) December 31, 2000
--------- -----------------
ASSETS
Cash and cash equivalents $ 7,841,626 $ 7,407,988
Restricted cash 8,349,469 7,954,688
Tenant escrows 266,970 222,371
Accrued interest receivable 4,016,007 3,011,496
Investments in real estate loans, net 184,690,342 140,724,787
Investments in real estate, net 106,654,299 107,907,967
Furniture, fixtures and equipment, net 327,196 49,007
Prepaid expenses and other assets 3,643,288 1,862,482
Goodwill, net 903,471 979,667
------------ ------------
Total assets $316,692,668 $270,120,453
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Accounts payable and accrued liabilities $ 1,371,983 $ 686,760
Accrued interest payable 656,602 1,663,631
Deferred interest payable - 880,347
Tenant security deposits 785,553 493,096
Borrowers' escrows 7,965,916 8,093,099
Dividends payable 6,471,470 -
Deferred income 951,880 492,588
Senior indebtedness secured by real estate
underlying the Company's loans 50,629,368 54,286,388
Long-term debt secured by real estate owned 72,300,558 94,147,937
Secured line of credit - 20,000,000
------------ ------------
Total liabilities 141,133,330 180,743,846
Minority interest 2,551,231 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
12,445,135 shares and 6,310,242 shares,
respectively 124,451 63,102
Additional paid-in-capital 169,002,593 87,316,637
Retained earnings/(accumulated deficit) 3,881,063 (704,625)
------------ ------------
Total shareholders' equity 173,008,107 86,675,114
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Total liabilities and shareholders' equity $316,692,668 $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 For the nine months
ended September 30, ended September 30,
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REVENUES 2001 2000 2001 2000
-------- ---- ---- ---- ----
Mortgage interest income $ 5,877,477 $4,868,917 $16,180,248 $13,575,950
Rental income 5,701,081 4,725,219 16,049,715 13,512,150
Fee income and other 2,588,282 221,951 4,745,642 921,251
Investment income 139,217 74,539 276,410 418,347
----------- ---------- ----------- -----------
Total revenues 14,306,057 9,890,626 37,252,015 28,427,698
COSTS AND EXPENSES
Interest 2,592,566 3,488,359 8,485,720 9,502,768
Property operating expenses 3,439,836 2,229,926 8,888,646 6,473,896
Salaries and benefits 521,125 201,902 1,753,418 728,445
General and administrative 330,195 235,251 1,062,858 509,226
Depreciation and amortization 799,322 754,374 2,450,640 2,104,183
----------- ---------- ----------- -----------
Total costs and expenses 7,683,044 6,909,912 22,641,282 19,318,518
----------- ---------- ----------- -----------
Net income before minority interest
and extraordinary gain 6,623,013 2,980,714 14,610,733 9,109,180
Minority interest 26,831 14,106 50,262 (38,598)
Extraordinary gain--consolidated
extinguishment of indebtedness underlying
investment in real estate - - 4,633,454 -
----------- ---------- ----------- -----------
Net Income $ 6,648,844 $2,994,820 $19,294,449 $ 9,070,582
=========== ========== =========== ===========
Earnings per share-basic:
Net income per common share before
minority interest and extraordinary gain $ .56 $ .48 $ 1.60 $ 1.46
Minority interest .01 - - -
Extraordinary gain - - .51 -
----------- ---------- ----------- -----------
Net income $ .57 $ .48 $ 2.11 $ 1.46
=========== ========== =========== ===========
Weighted average common shares-basic 11,750,828 6,279,391 9,155,629 6,232,675
=========== ========== =========== ===========
Earnings per share-diluted:
Net income per common share before
minority interest and extraordinary gain $ .56 $ .48 $ 1.58 $ 1.45
Minority interest - .01 -
Extraordinary gain - - .50 -
----------- ---------- ----------- -----------
Net income $ .56 $ .48 2.09 $ 1.45
=========== ========== =========== ===========
Weighted average common shares-diluted 11,868,432 6,298,478 9,226,517 6,241,294
=========== ========== =========== ===========
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 nine months ended September 30,
2001 2000
---- ----
Cash flows from operating activities
Net Income $ 19,294,449 $ 9,070,582
Adjustments to reconcile net income to net cash provided by
operating activities:
Minority interest (50,262) 38,598
Gain on extinguishment of debt (4,633,454) -
Depreciation and amortization 2,450,640 2,104,183
Accretion of loan discount - (213,474)
Increase in security deposit escrows (44,599) (66,148)
(Increase) decrease in accrued interest receivable (1,004,511) 60,197
Increase in prepaid expenses and other assets (1,968,549) (1,397,812)
Increase (decrease) in accounts payable and accrued liabilities 685,223 (208,400)
(Decrease) increase in accrued interest payable (550,036) 578,387
Increase in deferred interest payable - 296,331
Increase in tenant security deposits 292,457 218,522
Increase in deferred income 459,292 73,496
(Decrease) Increase in borrowers' escrows (521,964) 175,695
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Net cash provided by operating activities 14,408,686 10,730,157
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Cash flows from investing activities
Purchase of furniture, fixtures and equipment (317,549) (2,081)
Real estate loans purchased - (1,828,333)
Real estate loans originated (98,181,757) (25,940,782)
Principal repayments of loans 54,333,947 12,260,006
Real estate purchases and improvements (1,017,722) (6,269,440)
Utilization of reserves held by mortgagee to pay taxes (93,698) 643,889
Cash paid for RAIT Capital Corp. - (712,148)
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Net cash used in investing activities (45,276,779) (21,848,889)
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Cash flows from financing activities
(Repayments) advances on secured line of credit (20,000,000) 6,000,000
Issuance of common shares, net 81,747,305 539,575
Payment of dividends (8,237,289) (5,878,875)
Principal repayments on senior indebtedness (10,457,020) (291,394)
Principal repayments on long-term debt (577,830) (506,411)
Proceeds of senior indebtedness underlying Company's loans 6,800,000 14,000,000
Proceeds of long-term debt secured by real estate owned 2,275,000 330,805
Extinguishment of debt (20,248,435) -
Other - 41,689
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Net cash provided by financing activities 31,301,731 14,235,389
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Net change in cash and cash equivalents 433,638 3,116,657
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Cash and cash equivalents, beginning of period 7,407,988 11,323,301
------------ ------------
Cash and cash equivalents, end of period $ 7,841,626 $ 14,439,958
============ ============
Noncash items: Stock issued for purchase of RAIT Capital Corp. $ - $ 146,875
============ ============
The accompanying notes are an integral part of these
consolidated financial statements
-5-
RAIT INVESTMENT TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 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 September 30, 2001, the results of operations
for the three and nine months ended September 30, 2001 and 2000, and the cash
flows for the nine months ended September 30, 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 Company's 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 borrowers' loans.
NOTE 3-INVESTMENTS IN REAL ESTATE LOANS
The Company's portfolio of investments in real estate loans consisted
of the following at September 30, 2001:
Long-term first mortgages and senior loan participations $ 10,547,302
Mezzanine (including wraparound) loans 138,964,176
Short-term bridge loans 35,329,000
Loan costs 76,021
Less: Provision for loan losses (226,157)
------------
Investments in real estate loans 184,690,342
Less: Senior indebtedness secured by real estate
underlying the Company's loans (50,629,368)
------------
Net investments in real estate loans $134,060,974
============
6
RAIT INVESTMENT TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2001
(Unaudited)
The following is a summary description of the assets contained in the
Company's portfolio of investments in real estate loans:
Number of Average Loan-to- Yield Range of
Type of Loan Loans Value Range Maturities
------------ --------- ---------------- ----- ----------
Long-term first mortgages and senior loan participations 6 42% 11-16% 11/30/01-7/14/09
Mezzanine (including wraparound) loans 24 85% 10-30%(1) 3/22/02-5/1/21
Short term bridge loans 8 71% 14-27%(1) 11/13/01-9/28/03
(1) Includes points charged.
Approximately $69.5 million of the loans are secured by multi-family
residential properties and $115.3 million of the loans are secured by commercial
properties.
As of September 30, 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 $ 547,925
Senior loan participation, secured by real estate, interest only at
9.5% due monthly, principal balance due October 1, 2003 747,171
Loan payable, secured by real estate, interest only at 9.5% due
monthly, principal balance due July 14, 2009 498,015
Loan payable, secured by real estate, monthly installments of
$13,789, including interest at 7.08%, remaining principal due
December 1, 2008 1,857,028
Loan payable, secured by real estate, monthly installments of
$17,051, including interest at 6.83%, remaining principal due
December 1, 2008 2,344,577
Loan payable, secured by real estate, monthly installments of
$10,070, including interest at 6.83%, remaining principal due
December 1, 2008 1,497,189
7
RAIT INVESTMENT TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2001
(Unaudited)
Loan payable, secured by real estate, monthly installments of
$80,427, including interest at 6.95%, remaining principal due July
1, 2008 $11,723,852
Loan payable, secured by real estate, monthly installments of
$28,090, including interest at 6.82%, remaining principal due
November 1, 2008 4,162,936
Loan payable, secured by real estate, monthly installments of
$72,005, including interest at 7.55%, remaining principal due
December 1 2008 9,656,656
Loan payable, secured by real estate, monthly installments of
$88,575, including interest at 8.68%, remaining principal due
November 1, 2008 10,869,881
Loan payable, secured by Company's interest in bridge loan of
$7,500,000, interest only at 8% due monthly, principal balance due
June 23, 2003 5,000,000
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 1,724,138
-----------
$50,629,368
===========
As of September 30, 2001 the senior indebtedness secured by real estate
underlying the Company's loans maturing in the remainder of 2001, over the next
four years, and the aggregate indebtedness maturing thereafter, is as follows:
2001 $ 233,696
2002 1,020,403
2003 6,068,026
2004 2,803,870
2005 1,065,090
Thereafter 39,438,283
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$50,629,368
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8
RAIT INVESTMENT TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2001
(Unaudited)
NOTE 4-INVESTMENTS IN REAL ESTATE
Investments in real estate consisted of the following at September 30,
2001:
Land $ 613,519
Office buildings and improvements 71,019,718
Apartment buildings 42,629,300
------------
Subtotal 114,262,537
Less: Accumulated depreciation (7,608,238)
------------
Investments in real estate, net $106,654,299
============
As of September 30, 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 $ 1,050,665
Loan payable, secured by real estate, monthly installments of
$288,314, including interest at 6.85%, remaining principal due
August 1, 2008. 42,629,831
Loan payable, secured by real estate, monthly installments of
$107,255, including interest at 7.73%, remaining principal due
December 1, 2009 (1) 14,761,795
Loan payable, secured by real estate, monthly installments of
$15,396, including interest at 7.17%, remaining principal due March
1, 2012 (1) 2,264,018
Loan payable, secured by real estate, monthly installments of
$87,960, including interest at 8.37%, remaining principal due March
11, 2008 (2) 11,594,248
-----------
$72,300,558
===========
(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 $301,853 at September 30, 2001) which is amortized over the
term of the underlying debt.
9
RAIT INVESTMENT TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2001
(Unaudited)
As of September 30, 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 $ 209,553
2002 865,766
2003 930,802
2004 1,000,740
2005 1,075,952
Thereafter 68,217,247
-----------
$72,300,558
===========
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 10.6% shareholder of the Company) and a parent of
a director of RAI. A trustee of the Company is her son, who is also Executive
Vice President of RAI. The President and Chief Operating Officer of the Company
is a director of RAI.
In June 2001, the Company provided $1.6 million of financing in
connection with the borrower's acquisition of a loan from RAI with respect to an
81-unit apartment complex in Middletown, Connecticut. The loan is secured by a
collateral assignment of all of the underlying documents evidencing the loan
acquired from RAI, including assignment of the first mortgage encumbering the
property. The loan was repaid in July 2001.
NOTE 6 -SHAREHOLDERS' EQUITY
In July, RAIT issued an additional 2,550,000 common shares at $15.25
per share. After underwriting discounts and commissions of $0.78 per share, the
Company received net proceeds of $36.7 million. Total offering costs
approximated $2.9 million including underwriting discounts. 105,000 of the
common shares sold in the public offering were purchased by RAI, and 64,899
common shares sold in the public offering were purchased by officers and
trustees of the Company, and related persons, all at a price of $14.41 per share
(a price equal to the public offering price less the selling concession.) The
shares purchased by officers and trustees of the Company, along with the RAI
shares, were subject to restrictions on sale or disposal without the consent of
the underwriters for a period of 90 days following the Closing Date. The
remaining common shares were purchased separately and were freely tradable
immediately upon issuance.
In August, RAIT issued an additional 338,983 shares associated with the
over allotment of its July offering at $15.25 per share. After underwriting
discounts and commissions, the Company received total net proceeds of $5.4
million.
10
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, distributions in respect of
rents where the Company owns an equity interest in real property, and proceeds
from the sale of the Company's investments. The Company completed four public
offerings of its common shares, two during 1998 and two in 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. After offering costs and underwriting discounts and
commissions, the four offerings completed through September 30, 2001 resulted in
net proceeds to the Company of $169.0 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 $28.3 million
and $61.1 million for the three and nine months ended September 30, 2001,
respectively. The principal use of these funds during the three and nine months
ended September 30, 2001 has been the origination, acquisition and purchase of
loans in the amount of $40.5 million for the quarter ended September 30, 2001
and $98.2 million for the nine months ended September 30, 2001 and, as a result
of the strategic increase in the time period between the Company's origination
of loans and the consummation of senior lien refinancing in anticipation of the
Company's two offerings in 2001, a reduction in outstanding senior lien, long
term and line of credit financing.
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 90% of its taxable income) to pay dividends to its shareholders. For
the quarter ended September 30, 2001, the Company declared dividends of $6.5
million, which were paid on October 12, 2001.
The infusion of new capital from the March and July 2001
public offerings has improved the liquidity of the Company. Prior to the closing
of the offerings, 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 obtaining 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
11
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, as a result of its improved liquidity, the
Company may also provide longer-term financings as such appropriate
opportunities arise.
At September 30, 2001, the Company had approximately $1.4 million in
funds available for investment ($6.5 million of cash held at September 30, 2001
was reserved to pay a cash dividend on October 12, 2001). All cash was
temporarily invested in a money-market account that the Company believes has a
high degree of liquidity and safety.
Results of Operations
The Company had average earning net assets for the three and nine
months ended September 30, 2001 of $161.3 million and $127.7 million,
respectively, as compared to $106.7 million and $105.0 million for the three and
nine months ended September 30, 2000, including $7.3 million and $7.6 million of
average earning assets invested in a money-market account for the three and nine
months ended September 30, 2001, respectively, as compared to $8.6 and $12.9
million for the three and nine months ended September 30, 2000. The increases in
total average earning net assets from the three and nine months ended September
30, 2000 to the corresponding periods in 2001 were due to the completion of the
Company's public offerings in March and July 2001. The decreases in average
earning assets invested in a money-market account from the three and nine months
ended September 30, 2000 to the corresponding periods in 2001 were due to the
Company's recent ability to obtain senior lien refinancings of most types of
loans it originates rather than only first mortgage loans. This ability to
refinance increases the amount the Company may draw under its senior secured
line of credit, thereby allowing the Company to maintain less cash on hand.
Interest income derived from financings was $5.9 million and $16.2
million for the three and nine months ended September 30, 2001 as compared to
$4.9 million and $13.6 million for the corresponding periods in 2000. Interest
income from money-market accounts was $139,000 and $276,000 for the three and
nine months ended September 30, 2001 compared to $75,000 and $418,000 for the
corresponding periods in 2000. The increases in interest income from both the
three and nine months ended September 30, 2000 to the corresponding periods in
2001 were due to an increase in the Company's investments in real estate loans,
$184.7 million at September 30, 2001 versus $143.5 million at September 30,
2000, resulting from the infusion of new capital in March and July 2001 and the
Company's ability to obtain investable cash from senior lien refinancings of its
loans. The increase in interest income from money-market accounts from the three
months ended September 30, 2000 to the corresponding period in 2001 was due to
the proceeds of the July 2001 offering being temporarily invested in a
money-market account until they were utilized at the end of the third quarter of
2001. The decrease in interest income from money-market accounts from the nine
months ended September 30, 2000 to the corresponding period in 2001 was due to a
lower average balance of assets invested in money-market accounts during the
period due to increased availability of credit line financing as discussed
above. The yield on average earning non-money- market net assets was 21.0% and
21.8% for the three and nine months ended September 30, 2001 and was $17.7% and
17.2% for the corresponding periods in 2000. The increases in yield are due to a
decrease in the Company's cost of funds due to utilization of its secured line
of credit and to the Company's ability to increase the pricing of its loans in
response to market conditions. The yield on
12
average earning money-market account assets was 3.9% for both the three and nine
months ended September 30, 2001 as compared to 4.8% and 4.3% for the three and
nine months ended September 30, 2000. The decrease in yield on average earning
money-market account assets was due to a decrease in amounts paid by banks on
money-market funds.
The Company derived $5.7 million from rents from its property interests
for the quarter ended September 30, 2001 and $16.0 million for the nine months
ended September 30, 2001, as compared to $4.7 million for the quarter ended
September 30, 2000 and $13.5 million for the nine months ended September 30,
2000. The increase in rents from the Company's property interests from the three
and nine months ended September 30, 2000 to the same periods in 2001 was due to
new investments by the Company as a result of both the infusion of additional
capital in March and July 2001 from its public offerings and the availability of
senior lien refinancing.
The Company recognized fee and other income in the amount of $2.6
million for the three months ended September 30, 2001 and $4.7 million for the
nine months ended September 30, 2001, as compared to $222,000 for the three
months ended September 30, 2000 and $921,000 for the nine months ended September
30, 2000. The increases in fee and other income from the three and nine months
ended September 30, 2000 to the same periods in 2001 are due to $493,000 and
$931,000 of income for the three and nine months ended September 30, 2001
compared to $163,000 of income for the three and nine months ended September
30,2000 from the Company's real estate finance subsidiary, RAIT Capital Corp.,
which was acquired in August 2000, and $1.0 million and $2.4 million relating to
fees earned in the three and nine months ended September 30, 2001, respectively,
for services performed in the structuring of certain transactions. In addition,
in July 2001 the Company collected a $1.0 million exit fee at the end of a loan
term.
During the quarter and nine months ended September 30, 2001, the
Company incurred expenses of $7.7 million and $22.6 million compared to $6.9
million and $19.3 million for the three and nine months ended September 30,
2000. The expenses consist of interest expense, operating expenses relating to
the Company's property interests, salaries and benefits, general and
administrative, and depreciation and amortization. Interest expense was $2.6
million and $8.5 million for the three and nine months ended September 30, 2001
as compared to $3.5 million and $9.5 million for the corresponding periods in
2000. Interest expense relates to interest payments made on senior indebtedness
encumbering properties underlying the Company's investments in real estate loans
and properties owned by the Company and interest payments made on the Company's
secured line of credit. The decreases in interest expense from the three and
nine months ended September 30, 2000 to the same periods in 2001 were due to
lower average balances of all such indebtedness in 2001 as a result of the
repayment of indebtedness with the proceeds of the public offerings in March and
July 2001, and a strategic increase in the time period between the Company's
origination of loans and the consummation of senior lien refinancing in
anticipation of the closing of the offerings. In addition, the prime interest
rate, upon which most of the Company's indebtedness is based, went from a
nine-year high of 9.5% at September 30, 2000 to 6.0% at September 30, 2001.
Property operating expenses were $3.4 million and $8.9 million for the
three and nine months ended September 30, 2001 compared to $2.2 million and $6.5
million for the corresponding periods in 2000. Depreciation and amortization was
$800,000 and $2.5 million for the three and nine months ended September 30, 2001
as compared to $754,000 and $2.1 million for the corresponding periods in 2000.
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The increases in property operating expenses, depreciation and amortization from
the three and nine months ended September 30, 2000 to the corresponding periods
in 2001, were due to new investments by the Company as a result of both the
infusion of additional capital in March and July 2001 and the availability of
senior lien refinancing.
Salaries and benefits were $521,000 and $1.8 million for the three and
nine months ended September 30, 2001 as compared to $202,000 and $728,000 for
the corresponding periods in 2000. General and administrative expenses were
$330,000 and $1.1 million for the three and nine months ended September 30, 2001
as compared to $235,000 and $509,000 for the corresponding periods in 2000. The
increases in salaries and related benefits and general and administrative
expenses from the three and nine months ended September 30, 2000 to the same
periods in 2001 were due to the acquisition of the company's real estate finance
subsidiary, RAIT Capital Corp., in August, 2000.
The salary, related benefits, and general and administrative expenses
incurred by that subsidiary totaled approximately $161,000 and $602,000 for the
three and nine months ended September 30, 2001, respectively as compared to
$158,000 for the three and nine months ended September 30, 2000.
Increased personnel and occupancy expenses reflect the Company's
expansion of its staff to support the increased size of the Company's portfolio
due to the infusion of new capital.
The Company has not experienced any direct negative effects from the
current economic slowdown in the United States. Demand for the Company's
financing remains at or above levels in prior periods; and, the Company has not
experienced any payment defaults by borrowers or tenants. The Company cannot,
however, predict the effect, if any, that continuance of the economic slowdown
may have on it.
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.
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PART II OTHER INFORMATION
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ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Exhibit Number Description
-------------- -----------
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.
* 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 Registration
Statement on Form S-2 (File No. 333-55518), as amended.
(b) Reports on Form 8-K
(1) No reports on Form 8-K were filed during the quarter ending September 30,
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.
November 6, 2001 /s/ Ellen J. DiStefano
---------------- ----------------------
DATE Ellen J. DiStefano
Chief Financial Officer
(On behalf of the registrant and
as its principal financial officer)
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