10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2018

or

☐ TRANSITIONREPORT 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 FINANCIAL TRUST

(Exact Name of Registrant as Specified in its Charter)

Maryland	23-2919819
State or Other Jurisdiction of Incorporation or Organization	I.R.S. Employer Identification No.
Two Logan Square, 100 N. 18th Street, 23rd Floor, Philadelphia, PA	19103
Address of Principal Executive Offices	Zip Code

(215) 207-2100

Registrant’s Telephone Number, Including Area Code

N/A

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 ☒     No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).  Yes ☒    No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ☐	Accelerated filer ☒
Non-accelerated filer ☐	Smaller reporting company ☐
Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.    

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).  Yes ☐    No ☒ 

A total of 1,850,471 common shares of beneficial interest, par value $1.50 per share, of the registrant were outstanding as of November 2, 2018.

RAIT FINANCIAL TRUST

TABLE OF CONTENTS

		Page
	PART I—FINANCIAL INFORMATION
Item 1.	Financial Statements (unaudited)	1
	Consolidated Balance Sheets as of September 30, 2018 and December 31, 2017	1
	Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 2018 and 2017	2
	Consolidated Statements of Comprehensive Income (Loss) for the Three and Nine Months Ended September 30, 2018 and 2017	3
	Consolidated Statement of Changes in Equity for the Nine Months Ended September 30, 2018	4
	Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2018 and 2017	5
	Notes to Consolidated Financial Statements	6
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	46
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	63
Item 4.	Controls and Procedures	63
	PART II—OTHER INFORMATION
Item 1.	Legal Proceedings	65
Item 1A.	Risk Factors	65
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	66
Item 3.	Defaults Upon Senior Securities	66
Item 6.	Exhibits	66
	Signatures	71

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements

RAIT Financial Trust

Consolidated Balance Sheets

(Unaudited and dollars in thousands, except share and per share information)

	As of September 30, 2018			As of December 31, 2017
Assets
Investment in mortgage loans, held for investment:
Commercial mortgage loans, mezzanine loans, and preferred equity interests	$	627,910		$	1,270,607
Allowance for loan losses		(23,617	)		(14,883	)
Total investment in mortgage loans, held for investment, net (including $599,809 and $1,174,827 held by consolidated VIEs, respectively)		604,293			1,255,724
Investment in mortgage loans, held for sale		4,673			-
Investments in real estate, net of accumulated depreciation of $9,328 and $28,768, respectively (including $18,133 and $18,634 held by consolidated VIEs, respectively)		123,145			245,904
Cash and cash equivalents		98,352			53,380
Restricted cash		86,154			157,914
Accrued interest receivable		24,959			29,664
Other assets		14,134			43,871
Intangible assets, net of accumulated amortization of $5,527 and $6,831, respectively		1,893			5,376
Total assets	$	957,603		$	1,791,833
Liabilities and Equity
Indebtedness, net of unamortized discounts, premiums and deferred financing costs of $17,880 and $29,465 respectively (including $560,287 and $1,038,864 held by consolidated VIEs, respectively)	$	814,987		$	1,390,188
Accrued interest payable		3,857			4,688
Accounts payable and accrued expenses		4,931			9,641
Borrowers' escrows		46,844			117,070
Deferred taxes and other liabilities		2,573			12,116
Total liabilities		873,192			1,533,703
Series D cumulative redeemable preferred shares, $0.01 par value per share, 0 and 4,000,000 shares authorized, respectively, 0 and 3,133,720 shares issued and outstanding, respectively		-			78,343
Equity:
Shareholders’ equity:
Preferred shares, $0.01 par value per share, 25,000,000 shares authorized;
7.75% Series A cumulative redeemable preferred shares, liquidation preference $25.00 per share, 8,069,288 shares authorized, 5,727,500 and 5,344,353 shares issued and outstanding, respectively		57			53
8.375% Series B cumulative redeemable preferred shares, liquidation preference $25.00 per share, 4,300,000 shares authorized, 2,508,797 and 2,340,969 shares issued and outstanding, respectively		25			23
8.875% Series C cumulative redeemable preferred shares, liquidation preference $25.00 per share, 3,600,000 shares authorized, 1,758,030 and 1,640,425 shares issued and outstanding, respectively		18			17
Series E cumulative redeemable preferred shares, $0.01 par value per share, 0 and 4,000,000 shares authorized, respectively, 0 and 0 shares issued and outstanding, respectively		-			-
Common shares, $1.50 par value per share, 200,000,000 shares authorized 1,850,471 and 1,860,903 issued and outstanding, respectively, including 10,264 and 24,930 unvested restricted common share awards, respectively		2,776			2,791
Additional paid in capital		2,102,170			2,094,804
Accumulated other comprehensive income (loss)		9,743			-
Retained earnings (deficit)		(2,030,378	)		(1,921,533	)
Total shareholders’ equity		84,411			176,155
Noncontrolling interests		-			3,632
Total equity		84,411			179,787
Total liabilities and equity	$	957,603		$	1,791,833

The accompanying notes are an integral part of these consolidated financial statements.

1

RAIT Financial Trust

Consolidated Statements of Operations

(Unaudited and dollars in thousands, except share and per share information)

	For the Three Months Ended September 30,						For the Nine Months Ended September 30,
	2018			2017			2018			2017
Revenue:
Investment interest income	$	8,353		$	18,115		$	43,542		$	50,647
Investment interest expense		(5,940	)		(10,236	)		(26,079	)		(30,555	)
Net interest margin		2,413			7,879			17,463			20,092
Property income		6,332			15,012			23,814			52,023
Fee and other income		582			1,712			2,944			4,904
Total revenue		9,327			24,603			44,221			77,019
Expenses:
Interest expense		5,791			8,656			18,918			27,682
Real estate operating expense		4,311			8,313			15,503			28,456
Property management expenses		537			1,908			4,207			6,772
General and administrative expenses:
Compensation expense		2,408			3,194			8,446			10,210
Other general and administrative expense		2,847			3,233			13,270			8,627
Total general and administrative expenses		5,255			6,427			21,716			18,837
Acquisition and integration expenses		-			57			133			296
Provision for loan losses		7,489			5,516			30,269			27,914
Depreciation and amortization expense		1,828			6,139			8,158			23,712
IRT internalization and management transition expenses		-			-			-			736
Employee separation expenses		-			575			-			575
Shareholder activism expenses		-			155			-			2,464
Total expenses		25,211			37,746			98,904			137,444
Operating (Loss) Income		(15,884	)		(13,143	)		(54,683	)		(60,425	)
Interest and other income (expense), net		342			283			785			144
Gains on assets		6,440			30			2,292			22,795
Gains (losses) on deconsolidation of properties and VIEs		870			(4,035	)		(7,307	)		(19,982	)
Gain on sale of retail property manager		1,262			-			1,262			-
Gains (losses) on extinguishments of debt		(239	)		(644	)		(3,668	)		944
Asset impairment		(13,267	)		(3,121	)		(44,083	)		(96,354	)
Goodwill impairment		-			-			-			(8,342	)
Change in fair value of financial instruments		(410	)		4,753			(212	)		6,693
Income (loss) before taxes		(20,886	)		(15,877	)		(105,614	)		(154,527	)
Income tax benefit (provision)		(152	)		34			(152	)		261
Net income (loss)		(21,038	)		(15,843	)		(105,766	)		(154,266	)
(Income) loss allocated to preferred shares		(5,063	)		(8,387	)		(4,591	)		(25,730	)
(Income) loss allocated to noncontrolling interests		-			-			-			(76	)
Net income (loss) allocable to common shares	$	(26,101	)	$	(24,230	)	$	(110,357	)	$	(180,072	)
Earnings (loss) per share-Basic:
Earnings (loss) per share-Basic	$	(14.18	)	$	(13.23	)	$	(60.00	)	$	(98.47	)
Weighted-average shares outstanding-Basic		1,840,168			1,831,193			1,839,172			1,828,778
Earnings (loss) per share-Diluted:
Earnings (loss) per share-Diluted	$	(14.18	)	$	(13.23	)	$	(60.00	)	$	(98.47	)
Weighted average shares outstanding-Diluted		1,840,168			1,831,193			1,839,172			1,828,778

The accompanying notes are an integral part of these consolidated financial statements.

2

RAIT Financial Trust

Consolidated Statements of Comprehensive Income (Loss)

(Unaudited and dollars in thousands)

	For the Three Months Ended September 30,						For the Nine Months Ended September 30,
	2018			2017			2018			2017
Net income (loss)	$	(21,038	)	$	(15,843	)	$	(105,766	)	$	(154,266	)
Other comprehensive income (loss):
Unrealized gains (losses) from change in fair value based on instrument specific credit risk		(2,801	)		—			486			—
Total other comprehensive income (loss)		(2,801	)		—			486			—
Comprehensive income (loss) before allocation to noncontrolling interests		(23,839	)		(15,843	)		(105,280	)		(154,266	)
Allocation to noncontrolling interests - net (income) loss		—			—			—			(76	)
Allocation to noncontrolling interests - other comprehensive (income) loss		—			—			—			—
Comprehensive income (loss) allocable to common shares	$	(23,839	)	$	(15,843	)	$	(105,280	)	$	(154,342	)

The accompanying notes are an integral part of these consolidated financial statements.

3

RAIT Financial Trust

Consolidated Statement of Changes in Equity

(Unaudited and dollars in thousands, except share information)

	Preferred Shares— Series A		ParValue Preferred Shares— Series A		Preferred Shares— Series B		Par Value Preferred Shares— Series B		Preferred Shares— Series C		Par Value Preferred Shares— Series C		Common Shares			Par Value Common Shares			Additional Paid In Capital			AOCI		Retained Earnings (Deficit)			Total Shareholders’ Equity			Noncontrolling Interests			Total Equity
Balance, December 31, 2017		5,344,353	$	53		2,340,969	$	23		1,640,425	$	17		1,860,903		$	2,791		$	2,094,804		$	0	$	(1,921,533	)	$	176,155		$	3,632		$	179,787
Cumulative effect adjustments from adoption of recently issued accounting pronouncements																							9,257		(8,496	)		761						761
Adjusted Balance, January 1, 2018		5,344,353		53		2,340,969		23		1,640,425		17		1,860,903			2,791			2,094,804			9,257		(1,930,029	)		176,916			3,632			180,548
Net income (loss)																									(105,766	)		(105,766	)					(105,766	)
Preferred shares issued, net		383,147		4		167,828		2		117,605		1								4,359								4,366						4,366
Preferred dividends paid																									(6,397	)		(6,397	)					(6,397	)
Impact of Series D redemption (Note 9)																				(11	)				11,932			11,921						11,921
Common dividends declared																									(118	)		(118	)					(118	)
Other comprehensive income (loss), net																							486					486						486
Share-based compensation																				(163	)							(163	)					(163	)
Issuance of noncontrolling interests																															76			76
Distribution to noncontrolling interests																															(15	)		(15	)
Acquisition of noncontrolling interests																				3,239								3,239			(3,582	)		(343	)
Derecognition of noncontrolling interests																															(111	)		(111	)
Common shares activity related to equity compensation														(10,432	)		(15	)		(58	)							(73	)					(73	)
Balance, September 30, 2018		5,727,500	$	57		2,508,797	$	25		1,758,030	$	18		1,850,471		$	2,776		$	2,102,170		$	9,743	$	(2,030,378	)	$	84,411		$	-		$	84,411

The accompanying notes are an integral part of these consolidated financial statements.

4

RAIT Financial Trust

Consolidated Statements of Cash Flows

(Unaudited and dollars in thousands)

	For the Nine Months Ended September 30,
	2018			2017
Operating activities:
Net income (loss)	$	(105,766	)	$	(154,266	)
Adjustments to reconcile net income (loss) to cash flow from operating activities:
Provision for loan losses		30,269			27,914
Share-based compensation expense		(163	)		1,833
Depreciation and amortization expense		8,158			23,712
Amortization of deferred financing costs and debt discounts		8,042			10,920
Deferral of loan origination fees and costs, net		(1,175	)		1,267
(Amortization) of above/below market leases		(334	)		(822	)
(Gains) Losses on assets		(2,292	)		(22,795	)
(Gains) Losses on extinguishments of debt		3,668			(944	)
(Gains) Losses on deconsolidation of properties and VIEs		7,307			19,982
(Gain) on sale of retail property manager		(1,262	)		—
Asset impairment		44,083			96,354
Goodwill impairment		—			8,342
Change in fair value of financial instruments		212			(6,693	)
Provision (benefit) for deferred taxes		—			22
Changes in assets and liabilities:
Decrease in accrued interest receivable		3,514			3,966
Decrease in other assets		2,248			2,667
(Decrease) increase in accrued interest payable		(251	)		3,940
(Decrease) in accounts payable and accrued expenses		(314	)		(1,817	)
(Decrease) increase in other liabilities		22			(2,729	)
Proceeds from sale of loans originated for sale		14,265			—
Cash flows provided by (used in) operating activities		10,231			10,853
Investing activities:
Origination of loans for investment		(52,215	)		(369,981	)
Principal repayments on loans		274,702			384,567
Proceeds from sale of interests in floating rate securitizations, net of cash and restricted cash deconsolidated		31,837			—
Investments in real estate		(2,457	)		(5,715	)
Payments related to sale of retail property manager, including cash deconsolidated		(235	)		—
Proceeds from sale of loans originated for investment		108,494			—
Proceeds from the disposition of real estate		83,667			161,237
(Decrease) increase in borrowers' escrows		(47,677	)		6,813
Cash flows provided by (used in) investing activities		396,116			176,921
Financing activities:
Repayments on secured credit facilities and loans payable on real estate		(828	)		(975	)
Repayments and repurchase of CDO notes payable and floating rate securitizations		(280,890	)		(576,536	)
Net proceeds from issuance of CDO notes and floating rate securitizations		—			276,894
Repurchase of convertible notes and senior notes		(43,953	)		(7,316	)
Repayments of senior secured notes		(11,500	)		(48,500	)
Net proceeds (repayments) related to floating rate loan repurchase agreements		(22,313	)		97,498
Proceeds from issuance of other indebtedness		—			17,022
Distribution to noncontrolling interests		(15	)		(1,702	)
Acquisition of noncontrolling interests		(343	)		—
Issuance of noncontrolling interests		76			66
Payments for deferred costs		—			(4,435	)
Common share issuance, net of costs incurred		(74	)		(1,033	)
Repurchase of Series D preferred shares		(62,057	)		(10,057	)
Distributions paid to preferred shareholders		(11,121	)		(19,601	)
Distributions paid to common shareholders		(117	)		(21,301	)
Cash flows (used in) provided by financing activities		(433,135	)		(299,976	)
Net change in cash, cash equivalents, and restricted cash		(26,788	)		(112,202	)
Cash, cash equivalents, and restricted cash at the beginning of the period		211,294			300,710
Cash, cash equivalents, and restricted cash at the end of the period	$	184,506		$	188,508

The accompanying notes are an integral part of these consolidated financial statements.

5

RAIT Financial Trust

Notes to Consolidated Financial Statements

As of September 30, 2018

(Unaudited and dollars in thousands, except share and per share amounts)

NOTE 1: THE COMPANY

RAIT Financial Trust is a self-managed and self-advised Maryland real estate investment trust, or REIT, focused on managing a portfolio of commercial real estate, or CRE, loans and properties.  References to “RAIT”, “we”, “us”, and “our” refer to RAIT Financial Trust and its subsidiaries, unless the context otherwise requires.  

Effective after the close of trading on August 13, 2018, we completed a one for fifty reverse stock split, or the Reverse Stock Split of RAIT’s common shares, as previously authorized by RAIT’s board of trustees, or the Board, pursuant to authority granted to the Board by RAIT’s common shareholders. The par value of common shares changed to $1.50 per share after the Reverse Stock Split from $0.03 per share prior to the Reverse Stock Split and every fifty shares issued and outstanding prior to the Reverse Stock Split were combined into one common share after the Reverse Stock Split. The Reverse Stock Split did not change the number of authorized common shares. These financial statements give retroactive effect to such Reverse Stock Split and all share and per share amounts have been adjusted accordingly. The Reverse Stock Split did not affect RAIT’s preferred shares, including the number of authorized or outstanding RAIT preferred shares or the dividend rate per share of any outstanding RAIT preferred shares.

On June 27, 2018, RAIT Asset Holdings IV, LLC, or RAIT IV, a subsidiary of RAIT, completed the sale of its FL5 Interests, as defined below, and FL6 Interests, as defined below (collectively, the Interests), to Melody RE II, LLC, or the Purchaser, for an aggregate purchase price of $54,632.

Prior to the sale, RAIT IV was the holder of:

• 60% of the units, or the FL5 Interests, of RAIT – Melody 2016 Holdings, LLC, or Holdings 2016, which controls RAIT – Melody 2016 Holdings Trust. This trust owned, at the time of sale, various classes of non-investment grade bonds and the equity of RAIT 2015-FL5 Trust, or FL5, with the remaining 40% of the units of Holdings 2016 being held by affiliates of the Purchaser; and

• 60% of the units, or the FL6 Interests, of RAIT – Melody 2017 Holdings, LLC, or Holdings 2017, which controls RAIT – Melody 2017 Holdings Trust. This trust owned, at the time of sale, various classes of non-investment grade bonds and the equity of RAIT 2016-FL6 Trust, or FL6, with the remaining 40% of the units of Holdings 2017 being held by affiliates of the Purchaser.

As a result of the sale, RAIT is no longer the primary beneficiary of Holdings 2016 or Holdings 2017 (collectively, the RAIT Venture VIEs), or FL5 or FL6. Therefore, RAIT deconsolidated those entities as of June 27, 2018. See Note 8: Variable Interest Entities for more information.  After the sale of the Interests, RAIT retained its role as servicer and special servicer of the loans in FL5 and FL6.

Also on June 27, 2018, RAIT, several of RAIT’s subsidiaries, including RAIT IV, and ARS VI Investor I, LP, or the Investor, entered into a Redemption and Exchange Agreement with the Investor whereby RAIT and RAIT IV redeemed and cancelled the remaining 2,939,190 preferred units of RAIT IV, or the preferred units, and RAIT’s corresponding Series D cumulative redeemable preferred shares, or the Series D preferred shares, for $56,765 of cash received by RAIT IV from the sale of the Interests, defined available cash held by RAIT IV and $16,715 of liquidation preference of RAIT’s publicly traded Series A cumulative redeemable preferred shares, or the Series A preferred shares, Series B cumulative redeemable preferred shares, or the Series B preferred shares, and Series C cumulative redeemable preferred shares, or the Series C preferred shares.  See Note 9: Series D Preferred Shares for more information.

On September 7, 2017, we announced that our Board had formed a committee of independent trustees, or the Special Committee, to explore and evaluate a wide range of possible strategic and financial alternatives for RAIT. On February 20, 2018, we announced that the Special Committee had concluded this review and that the Board had determined that this review did not identify a strategic or financial transaction with another counterparty that was preferable to the steps described below. This review, conducted with the support of financial and legal advisors, evaluated a wide range of potential alternatives which included, but were not limited to, (i) refinements of RAIT’s operations or strategy, (ii) financial transactions, such as a recapitalization or other change to RAIT’s capital structure and (iii) strategic transactions, such as a sale of all or part of RAIT.  As a result, the Board, after considering the recommendations and advice of the Special Committee, RAIT’s management, and its legal and financial advisors, determined that RAIT should take steps to increase RAIT’s liquidity and better position RAIT to meet its financial obligations as they come due. We

6

RAIT Financial Trust

Notes to Consolidated Financial Statements

As of September30, 2018

(Unaudited and dollars in thousands, except share and per share amounts)

refer to these steps as the 2018 strategic steps and they include, but are not limited to: (i) the suspension of RAIT’s lending business along with the implementation of other steps to reduce costs within its other operating businesses; (ii) the continuation of the process of selling RAIT’s owned real estate, or REO, portfolio and selling certain of our loans, while continuing to service and manage its existing CRE loan portfolio; and (iii) the engagement of a financial advisor, M-III Advisory Partners, LP, to advise and assist RAIT in its ongoing assessment of its financial performance and financial needs and in evaluating strategic and financial transactions.

NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

a. Basis of Presentation

The accompanying unaudited interim consolidated financial statements have been prepared by management in accordance with U.S. generally accepted accounting principles, or GAAP. Certain information and footnote disclosures normally included in annual consolidated financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations, although we believe that the included disclosures are adequate to make the information presented not misleading. The unaudited interim consolidated financial statements should be read in conjunction with our audited financial statements as of and for the year ended December 31, 2017 included in our Annual Report on Form 10-K, or the Annual Report. In the opinion of management, all adjustments, consisting only of normal recurring adjustments, necessary to present fairly our consolidated financial position and consolidated results of operations and cash flows are included. The results of operations for the interim periods presented are not necessarily indicative of the results for the full year.

The consolidated balance sheet and consolidated statement of operations as of and for the three months ended September 30, 2018 includes the impact of correcting an error made in the determination of the amount of asset impairment that was recognized during the three months ended June 30, 2018 in the amount of $850.  The effect of this correction was an increase to investments in real estate and decrease in asset impairment.

The consolidated statement of cash flows for the nine-month period ended September 30, 2018 includes the impact of correcting the reporting of certain activity that occurred in the six-month period ended June 30, 2018 and the three-month period ended March 31, 2018.  Specifically, the correction re-classified cash proceeds from certain loan sales that were previously reported within cash flows from operating activities and should have been reported within cash flows from investing activities.  The impact of this was a decrease to cash flows from operating activities and an increase to cash flows from investing activities of $108,494 for the six-month period ended June 30, 2018 ($89,583 of which related to the three-month period ended March 31, 2018).  This correction had no impact to cash and cash equivalents as of June 30, 2018 (or March 31, 2018), nor did it impact any other consolidated financial statement amounts as of June 30, 2018 (or March 31, 2018) or for the six-month period ended June 30, 2018 (or the three-month period ended March 31, 2018).

We evaluated these error corrections and determined, based on quantitative and qualitative factors, the changes were not

material to the consolidated financial statements for any previously filed consolidated financial statements

b. Going Concern Considerations

Under the accounting guidance related to the presentation of financial statements, an entity is required to evaluate on a quarterly basis whether the entity’s current financial condition, including its liquidity sources at the date that the financial statements are issued, will enable the entity to meet its obligations arising within one year of the date the entity’s financial statements are issued and to make a determination as to whether it is probable, under the application of this accounting guidance, that the entity will be able to continue as a going concern over the applicable period.  The accompanying consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business.  The financial statements do not include any adjustments that might be necessary should RAIT be unable to continue as a going concern. As a result of the considerations articulated below, there is substantial doubt about RAIT’s ability to continue as a going concern within one year after the date that the financial statements are issued.

Analysis.  In applying the accounting guidance, management considered RAIT’s current financial condition and liquidity sources, including current funds available, forecasted future cash flows and RAIT’s conditional and unconditional obligations due over the next twelve months.  Management considered the following: i) our 7.125% senior notes which mature in August 2019 and

7

RAIT Financial Trust

Notes to Consolidated Financial Statements

As of September30, 2018

(Unaudited and dollars in thousands, except share and per share amounts)

have an unpaid principal balance of $65,356 as of September 30, 2018; ii) the financial covenant compliance requirements of RAIT’s senior notes; and (iii) RAIT’s recurring costs of operating its business.

As previously disclosed, RAIT has been notified by the staff of the New York Stock Exchange, or NYSE, that RAIT is not in compliance with certain continued listing standards of the NYSE.  As of the filing date of this report, $279 of our outstanding indebtedness contains provisions that would provide the holders thereof to require us to repurchase that indebtedness if RAIT was delisted from the NYSE. In October 2018, we exercised our right to call this indebtedness and expect to redeem it in November 2018.  

RAIT plans to control costs, to sell certain loans, to sell certain real estate properties and to continue to receive repayments of loans as they become due.  Consistent with these plans, RAIT has suspended new investment activity and the Board has not declared a dividend on RAIT’s outstanding preferred shares for the two quarters ended June 30, 2018 and September 30, 2018.  Due to the inherent risks, unknown results and significant uncertainties associated with each of these matters and the direct correlation between these matters and RAIT’s ability to satisfy its financial obligations that may arise over the applicable twelve month period, RAIT is unable to conclude that it is probable that RAIT will be able to meet its obligations arising within twelve months of the date of issuance of these financial statements under the parameters set forth in this accounting guidance.

As a result, management evaluated whether this was mitigated by RAIT’s approved plans and expectations for the applicable period under the second step of this accounting standard.

RAIT’s ability to satisfy its obligations under the 7.125% senior notes, to maintain compliance with its debt covenants and to fund recurring costs of operations depends on management’s ability to sell certain of RAIT’s remaining real estate assets releasing cash from those sales and/or distributions on our retained interests in our RAIT I and RAIT II securitizations, to continue to control costs, to sell certain loans, to sell retained interests in certain FL securitizations and to continue to receive repayments of loans as they become due.  While controlling costs are within management’s control to some extent, selling real estate assets, selling loans, selling other assets and the timing of loan repayments involve performance by third parties.  Since many of the real estate assets, loans and other assets that management plans to sell or receive repayment from to satisfy its obligations are not subject to an executed purchase and sale agreement or other contractual agreement as of the date hereof, the sale of those assets cannot be considered probable of occurring.  

c. Principles of Consolidation

The consolidated financial statements reflect our accounts and the accounts of our majority-owned and/or controlled subsidiaries. We also consolidate entities that are variable interest entities, or VIEs, where we have determined that we are the primary beneficiary of such entities. The portions of these entities that we do not own are presented as noncontrolling interests as of the dates and for the periods presented in the consolidated financial statements. All intercompany accounts and transactions have been eliminated in consolidation.

Under Financial Accounting Standards Board, or FASB, Accounting Standards Codification, or ASC, Topic 810, “Consolidation”, the determination of whether to consolidate a VIE is based on the power to direct the activities of the VIE that most significantly impact the VIE’s economic performance together with either the obligation to absorb losses or the right to receive benefits that could be significant to the VIE. We define the power to direct the activities that most significantly impact the VIE’s economic performance as the ability to buy, sell, refinance, or recapitalize assets or entities, and solely control other material operating events or items of the entity. For our commercial mortgage loans, mezzanine loans, and preferred equity investments, certain rights we hold are protective in nature and would preclude us from having the power to direct the activities that most significantly impact the VIE’s economic performance. Assuming both criteria are met, we would be considered the primary beneficiary and would consolidate the VIE. We will continually assess our involvement with VIEs and consolidate the VIEs when we are the primary beneficiary. See Note 8: Variable Interest Entities for additional disclosures pertaining to VIEs.

For entities that we do not consolidate, we account for our investment in them either under the equity method pursuant to ASC Topic 323, “Investments-Equity Method and Joint Ventures” or cost method pursuant to ASC Topic 325, “Investments – Other”.

d. Use of Estimates

8

RAIT Financial Trust

Notes to Consolidated Financial Statements

As of September30, 2018

(Unaudited and dollars in thousands, except share and per share amounts)

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting periods. The items that include significant estimates are fair value of financial instruments and allowance for loan losses. Actual results could differ from those estimates.

e. Cash and Cash Equivalents

Cash and cash equivalents include cash held in banks and highly liquid investments with maturities of three months or less when purchased.  Cash, including amounts restricted, may at times exceed the Federal Deposit Insurance Corporation deposit insurance limit of $250 per institution.  We attempt to mitigate credit risk by placing cash and cash equivalents with major financial institutions.  To date, we have not experienced any losses on cash and cash equivalents.

f. Restricted Cash

Restricted cash consists primarily of tenant escrows and borrowers’ funds held by us to fund certain expenditures or to be released at our discretion upon the occurrence of certain pre-specified events, and to serve as additional collateral for borrowers’ loans.  As of September 30, 2018 and December 31, 2017, we had $49,350 and $123,398 of restricted cash, respectively, which primarily relates to tenant escrows and borrowers’ funds.

Restricted cash also includes cash received from the sale, repayment and/or other disposition of assets held by the issuers of our securitizations that are awaiting to be distributed to holders of our CDO notes payable and CMBS securitizations, as well as the proceeds from the issuance of CDO notes payable by securitizations that are restricted for the purpose of funding additional investments in securities subsequent to the balance sheet date.  As of September 30, 2018 and December 31, 2017, we had $36,804 and $34,516, respectively, of restricted cash held by securitizations.

g. Investments in Commercial Mortgage Loans, Mezzanine Loans and Preferred Equity Interests

We have invested in commercial mortgage loans, mezzanine loans and preferred equity interests. We account for our investments in commercial mortgage loans, mezzanine loans and preferred equity interests that we do not have the intention or ability to sell, at amortized cost. The carrying value of these investments is adjusted for origination discounts/premiums, nonrefundable fees and direct costs for originating loans which are amortized into income on a level yield basis over the terms of the loans.

Loans that we have the intention and ability to sell are classified as held for sale, and are measured at the lower of amortized cost or fair value. If the amortized cost exceeds the loan’s fair value, we establish a valuation allowance equal to the difference between the amortized cost and fair value.

h. Allowance for Loan Losses, Impaired Loans and Non-accrual Status

We maintain an allowance for loan losses on our investments in commercial mortgage loans, mezzanine loans and preferred equity interests. Management’s periodic evaluation of the adequacy of the allowance is based upon expected and inherent risks in the portfolio, the estimated value of underlying collateral, and current economic conditions. The credit quality of our loans is monitored via quantitative and qualitative metrics.  Quantitatively we evaluate items such as the current debt service coverage ratio and annual net operating income of the underlying property.  Qualitatively we evaluate items such as recent operating performance of the underlying property and history of the borrower’s ability to provide financial support.  These items together are considered in developing our view of each loan’s risk rating which are categorized as either impaired or satisfactory. Management reviews loans for impairment and establishes specific reserves when a loss is probable under the provisions of FASB ASC Topic 310, “Receivables.” A loan is impaired when it is probable that we may not collect all principal and interest payments according to the contractual terms. As part of the detailed loan review, we consider many factors about the specific loan, including payment history, asset performance, borrower’s financial capability and other characteristics. Management evaluates loans for non-accrual status each reporting period. A loan is placed on non-accrual status when the loan payment deficiencies exceed 90 days unless it is well secured and in the process of collection, or if the collection of principal and interest in full is not probable. Payments received for non-accrual loans are applied to principal until the loan is removed from non-accrual status. Loans are generally removed from non-accrual status when they are making current interest payments. The allowance for loan losses is increased by the provision for loan losses and decreased by charge-offs (net of recoveries). We charge off a loan when we determine that all commercially reasonable means of recovering the loan

9

RAIT Financial Trust

Notes to Consolidated Financial Statements

As of September30, 2018

(Unaudited and dollars in thousands, except share and per share amounts)

balance have been exhausted.  This may occur at a variety of times, including when we receive cash or other assets in a pre-foreclosure sale or take control of the underlying collateral in full satisfaction of the loan upon foreclosure.  We consider circumstances such as these to indicate that the loan collection process has ceased and that a loan is uncollectible.

i. Investments in Real Estate

Investments in real estate are shown net of accumulated depreciation. We capitalize those costs that have been determined to improve the real property and depreciate those costs on a straight-line basis over the useful life of the asset. We depreciate real property using the following useful lives: buildings and improvements—30 to 40 years; furniture, fixtures, and equipment—5 to 10 years; and tenant improvements—shorter of the lease term or the life of the asset. Costs for ordinary maintenance and repairs are charged to expense as incurred.

Effective January 1, 2018, FASB ASC Topic 805, “Business Combinations” was amended to clarify the definition of a business by more clearly outlining the requirements for an integrated set of assets and activities to be considered a business and by establishing a practical framework to determine when the integrated set of assets and activities is a business. Prior to January 1, 2018, the properties we acquired were generally considered businesses and were accounted for as business combinations. Subsequent to January 1, 2018, we expect any properties that we acquire to generally not be considered businesses and, therefore, to be accounted for as asset acquisitions.  

Under business combination accounting, the fair value of the real estate acquired is allocated to the acquired tangible assets, generally consisting of land, building and tenant improvements, and identified intangible assets and liabilities, consisting of the value of above-market and below-market leases for acquired in-place leases and the value of tenant relationships, based, in each case, on their fair values.  Transaction costs and fees incurred related to the acquisition are expensed as incurred.  Under asset acquisition accounting, the costs to acquire real estate, including transaction costs related to the acquisition, are accumulated and then allocated to the individual assets and liabilities acquired based upon their relative fair value.  

In determining the fair value of the identified intangible assets and liabilities of an acquired property, above-market and below-market in-place lease values are recorded based on the present value (using an interest rate which reflects the risks associated with the leases acquired) of the differences between (i) the contractual amounts to be paid pursuant to the in-place leases and (ii) management’s estimate of fair market lease rates for the corresponding in-place leases, measured over a period equal to the remaining term of the lease. The capitalized above-market lease values and the capitalized below-market lease values are amortized as an adjustment to property income over the lease term.

The aggregate value of in-place leases is determined by evaluating various factors, including an estimate of carrying costs during the expected lease-up periods, current market conditions and similar leases. In estimating carrying costs, management includes real estate taxes, insurance and other operating expenses, and estimates of lost rental revenue during the expected lease-up periods based on current market demand. Management also estimates costs to execute similar leases including leasing commissions, legal and other related costs. The value assigned to this intangible asset is amortized over the assumed lease up period.

Management reviews our investments in real estate for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The review of recoverability is based on an estimate of the future undiscounted cash flows (excluding interest charges) expected to result from the long-lived asset’s use and eventual disposition. These cash flows consider factors such as expected future operating income, trends and prospects, as well as the effects of leasing demand, competition and other factors. If impairment exists due to the inability to recover the carrying value of a long-lived asset, an impairment loss is recorded to the extent that the carrying value exceeds the estimated fair value of the property.

j. Revenue Recognition

1) Interest income—We recognize interest income from investments in commercial mortgage loans, mezzanine loans, and preferred equity interests on a yield to maturity basis. Certain of our commercial mortgage loans, mezzanine loans and preferred equity interests provide for the accrual of interest at specified rates which differ from current payment terms. Interest income is recognized on such loans, the majority of which were originated prior to 2011, at the accrual rate subject to management’s determination that accrued interest and outstanding principal are ultimately collectible. Management will cease accruing interest on these loans when it determines that collection of the interest income is not

10

RAIT Financial Trust

Notes to Consolidated Financial Statements

As of September30, 2018

(Unaudited and dollars in thousands, except share and per share amounts)

probable based on the value of the underlying collateral using discounted cash flow models and market based assumptions. The accrued interest receivable associated with these loans as of September 30, 2018 and December 31, 2017 was $22,402 and $23,801, respectively. During the three months ended September 30, 2018, the accrued interest receivable of $1,964 related to one of these loans was determined to be uncollectible and was written off as a reduction to investment interest income. These loans are considered to be impaired when the total contractual amount owed exceeds the estimated value of the underlying collateral.  Four of these loans, with an unpaid principal balance of $28,873 and $28,904, were considered to be impaired as of September 30, 2018 and December 31, 2017, respectively, because the contractual amounts owed exceed the estimated value of the underlying collateral. Additionally, three and two of these loans with an unpaid principal amount of $32,664 and $30,379 were considered impaired as of September 30, 2018 and December 31, 2017, respectively, because their loan terms were modified in what constituted a troubled debt restructuring.

For investments that we do not elect to record at fair value under FASB ASC Topic 825, “Financial Instruments”, origination fees and direct loan origination costs are deferred and amortized to net investment income, using the effective interest method, over the contractual life of the underlying loan security or loan, in accordance with FASB ASC Topic 310, “Receivables.”

For investments that we elect to record at fair value under FASB ASC Topic 825, origination fees and direct loan costs are recorded in income and are not deferred.

2) Property income—We generate property income from tenant rent and other tenant-related activities at our consolidated real estate properties. For multifamily real estate properties, property income is recorded when due from residents and recognized monthly as it is earned and realizable, under lease terms which are generally for periods of one year or less. For retail and office real estate properties, property income is recognized on a straight-line basis from the later of the date of the commencement of the lease or the date of acquisition of the property subject to existing leases, which averages minimum rents over the terms of the leases. For retail and office real estate properties, leases also typically provide for tenant reimbursement of a portion of common area maintenance and other operating expenses to the extent that a tenant’s pro rata share of expenses exceeds a base year level set in the lease.

3) Fee and other income—We have generated fee and other income through our various subsidiaries by (a) funding conduit loans for sale into unaffiliated commercial mortgage-backed securities, or CMBS, securitizations, (b) providing or arranging to provide financing to our borrowers, (c) providing ongoing asset management services to investment portfolios under cancelable management agreements, and (d) providing property management services to third parties. We recognize revenue for these activities when the fees are fixed or determinable, are evidenced by an arrangement, collection is reasonably assured and the services under the arrangement have been provided. While we may receive asset management fees when they are earned, we eliminate earned asset management fee income from securitizations while such securitizations are consolidated. During the three and nine months ended September 30, 2018, we earned $129 and $443, respectively, of asset management fees, which were eliminated as they were associated with consolidated securitizations. During the three and nine months ended September 30, 2017, we earned $227 and $714, respectively, of asset management fees, which were eliminated as they were associated with consolidated securitizations.

Certain components of property income and fee and other income fall within the scope of FASB ASC Topic 606, “Revenue from Contracts with Customers”. This topic requires entities to disaggregate revenue into categories that depict how the nature, amount, timing, and uncertainty of revenue and cash flows are affected by economic factors. In the following table, revenue from contracts with customers is disaggregated by type of revenue.

	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
Revenue from Contracts with customers	2018		2017		2018		2017
Property Management Fee income	$	231	$	732	$	1,724	$	2,333
Parking		80		433		514		1,400
Leasing Commission income		78		598		742		1,765
Other miscellaneous		410		599		887		1,789
Total	$	799	$	2,362	$	3,867	$	7,287

There have been no changes in the measurement of revenue from contracts with customers resulting from the adoption of ASC 606.

11

RAIT Financial Trust

Notes to Consolidated Financial Statements

As of September30, 2018

(Unaudited and dollars in thousands, except share and per share amounts)

k. Fair Value of Financial Instruments

In accordance with FASB ASC Topic 820, “Fair Value Measurements and Disclosures”, fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Where available, fair value is based on observable market prices or parameters or derived from such prices or parameters. Where observable prices or inputs are not available, valuation models are applied. These valuation techniques involve management estimation and judgment, the degree of which is dependent on the price transparency for the instruments or market and the instruments’ complexity for disclosure purposes. Assets and liabilities recorded at fair value in the consolidated balance sheets are categorized based upon the level of judgment associated with the inputs used to measure their value. Hierarchical levels, as defined in FASB ASC Topic 820, “Fair Value Measurements and Disclosures” and directly related to the amount of subjectivity associated with the inputs to fair valuations of these assets and liabilities, are as follows:

• Level 1: Valuations are based on unadjusted, quoted prices in active markets for identical assets or liabilities at the measurement date. The types of assets carried at Level 1 fair value generally are equity securities listed in active markets. As such, valuations of these investments do not entail a significant degree of judgment.

• Level 2: Valuations are based on quoted prices for similar instruments in active markets or quoted prices for identical or similar instruments in markets that are not active or for which all significant inputs are observable, either directly or indirectly. Fair value assets and liabilities that are generally included in this category are derivatives where the fair value is based on observable market inputs.

• Level 3: Inputs are unobservable inputs for the asset or liability, and include situations where there is little, if any, market activity for the asset or liability. In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, the level in the fair value hierarchy within which the fair value measurement in its entirety falls has been determined based on the lowest level input that is significant to the fair value measurement in its entirety. Our assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment, and considers factors specific to the asset or liability.  

The availability of observable inputs can vary depending on the financial asset or liability and is affected by a wide variety of factors, including, for example, the type of investment, whether the investment is new, whether the investment is traded on an active exchange or in the secondary market, and the current market condition. To the extent that valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment. Accordingly, the degree of judgment exercised by us in determining fair value is greatest for instruments categorized in Level 3.

Fair value is a market-based measure considered from the perspective of a market participant who holds the asset or owes the liability rather than an entity-specific measure. Therefore, even when market assumptions are not readily available, our own assumptions are set to reflect those that management believes market participants would use in pricing the asset or liability at the measurement date. We use prices and inputs that management believes are current as of the measurement date, including during periods of market dislocation. In periods of market dislocation, the observability of prices and inputs may be reduced for many instruments. This condition could cause an instrument to be transferred from Level 1 to Level 2 or Level 2 to Level 3.

Many financial instruments have bid and ask prices that can be observed in the marketplace. Bid prices reflect the highest price that buyers in the market are willing to pay for an asset. Ask prices represent the lowest price that sellers in the market are willing to accept for an asset. For financial instruments whose inputs are based on bid-ask prices, we do not require that fair value always be a predetermined point in the bid-ask range. Our policy is to allow for mid-market pricing and adjusting to the point within the bid-ask range that results in our best estimate of fair value.

12

RAIT Financial Trust

Notes to Consolidated Financial Statements

As of September30, 2018

(Unaudited and dollars in thousands, except share and per share amounts)

Fair value for certain of our Level 3 financial instruments is derived using internal valuation models. These internal valuation models include discounted cash flow analyses developed by management using current interest rates, estimates of the term of the particular instrument, specific issuer information and other market data for securities without an active market. In accordance with FASB ASC Topic 820, “Fair Value Measurements and Disclosures”, the impact of our own credit spreads is also considered when measuring the fair value of financial assets or liabilities, including derivative contracts. Where appropriate, valuation adjustments are made to account for various factors, including bid-ask spreads, credit quality and market liquidity. These adjustments are applied on a consistent basis and are based on observable inputs where available. Management’s estimate of fair value requires significant management judgment and is subject to a high degree of variability based upon market conditions, the availability of specific issuer information and management’s assumptions.

l. Transfers of Financial Assets

We account for transfers of financial assets under FASB ASC Topic 860, “Transfers and Servicing”, as either sales or financings.  Transfers of financial assets that result in sales accounting are those in which (1) the transfer legally isolates the transferred assets from the transferor, (2) the transferee has the right to pledge or exchange the transferred assets and no condition both constrains the transferee’s right to pledge or exchange the assets and provides more than a trivial benefit to the transferor, and (3) the transferor does not maintain effective control over the transferred assets.  If the transfer does not meet these criteria, the transfer is accounted for as a financing.  Financial assets that are treated as sales are removed from our accounts with any realized gain (loss) reflected in earnings during the period of sale.  Financial assets that are treated as financings are maintained on the balance sheet with proceeds received from the legal transfer reflected as securitized borrowings or security-related receivables.

m. Deferred Financing Costs

Costs incurred in connection with debt financing are deferred and classified within indebtedness and charged to interest expense over the terms of the related debt agreements, under the effective interest method.

n. Intangible Assets

Intangible assets on our consolidated balance sheets represent identifiable intangible assets acquired in business acquisitions. We amortize identified intangible assets to expense over their estimated lives using the straight-line method. We evaluate intangible assets for impairment as events and circumstances change, in accordance with FASB ASC Topic 360, “Property, Plant, and Equipment.” The gross carrying amount for our in-place leases and above market leases was $7,420 as of September 30, 2018 and December 31, 2017, respectively.  The accumulated amortization for our intangible assets was $5,527 and $6,831 as of September 30, 2018 and December 31, 2017, respectively. We recorded amortization expense of $251 and $1,202 for the three months ended September 30, 2018 and 2017, respectively, and $1,069 and $5,763 for the nine months ended September 30, 2018 and 2017, respectively. Based on the intangible assets identified above, we expect to record amortization expense of intangible assets of $268 for the remainder of 2018, $701 for 2019, $341 for 2020, $259 for 2021, $143 for 2022 and $181 thereafter. As of September 30, 2018, we have determined that the carrying value of our intangible assets is recoverable.

o. Derivative Instruments

In accordance with FASB ASC Topic 815, “Derivatives and Hedging”, we measure each derivative instrument at fair value and record such amounts in our consolidated balance sheet as either an asset or liability. For derivatives designated as fair value hedges, derivatives not designated as hedges, or for derivatives designated as cash flow hedges associated with debt for which we elected the fair value option under FASB ASC Topic 825, “Financial Instruments”, the changes in fair value of the derivative instrument are recorded in earnings. For derivatives designated as cash flow hedges, the changes in the fair value of the effective portions of the derivative are reported in other comprehensive income. Changes in the ineffective portions of cash flow hedges, if any, are recognized in earnings.  

For derivatives cleared through the Chicago Mercantile Exchange, or CME, and the London Clearing House, or LCH, variation margin payments are considered settlements of the related derivatives.  As of September 30, 2018, we had no derivative instruments outstanding.  

13

RAIT Financial Trust

Notes to Consolidated Financial Statements

As of September30, 2018

(Unaudited and dollars in thousands, except share and per share amounts)

p. Income Taxes

RAIT, Taberna Realty Finance Trust, or TRFT, and the RAIT Venture REITs have each elected to be taxed as a REIT and to comply with the related provisions of the Internal Revenue Code of 1986, as amended, or the Internal Revenue Code. In February 2016 and January 2017, in conjunction with the ventures described in Note 5: Indebtedness and Note 8: Variable Interest Entities, we created two new entities that elected to be taxed as REITs, which we refer to as the RAIT Venture VIEs.  These entities were created to hold the FL-5 and FL-6 junior notes for the aforementioned ventures.  Accordingly, we generally will not be subject to U.S. federal income tax to the extent of our dividends to shareholders and as long as certain asset, income and share ownership tests are met. If we were to fail to meet these requirements, we would be subject to U.S. federal income tax, which could have a material adverse impact on our results of operations and amounts available for dividends to our shareholders. Management believes that all of the criteria to maintain RAIT’s, TRFT’s and the RAIT Venture VIEs REIT qualification have been met for the applicable periods, but there can be no assurance that these criteria will continue to be met in subsequent periods.  

As discussed in Note 1: The Company, we completed the sale of our interests in the RAIT Venture VIEs on June 27, 2018, and, as a result, the purchaser is responsible for their REIT compliance from and after that date.

We maintain various taxable REIT subsidiaries, or TRSs, which may be subject to U.S. federal, state and local income taxes and foreign taxes. Current and deferred taxes are provided on the portion of earnings (losses) recognized by us with respect to our interest in domestic TRSs. Deferred income tax assets and liabilities are computed based on temporary differences between our GAAP consolidated financial statements and the federal and state income tax basis of assets and liabilities as of the consolidated balance sheet date. We evaluate the realizability of our deferred tax assets (e.g., net operating loss and capital loss carryforwards) and recognize a valuation allowance if, based on the available evidence, it is more likely than not that some portion or all of our deferred tax assets will not be realized. When evaluating the realizability of our deferred tax assets, we consider estimates of expected future taxable income, existing and projected book/tax differences, tax planning strategies available, and the general and industry specific economic outlook. This realizability analysis is inherently subjective, as it requires management to forecast our business and general economic environment in future periods. Changes in estimates of deferred tax asset realizability, if any, are included in income tax expense on the consolidated statements of operations.

In prior years, our TRS entities generated taxable revenue primarily from (i) advisory fees for services provided to IRT, (ii) property management fees for services provided to RAIT properties, IRT properties and third-party properties, and (iii) fees and other income from our CMBS lending business.  In the current year, our TRS entities generate taxable revenue primarily from (i) property management fees for services provided to RAIT properties and third-party properties, and (ii) fees and other income from our CMBS lending business. On August 1, 2018, we sold the TRS entity that generates taxable revenue from property management fees. See item (q.) below for further discussion. In consolidation, the advisory fees and property management fees related to IRT were eliminated through October 5, 2016 and property management fees related to RAIT properties were eliminated in their entirety. Nonetheless, all income taxes are expensed and are paid by the TRSs in the year in which the revenue is received. These income taxes are not eliminated when the related revenue is eliminated in consolidation.

The TRS entities may be subject to tax laws that are complex and potentially subject to different interpretations by the taxpayer and the relevant governmental taxing authorities. In establishing a provision for income tax expense, we must make judgments and interpretations about the application of these inherently complex tax laws. Actual income taxes paid may vary from estimates depending upon changes in income tax laws, actual results of operations, and the final audit of tax returns by taxing authorities. Tax assessments may arise several years after tax returns have been filed. We review the tax balances of our TRS entities quarterly and, as new information becomes available, the balances are adjusted as appropriate.

As part of our change in strategic direction during the year ended December 31, 2016 and to decrease administrative processes, we moved our active TRS entities under a single holding company. We elected a November 30^th taxable year end for the TRS holding company. We estimated the effective tax rate and current income tax liability as of December 31, 2016 by projecting activity for the full taxable year ended November 30, 2017. As we projected ordinary taxable income for the TRS holding company for its taxable year ended November 30, 2017, we recognized a current income tax liability as of December 31, 2016. During the nine months ended September 30, 2017, we updated our projections for 2017, which indicated an ordinary loss position for taxable year 2017 for the TRS holding company. As a result, we reversed the current income tax liability accrued as of December 31, 2016, which generated a current income tax benefit of $249 for the nine months ended September 30, 2017. During the three months ended September 30, 2018, a current income tax provision of $152 was recognized related to our TRS entities.

14

RAIT Financial Trust

Notes to Consolidated Financial Statements

As of September30, 2018

(Unaudited and dollars in thousands, except share and per share amounts)

q. Sale of Retail Property Manager

On August 1, 2018, we completed the sale of our retail property management subsidiary for nominal consideration. We recognized a gain of $1,262 during the three months ended September 30, 2018 related to the sale as the liabilities associated with this business exceeded its assets.

r. Recent Accounting Pronouncements

Adopted within these Financial Statements

In May 2014, the FASB issued an accounting standard classified under FASB ASC Topic 606, “Revenue from Contracts with Customers”. This accounting standard establishes a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes the most current revenue recognition guidance, including industry-specific guidance. This accounting standard generally replaces existing guidance by requiring an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. This accounting standard applies to all contracts with customers, except those that are within the scope of other Topics in the FASB ASC. During 2016 and 2017, the FASB issued multiple amendments to this accounting standard that provide further clarification to this accounting standard.  In February 2017, the FASB issued an accounting standard classified under FASB ASC Subtopic 610-20, “Other Income – Gains and Losses from the Derecognition of Nonfinancial Assets”. The amendments in this accounting standard clarify what constitutes an “in substance nonfinancial asset” and changes the accounting for partial sales of nonfinancial assets to be more consistent with the accounting for a sale of a business. The amendments in this accounting standard also provide further guidance on accounting for the derecognition of non-financial assets by generally requiring the revenue recognition model under FASB ASC Topic 606 to be applied, which may allow for earlier gain recognition for certain sale transactions pursuant to which we have continuing involvement with the asset.  These standards were effective for annual reporting periods beginning after December 15, 2017. We have adopted this new standard as of January 1, 2018, and have applied the modified retrospective method.  The adoption of FASB ASC Topic 606 did not change our measurement of revenue from contracts with customers.  The adoption of FASB ASC Subtopic 610-20 resulted in a cumulative effect adjustment as an increase to shareholders’ equity in the amount of $761 as of the adoption date.  This adjustment is related to a previously deferred gain on the sale of two land parcels in 2017 that would have qualified for recognition under this accounting standard.

In January 2016, the FASB issued an accounting standard classified under FASB ASC Topic 825, “Financial Instruments”. This accounting standard addresses certain aspects of recognition, measurement, presentation, and disclosure of financial instruments.  Among other things, the amendment (i) eliminates certain disclosure requirements for financial instruments measured at amortized cost; (ii) requires the use of the exit price notion when measuring the fair value of financial instruments for disclosure purposes; (iii) requires separate presentation, in other comprehensive income, of the change in fair value of a liability, when the fair value option has been elected, resulting from a change in the instrument-specific credit risk; and (iv) requires separate presentation of financial instruments by measurement category and form.  This standard is effective for annual periods beginning after December 15, 2017, including interim periods within those fiscal years.  Early adoption is permitted for the separate presentation of changes in fair value due to changes in instrument-specific credit risk. We have adopted this new standard as of January 1, 2018, and have applied the modified retrospective method, which resulted in a cumulative effect adjustment as an increase to accumulated other comprehensive income (loss) and a decrease to retained earnings (deficit) in the amount of $9,257 as of the adoption date. This adjustment relates to the separate presentation of changes in instrument-specific credit risk on our junior subordinated notes, at fair value.

In August 2016, the FASB issued an accounting standard classified under FASB ASC Topic 230, “Statement of Cash Flows”.  This accounting standard provides guidance on eight specific cash flow issues; (i) debt prepayment or debt extinguishment costs; (ii) settlement of zero-coupon debt instruments or other debt instruments with coupon interest rates that are insignificant in relation to the effective interest rate of the borrowing; (iii) contingent consideration payments made after a business combination; (iv) proceeds from the settlement of insurance claims; (v) proceeds from the settlement of corporate-owned life insurance policies, including bank-owned life insurance policies; (vi) distributions received from equity method investees; (vii) beneficial interests in securitization transactions; and (viii) separately identifiable cash flows and application of the predominance principle. The amendments are effective for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years.  Early adoption is permitted, including adoption in an interim period. This standard did not have an impact on our consolidated financial statements.

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RAIT Financial Trust

Notes to Consolidated Financial Statements

As of September30, 2018

(Unaudited and dollars in thousands, except share and per share amounts)

In October 2016, the FASB issued an accounting standard classified under FASB ASC Topic 740, “Income Taxes”.  The amendments in this accounting standard provide that the current and deferred income tax consequences of an intra-entity transfer of an asset other than inventory should be recognized when the transfer occurs rather than when the asset has been sold to an outside party.   Two common examples of assets included in the scope of this accounting standard are intellectual property and property, plant, and equipment.  The amendments in this standard are effective for annual reporting periods beginning after December 15, 2017, including interim reporting periods within those annual reporting periods.  Early adoption is permitted for all entities as of the beginning of an annual reporting period for which financial statements (interim or annual) have not been issued.  The amendments in this accounting standard should be applied on a modified retrospective basis through a cumulative-effect adjustment directly to retained earnings as of the beginning of the period of adoption. This standard did not have an impact on our consolidated financial statements.

In November 2016, the FASB issued an accounting standard classified under FASB ASC Topic 230, “Statement of Cash Flows”.  The amendments in this accounting standard require that the statement of cash flows explain the change during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents.  Amounts generally described as restricted cash and restricted cash equivalents should be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows.  The amendments in this update are effective for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years.  Early adoption is permitted, including adoption in an interim period.  We have adopted this new standard as of January 1, 2018 and have utilized a retrospective transition method for each period presented in our consolidated financial statements. The adoption of this standard has resulted in the presentation of additional details regarding the changes in restricted cash in the consolidated statements of cash flows.

In January 2017, the FASB issued an accounting standard classified under FASB ASC Topic 805, “Business Combinations”. The amendments in this accounting standard clarify the definition of a business by more clearly outlining the requirements for an integrated set of assets and activities to be considered a business and by establishing a practical framework to determine when the integrated set of assets and activities is a business. The amendments in this accounting standard are effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. Early adoption is permitted for transactions not yet reflected in the financial statements. We have adopted this new standard as of January 1, 2018 although it has not yet had an impact on our consolidated financial statements as no acquisition transactions have been completed as of September 30, 2018.

In May 2017, the FASB issued an accounting standard classified under FASB ASC Subtopic 718, “Compensation – Stock Compensation”. The amendments in this accounting standard are to provide guidance about which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting in Topic 718.  The amendments in this accounting standard are effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. Early adoption of the amendments in this standard is permitted.  This standard did not have an impact on our consolidated financial statements.

Not Yet Adopted Within These Financial Statements

In February 2016, the FASB issued an accounting standard classified under FASB ASC Topic 842, “Leases”.  This accounting standard states that a lessee should recognize the assets and liabilities that arise from all leases with a term greater than 12 months. The core principle requires the lessee to recognize a liability to make lease payments and a right-of-use (“ROU”) asset. The accounting applied by the lessor is relatively unchanged. During 2017 and 2018, the FASB issued multiple amendments to this accounting standard that provide further clarification to this accounting standard. The new standard is effective for us on January 1, 2019, with early adoption permitted. A modified retrospective transition approach is required, applying the new standard to all leases existing at the date of initial application. An entity may choose to use either (1) its effective date or (2) the beginning of the earliest comparative period presented in the financial statements as its date of initial application. We expect to adopt the new standard on January 1, 2019 and use the effective date as our date of initial application. The new standard provides a number of optional practical expedients in transition. We expect to elect the “package of practical expedients” for all our leases that exist at the date of initial application. This package permits us not to reassess under the new standard our prior conclusions about lease identification, lease classification and initial direct costs. We also currently expect to elect the practical expedient to not separate lease and non-lease components for all of our leases. Management is currently evaluating the impact that this standard will have on our consolidated financial statements. We currently expect to recognize a lease liability and an offsetting ROU asset for one of our real estate operating leases for which we are the lessee. We do not expect the standard to have a significant impact on any of our real estate leases for which we are the lessor.

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RAIT Financial Trust

Notes to Consolidated Financial Statements

As of September30, 2018

(Unaudited and dollars in thousands, except share and per share amounts)

In June 2016, the FASB issued an accounting standard classified under FASB ASC Topic 326, “Financial Instruments-Credit Losses”.  The amendments in this standard provide an approach based on expected losses to estimate credit losses on certain types of financial instruments.  The amendments also modify the impairment model for available-for-sale debt securities and provides for a simplified accounting model for purchased financial assets with credit deterioration since their origination.  The amendments in this standard expand the disclosure requirements regarding an entity’s assumptions, models, and methods for estimating the allowance for loan and lease losses.  In addition, public business entities will need to disclose the amortized cost balance for each class of financial asset by credit quality indicator, disaggregated by the year of origination.  This standard is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years.  Early application of the guidance will be permitted for all entities for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years.  Management is currently evaluating the impact that this standard will have on our consolidated financial statements.

In July 2017, the FASB issued an accounting standard classified under FASB ASC Subtopic 260, “Earnings per Share”, Subtopic 480, “Distinguishing Liabilities from Equity”, and Subtopic 815, “Derivatives and Hedging”. The amendments in this accounting standard change the classification analysis of certain equity-linked financial instruments (or embedded features) with down round features and recharacterize the indefinite deferral of certain provisions of Topic 480 to a scope exception. The amendments in this accounting standard are effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Early adoption of the amendments in this standard is permitted. Management is currently evaluating the impact that this standard may have on our consolidated financial statements.

In August 2017, the FASB issued an accounting standard classified under FASB ASC Topic 815, “Derivatives and Hedging”.  This accounting standard states specific limitations in current GAAP by expanding hedge accounting for both nonfinancial and financial risk components and by refining the measurement of hedge results to better reflect an entity’s hedging strategies. The amendments in this accounting standard are effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Early adoption of the amendments in this standard is permitted. Management is currently evaluating the impact that this standard may have on our consolidated financial statements.

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RAIT Financial Trust

Notes to Consolidated Financial Statements

As of September30, 2018

(Unaudited and dollars in thousands, except share and per share amounts)

NOTE 3: INVESTMENTS IN COMMERCIAL MORTGAGE LOANS, MEZZANINE LOANS AND PREFERRED EQUITY INTERESTS

Loans Held for Investment

The following table summarizes our investments in commercial mortgage loans, mezzanine loans and preferred equity interests held for investment as of September 30, 2018:

	Unpaid Principal Balance			Unamortized (Discounts) Premiums			Carrying Amount			Number of Loans		Weighted- Average Coupon (1)			Range of Maturity Dates
Commercial Real Estate (CRE)
Commercial mortgage loans	$	574,896		$	(546	)	$	574,350			42		6.5	%	Oct. 2018 to Jun. 2025
Mezzanine loans		21,122			164			21,286			2		13.3	%	Jun. 2020 to Mar. 2023
Preferred equity interests		33,279			(1	)		33,278			15		6.7	%	Nov. 2018 to Jan. 2029
Total CRE (2)		629,297			(383	)		628,914			59		6.8	%
Deferred fees and costs, net (3)		(1,004	)		-			(1,004	)
Total	$	628,293		$	(383	)	$	627,910

(1) Weighted-average coupon is calculated on the unpaid principal balance, which does not necessarily correspond to the carrying amount.

(2) Includes $100,442 of cash flow loans, of which $49,690 are commercial mortgage loans, $21,122 are mezzanine loans and $29,630 are preferred equity interests. See Note 2: Summary of Significant Accounting Policies, (j) Revenue Recognition, for further discussion of our cash flow loans.

(3) Includes $3,822 of deferred fees, net of $2,818 of deferred costs.

The following table summarizes our investments in commercial mortgage loans, mezzanine loans and preferred equity interests held for investment as of December 31, 2017:

	Unpaid Principal Balance			Unamortized (Discounts) Premiums			Carrying Amount			Number of Loans		Weighted- Average Coupon (1)			Range of Maturity Dates
Commercial Real Estate (CRE)
Commercial mortgage loans	$	1,194,735		$	(719	)	$	1,194,016			95		6.3	%	Jan. 2018 to Dec. 2025
Mezzanine loans		45,488			164			45,652			13		11.2	%	May 2018 to May 2025
Preferred equity interests		33,284			(1	)		33,283			15		9.1	%	Nov. 2018 to Jan. 2029
Total CRE (2)		1,273,507			(556	)		1,272,951			123		6.5	%
Deferred fees and costs, net (3)		(2,344	)		-			(2,344	)
Total	$	1,271,163		$	(556	)	$	1,270,607

(1) Weighted-average coupon is calculated on the unpaid principal balance, which does not necessarily correspond to the carrying amount.

(2) Includes $106,136 of cash flow loans, of which $55,353 are commercial mortgage loans, $21,149 are mezzanine loans and $29,634 are preferred equity interests. See Note 2: Summary of Significant Accounting Policies, (j) Revenue Recognition, for further discussion of our cash flow loans.

(3) Includes $8,497 of deferred fees, net of $6,153 of deferred costs.

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RAIT Financial Trust

Notes to Consolidated Financial Statements

As of September30, 2018

(Unaudited and dollars in thousands, except share and per share amounts)

A loan is placed on non-accrual status if it is delinquent for 90 days or more or if there is uncertainty over full collection of principal and interest, which generally includes our impaired loans that have reserves. The following table summarizes the delinquency statistics of our commercial real estate loans held for investment as of September 30, 2018 and December 31, 2017:

	As of September 30, 2018
Delinquency Status	Current		30 to 59 days		60 to 89 days		90 days or more		Total		Non-accrual (1)
Commercial mortgage loans	$	508,978	$	8,892	$	17,466	$	39,560	$	574,896	$	106,860
Mezzanine loans		21,122		—		—		—		21,122		8,253
Preferred equity interests		33,279		—		—		—		33,279		8,350
Total	$	563,379	$	8,892	$	17,466	$	39,560	$	629,297	$	123,463

(1) Includes six loans that are current, one loan that is 30 to 59 days or more past due, and one loan that is 60 to 89 days or more past due, but are on non-accrual due to uncertainty over whether we will fully collect principal and interest.  Also includes one loan that is 90 days or more past due in accordance with its terms.

	As of December 31, 2017
Delinquency Status	Current		30 to 59 days		60 to 89 days		90 days or more		Total		Non-Accrual (1)
Commercial mortgage loans	$	1,149,501	$	—	$	—	$	45,234	$	1,194,735	$	81,443
Mezzanine loans		40,258		—		—		5,230		45,488		13,510
Preferred equity interests		33,284		—		—		—		33,284		3,650
Total	$	1,223,043	$	—	$	—	$	50,464	$	1,273,507	$	98,603

(1)      Includes five loans that were current in accordance with their terms, but are on non-accrual due to uncertainty over whether we will fully collect principal and interest, and two loans that are 90 days or more past due in accordance with their terms.

As of September 30, 2018 and December 31, 2017, all of our commercial mortgage loans, mezzanine loans and preferred equity interests that were 90 days or more past due or in foreclosure were on non-accrual status.  It is noted that as of September 30, 2018, $100,442 of our loans are cash flow loans, which provide for the accrual of interest at specified rates which differ from current payment terms, and in some cases, do not require current payments. See Note 2: Summary of Significant Accounting Policies, (j) Revenue Recognition, for further discussion of our cash flow loans. As of September 30, 2018 and December 31, 2017, $123,463 and $98,603, respectively, of our commercial real estate loans were on non-accrual status and had a weighted-average interest rate of 6.8% and 6.1%, respectively. Also, as of September 30, 2018 and December 31, 2017, two, and three loans with unpaid principal balances of $15,919 and $20,624, respectively, and weighted average interest rate of 13.5% and 12.9%, respectively, were not recognizing interest based on the estimated value of the underlying collateral. Additionally, as of September 30, 2018, one loan, with an unpaid principal balance of $7,948, which had previously been restructured in a troubled debt restricting, or TDR, did not accrue interest in accordance with its restructured terms.

Allowance For Loan Losses And Impaired Loans

During the three and nine months ended September 30, 2018, we recognized provision for loan losses of $7,489 and $30,269.  Our provision for loan losses during the three and nine months ended September 30, 2018 was primarily driven by two and seven loans, respectively, where the borrower and/or property experienced an unfavorable event or events during the period, which resulted in probable, incurred losses and credit related impairments recognized on the loans transferred to loans held for sale that are further discussed below.

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RAIT Financial Trust

Notes to Consolidated Financial Statements

As of September30, 2018

(Unaudited and dollars in thousands, except share and per share amounts)

We closely monitor our loans, which require evaluation for loan loss in two categories: satisfactory and watchlist. Loans classified as satisfactory are loans that are performing consistent with our expectations. Loans classified as watchlist are generally loans that have performed below our expectations, have credit weaknesses or in which the credit quality of the collateral has deteriorated. This is determined by evaluating quantitative factors including debt service coverage ratios, net operating income of the underlying collateral and qualitative factors such as current performance of the underlying collateral. We have classified our loans held for investment by credit risk category as of September 30, 2018 and December 31, 2017 as follows:

	As of September 30, 2018
Credit Status	Commercial Mortgage Loans		Mezzanine Loans		Preferred Equity		Total
Satisfactory	$	428,646	$	—	$	13,930	$	442,576
Watchlist (1)		146,250		21,122		19,349		186,721
Total	$	574,896	$	21,122	$	33,279	$	629,297

(1) Includes $154,581 of loans that are considered to be impaired and $32,140 of loans that are not considered to be impaired.  

	As of December 31, 2017
Credit Status	Commercial Mortgage Loans		Mezzanine Loans		Preferred Equity		Total
Satisfactory	$	1,083,741	$	19,109	$	21,879	$	1,124,729
Watchlist (1)		110,994		26,379		11,405		148,778
Total	$	1,194,735	$	45,488	$	33,284	$	1,273,507

(1) Includes $126,478 of loans that are considered to be impaired and $22,300 of loans that are not considered impaired.

The following tables provide a roll-forward of our allowance for loan losses for our commercial mortgage loans, mezzanine loans and preferred equity interests held for investment for the three months ended September 30, 2018 and 2017:

	For the Three Months Ended September 30, 2018
	Commercial Mortgage Loans			Mezzanine Loans		Preferred Equity		Total
Beginning balance	$	11,226		$	5,231	$	242	$	16,699
Provision (benefit) for loan losses		5,506			1,258		725		7,489
Charge-offs, net of recoveries		(571	)		—		—		(571	)
Ending balance	$	16,161		$	6,489	$	967	$	23,617

	For the Three Months Ended September 30, 2017
	Commercial Mortgage Loans		Mezzanine Loans			Preferred Equity		Total
Beginning balance	$	12,722	$	9,092		$	1,700	$	23,514
Provision (benefit) for loan losses		3,368		2,148			—		5,516
Charge-offs, net of recoveries		—		(3,890	)		—		(3,890	)
Ending balance	$	16,090	$	7,350		$	1,700	$	25,140

The following tables provide a roll-forward of our allowance for loan losses for our commercial mortgage loans, mezzanine loans and preferred equity interests held for investment for the nine months ended September 30, 2018 and 2017:

	For the Nine Months Ended September 30, 2018
	Commercial Mortgage Loans			Mezzanine Loans			Preferred Equity		Total
Beginning balance	$	9,019		$	5,622		$	242	$	14,883
Provision (benefit) for loan losses		25,502			4,042			725		30,269
Charge-offs, net of recoveries (1)		(18,360	)		(3,175	)		—		(21,535	)
Ending balance	$	16,161		$	6,489		$	967	$	23,617

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RAIT Financial Trust

Notes to Consolidated Financial Statements

As of September30, 2018

(Unaudited and dollars in thousands, except share and per share amounts)

(1) Includes $5,331 of charge-offs related to loans transferred to held for sale during the nine months ended September 30, 2018.

	For the Nine Months Ended September 30, 2017
	Commercial Mortgage Loans			Mezzanine Loans			Preferred Equity			Total
Beginning balance	$	10,640		$	—		$	1,714		$	12,354
Provision (benefit) for loan losses		16,690			11,238			(14	)		27,914
Charge-offs, net of recoveries		(11,240	)		(3,888	)		—		$	(15,128	)
Ending balance	$	16,090		$	7,350		$	1,700		$	25,140

Information on those loans considered to be impaired as of September 30, 2018 and December 31, 2017 was as follows:

	As of September 30, 2018
Impaired Loans	Commercial Mortgage Loans		Mezzanine Loans		Preferred Equity		Total
Impaired loans expecting full recovery	$	11,164	$	12,869	$	10,999	$	35,032
Impaired loans with reserves		102,946		8,253		8,350		119,549
Total Impaired Loans (1)		114,110		21,122		19,349		154,581
Allowance for loan losses	$	16,161	$	6,489	$	967	$	23,617

(1)  As of September 30, 2018, there was no unpaid principal relating to previously identified TDRs that are on accrual status.

	As of December 31, 2017
Impaired Loans	Commercial Mortgage Loans		Mezzanine Loans		Preferred Equity		Total
Impaired loans expecting full recovery	$	14,321	$	12,869	$	7,756	$	34,946
Impaired loans with reserves		74,372		13,510		3,650		91,532
Total Impaired Loans (1)		88,693		26,379		11,406		126,478
Allowance for loan losses	$	9,019	$	5,622	$	242	$	14,883

(1) As of December 31, 2017, there was no unpaid principal relating to previously identified TDRs that are on accrual status.

The average unpaid principal balance and recorded investment of total impaired loans was $141,524 and $157,649 during the three months ended September 30, 2018 and 2017, respectively and $133,201 and $153,707 for the nine months ended September 30, 2018 and 2017, respectively. We recorded interest income from impaired loans of $479 and $138 for the three months ended September 30, 2018 and 2017, respectively. We recorded interest income from impaired loans of $919 and $1,140 for the nine months ended September 30, 2018 and 2017, respectively.

We have evaluated modifications to our commercial real estate loans to determine if the modification constitutes a troubled debt restructuring, or TDR, under FASB ASC Topic 310, “Receivables”. During the three months ended September 30, 2018, there were no restructurings of our commercial real estate loans that constituted a TDR. During the nine months ended September 30, 2018, we determined that restructuring of one commercial real estate loan with an unpaid principal balance totaling $7,948 constituted a TDR as the interest payment rate was decreased to zero percent and the maturity date was extended. During the three and nine months ended September 30, 2017, there were no restructurings of our commercial real estate loans that constituted a TDR.  During the nine months ended September 30, 2018, and September 30, 2017, there were no TDRs that subsequently defaulted for restructurings that had been entered into within the previous 12 months.

Loans Held for Sale

In February 2018, we began to pursue a sale of certain loans. In March 2018, we sold these loans, which had unpaid principal balance of $90,260 and received proceeds of $43,384 after repayment of $45,850 of secured warehouse facility debt and $349 of interest. We recognized a loss of $930 on the sale of these loans.

During March 2018, we transferred nine additional loans to held for sale as we had the intention and ability to sell these loans. The transfer was made at the lower of cost or fair value for each respective loan. During the nine months ended September 30, 2018,

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RAIT Financial Trust

Notes to Consolidated Financial Statements

As of September30, 2018

(Unaudited and dollars in thousands, except share and per share amounts)

six of these loans were sold or repaid, resulting in a net loss of $3,280.  As of September 30, 2018, the three remaining loans held for sale were measured at the lower of cost or fair value, resulting in a loss of $1,524 for three months ended September 30, 2018. As of September 30, 2018, these loans had an unpaid principal balance of $7,015 and a carrying amount of $4,673.

In May 2018, we began to pursue a sale of one additional loan. In June 2018, we sold this loan, which had unpaid principal balance of $13,000 and received proceeds of $11,577. We recognized a provision for loan loss of $1,423 on the transfer of this loan to loans held for sale.

Loan-to-Real Estate Conversion

In October 2018, we completed the conversion of one commercial mortgage loan with a carrying value of $5,096 to real estate owned property.

NOTE 4: INVESTMENTS IN REAL ESTATE

The table below summarizes our investments in real estate:

	Book Value
	As of September 30, 2018			As of December 31, 2017
Multifamily real estate properties	$	—		$	17,163
Office real estate properties		51,460			130,125
Retail real estate properties		60,446			106,817
Parcels of land		20,567			20,567
Subtotal		132,473			274,672
Less: Accumulated depreciation and amortization		(9,328	)		(28,768	)
Investments in real estate, net (1)	$	123,145		$	245,904

(1) As of September 30, 2018 and December 31, 2017, there were no properties considered held-for-sale.

As of September 30, 2018, our investments in real estate were comprised of land of $41,407 and buildings and improvements of $91,066. As of December 31, 2017, our investments in real estate were comprised of land of $73,003 and buildings and improvements of $201,669.

As of September 30, 2018, our investments in real estate of $132,473 were financed through $40,906 of mortgage loans or other debt held by third parties and $133,525 of mortgage loans held directly by RAIT or through our RAIT I and RAIT II CDO securitizations. As of December 31, 2017, our investments in real estate of $274,672 were financed through $62,297 of mortgage loans or other debt held by third parties and $298,050 of mortgage loans held directly by RAIT or through our RAIT I and RAIT II CDO securitizations. Together, along with commercial real estate loans held by RAIT I and RAIT II, these mortgage loans serve as collateral for the CDO notes payable issued by the RAIT I and RAIT II CDO securitizations. All intercompany balances and interest charges are eliminated in consolidation.

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Notes to Consolidated Financial Statements

As of September30, 2018

(Unaudited and dollars in thousands, except share and per share amounts)

Property Sales:

During the nine months ended September 30, 2018, we sold two office properties, one multifamily, and one retail property. We also recognized $6 of losses on sales related to properties sold in the prior year, as we settled remaining amounts with third parties subsequent to the sale date. The below table summarizes our property sales for the current year and also presents each property’s contribution to net income (loss) allocable to common shares, excluding the impact of the gain (loss) on sale:

							Net income (loss) allocable to common shares
Property Name	Property Type	Date of Sale	Sale Price		Gain (loss) on sale		For the Three Months Ended September 30, 2018			For the Nine Months Ended September30, 2018
1501 Yamato Road (1)	Office	6/15/2018	$	42,050	$	906	$	-		$	(259	)
Erieview Tower & Parking (2)	Office	8/1/2018		28,901		-		(22	)		(10	)
Erieview Galleria	Retail	8/1/2018		1,099		-		1			(9	)
Lexington	Multifamily	8/31/2018		21,150		7,964		194			609
Total			$	93,200	$	8,870	$	173		$	331

(1) We also recognized a loss on extinguishment of debt related to the sale of this property, resulting from a defeasance premium of $1,943.

(2)  This property was previously impaired.

Impairment:

During the three and nine months ended September 30, 2018, we recognized impairment charges related to certain real estate assets of $13,267 and $44,083, respectively, as it was more likely than not that we would dispose of the assets before the end of their previously estimated useful lives and a portion of our recorded investment in these assets was determined to not be recoverable.

During the three months ended September 30, 2018, due to the current conditions affecting one of our retail properties in its local market, we recognized an impairment charge on one of our retail properties. The analysis performed, which included a third-party appraisal, resulted in an impairment charge of $13,482.  We also recognized impairment charges of $635 on three other assets based on the status of negotiations for the sale of the assets.  As discussed in Note 2: Summary of Significant Accounting Policies, we also corrected an error which resulted in the reversal of $850 of asset impairment during the three months ended September 30, 2018.

During the nine months ended September 30, 2018, we recognized impairment charges on six of our real estate assets of $44,083.  Due to the current conditions affecting one of our retail properties in its local market, we recognized an impairment of $13,482 based on a third-party appraisal.  Due to the current conditions affecting one of our retail properties in its local market as well as our current efforts to increase our liquidity, we accepted an offer to purchase this asset which resulted in an impairment charge of $17,249 based on an executed purchase and sale agreement. We recognized impairment charges of $9,754 on three assets based on the status of negotiations for the sale of the assets. An impairment charge of $3,598 on the sixth asset was driven by a default on the asset’s associated ground lease.

See Note 7: Fair Value of Financial Instruments for further information regarding our non-recurring fair value measurements.

Other Dispositions:

During the three months ended September 30, 2018, we recognized a non-cash gain on deconsolidation of properties of $907 relating to the voluntary surrender of a ground leasehold interest in one of our retail properties. The ground leasehold interest was held by one of our wholly owned subsidiaries, whose only assets were those relating to owning its ground leasehold interest in and operating the property. The gain on deconsolidation resulted from the derecognition of certain liabilities related to the ground lease, as the leasehold improvements had previously been reduced to $0 as a result of the ground lease default.

23

RAIT Financial Trust

Notes to Consolidated Financial Statements

As of September30, 2018

(Unaudited and dollars in thousands, except share and per share amounts)

During the nine months ended September 30, 2017, we incurred a non-cash loss on deconsolidation of properties of $20,660 relating to an industrial real estate portfolio containing ten properties with carrying value of $82,501 of investments in real estate and $81,941 of related cross-collateralized non-recourse debt as of December 31, 2016. During the nine months ended September 30, 2017, the senior lender foreclosed on the mortgage liens encumbering eight of these industrial properties and disposed of the properties through auction processes.  These eight properties, including other assets, net of related liabilities, had an aggregate carrying value of $67,726. Upon foreclosure, we derecognized these net assets and extinguished related debt of $27,067 based on the proceeds received by the senior lender at the auctions. The difference between the net carrying value and the debt extinguished resulted in the non-cash loss noted above as full release of the remaining cross-collateralized non-recourse debt had not yet been received. The remaining two of these industrial properties had a carrying value of $13,909 of investments in real estate and $34,874 of related cross-collateralized non-recourse debt as of September 30, 2017. During the remainder of 2017, the remaining properties within this portfolio were foreclosed upon and, as a result, there were no assets or liabilities related to this portfolio on our balance sheet as of December 31, 2017.

NOTE 5: INDEBTEDNESS

We maintain various forms of short-term and long-term financing arrangements. Generally, these financing agreements are collateralized by assets within securitizations.

The following table summarizes our total recourse and non-recourse indebtedness as of September 30, 2018:

Description	Unpaid Principal Balance		Unamortized Discount/Premium and Deferred Financing Costs			Carrying Amount		Weighted- Average Interest Rate			Contractual Maturity
Recourse indebtedness:
7.0% convertible senior notes (1)	$	871	$	(35	)	$	836		7.0	%	Apr. 2031 (1)
4.0% convertible senior notes (2)		68,222		(1,648	)		66,574		4.0	%	Oct. 2033 (2)
7.625% senior notes		56,324		(1,282	)		55,042		7.6	%	Apr. 2024
7.125% senior notes		65,356		(492	)		64,864		7.1	%	Aug. 2019
Junior subordinated notes, at fair value (3)		18,671		(10,348	)		8,323		6.3	%	Mar. 2035
Junior subordinated notes, at amortized cost		25,100		—			25,100		4.8	%	Apr. 2037
Total recourse indebtedness		234,544		(13,805	)		220,739		6.0	%
Non-recourse indebtedness:
CDO notes payable, at amortized cost (4)(5)		152,710		(264	)		152,446		2.9	%	Jun. 2045 to Nov. 2046
CMBS securitizations (6)(7)		404,707		(3,567	)		401,140		3.6	%	Jun. 2037 to Dec. 2037
Loans payable on real estate		40,906		(244	)		40,662		4.7	%	Oct. 2021 to Dec. 2021
Total non-recourse indebtedness		598,323		(4,075	)		594,248		3.5	%
Total indebtedness	$	832,867	$	(17,880	)	$	814,987		4.2	%

(1) In October 2018, we exercised our right to optionally redeem and cancel the remaining 7.0% convertible senior notes at par.

(2) Our 4.0% convertible senior notes are redeemable at par, at the option of the holder, in October 2018, October 2023, and October 2028. On October 1, 2018, we repurchased $67,943 in principal amount of the 4.0% convertible senior notes at par pursuant to the exercise by the holders of these notes of their redemption option, leaving $279 aggregate principal amount outstanding. On October 2, 2018, we notified the Trustee for the 4% convertible senior notes that we would exercise our right to optionally redeem and cancel the remaining $279 on November 16, 2018.

(3) Relates to liabilities which we elected to record at fair value under FASB ASC Topic 825.

(4) Excludes CDO notes payable purchased by us which are eliminated in consolidation.

(5) Collateralized by $299,250 principal amount of commercial mortgage loans, mezzanine loans, other loans and preferred equity interests, $162,116 of which is eliminated in consolidation.  These obligations were issued by separate legal entities and consequently the assets of the special purpose entities that collateralize these obligations are not available to our creditors.

(6) Excludes CMBS securitization notes purchased by us which are eliminated in consolidation.

24

RAIT Financial Trust

Notes to Consolidated Financial Statements

As of September30, 2018

(Unaudited and dollars in thousands, except share and per share amounts)

(7) Collateralized by $481,600 principal amount of commercial mortgage loans and participation interests. These obligations were issued by separate legal entities and consequently the assets of the special purpose entities that collateralize these obligations are not available to our creditors.

The following table summarizes our total recourse and non-recourse indebtedness as of December 31, 2017:

Description	Unpaid Principal Balance		Unamortized Discount/Premium and Deferred Financing Costs			Carrying Amount		Weighted- Average Interest Rate			Contractual Maturity
Recourse indebtedness:
7.0% convertible senior notes (1)	$	871	$	(38	)	$	833		7.0	%	Apr. 2031 (1)
4.0% convertible senior notes (2)		110,513		(3,713	)		106,800		4.0	%	Oct. 2033 (2)
7.625% senior notes		56,324		(1,457	)		54,867		7.6	%	Apr. 2024
7.125% senior notes		68,408		(934	)		67,474		7.1	%	Aug. 2019
Senior secured notes		11,500		(437	)		11,063		7.3	%	Apr. 2019
Junior subordinated notes, at fair value (3)		18,671		(10,550	)		8,121		5.3	%	Mar. 2035
Junior subordinated notes, at amortized cost		25,100		—			25,100		3.9	%	Apr. 2037
Secured warehouse facilities		22,313		(570	)		21,743		3.5	%	Jan.2018 to Jul. 2018
Total recourse indebtedness		313,700		(17,699	)		296,001		5.5	%
Non-recourse indebtedness:
CDO notes payable, at amortized cost (4)(5)		258,063		(3,339	)		254,724		2.2	%	Jun. 2045 to Nov. 2046
CMBS securitizations (6)(7)		744,763		(8,177	)		736,586		3.4	%	Jan. 2031 to Dec. 2037
Loans payable on real estate		62,297		(375	)		61,922		5.2	%	May 2021 to Dec. 2021
Total non-recourse indebtedness		1,065,123		(11,891	)		1,053,232		3.2	%
Other indebtedness (8)		40,830		125			40,955		—			—
Total indebtedness	$	1,419,653	$	(29,465	)	$	1,390,188		3.7	%

(1) Our 7.0% convertible senior notes are redeemable at par, at the option of the holder, in April 2021, and April 2026.

(2) Our 4.0% convertible senior notes are redeemable at par, at the option of the holder, in October 2018, October 2023, and October 2028.

(3) Relates to liabilities which we elected to record at fair value under FASB ASC Topic 825.

(4) Excludes CDO notes payable purchased by us which are eliminated in consolidation.  

(5) Collateralized by $507,306 principal amount of commercial mortgage loans, mezzanine loans, other loans and preferred equity interests, $274,629 of which is eliminated in consolidation.  These obligations were issued by separate legal entities and consequently the assets of the special purpose entities that collateralize these obligations are not available to our creditors.

(6) Excludes CMBS securitization notes purchased by us which are eliminated in consolidation.

(7) Collateralized by $944,894 principal amount of commercial mortgage loans and participation interests in commercial mortgage loans. These obligations were issued by separate legal entities and consequently the assets of the special purpose entities that collateralize these obligations are not available to our creditors.    

(8) Represents two 40% interests issued to an unaffiliated third party in two ventures to which we contributed the junior notes and equity of two floating rate securitizations. Together these ventures are referred to as the RAIT Venture VIEs.  The first of these ventures, the 2016 RAIT Venture VIE, was formed in 2016.  The second, the 2017 RAIT Venture VIE, was formed in 2017. We retained a 60% interest in these ventures, and, as a result of our controlling financial interest, we consolidated the ventures. We received approximately $41,689 of proceeds as a result of issuing these 40% interests, which have an unpaid principal balance of $40,830. These 40% interests have no stated maturity date and do not provide for mandatory redemption or any required return or interest payment. These ventures allocate the distributions on such junior notes and equity when made between the parties to the ventures.

25

RAIT Financial Trust

Notes to Consolidated Financial Statements

As of September30, 2018

(Unaudited and dollars in thousands, except share and per share amounts)

Recourse indebtedness refers to indebtedness that is recourse to our general assets, including the loans payable on real estate that are guaranteed by us. Non-recourse indebtedness consists of indebtedness of consolidated securitizations and loans payable on real estate which is recourse only to specific assets pledged as collateral to the lenders. The creditors of each consolidated securitization have no recourse to our general credit.

The current status or activity in our financing arrangements occurring as of or during the nine months ended September 30, 2018 is as follows:

Recourse Indebtedness

7.0% convertible senior notes. The 7.0% convertible senior notes are convertible at the option of the holder at a current conversion rate of 4.1217 common shares per $1 principal amount of 7.0% convertible senior notes (equivalent to a current conversion price of $242.6 per common share). As of September 30, 2018, $871 of the 7.0% convertible notes remain outstanding.  The 7.0% convertible senior notes are redeemable at par, at the option of the holder, in April 2021, and April 2026. During the nine months ended September 30, 2018, there was no activity other than recurring interest during the current period. These notes do not contain financial covenants.

In October 2018, we exercised our right to optionally redeem and cancel the remaining 7.0% convertible senior notes at a redemption price equal to the principal amount of $871 plus accrued and unpaid interest.

4.0% convertible senior notes. The 4.0% convertible senior notes are convertible at the option of the holder at a current conversion rate of 2.1716 common shares per $1 principal amount of 4.0% convertible senior notes (equivalent to a current conversion price of $460.5 per common share). The 4.0% convertible senior notes are redeemable at par, at the option of the holder, in October 2018, October 2023, and October 2028. These notes do not contain financial covenants.

During the three months ended March 31, 2018, we repurchased $6,000 in principal amount of the 4% convertible senior notes for $5,708. During the three months ended June 30, 2018, we repurchased $36,291 in principal amount of the 4% convertible senior notes for $35,319. As of September 30, 2018, $68,222 of the 4.0% convertible senior notes remain outstanding.

On October 1, 2018, we repurchased $67,943 in principal amount of the 4.0% convertible senior notes at par pursuant to the exercise by the holders of these notes of their redemption option, leaving $279 aggregate principal amount outstanding. On October 2, 2018, we notified the Trustee for the 4% convertible senior notes that we would exercise our right to optionally redeem and cancel the remaining $279 on November 16, 2018.

7.625% senior notes.  During the nine months ended September 30, 2018, there was no activity other than recurring interest. As of September 30, 2018, $56,324 of the 7.625% senior notes remain outstanding. These notes contain financial covenants that are applicable upon the incurrence of debt as defined in the notes’ related indenture including a maximum leverage ratio covenant and a minimum fixed charge ratio covenant. We have not incurred debt, as defined in this indenture, since the three months ended March 31, 2018. As of March 31, 2018, the leverage ratio, calculated in accordance with the indenture, was 74.6% as compared to a maximum leverage ratio not to exceed 80%, and for the preceding four quarters, the fixed charge coverage ratio, calculated in accordance with the indenture, was 1.34x as compared to a minimum fixed charge coverage ratio of no less than 1.20x.

7.125% senior notes.  During the three months ended September 30, 2018, we repurchased $3,051 in principal amount of the 7.125% convertible senior notes for $2,852. As of September 30, 2018, $65,356 of the 7.125% senior notes remain outstanding. These notes contain financial covenants that are applicable upon the incurrence of debt as defined in the notes’ related indenture including a maximum leverage ratio covenant and a minimum fixed charge ratio covenant. We have not incurred debt, as defined in this indenture, since the three months ended March 31, 2018.  As of March 31, 2018, the leverage ratio, calculated in accordance with the indenture, was 74.6% as compared to a maximum leverage ratio not to exceed 80%, and for the preceding four quarters, the fixed charge coverage ratio, calculated in accordance with the indenture, was 1.34x as compared to a minimum fixed charge coverage ratio of no less than 1.20x.

Senior secured notes. During the three months ended March 31, 2018, we repaid $2,000 of the senior secured notes. During the three and nine months ended September 30, 2018, we redeemed the remaining $9,500 of the senior secured notes at a redemption price equal to the principal amount plus accrued and unpaid interest. These notes did not contain financial covenants.

26

RAIT Financial Trust

Notes to Consolidated Financial Statements

As of September30, 2018

(Unaudited and dollars in thousands, except share and per share amounts)

Junior subordinated notes, at fair value. At issuance, we elected to record the $18,671 junior subordinated notes at fair value under FASB ASC Topic 825. As of September 30, 2018, the fair value, or carrying amount, of this indebtedness was $8,323. These notes do not contain financial covenants.

Junior subordinated notes, at amortized cost.  During the nine months ended September 30, 2018, there was no activity other than recurring interest. These notes do not contain financial covenants.

Secured warehouse facilities. As of September 30, 2018, we had $0 of outstanding secured warehouse borrowings and $0 of outstanding commercial mortgage borrowings under the amended and restated master repurchase agreement, or the Amended MRA.  The Amended MRA had a capacity of $150,000 with a limit of $100,000 for floating rate loans. This facility was not renewed after its maturity in July 2018 and it has terminated.

As of September 30, 2018, we had $0 of outstanding borrowings under the $75,000 commercial mortgage facility. This facility was not renewed after its June 2018 maturity and it has terminated.   

As of September 30, 2018, we had $0 of outstanding borrowings under the $150,000 commercial mortgage facility. This facility was not renewed after its June 2018 maturity and it has terminated.   

Non-Recourse Indebtedness

CDO notes payable, at amortized cost. CDO notes payable at amortized cost represent notes issued by consolidated CDO securitizations which were used to finance the acquisition of unsecured REIT notes, CMBS securities, commercial mortgage loans and mezzanine loans in our commercial real estate portfolio. Generally, CDO notes payable are comprised of various classes of notes payable, with each class bearing interest at variable or fixed rates. Both RAIT I and RAIT II are meeting all of their over collateralization, or OC, and interest coverage, or IC, trigger tests as of September 30, 2018.

CMBS securitizations

On June 27, 2018, RAIT IV, a subsidiary of RAIT, completed the sale of its FL5 Interests and FL6 Interests to Melody RE II, LLC. As a result of the sale, we determined that RAIT is no longer the primary beneficiary of the RAIT Venture VIEs, FL5 or FL6 (each as defined in Note 8: Variable Interest Entities). Therefore, we deconsolidated those entities as of June 27, 2018. See Note 8: Variable Interest Entities for more information regarding this transaction.

As of September 30, 2018, our subsidiary, RAIT 2017-FL7 Trust, or RAIT FL7, had $258,404 of total collateral at par value, none of which was defaulted. As of November 2018, $9,000 of this collateral is in default.  As of September 30, 2018, RAIT FL7 had classes of investment grade senior notes with an aggregate principal balance outstanding of approximately $225,847 to investors. We currently own the unrated classes of junior notes, including classes with an aggregate principal balance of $65,479, and the equity, or the retained interests, of RAIT FL7. RAIT FL7 does not have OC triggers or IC triggers.  

As of September 30, 2018, our subsidiary, RAIT 2017-FL8 Trust, or RAIT FL8, had $223,196 of total collateral at par value, none of which was defaulted. As of September 30, 2018, RAIT FL8 had classes of investment grade senior notes with an aggregate principal balance outstanding of approximately $178,860 to investors. We currently own the unrated classes of junior notes, including a class with an aggregate principal balance of $44,162, and the equity, or the retained interests, of RAIT FL8. RAIT FL8 does not have OC triggers or IC triggers.  

The junior notes that we have retained in our CMBS securitizations include the class of junior notes that is subject to the first dollar of loss.

Loans payable on real estate

As of September 30, 2018, and December 31, 2017, we had $40,906 and $62,297, respectively, of other indebtedness outstanding relating to loans payable on consolidated real estate. These loans are secured by specific consolidated real estate assets included in our consolidated balance sheets.

27

RAIT Financial Trust

Notes to Consolidated Financial Statements

As of September30, 2018

(Unaudited and dollars in thousands, except share and per share amounts)

Maturity of Indebtedness

Generally, the majority of our indebtedness is payable in full upon the maturity or termination date of the underlying indebtedness. The following table displays the aggregate contractual maturities of our indebtedness, outstanding as of September 30, 2018, on or before December 31 by year:

	Recourse indebtedness		Non-recourse indebtedness
2018	$	-	$	183
2019		65,356		749
2020		-		779
2021		-		39,195
2022		-		-
Thereafter (1)		169,188		557,417
Total	$	234,544	$	598,323

(1) Includes $871 of our 7.0% convertible senior notes which were fully redeemed at par in October 2018. Includes $68,222 of our 4.0% convertible senior notes which are redeemable, at par at the option of the holder in October 2018, October 2023, and October 2028. On October 1, 2018, we repurchased $67,943 in principal amount of the 4.0% convertible senior notes at par pursuant to the exercise by the holders of these notes of their redemption option, leaving $279 aggregate principal amount outstanding. On October 2, 2018, we notified the Trustee for the 4% convertible senior notes that we would exercise our right to optionally redeem and cancel the remaining $279 on November 16, 2018.

NOTE 6: DERIVATIVE FINANCIAL INSTRUMENTS

We may use derivative financial instruments to hedge all or a portion of the interest rate risk associated with our borrowings or fixed rate assets. The principal objective of such arrangements is to minimize the risks and/or costs associated with our operating and financial structure as well as to hedge specific anticipated transactions.  While these instruments may impact our periodic cash flows, they benefit us by minimizing the risks and/or costs previously described.  The counterparties to these contractual arrangements are major financial institutions with which we and our affiliates may also have other financial relationships. In the event of nonperformance by the counterparties, we are potentially exposed to credit loss. However, because of the high credit ratings of the counterparties, we do not anticipate that any of the counterparties will fail to meet their obligations.

Interest Rate Derivatives

We have historically entered into various interest rate swap contracts to hedge interest rate exposure on floating rate indebtedness.

We designate interest rate hedge agreements at inception and determine whether or not the interest rate hedge agreement is highly effective in offsetting interest rate fluctuations associated with the identified indebtedness. We use regression analysis to assess the effectiveness of our hedging relationship and use the hypothetical derivative method to measure any ineffectiveness at each reporting period. As of September 30, 2018, all of our cash flow hedge interest rate swaps had reached maturity. As of September 30, 2018, no new cash flow hedge interest rate swaps have been entered into.

The following table summarizes the aggregate notional amount and estimated net fair value of our derivative instruments as of September 30, 2018 and December 31, 2017:

	As of September 30, 2018						As of December 31, 2017
	Notional		Fair Value of Assets		Fair Value of Liabilities		Notional		Fair Value of Assets		Fair Value of Liabilities
Interest rate caps	$	—	$	—	$	—	$	—	$	—	$	—
Interest rate swaps		—		—		—		12,650		11		—
Net fair value	$	—	$	—	$	—	$	12,650	$	11	$	—

28

RAIT Financial Trust

Notes to Consolidated Financial Statements

As of September30, 2018

(Unaudited and dollars in thousands, except share and per share amounts)

Changes in fair value on our other interest rate derivatives are reported in change in fair value of financial instruments in the Consolidated Statements of Operations.  

NOTE 7: FAIR VALUE OF FINANCIAL INSTRUMENTS

Fair Value of Financial Instruments

FASB ASC Topic 825, “Financial Instruments” requires disclosure of the fair value of financial instruments for which it is practicable to estimate that value. The fair value of investments in mortgage loans, mezzanine loans, preferred equity interests, CDO notes payable, convertible senior notes, junior subordinated notes, and derivative assets and liabilities is based on significant observable and unobservable inputs. The fair value of cash and cash equivalents, restricted cash, CMBS facilities, and other indebtedness approximates their carrying amount or unpaid principal balance due to the nature of these instruments.

Fair Value of Investment in Mortgage Loans, Held for Investment

The fair value of mortgage loans held for investment is determined using an exit price notion. Prior to adopting the January 2016 amendment to FASB ASC Topic 825, we measured the fair value of mortgage loans held for investment under an entry price notion. The entry price notion previously applied used a discounted cash flows technique to calculate the present value of expected future cash flows for a financial instrument. The exit price notion uses the same approach, but also incorporates other factors, such as enhanced credit risk, illiquidity risk, and market factors. We determined the fair value on substantially all of our loans for disclosure purposes, on an individual loan basis. The discount rates reflect current market rates for loans with similar terms to borrowers having similar credit quality on an exit price basis.

The following table summarizes the carrying amount and the fair value of our financial instruments as of September 30, 2018:

Financial Instrument	Carrying Amount		Estimated Fair Value
Assets
Total investment in mortgage loans, held for investment, net	$	604,293	$	579,874
Investment in mortgage loans, held for sale		4,673		4,673
Cash and cash equivalents		98,352		98,352
Restricted cash		86,154		86,154
Liabilities
Recourse indebtedness:
7.0% convertible senior notes		836		579
4.0% convertible senior notes		66,574		68,817
7.625% senior notes		55,042		44,338
7.125% senior notes		64,864		63,619
Junior subordinated notes, at fair value		8,323		8,323
Junior subordinated notes, at amortized cost		25,100		9,210
Non-recourse indebtedness:
CDO notes payable, at amortized cost		152,446		123,453
CMBS securitizations		401,140		404,046
Loans payable on real estate		40,662		40,289

29

RAIT Financial Trust

Notes to Consolidated Financial Statements

As of September30, 2018

(Unaudited and dollars in thousands, except share and per share amounts)

The following table summarizes the carrying amount and the fair value of our financial instruments as of December 31, 2017:

Financial Instrument	Carrying Amount		Estimated Fair Value
Assets
Total investment in mortgage loans, held for investment, net	$	1,255,723	$	1,252,780
Cash and cash equivalents		53,380		53,380
Restricted cash		157,914		157,914
Derivative assets		11		11
Liabilities
Recourse indebtedness:
7.0% convertible senior notes		833		533
4.0% convertible senior notes		106,800		103,457
7.625% senior notes		54,867		43,009
7.125% senior notes		67,474		61,567
Senior secured notes		11,063		11,197
Junior subordinated notes, at fair value		8,121		8,121
Junior subordinated notes, at amortized cost		25,100		8,849
Secured warehouse facilities		21,743		22,313
Non-recourse indebtedness:
CDO notes payable, at amortized cost		254,724		196,212
CMBS securitizations		736,586		744,359
Loans payable on real estate		61,922		64,377
Other indebtedness		40,955		40,830

Fair Value Measurements

The following table summarizes information about our liabilities measured at fair value on a recurring basis as of September 30, 2018, and indicate the fair value hierarchy of the valuation techniques utilized to determine such fair value:

Liabilities:	Quoted Prices in Active Markets for Identical Assets (Level 1) (1)		Significant Other Observable Inputs (Level 2) (1)		Significant Unobservable Inputs (Level 3) (1)		Balance as of September 30, 2018
Junior subordinated notes, at fair value	$	—	$	—	$	8,323	$	8,323
Total liabilities	$	—	$	—	$	8,323	$	8,323

(1) During the nine months ended September 30, 2018, there were no transfers between Level 1 and Level 2, and there were no transfers into and/or out of Level 3.

The following tables summarize information about our assets and liabilities measured at fair value on a recurring basis as of December 31, 2017, and indicate the fair value hierarchy of the valuation techniques utilized to determine such fair value:

Assets:	Quoted Prices in Active Markets for Identical Assets (Level 1) (1)		Significant Other Observable Inputs (Level 2) (1)		Significant Unobservable Inputs (Level 3) (1)		Balance as of December 31, 2017
Derivative assets	$	—	$	11	$	—	$	11
Total assets	$	—	$	11	$	—	$	11

30

RAIT Financial Trust

Notes to Consolidated Financial Statements

As of September30, 2018

(Unaudited and dollars in thousands, except share and per share amounts)

Liabilities:	Quoted Prices in Active Markets for Identical Assets (Level 1) (1)		Significant Other Observable Inputs (Level 2) (1)		Significant Unobservable Inputs (Level 3) (1)		Balance as of December 31, 2017
Junior subordinated notes, at fair value	$	—	$	—	$	8,121	$	8,121
Total liabilities	$	—	$	—	$	8,121	$	8,121

(1) During the year ended December 31, 2017, there were no transfers between Level 1 and Level 2, and there were no transfers into and/or out of Level 3.

When estimating the fair value of our Level 3 financial instruments, management uses various observable and unobservable inputs. These inputs include yields, credit spreads, duration, effective dollar prices and overall market conditions on not only the exact financial instrument for which management is estimating the fair value, but also financial instruments that are similar or issued by the same issuer when such inputs are unavailable. Generally, an increase in the yields, credit spreads or estimated duration will decrease the fair value of our financial instruments. Due to the inherent uncertainty of determining the fair value of investments that do not have a readily available market value, the fair value, as determined by management, may fluctuate from period to period and any ultimate liquidation or sale of the investment may result in proceeds that may be significantly different than fair value. For the fair value of our junior subordinated notes, at fair value, we estimate the fair value of these financial instruments using significant unobservable inputs. For the junior subordinated notes, at fair value, a discounted cash flow model was used as the valuation technique and the significant unobservable inputs as of September 30, 2018 include a discount rate of 20% and as of December 31, 2017 include discount rates ranging from 18.01% to 18.21%. The gains attributable to changes in instrument-specific credit risk were determined by discounting the future cash flows of the notes at base market interest rates and subtracting this amount from the total fair value of the instrument.

The following table summarizes additional information about assets and liabilities that are measured at fair value on a recurring basis for which we have utilized level 3 inputs to determine fair value for the nine months ended September 30, 2018: 

Liabilities	Junior Subordinated Notes, at Fair Value		Total Level 3 Liabilities
Balance, as of December 31, 2017	$	8,121	$	8,121
Change in fair value of financial instruments		202		202
Balance, as of September 30, 2018	$	8,323	$	8,323

The following table summarizes additional information about assets and liabilities that are measured at fair value on a recurring basis for which we have utilized level 3 inputs to determine fair value for the three months ended September 30, 2018:

Liabilities	Junior Subordinated Notes, at Fair Value		Total Level 3 Liabilities
Balance, as of June 30, 2018	$	5,111	$	5,111
Change in fair value of financial instruments		3,212		3,212
Balance, as of September 30, 2018	$	8,323	$	8,323

Non-Recurring Fair Value Measurements

As of September 30, 2018, we measured two of our real estate assets at a fair value of $31,252 in our consolidated balance sheets as they were impaired.  The fair values were based on an executed purchase and sale agreement and the status of negotiations to sell the real estate asset and was classified within Level 2 of the fair value hierarchy.  The significant input was the purchase price derived by the potential buyer.

As of September 30, 2018, we measured one of our real estate assets at a fair value of $10,100 as it was impaired.  The fair value was based on an appraisal received on the property and was classified within Level 3 of the fair value hierarchy.  The significant inputs were the terminal capitalization rate of 9% and discount rate of 12.25%.

31

RAIT Financial Trust

Notes to Consolidated Financial Statements

As of September30, 2018

(Unaudited and dollars in thousands, except share and per share amounts)

Our other non-recurring fair value measurements relate primarily to our commercial real estate loans that are considered impaired. In evaluating our impaired loans, we estimate the fair value of the underlying collateral of the respective commercial real estate loan and compare that fair value to our total investment in the loan. When estimating the fair value of the underlying collateral of the commercial real estate loan, management uses discounted cash flow analyses and/or direct capitalization valuation analyses. The significant inputs to these valuations are capitalization rates and discount rates and are based on market information and comparable sales of similar properties.  As of September 30, 2018, we measured the underlying collateral of nine of our loans at a fair value of $101,450 in our consolidated balance sheet as they were impaired.

Fair Value of Financial Instruments

The following tables summarize the valuation technique and the level of the fair value hierarchy for financial instruments that are not fair valued in the accompanying consolidated balance sheets but for which fair value is required to be disclosed. The fair value of cash and cash equivalents, restricted cash, secured warehouse facilities, commercial mortgage facilities and other indebtedness approximates cost due to the nature of these instruments and are not included in the tables below.

	Carrying Amount as of September 30, 2018		Estimated Fair Value as of September 30, 2018		Valuation Technique	Level in Fair Value Hierarchy
Total investment in mortgage loans, held for investment, net	$	604,293	$	579,874	Discountedcash flows	Three
Investment in mortgage loans, held for sale		4,673		4,673	Discounted cash flows	Three
7.0% convertible senior notes		836		579	Trading price	Two
4.0% convertible senior notes		66,574		68,817	Trading price	Two
7.625% senior notes		55,042		44,338	Trading price	Two
7.125% senior notes		64,864		63,619	Trading price	Two
Junior subordinated notes, at amortized cost		25,100		9,210	Discounted cash flows	Three
CDO notes payable, at amortized cost		152,446		123,453	Discounted cash flows	Three
CMBS securitizations		401,140		404,046	Discounted cash flows	Three
Loans payable on real estate		40,662		40,289	Discounted cash flows	Three

	Carrying Amount as of December 31, 2017		Estimated Fair Value as of December 31, 2017		Valuation Technique	Level in Fair Value Hierarchy
Total investment in mortgage loans, held for investment, net	$	1,255,723	$	1,252,780	Discounted cash flows	Three
7.0% convertible senior notes		833		533	Trading price	Two
4.0% convertible senior notes		106,800		103,457	Trading price	Two
7.625% senior notes		54,867		43,009	Trading price	Two
7.125% senior notes		67,474		61,567	Trading price	Two
Senior secured notes		11,063		11,197	Discounted cash flows	Three
Junior subordinated notes, at amortized cost		25,100		8,849	Discounted cash flows	Three
CDO notes payable, at amortized cost		254,724		196,212	Discounted cash flows	Three
CMBS securitizations		736,586		744,359	Discounted cash flows	Three
Loans payable on real estate		61,922		64,377	Discounted cash flows	Three
Other indebtedness		40,955		40,830	Discounted cash flows	Three

32

RAIT Financial Trust

Notes to Consolidated Financial Statements

As of September30, 2018

(Unaudited and dollars in thousands, except share and per share amounts)

The following table summarizes realized and unrealized gains and losses on assets and liabilities for which we elected the fair value option of FASB ASC Topic 825, “Financial Instruments” and derivatives as reported in change in fair value of financial instruments in the accompanying consolidated statements of operations:

	For the Three Months Ended September 30,						For the Nine Months Ended September 30,
Description	2018			2017			2018			2017
Change in fair value of junior subordinated notes	$	(410	)	$	3,270		$	(682	)	$	2,568
Change in fair value of derivatives		—			(17	)		470			(275	)
Change in fair value of warrants and investors SARs		—			1,500			—			4,400
Change in fair value of financial instruments	$	(410	)	$	4,753		$	(212	)	$	6,693

The changes in the fair value for the junior subordinated notes for which the fair value option was elected for the three and nine months ended September 30, 2018 was primarily attributable to changes in base market interest rates. The changes in the fair value for the junior subordinated notes for which the fair value option was elected for the three and nine months ended September 30, 2017 was primarily attributable to changes in base market interest rates and instrument specific credit risks. The changes in the fair value of derivatives for the three and nine months ended September 30, 2018 and 2017 was primarily attributable to changes in interest rates. The changes in fair value of the warrants and investor SARs for the three and nine months ended September 30, 2017 was primarily attributable to changes in the reference stock price and volatility.

33

RAIT Financial Trust

Notes to Consolidated Financial Statements

As of September30, 2018

(Unaudited and dollars in thousands, except share and per share amounts)

NOTE 8: VARIABLE INTEREST ENTITIES

The determination of when to consolidate a VIE is based on the power to direct the activities of the VIE that most significantly impact the VIE’s economic performance together with either the obligation to absorb losses or the right to receive benefits that could be significant to the VIE. We evaluated our investments and determined that, as of September 30, 2018, our consolidated VIEs were: RAIT I, RAIT II, RAIT FL7, RAIT FL8, and the RAIT VIE Properties (Willow Grove and Cherry Hill).  As of December 31, 2017, our consolidated VIEs included the aforementioned VIEs and the two ventures described in Note 5: Indebtedness (RAIT Venture VIEs).

We consolidate the securitizations that we sponsor for which we have retained interests in and control the significant decisions regarding the collateral in these entities, such as the approval of loan workouts.  As of September 30, 2018, we consolidated the VIE properties as we own a majority of these entities and control the significant capital and operating decisions regarding the properties. 

The following tables present the assets and liabilities of our consolidated VIEs as of each respective date. Certain amounts included in the tables below are eliminated upon consolidation with our other subsidiaries that maintain investments in the debt or equity securities issued by these entities.

	As of September 30, 2018
	RAIT Securitizations		RAIT VIE Properties			Total
Assets
Investments in commercial mortgage loans, mezzanine loans and preferred equity interests	$	756,004	$	—		$	756,004
Investments in real estate		—		18,133			18,133
Cash and cash equivalents		—		197			197
Restricted cash		36,512		302			36,814
Accrued interest receivable		26,286		—			26,286
Other assets		72		3,971			4,043
Total assets	$	818,874	$	22,603		$	841,477
Liabilities and Equity
Indebtedness, net	$	784,873	$	19,530		$	804,403
Accrued interest payable		1,769		5,748			7,517
Accounts payable and accrued expenses		69		3,257			3,326
Deferred taxes, borrowers’ escrows and other liabilities		—		197			197
Total liabilities		786,711		28,732			815,443
Equity:
Shareholders’ equity:
RAIT investment and Retained earnings (deficit)		32,163		(6,129	)		26,034
Total shareholders’ equity		32,163		(6,129	)		26,034
Total liabilities and equity	$	818,874	$	22,603		$	841,477

34

RAIT Financial Trust

Notes to Consolidated Financial Statements

As of September30, 2018

(Unaudited and dollars in thousands, except share and per share amounts)

	As of December 31, 2017
	RAIT Securitizations		RAIT VIE Properties			RAIT Venture VIE			Total
Assets
Investments in commercial mortgage loans, mezzanine loans and preferred equity interests	$	1,082,528	$	—		$	349,924		$	1,432,452
Investments in real estate		—		18,634			—			18,634
Cash and cash equivalents		—		283			92			375
Restricted cash		1,068		237			10			1,315
Accrued interest receivable		41,639		—			2,462			44,101
Other assets		16,860		3,954			—			20,814
Total assets	$	1,142,095	$	23,108		$	352,488		$	1,517,691
Liabilities and Equity
Indebtedness, net	$	1,034,750	$	19,630		$	354,835		$	1,409,215
Accrued interest payable		1,869		5,356			1,111			8,336
Accounts payable and accrued expenses		23		3,274			—			3,297
Deferred taxes, borrowers’ escrows and other liabilities		—		184			643			827
Total liabilities		1,036,642		28,444			356,589			1,421,675
Equity:
Shareholders’ equity:
RAIT investment and Retained earnings (deficit)		105,453		(5,336	)		(4,140	)		95,978
Total shareholders’ equity		105,453		(5,336	)		(4,140	)		95,977
Noncontrolling Interests		—		—			39			39
Total liabilities and equity	$	1,142,095	$	23,108		$	352,488		$	1,517,691

The assets of the VIEs can only be used to settle obligations of the VIEs and are not available to our creditors. The amounts that eliminate in consolidation include $156,195 of total investments in mortgage loans and $244,116 of indebtedness as of September30, 2018 and $257,625 of total investments in mortgage loans and $370,351 of indebtedness as of December 31, 2017. We do not have any contractual obligation to provide the VIEs listed above with any financial support. We have not and do not intend to provide financial support to these VIEs that we were not previously contractually required to provide.

35

RAIT Financial Trust

Notes to Consolidated Financial Statements

As of September30, 2018

(Unaudited and dollars in thousands, except share and per share amounts)

Deconsolidation of RAIT Venture VIEs and RAIT FL5 & RAIT FL6

On June 27, 2018, RAIT IV completed the sale of its FL5 Interests, as defined below, and FL6 Interests, as defined below (collectively, the Interests), to Melody RE II, LLC, or the Purchaser, for an aggregate purchase price of $54,632.

Prior to the sale, RAIT IV was the holder of:

• 60% of the units, or the FL5 Interests, of Holdings 2016, which controls RAIT – Melody 2016 Holdings Trust. This trust owned, at the time of sale, various classes of non-investment grade bonds and the equity of FL5 with the remaining 40% of the units of Holdings 2016 being held by affiliates of the Purchaser; and

• 60% of the units, or the FL6 Interests, of Holdings 2017, which controls RAIT – Melody 2017 Holdings Trust. This trust owned, at the time of sale, various classes of non-investment grade bonds and the equity of FL6 with the remaining 40% of the units of Holdings 2017 being held by affiliates of the Purchaser.

Holdings 2016 and Holdings 2017, have been referred to as the RAIT Venture VIEs.  As a result of the sale, RAIT is no longer the primary beneficiary of the RAIT Venture VIEs, FL5 or FL6.  Therefore, RAIT deconsolidated those entities as of June 27, 2018.

The following table summarizes the effects of deconsolidating the RAIT Venture VIEs, RAIT FL5 and RAIT FL6 from our balance sheet as of June 27, 2018:

	As of June 27, 2018
Assets
Commercial mortgage loans, mezzanine loans, and preferred equity interests	$	266,502
Cash and cash equivalents		189
Restricted cash		22,569
Accrued interest receivable		1,191
Other assets		1,233
Total assets	$	291,684
Liabilities
Indebtedness, net	$	205,137
Accrued interest payable		502
Accounts payable and accrued expenses		45
Borrowers' escrows		22,549
Deferred taxes and other liabilities		531
Total liabilities		228,764
Equity:
Stockholders' equity:
Noncontrolling interests		111
Total liabilities and equity	$	228,875
RAIT IV's net investment in RAIT FL5 & RAIT FL6	$	62,809
Purchase price for RAIT IV's FL5 Interests & FL6 Interests		54,632
Loss on deconsolidation of RAIT Venture VIEs, RAIT FL5 & RAIT FL6	$	(8,177	)

36

RAIT Financial Trust

Notes to Consolidated Financial Statements

As of September30, 2018

(Unaudited and dollars in thousands, except share and per share amounts)

NOTE 9: SERIES D PREFERRED SHARES

On October 1, 2012, we entered into a Securities Purchase Agreement, or the purchase agreement, with ARS VI Investor I, LLC, or the Investor, an affiliate of Almanac Realty Investors, LLC, or Almanac. During the period from the effective date of the purchase agreement through March 2014, we sold to the Investor on a private placement basis in four separate sales for an aggregate purchase price of $100,000, or the total commitment, the following securities: (i) 4,000,000 of our Series D Cumulative Redeemable Preferred Shares of Beneficial Interest, par value $0.01 per share, or the Series D preferred shares, (ii) common share purchase warrants, or the warrants, exercisable for 9,931,000 of our common shares, or the common shares (which had subsequently adjusted to 11,035,875 shares), and (iii) common share appreciation rights, or the Investor SARs, with respect to up to 6,735,667 common shares (which had subsequently adjusted to 7,485,045 shares).  

All transactions involving the issuance, repurchase, redemption and/or exchange of the Series D preferred shares discussed herein also involved the corresponding preferred units of RAIT IV, and with respect to the redemption on June 27, 2018 in connection with the below referenced Redemption and Exchange Agreement, resulted from the redemption of the linked preferred units of RAIT IV.

In September 2015, we amended the purchase agreement with Almanac related to the Series D preferred shares.  This amendment changed two of the covenants therein.  As consideration for this amendment, we paid the Investor $450. We accounted for this amendment as a modification of the Series D preferred shares.

On December 7, 2016, we entered into a securities repurchase agreement with the Investor pursuant to which we repurchased and cancelled 464,000 Series D preferred shares at par for a purchase price of $11,600 which resulted in a decrease from 4,000,000 Series D preferred shares issued and outstanding to 3,536,000 Series D preferred shares issued and outstanding.

On June 22, 2017, we entered into a securities repurchase agreement with the Investor pursuant to which we repurchased and cancelled 402,280 Series D preferred shares at par for a purchase price of $10,057 which resulted in a decrease from 3,536,000 Series D preferred shares issued and outstanding to 3,133,720 Series D preferred shares issued and outstanding.

On March 19, 2018, we redeemed and cancelled 194,530 Series D preferred shares at par for a purchase price of $4,863 which resulted in a decrease from 3,133,720 Series D preferred shares issued and outstanding to 2,939,190 Series D preferred shares issued and outstanding.

As discussed in Note 1: The Company, on June 27, 2018, we entered into a Redemption and Exchange Agreement with the Investor whereby we redeemed and cancelled the remaining 2,939,190 preferred units of RAIT IV and RAIT’s corresponding Series D preferred shares for $56,765 of cash received by RAIT IV from the sale of the Interests, defined available cash held by RAIT IV and $16,715 of liquidation preference of RAIT’s publicly traded Series A preferred shares, Series B preferred shares and Series C preferred shares.  Accordingly, the Investor received 383,147 of RAIT’s Series A preferred shares, 167,828 of RAIT’s Series B preferred shares, and 117,605 of RAIT’s Series C preferred shares.  In addition, RAIT paid the Investor an exchange fee of $418.  The Redemption and Exchange Agreement also provided for the termination of the Securities Purchase Agreement and mutual releases between RAIT and the Investor of the previously reported dispute between the two parties.

37

RAIT Financial Trust

Notes to Consolidated Financial Statements

As of September30, 2018

(Unaudited and dollars in thousands, except share and per share amounts)

This transaction is accounted for as an extinguishment of Series D preferred shares of RAIT and issuance of Series A, Series B and Series C preferred shares, in each case, of RAIT.  Accordingly, the difference between the fair value of the consideration transferred to the Investor (i.e., cash and RAIT’s Series A, Series B and Series C preferred shares) and the carrying amount of the Series D preferred shares that were redeemed and exchanged represents a return from the Investor.  The following table summarizes the transaction:

Liquidation preference of Series D preferred shares of RAIT prior to June 27, 2018					$	73,480
Cash received for sale of RAIT IV's interests in Holdings 2016 and Holdings 2017	$	54,632
Defined available cash held by RAIT IV		2,133
Total par amount of Series D preferred shares of RAIT redeemed	$	56,765
Fair value of Series A preferred shares of RAIT issued in exchange		2,498	(1	)
Fair value of Series B preferred shares of RAIT issued in exchange		1,091	(2	)
Fair value of Series C preferred shares of RAIT issued in exchange		776	(3	)
Total fair value of Series A, Series B and Series C preferred shares exchanged	$	4,365
Cash exchange fee	$	418
Total consideration transferred in redemption and exchange					$	61,548
Net increase to equity as a result of redemption					$	11,932

(1) Represents the fair value of 383,147 shares of Series A preferred that were issued to the Investor.  The fair value is based upon $6.52 per share, which was the closing price of the Series A preferred shares on June 27, 2018.

(2) Represents the fair value of 167,828 shares of Series B preferred that were issued to the Investor.  The fair value is based upon $6.50 per share, which was the closing price of the Series B preferred shares on June 27, 2018.

(3) Represents the fair value of 117,605 shares of Series C preferred that were issued to the Investor.  The fair value is based upon $6.60 per share, which was the closing price of the Series C preferred shares on June 27, 2018.

On October 11, 2017, we received a put right notice from the Investor exercising the Investor’s right to require us to purchase for $20,500 all the previous warrants and Investor SARs.  On October 17, 2017, RAIT purchased all of the warrants and Investor SARs.  As a result, RAIT had no further obligations beyond October 17, 2017 relating to the warrants and Investor SARs and none remain outstanding, respectively, as of that date.

38

RAIT Financial Trust

Notes to Consolidated Financial Statements

As of September30, 2018

(Unaudited and dollars in thousands, except share and per share amounts)

NOTE 10: SHAREHOLDERS’ EQUITY

Preferred Shares

Dividends:

RAIT’s Board determined that it would suspend the dividend on RAIT’s outstanding preferred shares on June 12, 2018. The Board considers dividends on a quarterly basis.

The following table summarizes the dividends we declared and paid on the preferred shares for the nine months ended September30, 2018:

	March 31, 2018
Series A Preferred Shares
Date declared	3/13/2018
Record date	3/23/2018
Date paid	3/30/2018
Total dividend amount	$	2,589
Series B Preferred Shares
Date declared	3/13/2018
Record date	3/23/2018
Date paid	3/30/2018
Total dividend amount	$	1,225
Series C Preferred Shares
Date declared	3/13/2018
Record date	3/23/2018
Date paid	3/30/2018
Total dividend amount	$	910
Series D Preferred Shares
Date declared	3/13/2018
Record date	3/23/2018
Date paid	3/30/2018
Total dividend amount	$	1,665

On March 19, 2018, we redeemed and cancelled 194,530 Series D preferred shares. The Series D Preferred Shares had a $1,665 total dividend declared on March 13, 2018 with a record date of March 23, 2018 which included a $103 payment on March 19, 2018 and a $1,562 payment on March 30, 2018.

As discussed in Note 9: Series D Preferred Shares, on June 27, 2018, we redeemed and cancelled the remaining 2,939,190 preferred units of RAIT IV and RAIT’s corresponding Series D preferred shares for $56,765 of cash received by RAIT IV from the sale of the Interests, defined available cash held by RAIT IV and $16,715 of liquidation preference of RAIT’s publicly traded Series A preferred shares, Series B preferred shares, and Series C preferred shares (383,147 of Series A preferred shares, 167,828 of Series B preferred shares and 117,605 of Series C preferred shares).  Upon issuance, the Series A preferred shares had a fair value of $2,498, the Series B preferred shares had a fair value of $1,091 and the Series C preferred shares had a fair value of $776, based on the closing prices of the respective shares on June 27, 2018.

In the second quarter of 2018, the Board elected not to declare a dividend on RAIT’s Series A, B and C preferred shares. As of September 30, 2018, $10,125 of dividends on these shares were unpaid and in arrears. These dividends in arrears are included in (income) loss allocated to preferred shares on our consolidated statements of operations since they represent a claim on earnings superior to common shareholders, but have not been accrued as a liability since they have not been declared.

At Market Issuance Sales Agreement (ATM):

39

RAIT Financial Trust

Notes to Consolidated Financial Statements

As of September30, 2018

(Unaudited and dollars in thousands, except share and per share amounts)

On June 13, 2014, we entered into an At Market Issuance Sales Agreement, or the 2014 Preferred ATM agreement, with MLV & Co. LLC, or MLV, providing that, from time to time during the term of the 2014 Preferred ATM agreement, on the terms and subject to the conditions set forth therein, we may issue and sell through MLV up to $150,000 aggregate amount of preferred shares.

With respect to each series of preferred shares, the maximum amount issuable is as follows: 4,000,000 Series A Preferred Shares, 1,000,000 Series B Preferred Shares, and 1,000,000 Series C Preferred Shares. Unless the 2014 Preferred ATM agreement is earlier terminated by MLV or us, the 2014 Preferred ATM agreement automatically terminates upon the issuance and sale of all of the Series A Preferred Shares, Series B Preferred Shares, and Series C Preferred Shares.

As of September30, 2018, while 2,724,935 Series A Preferred Shares, 947,496 Series B Preferred Shares, and 999,675 Series C Preferred Shares had not been issued under the 2014 Preferred ATM agreement, we would need to register them for sale under the Securities Act of 1933, as amended, prior to issuing any such securities.

Common Shares

Dividends:

RAIT’s Board determined that it would suspend the dividend on RAIT’s outstanding common shares on November 1, 2017.  The Board considers dividends on a quarterly basis.

During the three and nine months ended September30, 2018, we paid $12 and $117, respectively, of dividends on restricted common share awards that vested in each respective period. These dividends were declared during the vesting period but remained forfeitable prior to vesting and became payable upon vesting in accordance with the terms of these awards.

Dividend Reinvestment and Share Purchase Plan (DRSPP):

We have a dividend reinvestment and share purchase plan, or DRSPP, under which we registered and reserved for issuance, in the aggregate, 210,000 common shares, which has been adjusted for the Reverse Stock Split. During the nine months ended September30, 2018, we issued a total of zero common shares. As of September30, 2018, 154,783 common shares, in the aggregate, remain available for issuance under the DRSPP.

Capital on Demand™ Sales Agreement (COD):

On November 21, 2012, we entered into a Capital on Demand™ Sales Agreement, or the COD sales agreement, with JonesTrading Institutional Services LLC, or JonesTrading, pursuant to which we may issue and sell up to 200,000 of our common shares, which has been adjusted for the reverse stock split, from time to time through JonesTrading acting as agent and/or principal, subject to the terms and conditions of the COD sales agreement. Unless the COD sales agreement is earlier terminated by JonesTrading or us, the COD sales agreement automatically terminates upon the issuance and sale of all of the common shares subject to the COD sales agreement. During the nine months ended September30, 2018, we did not issue any common shares pursuant to this agreement. As of September30, 2018, while 158,378 common shares, in the aggregate, which has been adjusted for the Reverse Stock Split, had not been issued under the COD sales agreement, we would need to register them for sale under the Securities Act of 1933, as amended, prior to issuing any such securities.

Shareholders’ Equity Attributable to Common Shares:

As of September30, 2018, total shareholders’ equity attributable to common shares was a deficit of $165,447.

Non-Controlling Interests

RAIT Venture VIEs:

During the nine months ended September30, 2018, the 2017 RAIT Venture VIE, which elected to be taxed as a REIT and that was formed in 2017 to hold the junior subordinated notes of FL-6, sold 125 preferred shares of the 2017 RAIT Venture VIE to unaffiliated purchasers.  The price was $1,000 per share and the 2017 RAIT Venture VIE received $76 of net proceeds. During the

40

RAIT Financial Trust

Notes to Consolidated Financial Statements

As of September30, 2018

(Unaudited and dollars in thousands, except share and per share amounts)

nine months ended September30, 2018, we distributed $15 to the non-controlling interest holders of the RAIT Venture VIEs. Refer to Note 2: Summary of Significant Accounting Policies, (p) Income Taxes, and Note 5: Indebtedness for further discussion about these entities.

On June 27, 2018, RAIT IV, a subsidiary of RAIT, completed the sale of its FL5 Interests and FL6 Interests to Melody RE II, LLC. As a result of the sale, we deconsolidated the RAIT Venture VIEs which resulted in the derecognition of $111 of noncontrolling interests related to the RAIT Venture VIEs. See Note 8: Variable Interest Entities for more information regarding this transaction.

Acquisition of noncontrolling interests related to PlazAmericas Mall:

On March 16, 2018, we acquired the noncontrolling interests related to PlazAmericas Mall, a retail real estate property, for $343, including transaction costs.  These noncontrolling interests had a carrying amount of $3,582.  As we previously held a controlling financial interest in PlazAmericas Mall, we accounted for the acquisition of the noncontrolling interests as an equity transaction.

NOTE 11: EARNINGS (LOSS) PER SHARE

The following table presents a reconciliation of basic and diluted earnings (loss) per share for the three and nine months ended September30, 2018 and 2017:

	For the Three Months Ended September 30,						For the Nine Months Ended September 30,
	2018			2017			2018			2017
Income (loss)	$	(21,038	)	$	(15,843	)	$	(105,766	)	$	(154,266	)
(Income) loss allocated to preferred shares		(5,063	)		(8,387	)		(4,591	)		(25,730	)
(Income) loss allocated to noncontrolling interests		—			—			—			(76	)
Net income (loss) allocable to common shares		(26,101	)		(24,230	)		(110,357	)		(180,072	)
Weighted-average shares outstanding—Basic (1)		1,840,168			1,831,193			1,839,172			1,828,778
Dilutive securities		—			—			—			—
Weighted-average shares outstanding—Diluted (1)		1,840,168			1,831,193			1,839,172			1,828,778
Earnings (loss) per share—Basic:
Earnings (loss) per share—Basic	$	(14.18	)	$	(13.23	)	$	(60.00	)	$	(98.47	)
Earnings (loss) per share—Diluted:
Earnings (loss) per share—Diluted	$	(14.18	)	$	(13.23	)	$	(60.00	)	$	(98.47	)

(1) All share and per-share amounts have been retroactively adjusted to reflect the Reverse Stock Split for all periods presented herein.

For the three and nine months ended September30, 2018, securities convertible into 162,170 and 164,786 common shares, respectively, were excluded from the earnings (loss) per share computations because their effect would have been anti-dilutive. For the three and nine months ended September30, 2017, securities convertible into 523,243 and 520,507 common shares, respectively, were excluded from the earnings (loss) per share computations because their effect would have been anti-dilutive.

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RAIT Financial Trust

Notes to Consolidated Financial Statements

As of September30, 2018

(Unaudited and dollars in thousands, except share and per share amounts)

NOTE 12: RELATED PARTY TRANSACTIONS

In the ordinary course of our business operations, we have ongoing relationships and have engaged in transactions with the related entities described below. All of these relationships and transactions were approved or ratified by our audit committee as being on terms comparable to those available from an unaffiliated third party or otherwise not creating a conflict of interest.

Almanac Realty

On June 27, 2018, the purchase agreement that previously provided for Andrew M. Silberstein to serve as a trustee on our board was terminated as part of the Redemption and Exchange Agreement that was entered into with the Investor on June 27, 2018.  As part of the Redemption and Exchange Agreement, Mr. Silberstein resigned as a trustee.  While Mr. Silberstein was a trustee, his trustee fees were paid to the Investor.  Mr. Silberstein is an equity owner of Almanac and an officer of the Investor and holds indirect equity interests in the Investor. The transactions completed pursuant to the purchase agreement are described above in Note 9: Series D Preferred Shares.  Subsequent to June 27, 2018, Almanac is not considered a related party.

Ballard Spahr LLP

On June 27, 2017, Justin P. Klein was appointed as a trustee on our board.  Mr. Klein is a partner at Ballard Spahr LLP. RAIT has paid Ballard Spahr LLP $3 and $88 during the three and nine months ended September30, 2018. The approximate dollar value of Mr. Klein’s interest in these fees was less than $1 for the nine months ended September30, 2018, based on Mr. Klein’s Ballard partnership interest.

Charles Frischer and the Libby Frischer Family Partnership

On March 30, 2018, the Libby Frischer Family Partnership, or LFFP, Charles F. Frischer, or Mr. Frischer, and RAIT signed a letter which provided that RAIT would exempt LFFP from RAIT’s common share ownership limit up to an amount equal to 12.5%. Mr. Frischer is the general partner of LFFP.

On April 6, 2018, RAIT, LFFP and Mr. Frischer entered into a cooperation agreement which sets forth certain transfer restrictions and standstill provisions, among other things, for a period of time. Subsequent to entering into the cooperation agreement, on April 6, 2018, LFFP, and Mr. Frischer and RAIT signed a letter agreement which provided that RAIT would exempt LFFP from RAIT’s common share and preferred share ownership limits up to an amount equal to 15.0% with respect to each class of shares.  

On May 11, 2018, RAIT, LFFP and Mr. Frischer entered into a letter agreement which provided that RAIT would exempt LFFP from RAIT’s common share and preferred share ownership limits up to an amount equal to 20.0% with respect to each class of shares.

Highland Capital Management, L.P.

On May 26, 2017, RAIT entered into a previously disclosed cooperation agreement with Highland Capital Management, L.P. and its affiliates (Highland), which remains in effect.

IRT

During 2017, RAIT engaged in transactions with a former related party, Independence Realty Trust, or IRT. RAIT ended its last arrangement with IRT as of December 20, 2017 and does not consider IRT to be a related party after that date. The following are the transactions with IRT for the nine months ended September30, 2017:

Pursuant to a shared services agreement, IRT reimbursed RAIT $727 for general and administrative services for the nine months ended September30, 2017.  In addition, during the nine months ended September30, 2017, IRT reimbursed RAIT for $155 of general and administrative items that were paid on IRT’s behalf.

Pursuant to property management agreements with IRT with respect to RAIT’s multifamily properties, RAIT paid IRT $239 of property management fees for the nine months ended September30, 2017.  This is reflected within real estate operating expense in our consolidated statements of operations.

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RAIT Financial Trust

Notes to Consolidated Financial Statements

As of September30, 2018

(Unaudited and dollars in thousands, except share and per share amounts)

Other

On December 20, 2016, Scott F. Schaeffer resigned from his position as Chief Executive Officer of RAIT and became the full-time Chief Executive Officer of IRT.  On the same date, Scott F. Schaeffer entered into a one year consulting agreement with RAIT for which he received compensation of $375.  For the nine months ended September30, 2017, $282 was earned and paid related to this consulting agreement, which is reflected in general and administrative expenses in our consolidated statements of operations. In accordance with the Memorandum of Understanding dated September 26, 2016, which memorialized the terms of Scott F. Schaeffer’s resignation, RAIT granted Scott F. Schaeffer 150,000 unvested shares of common stock on December 23, 2016, and made a $500 cash payment in January 2017.  The shares vested 50% on the six month anniversary and 50% on the one year anniversary of the grant date.

In accordance with the Memorandum of Understanding dated September 26, 2016, which memorialized the terms of James J. Sebra’s resignation, he was owed a cash bonus, payable in 2017, equal to 25% of his cash bonus for the year ended December 31, 2016.  As of September30, 2017, $110 had been accrued as a payable for this cash bonus, which was subsequently paid.

NOTE 13: SUPPLEMENTAL DISCLOSURE TO STATEMENT OF CASH FLOWS

The following are supplemental disclosures to the statements of cash flows for the nine months ended September30, 2018 and 2017: 

	For the Nine Months Ended September 30,
	2018			2017
Cash paid for interest	$	37,487		$	45,197
Cash paid (refunds received) for taxes		(1	)		(70	)
Non-cash increase in investments in real estate, intangible assets, and other liabilities from conversion of loans		—			1,590
Non-cash increase (decrease) in investments in real estate, restricted cash, other assets, intangible assets, accounts payable and accrued expenses, and other liabilities from deconsolidation of properties		907			(84,285	)
Non-cash increase (decrease) in indebtedness from debt extinguishments		(1,464	)		(4,640	)
Non-cash increase (decrease) to noncontrolling interests from distribution of limited partnership units on South Terrace		—			(1,618	)
Non-cash increase (decrease) in indebtedness from deconsolidation of properties		—			(64,790	)

For a discussion of the non-cash changes in indebtedness and investments in real estate, restricted cash, other assets, intangible assets, accounts payable and accrued expenses, and other liabilities that occurred during the nine months ended September30, 2018, see Note 4: Investments in Real Estate and Note 5: Indebtedness.

During the nine months ended September30, 2018, we transferred nine loans to held for sale as we had the intention and ability to sell these loans. The transfer was made at the lower of cost or fair value for each respective loan. During the nine months ended September30, 2018, we sold six loans, which had an unpaid principal balance and carrying amount of $31,377. See Note 3: Investment in Commercial Mortgage Loans, Mezzanine Loans, and Preferred Equity Interests for further discussion.

During the nine months ended September 30, 2018, we acquired the noncontrolling interests related to PlazAmericas Mall for $343, including transaction costs. See Note 10: Shareholders’ Equity for further discussion.

During the nine months ended September 30, 2018, we redeemed and cancelled the remaining 2,939,190 preferred units of RAIT IV and the corresponding Series D preferred shares for $56,765 of cash from RAIT IV’s sale of the Interests, $2,133 of other cash held by RAIT IV and $16,715 of liquidation preference of RAIT’s publicly traded Series A preferred shares, Series B preferred shares and Series C preferred shares. See Note 9: Series D Preferred Shares for further discussion.

The following table summarizes our cash and cash equivalents and restricted cash balances as of September 30, 2018 and September 30, 2017:

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RAIT Financial Trust

Notes to Consolidated Financial Statements

As of September30, 2018

(Unaudited and dollars in thousands, except share and per share amounts)

	As of September 30, 2018		As of September 30, 2017
Cash and cash equivalents	$	98,352	$	46,019
Restricted cash		86,154		142,489
Total cash and cash equivalents and restricted cash	$	184,506	$	188,508

NOTE 14: COMMITMENTS AND CONTINGENCIES

General

We are involved from time to time in litigation on various matters, including disputes with tenants of owned properties, disputes arising out of agreements to purchase or sell properties, disputes arising out of our loan portfolio, negligence, and similar tort claims related to owned properties or employment related disputes. Given the nature of our business activities, these lawsuits are considered routine to the conduct of our business. The result of any particular lawsuit cannot be predicted, because of the very nature of litigation, the litigation process and its adversarial nature, and the jury system. We do not expect that the liabilities, if any, that may ultimately result from such routine legal actions will have a material adverse effect on our consolidated financial position, results of operations or cash flows, except as described below.

Employment Related Commitments and Contingencies

On February 21, 2018, Scott L.N. Davidson, our former Chief Executive Officer and President, pursuant to his previously disclosed employment agreement with us provided notice to RAIT of his intent to resign from his employment with RAIT for “Good Reason” (as defined in his employment agreement). While RAIT and Mr. Davidson entered into a separation agreement, under which Mr. Davidson’s employment with RAIT terminated effective February 28, 2018, each reserved their respective rights as to whether “Good Reason” exists.  On May 16, 2018, Mr. Davidson filed for arbitration against RAIT and, on June 14, 2018, against the trustees for RAIT's alleged non-payment of post-resignation compensation which he claims he is entitled to under his employment contract in the amount of $4,547 and alleged that the non-payment also constituted a breach of the Pennsylvania Wage Payment and Collection Law which he claims entitles him to interest, attorney’s fees, costs and liquidated damages. We have not accrued any liability related to this matter as we have concluded it is not probable that a loss has been incurred.We may incur additional expenses and costs in connection with Mr. Davidson’s separation from RAIT.

During the nine months ended September30, 2017, we reached an agreement in principle to settle a matter with a former employee for $175.  This amount had been accrued as a liability as of June 30, 2017 and was subsequently paid during the third quarter of 2017.

RAIT Preferred Funding II, Ltd. v. CWCapital Asset Management LLC, et al.–Index No. 651729/2016 (Sup. Ct. N.Y.)

On September 20, 2017, RAIT Preferred Funding II, Ltd., or RAIT II, filed an amended complaint against CWCapital Asset Management, LLC, or CWCapital, Wells Fargo Bank N.A., or Wells Fargo, and U.S. Bank N.A., or U.S. Bank. This action concerns a loan, or the mortgage loan, to a non-party borrower, or the borrower, made in 2007.  RAIT II purchased $18,500 of the mortgage loan for which it holds a promissory note, or note B.  U.S. Bank is the trustee for a securitization trust that purchased the remaining $190,000 of the mortgage loan and for which it held a promissory note, or note A.  CWCapital is the special servicer and Wells Fargo is the master servicer for the mortgage loan (including note A and note B).  The parties’ rights and obligations are governed by, among other things, a pooling and servicing agreement and a co-lender agreement.  The mortgage loan was repaid in May of 2017, and the defendants have alleged that RAIT II was not entitled to receive any payoff of principal under note B pursuant to the subordination and other provisions of the co-lender agreement.  RAIT charged off its $18,500 note B during the year ended December 31, 2017.  In the amended complaint, RAIT II alleges, among other things, that the defendants breached certain of their obligations under the operative documents and RAIT II should have received, among other things, all of its $18,500 principal under note B.  The court denied defendants’ motion to dismiss RAIT II’s amended complaint, and the parties are now in the midst of the discovery phase of the litigation.

Loan Funding Commitments

Certain of the existing mortgage loans that we previously originated contain commitments to fund certain amounts that were not funded upon the origination of the mortgage loan. Senior participation interests in these loans are held by certain of our FL

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RAIT Financial Trust

Notes to Consolidated Financial Statements

As of September30, 2018

(Unaudited and dollars in thousands, except share and per share amounts)

securitizations and these FL securitizations are required to purchase additional participation interests in these loans that include the funded portions of these funding commitments from us and at our direction as the commitments are funded by us and as funds become available from loan payoffs in the FL securitization. As of September 30, 2018, our total outstanding funding commitment was $9,990.

NOTE 15: SUBSEQUENT EVENTS

We have evaluated subsequent events or transactions that have occurred after the consolidated balance sheet date of September 30, 2018, but prior to the filing of the consolidated financial statements on this Quarterly Report on Form 10-Q. We have determined that, except as disclosed within this Note and other Notes, there are no subsequent events that require disclosure in this Quarterly Report on Form 10-Q.

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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,” “seek,” “continue” or similar words.

RAIT’s forward-looking statements include, but are not limited to, statements regarding RAIT’s plans and initiatives to:

• address the “going concern” considerations described in our financial statement footnotes and generate sufficient liquidity to satisfy our obligations as they become due;

• divest RAIT of the majority of RAIT’s remaining real estate assets releasing cash from those sales and/or distributions on our retained interests in our RAIT I and RAIT II securitizations;

• opportunistically divest and maximize the value of RAIT’s legacy REO portfolio and, ultimately, minimize REO holdings;

• significantly reduce RAIT’s total expense base;

• sell non-core commercial real estate, or CRE, and lower asset management costs;

• opportunistically divest and maximize the value of certain of RAIT’s loans; and

• reverse steps taken by the NYSE staff to suspend trading in RAIT’s listed securities and to seek to delist RAIT’s listed securities.

Risks, uncertainties and contingencies that may affect the results expressed or implied by RAIT’s forward-looking statements include, but are not limited to:

• whether management’s plans and initiatives will address the “going concern” considerations described in our financial statement footnotes and generate sufficient liquidity to satisfy our obligations as they become due;

• whether RAIT management will be able to successfully divest RAIT of the majority of RAIT’s remaining real estate assets releasing cash from those sales and/or distributions on our retained interests in our RAIT I and RAIT II securitizations;

• if any of our indebtedness is accelerated because of a breach of covenant or payment default, whether we would be able to satisfy such indebtedness and any other debt that was accelerated due to a cross default or otherwise as a consequence;

• whether the suspension of our lending business will have adverse consequences on our ability to negotiate with creditors and investors and adversely affect our access to capital or the ability to maximize the value of our assets held for disposition;

• whether RAIT will be able to continue to opportunistically divest and maximize the value of RAIT’s legacy REO portfolio, and the majority of RAIT’s non-lending assets;

• whether RAIT will be able to opportunistically divest and maximize the value of certain of RAIT’s loans and/or RAIT FL7 and/or RAIT FL8;

• whether the divestiture of RAIT’s CRE portfolio will lead to lower asset management costs and lower expenses;

• whether RAIT will be able to reduce compensation and G&A expenses and indebtedness;

• whether RAIT will resume paying dividends and the amount of such dividends;

• overall conditions in commercial real estate and the economy generally;

• whether market conditions will enable RAIT to continue to implement our capital recycling and debt reduction plan involving selling assets and repurchasing or paying down our debt;

• changes in the expected yield of our investments;

• changes in financial markets and interest rates, or to the business or financial condition of RAIT;

• whether the amount of loan repayments will be at the level assumed;

• whether our management changes will be successfully implemented;

• whether RAIT will be able to sell real estate properties and certain loans;

• the availability of financing and capital, including through the capital and securitization markets;

• risks, disruption, costs and uncertainty caused by or related to the actions of activist shareholders, including that if individuals are elected to our board with a specific agenda, it may adversely affect our ability to effectively implement our business strategy and create value for our shareholders, and perceived uncertainties as to our future direction as a result of potential changes to the composition of our board may lead to the perception of a change in the direction of our business, instability or a lack of continuity which may be exploited by our competitors, cause concern to our current or potential customers, and may result in the loss of potential business opportunities and make it more difficult to attract and retain qualified personnel and business partners;

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• the level of asset impairments, loan sale losses and provision for loan losses RAIT recognizes; and

• other factors described in RAIT’s Annual Report on Form 10-K, Quarterly Reports on Form 10-Q and other filings with the SEC.

These factors, among others, could cause actual results to differ materially from the anticipated results or other expectations expressed in the forward-looking statements. We caution you not to place undue reliance on these forward-looking statements, which speak only as of the date of this report. All subsequent written and oral forward-looking statements attributable to us or any person acting on our behalf are expressly qualified in their entirety by the cautionary statements contained or referred to in this section. Except to the extent required by applicable law or regulation, we undertake no obligation to update these forward-looking statements to reflect events or circumstances after the date of this filing or to reflect the occurrence of unanticipated events.

Overview

We are an internally-managed Maryland real estate investment trust, or REIT, focused on managing a portfolio of commercial real estate (CRE) loans and properties.

During the nine months ended September 30, 2018, we continued to undertake steps intended to increase RAIT’s liquidity and better position RAIT to meet its financial obligations as they come due.  We refer to these steps as the 2018 strategic steps and they include, but are not limited to:

• The suspension of our lending business along with the implementation of other steps to reduce costs within our other operating businesses; and

• The continuation of the process of selling our owned real estate, or REO, portfolio and selling certain of our loans, while continuing to service and manage our existing CRE loan portfolio.

Key developments related to the 2018 strategic steps included the following:

• Redemption of the Series D Preferred Shares

o On June 27, 2018, we redeemed and cancelled the remaining 2,939,190 Series D preferred shares (and linked preferred units of RAIT IV) for $56.8 million of cash received by RAIT IV from the sale of RAIT IV’s FL5 Interests and FL6 Interests, defined available cash held by RAIT IV and $16.7 million of liquidation preference of RAIT’s publicly traded Series A preferred shares, Series B preferred shares and Series C preferred shares. Refer to section titled “Sale of FL5 Interests & FL6 Interests and Series D Preferred Shares Redemption” below for further information.

• Debt Reductions

o RAIT’s indebtedness, based on principal amount, declined by $125.3 million, or 13.1%, during the three months ended September 30, 2018, and declined by $586.8 million, or 41.3%, during the nine months ended September 30, 2018.

o Total recourse debt, excluding RAIT’s secured warehouse facilities, declined by $12.6 million, or 5.1% during the three months ended September 30, 2018, and declined by $56.8 million, or 19.5%, during the nine months ended September 30, 2018.

o In October 2018, RAIT redeemed $68.8 million of recourse debt.

• Asset Monetization Plan and Liquidity Position

o For the nine months ended September 30, 2018, RAIT has monetized certain loans and real estate assets in the aggregate amount of $267.2 million.  These monetizations include sales of loans, sales of real estate assets and repayments of loans.  After selling costs and repayment of obligations secured by those assets of $131.7 million, RAIT received net proceeds of $135.5 million.

o RAIT’s cash and cash equivalents balance as of September 30, 2018 was $98.4 million and $28.8 million as of November 1, 2018.

• Compensation & General and Administrative, or G&A, Expenses

o RAIT implemented a reduction in force of certain of its employees determined to be non-essential to RAIT’s implementation of the 2018 strategic steps, which has contributed to the reduced run rate of base compensation expense from approximately $2.5 million per quarter at December 31, 2017 to approximately $1.4 million per quarter subsequent to the reduction in force.

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o RAIT implemented a retention plan, which RAIT expects to incentivize its executive and non-executive employees to remain employed at RAIT and to work to implement the 2018 strategic steps.

o In connection with the implementation of the 2018 strategic steps, the earlier strategic alternatives process, redemption of the Series D preferred shares discussed above and other matters including our NYSE continued listing status, RAIT incurred significant legal and consulting expenses which led to an increased level of G&A expenses during the nine months ended September 30, 2018.  These items contributed to $13.3 million of G&A expenses during the nine months ended September 30, 2018.  

During the three months ended September 30, 2018, we generated GAAP net income (loss) allocable to common shares of $(26.1) million, or $(14.18) per common share-diluted, as compared to $(24.2) million, or $(13.23) per common share-diluted, during the three months ended September 30, 2017.  

Sale of FL5 & FL6 Interests and Series D Preferred Shares Redemption

On June 27, 2018, RAIT IV, a subsidiary of RAIT, completed the sale of its FL5 Interests, as defined below, and FL6 Interests, as defined below (collectively, the Interests), to Melody RE II, LLC, or the Purchaser, for an aggregate purchase price of $54.6 million.

Prior to the sale, RAIT, through its subsidiary RAIT IV, was the holder of:

• 60% of the units, or the FL5 Interests, of RAIT – Melody 2016 Holdings, LLC, or Holdings 2016, which controls RAIT – Melody 2016 Holdings Trust. This trust owned, at the time of sale, various classes of non-investment grade bonds and the equity of FL5 with the remaining 40% of the units of Holdings 2016 being held by affiliates of the Purchaser; and

• 60% of the units, or the FL6 Interests, of RAIT – Melody 2017 Holdings, LLC, or Holdings 2017, which controls RAIT – Melody 2017 Holdings Trust. This trust owned, at the time of sale, various classes of non-investment grade bonds and the equity of FL6 with the remaining 40% of the units of Holdings 2017 being held by affiliates of the Purchaser.

Prior to the sale, RAIT consolidated Holdings 2016 and FL5 and also consolidated Holdings 2017 and FL6 in its consolidated financial statements as RAIT was the primary beneficiary of these variable interest entities, or VIEs.  Holdings 2016 and Holdings 2017 have been referred to as the RAIT Venture VIEs in RAIT’s consolidated financial statements.  As a result of the sale, RAIT is no longer considered the primary beneficiary of these entities and has deconsolidated these entities from its consolidated financial statements.  RAIT recognized a loss of $8.2 million on the deconsolidation of these entities as the aggregate purchase price for the Interests of $54.6 million was less than RAIT’s net investment in these entities of $62.8 million.  After the sale of the Interests, RAIT retained its role as servicer and special servicer of the loans in FL5 and FL6.

Also on June 27, 2018, RAIT, several of RAIT’s subsidiaries, and ARS VI Investor I, LP, or the Investor, entered into a Redemption and Exchange Agreement whereby RAIT redeemed and cancelled the remaining 2,939,190 preferred units of RAIT IV and RAIT’s corresponding Series D preferred shares, for $56.8 million of cash received by RAIT IV from the sale of the Interests, defined available cash held by RAIT IV and $16.7 million of liquidation preference of RAIT’s publicly traded Series A preferred shares, Series B preferred shares, and Series C preferred shares ($9.6 million of liquidation preference of Series A preferred shares, $4.2 million of liquidation preference of Series B preferred shares; and $2.9 million of liquidation preference of Series C preferred shares).

In addition, RAIT paid the Investor an exchange fee of $0.4 million.  The Redemption and Exchange Agreement also provided for the termination of the Securities Purchase Agreement and mutual releases between RAIT and the Investor of the previously reported dispute between the two parties.

The redemption and exchange of the preferred units of RAIT IV and the linked Series D preferred shares resulted in an increase to shareholders equity of $11.9 million as the consideration exchanged of $61.6 million was less than the $73.5 million of Series D preferred shares that were redeemed and cancelled.

NYSE Continued Listing Status

As previously disclosed, effective September 21, 2017, RAIT received written notification, or NYSE Notice #1, from the New York Stock Exchange, or the NYSE, that RAIT was not in compliance with a NYSE continued listing standard in Rule 802.01C of the NYSE Listed Company Manual because the average closing price of RAIT’s common shares fell below $1.00 over a consecutive 30 trading-day period ending September 15, 2017. RAIT subsequently informed the NYSE that it intended to cure the price condition by proposing a reverse stock split or other action that may require approval of its shareholders.

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On May 11, 2018, RAIT received written notification, or NYSE Notice #2, from the NYSE that RAIT was not in compliance with a NYSE continued listing standard in Rule 802.01D of the NYSE Listed Company Manual because the trading price of RAIT’s common shares fell below $0.16, which the NYSE staff interpreted as “abnormally low” and, as a result, the NYSE immediately suspended trading of all of RAIT’s listed securities.  On June 5, 2018, RAIT received written notification, or NYSE Notice #3, from the NYSE that RAIT was not in compliance with a NYSE continued listing standard in Rule 802.01B of the NYSE Listed Company Manual because RAIT had not maintained at least a $15.0 million average market capitalization over a 30-day trading period.  On May 29, 2018, RAIT sent a notice, or the Appeal Notice, to the NYSE appealing the NYSE staff’s determinations in NYSE Notice #2, requesting review of these determinations by a committee of the NYSE’s Board of Directors, the Review Committee, and requesting the opportunity to make an oral presentation to the Review Committee.  RAIT discussed the market capitalization continued listing standard in its Appeal Notice and has asked the Review Committee to review the NYSE staff’s determination in NYSE Notice #3 in its appeal.  The NYSE notified RAIT that RAIT’s appeal would be held on October 11, 2018.  As of the filing of this report, the NYSE has not notified RAIT of any decision by the NYSE regarding RAIT’s appeal.During the appeal period, RAIT remains “listed” on the NYSE though trading in RAIT’s listed securities is suspended.  RAIT cannot provide any assurance that the appeal will be successful. If RAIT’s securities are ultimately delisted, RAIT expects them to continue to trade on the OTCQB market, subject to continued compliance with the continued trading requirements of the OTCQB.

See Item 1A of our Annual Report for risks relating to the potential consequences of our failure to meet NYSE continued listing standards.  As discussed further in Part I, Item1, “Financial Statements —Note 2: Summary of Significant Accounting Policies—Going Concern Considerations” and Part I, Item 2, “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources” substantially all of the obligations which could have put rights triggered by any NYSE delisting has been repaid and the remaining outstanding amount is expected to be repaid in November 2018.  As a result, the potential for our failure to remain listed on the NYSE to cause a default or cross default under our indebtedness or preferred shares has been significantly diminished.

Reverse Stock Split

Effective after the close of trading on August 13, 2018, we completed a one for fifty reverse stock split, or the Reverse Stock Split, as previously authorized by RAIT’s board of trustees, or the Board, pursuant to authority granted to the Board by RAIT’s common shareholders. The par value of common shares changed to $1.50 per share after the Reverse Stock Split from $0.03 per share prior to the Reverse Stock Split and every fifty shares issued and outstanding prior to the Reverse Stock Split were combined into one common share after the Reverse Stock Split. The Reverse Stock Split did not change the number of authorized common shares. These financial statements give retroactive effect to such Reverse Stock Split and all share and per share amounts have been adjusted accordingly. The Reverse Stock Split did not affect RAIT’s preferred shares, including the number of authorized or outstanding RAIT preferred shares or the dividend rate per share of any outstanding RAIT preferred shares.

Going Concern Considerations

Please see Part I, Item1, “Financial Statements —Note 2: Summary of Significant Accounting Policies—Going Concern

Considerations” and Part I, Item 2, “Management’s Discussion and Analysis of Financial Condition and Results of Operations—

Liquidity and Capital Resources” for a discussion of going concern considerations.

Commitments and Contingencies

Please see Part I, Item1, “Financial Statements —Note 14: Commitments and Contingencies” for a description of litigation and certain other possible events that could have a significant impact on our future operating results.

Trends That May Affect our Business

Investors should read Management’s Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report for a detailed discussion of the following items:

• Impact of Change in Business Strategy.

• Trends relating to capital markets.

• Trends relating to investments in loans.

• Trends relating to investments in real estate.

• Interest rate environment.

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• Prepayment rates.

CRE Lending

We primarily own short-term bridge loans, subordinated, or “mezzanine,” loans and preferred equity interests. We historically offered mezzanine loans and preferred equity interests in limited circumstances to support first lien loans.  These represent a smaller portion of our CRE loan portfolio.  Our mezzanine loans are subordinate in repayment priority to a senior mortgage loan or loans on a property and are typically secured by pledges of ownership interests, in whole or in part, in the entities that own the real property. We generate a return on our preferred equity investments primarily through distributions to us at a fixed rate and, in some instances, the payment of distributions may be subject to there being sufficient net cash flow from the underlying real estate to make such payments. We used this investment structure as an alternative to a mezzanine loan where the financial needs and tax situation of the borrower, the terms of senior financing secured by the underlying real estate or other circumstances necessitate holding preferred equity. Our CRE loans are in most cases non-recourse or limited recourse loans secured by commercial real estate assets or real estate entities. This means that we look primarily to the assets securing the loan for repayment, subject to certain standard exceptions. Where possible, we sought to maintain direct lending relationships with borrowers, as opposed to investing in loans controlled by third-party lenders.

The tables below describe certain characteristics of our held-for-investment commercial mortgage loans, mezzanine loans, and preferred equity interests as of September 30, 2018 (dollars in thousands):

	Carrying Value		Weighted- Average Coupon	Range of Maturities	Number of Loans
Commercial Real Estate (CRE) Loans
Commercial mortgage loans	$	574,350	6.5%	Oct. 2018 to Jun. 2025		42
Mezzanine loans		21,286	13.3%	Jun. 2020 to Mar. 2023		2
Preferred equity interests		33,278	6.7%	Nov. 2018 to Jan. 2029		15
Total investments in loans	$	628,914	6.8%			59

As of September 30, 2018, three mezzanine loans were classified as held for sale and had a carrying amount of $4.7 million.  

During the nine months ended September 30, 2018, we originated $46.2 million of CRE loans prior to our implementation of the 2018 strategic steps.  During the nine months ended September 30, 2018, we received CRE loan repayments of $274.7 million and deconsolidated loans with an unpaid principal balance of $266.6 million.  

During the nine months ended September 30, 2018, we sold certain loans which had an unpaid principal balance of $128.8 million and received gross proceeds of $123.1 million.  We received $74.9 million of net proceeds after payment of the costs to sell those loans and repayments of indebtedness secured by certain of those loans of $48.2 million.

Certain of our commercial mortgage loans, mezzanine loans and preferred equity interests provide for the accrual of interest at specified rates which differ from current payment terms.  We refer to these loans as cash flow loans.  Although a cash flow loan accrues interest at a stated rate, pursuant to forbearance or other agreements, the borrower is only required to pay interest each month at a minimum rate, which may be as low as zero percent, plus additional interest up to the stated rate to the extent of all remaining cash flow from the property underlying the loan after the payment of property operating expenses.  Please see Part I, Item 1, “Financial Statements —Note 2: Summary of Significant Accounting Policies—Revenue Recognition” for further information on these loans.  As of September 30, 2018, we held investments we characterized as cash flow loans, with a recorded investment (including accrued interest) of $124.0 million comprised of preferred equity interests totaling $41.1 million, bridge loans totaling $52.7 million and mezzanine loans totaling $30.2 million.  

As of September 30, 2018, our nonaccrual loans total $123.5 million up from $98.6 million as of December 31, 2017 primarily due to a $30.0 million loan that was placed on nonaccrual status as of September 30, 2018.  We remain focused on working with our borrowers on these loans to either sell or refinance the underlying properties as expeditiously as possible.  As of September 30, 2018, we have a loan loss reserve of $23.6 million, representing approximately 19.2% of our nonaccrual loans and 3.8% of our total CRE loan portfolio.

We have historically financed our consolidated CRE loans on a long-term basis through securitizations. See Part I, Item 2, “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Securitization Summary” for more information about our securitizations.

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The charts below describe the property types and the geographic breakdown of our commercial mortgage loans, mezzanine loans, and preferred equity interests as of September 30, 2018:

    

(1) Based on carrying amount.

REO Portfolio

As of September 30, 2018, our real estate portfolio had an aggregate gross cost (carrying value) of $132.5 million ($123.1 million) comprised of $51.5 million ($42.3 million) of office properties, $60.4 million ($60.3 million) of retail properties and $20.6 million ($20.6 million) of land. As of November 5, 2018, we have three REO properties under contracts for sale with an aggregate gross cost (carrying value), as of September 30, 2018, of approximately $50.7 million ($50.5 million).  In October 2018, we completed the conversion of one commercial mortgage loan to REO and as of November 5, 2018, that property is under contract for sale as well.

During the three and nine months ended September 30, 2018, we recognized impairment charges related to certain real estate assets of $13.3 million and $44.1 million, respectively, as it was more likely than not that we would dispose of the assets before the end of their previously estimated useful lives and a portion of our recorded investment in these assets was determined to not be recoverable.

During the three months ended September 30, 2018, due to the current conditions affecting one of our retail properties in its local market, we recognized an impairment charge on one of our retail properties. The analysis performed, which included a third-party appraisal, resulted in an impairment charge of $13.5 million.  We also recognized impairment charges of $0.6 million on three other assets based on the status of negotiations for the sale of the assets.  As discussed in Part I, Item 1, “Financial Statements —Note 2: Summary of Significant Accounting Policies”, we also corrected an error which resulted in the reversal of $0.9 million of asset impairment during the three months ended September 30, 2018.

During the nine months ended September 30, 2018, we recognized impairment charges on six of our real estate assets of $44.1 million.  Due to the current conditions affecting one of our retail properties in its local market, we recognized an impairment of $13.5 million based on a third-party appraisal.  Due to the current conditions affecting one of our retail properties in its local market as well as our current efforts to increase our liquidity, we accepted an offer to purchase this asset which resulted in an impairment charge of $17.2 million based on an executed purchase and sale agreement. We recognized impairment charges of $9.8 million on three assets based on the status of negotiations for the sale of the assets. An impairment charge of $3.6 million on the sixth asset was driven by a default on the asset’s associated ground lease.  

We are continuing to market for sale several of our real estate properties, and the ultimate outcomes of the sales of those properties is dependent on current market conditions and demand specific to each individual property, among other factors. The ultimate outcomes of these processes may lead to additional impairment charges, which may have a material adverse effect on our financial condition and financial performance.

We have financed our portfolio of investments in commercial real estate through secured commercial mortgage loans held by either third-party lenders or our commercial real estate securitizations.

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The table below describes certain characteristics of our REO Portfolio as of September 30, 2018 (dollars in thousands).  We have historically invested in real estate properties throughout the United States.  

	Investments in Real Estate (1)		Average Physical Occupancy	Units/ Square Feet/ Acres		Number of Properties
Office real estate properties	$	51,460	75.0%		349,999		3
Retail real estate properties		60,446	62.2%		1,144,292		4
Parcels of land		20,567	N/A		9.2		4
Total	$	132,473	—				11

(1) Based on properties owned as of September 30, 2018.

The charts below describe the property types and the geographic breakdown of our investments in real estate as of September 30, 2018:

(1) Based on gross cost.

Securitization Summary

Overview. We have used securitizations to match fund the interest rates and maturities of our assets with the interest rates and maturities of the related financing. This strategy has helped us reduce interest rate and funding risks on our portfolios for the long-term. A securitization is a structure in which multiple classes of debt and equity are issued by a special purpose entity to finance a portfolio of assets. Cash flow from the portfolio of assets is used to repay the securitization liabilities sequentially, in order of seniority. The most senior classes of debt typically have credit ratings of “AAA” through “BBB–” and therefore can be issued at yields that are lower than the average yield of the loans collateralizing the securitization. The debt tranches are typically rated based on portfolio quality, diversification and structural subordination. The equity securities issued by the securitization are the “first loss” piece of the capital structure, but they are entitled to all residual amounts available for payment after the obligations to the debt holders have been satisfied. Our retained interests described below included in our investments in our consolidated securitizations are typically in such “first loss” position. Historically, the stated maturity of the debt issued by a securitization we have sponsored has been between 15 and 19 years for our FL securitizations and approximately 40 years for RAIT I and RAIT II. However, we expect the weighted average life of such debt to be shorter than the stated maturity due to the financial condition of the borrowers on the underlying loans and the characteristics of such loans, including the existence and frequency of exercise of any permitted prepayment, the prevailing level of interest rates, the actual default rate and the actual level of any recoveries on any defaulted loans. Debt issued by these securitizations is non-recourse to RAIT and payable solely from the payments by the borrowers on the loans collateralizing these securitizations. These assets are in most cases “non-recourse” or limited recourse loans secured by commercial real estate assets or real estate entities. This means that we look primarily to the assets securing the loan for repayment, subject to certain standard exceptions.

As of September 30, 2018, we had sponsored four outstanding securitizations with varying amounts of retained or residual interests held by us which we consolidate in our financial statements as follows: RAIT I, RAIT II, RAIT 2017-FL7 Trust, or RAIT-FL7 and RAIT 2017-FL8 Trust, or RAIT-FL8. We refer to RAIT FL7 and RAIT FL8 as the FL securitizations. We previously exercised our rights and unwound four other securitizations we had sponsored, RAIT 2013-FL1 Trust, or RAIT FL1, in 2015, RAIT 2014-FL2 Trust, or RAIT FL2, in 2016, RAIT 2014-FL3 Trust, or RAIT FL3, in April 2017, RAIT 2015-FL4 Trust, or RAIT FL4, in September 2017. We expect to exercise our rights to unwind RAIT II prior to December 31, 2018. During the three months ended June 30, 2018, we deconsolidated RAIT 2015-FL5 Trust or RAIT FL5 and RAIT 2016-FL6 or RAIT FL6 as described above. We

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originated substantially all the loans collateralizing RAIT I, RAIT II and the FL securitizations. We serve as the collateral manager, servicer and special servicer on RAIT I and RAIT II and as servicer and special servicer for each of the FL securitizations.  

Over time, our returns on and cash flows from our retained interests in our securitizations generally decrease as the senior classes of debt bearing relatively lower interest rates are paid down by collateral pool payments and other proceeds leaving more junior classes of debt bearing relatively higher interest rates on the smaller collateral pool.  As a result, we continue to evaluate strategies to manage the returns on our capital allocated to our retained interests in each of our securitizations consistent with our rights and obligations under our securitizations and relevant market conditions, which may include, without limitation, unwinding a securitization and rolling the remaining collateral over to a new securitization and may involve, where applicable, selling our properties securing loans included in the collateral pool and repaying such loans.  With respect to our floating rate CMBS securitizations described below, we have implemented a process of unwinding the FL securitizations when, because of loan repayments, the securitizations become inefficient and we have the means and desire to do so.  Under the terms of FL7 and FL8, the earliest that we could unwind these securitizations are June 2019 and December 2019, respectively.

Securitization Performance. RAIT I and RAIT II contain interest coverage triggers, or IC triggers, and over collateralization triggers, or OC triggers, that must be met in order for us to receive our subordinated management fees and our lower-rated debt or residual equity returns. If the IC triggers or OC triggers are not met in a given period, then the cash flows are redirected from lower rated tranches and used to repay the principal amounts to the senior tranches of CDO notes payable. These conditions and the re-direction of cash flow continue until the triggers are met by curing the underlying payment defaults, paying down the CDO notes payable, or other actions permitted under the relevant securitization indenture. As of the most recent payment information, all applicable IC triggers and OC triggers continue to be met for RAIT I and RAIT II, and we continue to receive all of our management fees, interest and residual returns from these securitizations. The FL securitizations do not have IC triggers and OC triggers.

Repayment of the loans collateralizing RAIT I and RAIT II outside their contractual maturities are expected to be slower than 2017 levels for the foreseeable future. As of November 5, 2018, we have three REO properties under contracts for sale with an aggregate gross cost (carrying value), as of September 30, 2018, of approximately $50.7 million ($50.5 million). In October 2018, we completed the conversion of one commercial mortgage loan to REO and as of November 5, 2018, that property is under contract for sale as well. The related indebtedness of these properties is expected to be repaid with the proceeds of any sales, which primarily includes paying down the most senior notes outstanding issued by RAIT I and RAIT II, as applicable. We continue to evaluate our real estate portfolio with regards to identifying other possible properties to sell as part of our previously disclosed debt reduction plan.  Because we own properties that are financed, in part, by loans collateralizing RAIT I and RAIT II, sales of our properties could result in a significant reduction of our securitization notes payable. These repayments have reduced our returns from these securitizations and we expect future repayments to continue to reduce these returns. We currently expect a sufficient number of the remaining loans collateralizing RAIT II to be substantially repaid or otherwise disposed of by the end of 2018, which will allow us to redeem and collapse that securitization by such date. We do not expect the redemption of RAIT II to have a material impact to our financial position or financial results.

If the CDO notes issued by RAIT I and RAIT II have not been redeemed in full prior to the distribution date occurring in February 2019, in the case of RAIT I, and November 2018, in the case of RAIT II, then an auction of the collateral assets of RAIT I or RAIT II, as relevant, will continue to be conducted by the relevant trustee periodically thereafter and, if certain conditions set forth in the relevant indenture are satisfied, such collateral assets will be sold at the auction and the relevant CDO notes will be redeemed, in whole, but not in part, on such distribution date. Nine auctions for RAIT I and seventeen auctions for RAIT II have been held but no sales occurred as not all of the conditions precedent were satisfied.

In March 2018, a rating agency, DBRS Limited, or DBRS announced that it had placed all classes of the floating rate notes issued by RAIT FL5, RAIT FL6 and RAIT FL8 under review with negative implications. DBRS did this citing concerns over RAIT’s ability to continue to effectively service and special service these transactions due to RAIT’s announcement of the 2018 strategic steps. DBRS announced it would revisit the ratings once additional information becomes available. RAIT’s ability to act as servicer and special servicer for RAIT FL6 and RAIT FL8 could be materially adversely affected if RAIT is unable to address DBRS’ concerns.

A summary of the investments in our consolidated securitizations as of the most recent payment date is as follows:

Our Legacy Securitizations

• RAIT I—RAIT I has $251.3 million of total collateral at par value, of which $41.1 million is defaulted. The current overcollateralization, or OC, test is passing at 121.8% with an OC trigger of 116.2%. We currently own $41.0 million of the securities that were originally rated investment grade and $200.0 million of the non-investment grade securities issued

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by this securitization. We are currently receiving all distributions required by the terms of our retained interests in this securitization and are receiving all of our collateral management fees.

• RAIT II—RAIT II has $73.4 million of total collateral at par value, of which $18.5 million is defaulted. The current OC test is passing at 228.2% with an OC trigger of 111.7%. We currently own $9.2 million of the securities that were originally rated investment grade and $110.3 million of the non-investment grade securities issued by this securitization. We are currently receiving all distributions required by the terms of our retained interests in this securitization and are receiving all of our collateral management fees.

Our Floating Rate CMBS Securitizations

• RAIT FL7—RAIT FL7 has $251.2 million of total collateral at par value, $9.0 million of which is in default. RAIT FL7 does not have OC triggers or IC triggers. RAIT FL7 has classes of investment grade senior notes with an aggregate principal balance outstanding of approximately $185.7 million to investors. We currently own the less than investment grade classes of junior notes, including a class with an aggregate principal balance of $65.5 million, and the equity, or the retained interests, of RAIT FL7.

• RAIT FL8—RAIT FL8 has $223.0 million of total collateral at par value, none of which is in default. RAIT FL8 has classes of investment grade senior notes with an aggregate principal balance outstanding of approximately $178.8 million to investors. We currently own the less than investment grade classes of junior notes, including a class with an aggregate principal balance of $44.2 million, and the equity, or the retained interests, of RAIT FL8.

The below table summarizes the current outstanding balances in our consolidated securitizations as of the most recent payment date:  

($ in millions)	RAIT I		RAIT II		FL 7		FL 8
Total Collateral Outstanding (Par)	$	251.3	$	73.4	$	251.2	$	223.0
Total Bonds Outstanding (Par)	$	216.4	$	54.6	$	251.2	$	223.0
Bonds Held by 3rd Parties Outstanding (Par)	$	140.4	$	9.2	$	185.7	$	178.8
RAIT Investment Grade Bond Ownership (Par) (1)	$	41.0	$	14.8	$	-	$	-
RAIT Below Investment Grade Bond Ownership (Par) (1)	$	35.0	$	30.5	$	65.5	$	44.2
RAIT Equity Interest Ownership (Par)	$	165.0	$	110.2	$	-	$	-

(1) Investment grade and below investment grade determinations made based upon ratings of bonds upon their issuance.

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Results of Operations

Three Months Ended September 30, 2018 Compared to the Three Months Ended September 30, 2017

The following table sets forth information regarding our consolidated results of operations for the three months ended September 30, 2018 and 2017.

	For the Three Months Ended September 30,
	2018			2017			$ Variance			% Variance
Revenue:
Investment interest income	$	8,353		$	18,115		$	(9,762	)		-54	%
Investment interest expense		(5,940	)		(10,236	)		4,296			-42	%
Net interest margin		2,413			7,879			(5,466	)		-69	%
Property income		6,332			15,012			(8,680	)		-58	%
Fee and other income		582			1,712			(1,130	)		-66	%
Total revenue		9,327			24,603			(15,276	)		-62	%
Expenses:
Interest expense		5,791			8,656			(2,865	)		-33	%
Real estate operating expense		4,311			8,313			(4,002	)		-48	%
Property management expenses		537			1,908			(1,371	)		-72	%
General and administrative expenses:
Compensation expense		2,408			3,194			(786	)		-25	%
General and administrative expense		2,847			3,233			(386	)		-12	%
Total general and administrative expenses		5,255			6,427			(1,172	)		-18	%
Acquisition and integration expenses		-			57			(57	)		-100	%
Provision for loan losses		7,489			5,516			1,973			36	%
Depreciation and amortization expense		1,828			6,139			(4,311	)		-70	%
Employee separation expenses		-			575			(575	)		-100	%
Shareholder activism expenses		-			155			(155	)		-100	%
Total expenses		25,211			37,746			(12,535	)		-33	%
Operating (Loss) Income		(15,884	)		(13,143	)		(2,741	)		21	%
Interest and other income (expense), net		342			283			59			21	%
Gains on assets		6,440			30			6,410			21367	%
Gains (losses) on deconsolidation of properties and VIEs		870			(4,035	)		4,905			-122	%
Gain on sale of retail property manager		1,262			-			1,262		N/M
Gains (losses) on extinguishments of debt		(239	)		(644	)		405			-63	%
Asset impairment		(13,267	)		(3,121	)		(10,146	)		325	%
Goodwill impairment		-			-			-		N/M*
Change in fair value of financial instruments		(410	)		4,753			(5,163	)		-109	%
Income (loss) before taxes		(20,886	)		(15,877	)		(5,009	)		32	%
Income tax benefit (provision)		(152	)		34			(186	)		-547	%
Net income (loss)		(21,038	)		(15,843	)		(5,195	)		33	%
(Income) loss allocated to preferred shares		(5,063	)		(8,387	)		3,324			-40	%
(Income) loss allocated to noncontrolling interests		-			-			-		N/M
Net income (loss) allocable to common shares	$	(26,101	)	$	(24,230	)	$	(1,871	)		8	%

Revenue

Net interest margin. Net interest margin decreased $5.5 million, or 69%, to $2.4 million for the three months ended September 30, 2018 from $7.9 million for the three months ended September 30, 2017 mainly due to the deconsolidation of $266.5 million of loans due to the sale of the FL5 Interests and the FL6 Interests on June 27, 2018 and the $472.7 million of loan repayments and related repayments of indebtedness since October 1, 2017. An additional decrease was due to the third quarter 2018 write-off of $2.0 million of accrued interest receivable related to a loan whose interest income was determined to be not probable of collection based on a proposed loan amendment containing a discounted payoff feature.

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Property income. Property income decreased $8.7 million to $6.3 million for the three months ended September 30, 2018 from $15.0 million for the three months ended September 30, 2017. The decrease is primarily attributable to the sale or divestiture of 20 properties since October 1, 2017.

Fee and other income. Fee and other income decreased $1.1, or 66% million to $0.6 million for the three months ended September 30, 2018 from $1.7 million for the three months ended September 30, 2017. The decrease is primarily attributable to sale of our retail property management subsidiary in August 2018.

Expenses

Interest expense. Interest expense decreased $2.9 million, or 33%, to $5.8 million for the three months ended September 30, 2018 from $8.7 million for the three months ended September 30, 2017. The decrease is attributable to $69.6 million of recourse debt reductions since October 1, 2017 and $36.1 million of repayments of indebtedness related to property dispositions.

Real estate operating expense. Real estate operating expense decreased $4.0 million, or 48%, to $4.3 million for the three months ended September 30, 2018 from $8.3 million for the three months ended September 30, 2017. The decrease is primarily attributable to the sale or divestiture of 20 properties since October 1, 2017.

Property management expense. Property management expense decreased $1.4 million, or 72%, to $0.5 million for the three months ended September 30, 2018 from $1.9 million for the three months ended September 30, 2017.  The decrease is primarily attributable to the sale of our retail property management subsidiary in August 2018.

Compensation expense. Compensation expense decreased $0.8 million, or 25% to $2.4 million for the three months ended September 30, 2018 from $3.2 million for the three months ended September 30, 2017.  The primary driver of the decrease was a decrease in the number of employees.  

General and administrative expense. General and administrative expense decreased $0.4 million, or 12%, to $2.8 million for the three months ended September 30, 2018 from $3.2 million for the three months ended September 30, 2017.  This is primarily due to a decrease in legal and consulting fees incurred.

Provision for loan losses. Provision for loan losses increased $2.0 million, or 36%, to $7.5 million for the three months ended September 30, 2018 from $5.5 million for the three months ended September 30, 2017.  During the three ended September 30, 2018, the provision for loan losses was primarily related to two loans where the property experienced an unfavorable event during the period, which resulted in probable, incurred losses.  

Depreciation and amortization expense. Depreciation and amortization expensedecreased$4.3 million, or 70%, to $1.8 million for the three months ended September 30, 2017 from $6.1 million for the three months ended September 30, 2017. The decrease is primarily attributable to the sale or divestiture of 20 properties since October 1, 2017.

Other income (expense)

Gains (losses) on assets. During the three months ended September 30, 2018, we recognized a $6.4 million net gain mainly due to the $8.0 gain on sale of one multi-family property offset by $1.5 million of losses on three held for sale loans measured at the lower of cost or fair value.  

Gains (losses) on deconsolidation of properties and VIEs. During the three months ended September 30, 2018, we recognized a $0.9 million gain on the surrender of our ground leasehold interest in one property to the ground lessor.

Gains (losses) on sale of retail property manager. During the three months ended September 30, 2018, we recognized a $1.3 million gain on sale of our retail property management subsidiary.

Gains (losses) on extinguishment of debt. During the three months ended September 30, 2018, we recognized a loss on extinguishment of debt of $0.2 million incurred primarily due to a $0.4 million loss on the write-off of the unamortized deferred financing costs and discount associated with the related extinguished indebtedness offset by a $0.2 million gain on repurchase of indebtedness at a discount.

Asset impairment. During the three months ended September 30, 2018, we recognized asset impairment charges of $13.3 million, which was primarily related to one real estate asset where it was more likely than not that we would dispose of the asset

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before the end of its previously estimated useful life and a portion of our recorded investment in the asset was determined to not be recoverable.

Change in fair value of financial instruments. During the three months ended September 30, 2018, the change in fair value of financial instruments increased our net income by $0.4 million. The fair value adjustments we recorded were as follows (dollars in thousands):

Description	For the Three Months Ended September 30, 2018			For the Three Months Ended September 30, 2017
Change in fair value of junior subordinated notes	$	(410	)	$	3,270
Change in fair value of derivatives		—			(17	)
Change in fair value of warrants and investor SARs		—			1,500
Change in fair value of financial instruments	$	(410	)	$	4,753

The changes in the fair value for the junior subordinated notes for which the fair value option was elected for the three months ended September 30, 2018 was primarily attributable to changes in interest rates. The changes in the fair value for the junior subordinated notes for which the fair value option was elected for the three months ended September 30, 2017 was primarily attributable to changes in interest rates and instrument specific credit risks. The changes in the fair value of derivatives for the three months ended September 30, 2018 and 2017 was primarily attributable to changes in interest rates. The changes in fair value of the warrants and investor SARs for the three months ended September 30, 2017 was primarily attributable to changes in the reference stock price and volatility.

Income tax benefit (provision). During the three months ended September 30, 2018 and 2017, the income tax provision related to our TRS entities.

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Nine Months Ended September 30, 2018 Compared to the Nine Months Ended September 30,2017

The following table sets forth information regarding our consolidated results of operations for the nine months ended September 30, 2018 and 2017.

	For the Nine Months Ended September 30,
	2018			2017			$ Variance			% Variance
Revenue:
Investment interest income	$	43,542		$	50,647		$	(7,105	)		-14	%
Investment interest expense		(26,079	)		(30,555	)		4,476			-15	%
Net interest margin		17,463			20,092			(2,629	)		-13	%
Property income		23,814			52,023			(28,209	)		-54	%
Fee and other income		2,944			4,904			(1,960	)		-40	%
Total revenue		44,221			77,019			(32,798	)		-43	%
Expenses:
Interest expense		18,918			27,682			(8,764	)		-32	%
Real estate operating expense		15,503			28,456			(12,953	)		-46	%
Property management expenses		4,207			6,772			(2,565	)		-38	%
General and administrative expenses:
Compensation expense		8,446			10,210			(1,764	)		-17	%
General and administrative expense		13,270			8,627			4,643			54	%
Total general and administrative expenses		21,716			18,837			2,879			15	%
Acquisition and integration expenses		133			296			(163	)		-55	%
Provision for loan losses		30,269			27,914			2,355			8	%
Depreciation and amortization expense		8,158			23,712			(15,554	)		-66	%
Employee separation expenses		-			575			(575	)		-100	%
Shareholder activism expenses		-			2,464			(2,464	)		-100	%
IRT internalization and management transition expenses		-			736			(736	)		-100	%
Total expenses		98,904			137,444			(38,540	)		-28	%
Operating (Loss) Income		(54,683	)		(60,425	)		5,742			-10	%
Interest and other income (expense), net		785			144			641			445	%
Gains on assets		2,292			22,795			(20,503	)		-90	%
Gains (losses) on deconsolidation of properties and VIEs		(7,307	)		(19,982	)		12,675			-63	%
Gain on sale of retail property manager		1,262			-			1,262		N/M
Gains (losses) on extinguishments of debt		(3,668	)		944			(4,612	)		-489	%
Asset impairment		(44,083	)		(96,354	)		52,271			-54	%
Goodwill impairment		-			(8,342	)		8,342			-100	%
Change in fair value of financial instruments		(212	)		6,693			(6,905	)		-103	%
Income (loss) before taxes		(105,614	)		(154,527	)		48,913			-32	%
Income tax benefit (provision)		(152	)		261			(413	)		-158	%
Net income (loss)		(105,766	)		(154,266	)		48,500			-31	%
(Income) loss allocated to preferred shares		(4,591	)		(25,730	)		21,139			-82	%
(Income) loss allocated to noncontrolling interests		-			(76	)		76			-100	%
Net income (loss) allocable to common shares	$	(110,357	)	$	(180,072	)	$	69,715			-39	%

Revenue

Net interest margin. Net interest margin decreased$2.6 million, or 13%, to $17.5 million for the nine months ended September 30, 2018 from $20.1 million for the nine months ended September 30, 2017 mainly due to the deconsolidation of $266.5 million of loans due to the sale of the FL5 Interests and the FL6 Interests on June 27, 2018 and the $472.7 million of loan repayments and related repayments of indebtedness since October 1, 2017. An additional decrease was due to the third quarter 2018 write-off of $2.0 million of accrued interest receivable related to a loan whose interest income was determined to be not probable of collection based on a proposed loan amendment containing a discounted payoff feature. The overall decrease was offset by the 2017 write off of $3.6 million of accrued interest receivable related to a loan whose interest income was determined to be not probable of collection based on the value of the underlying collateral using discounted cash flow models and market-based assumptions.

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Property income. Property income decreased $28.2 million, or 54% to $23.8 million for the nine months ended September 30, 2018 from $52.0 million for the nine months ended September 30, 2017. The decrease is primarily attributable to the sale or divesture of 20 properties since October 1, 2017.

Fee and other income. Fee and other income decreased $2.0 million to $2.9 million for the nine months ended September 30, 2018 from $4.9 million for the nine months ended September 30, 2017. The decrease is primarily attributable tolower property management fees earned by our retail property management subsidiary and the sale of our retail property management subsidiary in August 2018.

Expenses

Interest expense. Interest expense decreased $8.8 million, or 32%, to $15.5 million for the nine months ended September 30, 2018 from $27.7 million for the nine months ended September 30, 2017. The decrease is attributable to $69.6 million of recourse debt reductions since October 1, 2017 and $36.1 million of repayments of indebtedness related to property dispositions.

Real estate operating expense. Real estate operating expense decreased $13.0 million, or 46%, to $11.2 million for the nine months ended September 30, 2018 from $28.5 million for the nine months ended September 30, 2017. The decrease is primarily attributable to the sale or divesture of 20 properties since October 1, 2017.

Property management expense. Property management expense decreased $2.6 million, or 38%, to $4.2 million for the nine months ended September 30, 2018 from $6.8 million for the nine months ended September 30, 2017. The decrease is primarily attributable to a decrease in the number of employees at our retail property management subsidiary and sale of our retail property management subsidiary in August 2018.

Compensation expense. Compensation expense decreased $1.8 million, or 17% to $8.4 million for the nine months ended September 30, 2018 from $10.2 million for the nine months ended September 30, 2017. The primary driver of the decrease was a decrease in the number of employees.

General and administrative expense. General and administrative expense increased $4.6 million to $13.3 million for the nine months ended September 30, 2018 from $8.6 million for the nine months ended September 30, 2017. This is primarily due to increase in legal and consulting fees incurred as part of our strategic alternatives process, the 2018 strategic steps, and the redemption of the Series D preferred shares.

Provision for loan losses. Provision for loan losses increased $2.4 million to $30.3 million for the nine months ended September 30, 2018 from $27.9 million for the nine months ended September 30, 2017. During the nine months ended September 30, 2018, the provision for loan losses was primarily related to six loans where the borrower and/or property experienced an unfavorable event or events during the period, which resulted in probable, incurred losses.

Depreciation and amortization expense. Depreciation and amortization expense decreased$15.6 million to $8.2 million for the nine months ended September 30, 2018 from $23.7 million for the nine months ended September 30, 2017. The decrease is primarily attributable to the sale or divesture of 20 properties since October 1, 2017.

Other income (expense)

Gains (losses) on assets. During the nine months ended September 30, 2018, we incurred a net $2.3 million gain on assets.  This includes a $4.2 million net loss on the sale or repayment of loans held for sale, $2.3 million of losses on three held for sale loans measured at the lower of cost or market, a $0.9 million gain on the sale of one office property and an $8.0 million gain on the sale of one multi-family property.  

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Gains (losses) on deconsolidation of properties and VIEs. During the nine months ended September 30, 2018, we completed the sale of the FL5 Interests and the FL6 Interests as described in Note 1 and Note 8.  As a result of the sale, we are no longer the primary beneficiary of the RAIT Venture VIEs, FL5 and FL6.  Therefore, RAIT deconsolidated those entities as of June 27, 2018 and recognized an $8.2 million loss on deconsolidation as the purchase price of $54.6 million was less than our net investment in our FL5 and FL6 securitizations of $62.8 million. Additionally, during the nine months ended September 30, 2018, we recognized a $0.9 million gain on the surrender of our ground leasehold interest in one property to the ground lessor.

Gains (losses) on sale of retail property manager. During the nine months ended September 30, 2018, we recognized a $1.3 million gain on sale of our retail property management subsidiary.

Gains (losses) on extinguishment of debt. During the nine months ended September 30, 2018, we recognized a loss on extinguishment of debt of $3.7 million. This includes a $1.9 million loss related to defeasance of mortgage indebtedness upon the sale of one office property and a $2.3 million loss due to the write-off of the unamortized deferred financing costs and discounts associated with the related extinguished indebtedness offset by a net $0.6 million gain on the redemption or repurchase of indebtedness.

Asset impairment. During the nine months ended September 30, 2018, we recognized asset impairment charges of $44.1 million, which was primarily related to certain real estate assets where it was more likely than not that we would dispose of the assets before the end of their previously estimated useful lives and a portion of our recorded investment in these assets was determined to not be recoverable.

Change in fair value of financial instruments. During the nine months ended September 30, 2018, the change in fair value of financial instruments increasedour net income by $0.2 million. The fair value adjustments we recorded were as follows (dollars in thousands):

Description	For the Nine Months Ended September 30, 2018			For the Nine Months Ended September 30, 2017
Change in fair value of junior subordinated notes	$	(682	)	$	2,568
Change in fair value of derivatives		470			(275	)
Change in fair value of warrants and investor SARs		—			4,400
Change in fair value of financial instruments	$	(212	)	$	6,693

The changes in the fair value for the junior subordinated notes for which the fair value option was elected for the nine months ended September 30, 2018 was primarily attributable to changes in interest rates. The changes in the fair value for the junior subordinated notes for which the fair value option was elected for the nine months ended September 30, 2017 was primarily attributable to changes in interest rates and instrument specific credit risks. The changes in the fair value of derivatives for the nine months ended September 30, 2018 and 2017 was primarily attributable to changes in interest rates. The changes in the fair value of the warrants and investor SARs for the nine months ended September 30, 2017 was primarily attributable to changes in the reference stock price and volatility.

Income tax benefit (provision). During the nine months ended September 30, 2018, the income tax provision related to our TRS entities. During the nine months ended September 30, 2017, the income tax benefit was driven by a reversal of the current income tax liability accrued as of December 31, 2016 as a result of updating our projections for 2017.

Liquidity and Capital Resources

Liquidity is a measure of our ability to meet potential cash requirements, including ongoing commitments to repay borrowings, fund and maintain investments, pay dividends and other general business needs.

Our primary cash requirements are as follows:

• to repay, repurchase or redeem our indebtedness;

• to pay our expenses, including compensation to our employees and fees to our legal and financial advisors;

• to pay U.S. federal, state, and local taxes of our taxable REIT subsidiaries; and

• to distribute a minimum of 90% of our REIT taxable income and to make investments in a manner that enables us to maintain our qualification as a REIT.

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We intend to meet these liquidity requirements primarily through the following:

• the use of our cash and cash equivalent balance, which was $98.4 million as of September 30, 2018 and $28.8 million as of November 1, 2018;

• cash generated from operating activities, including net investment income from our investment portfolio;

• cash generated from distributions on our retained interests we hold related to RAIT I, RAIT II, RAIT FL7 and RAIT FL8; and

• proceeds from the sales of assets and repayments of the loans we hold.  

We may consider selling our retained interests in RAIT FL7 and/or RAIT FL8 to generate liquidity, which we expect would significantly affect our financial position and financial results.

Our ability to incur new indebtedness is limited due to the financial covenants that are included in the indenture that governs our 7.625% senior notes and our 7.125% senior notes.  

The financial statements included in this report have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities and other commitments in the normal course of business. As described in Part I, Item1, “Financial Statements —Note 2: Summary of Significant Accounting Policies—Going Concern Considerations”, our ability to continue to operate as a going concern is subject to certain risks and uncertainties.

In evaluating RAIT’s potential cash requirements over the next 12 months, management considered our 7.125% senior notes which mature in August 2019 and have an unpaid principal balance of $65.4 million as of September 30, 2018, the financial covenant compliance requirements of certain of RAIT’s indebtedness described below, and RAIT’s recurring costs of operating its business.  

As previously disclosed, RAIT has been notified by the staff of the New York Stock Exchange, or NYSE, that RAIT is not in compliance with certain continued listing standards of the NYSE.  As of the filing date of this report, $279 of our outstanding indebtedness contains provisions that would provide the holders thereof to require us to repurchase that indebtedness if RAIT was delisted from the NYSE. In October 2018, we exercised our right to call this indebtedness and expect to redeem it in November 2018.  

As previously disclosed, RAIT is implementing the 2018 strategic steps seeking to increase liquidity and reduce costs within our businesses.  As such, RAIT plans to control costs, to sell certain loans, to sell certain real estate properties and to continue to receive repayments of loans as they become due.  Consistent with the 2018 strategic steps and these plans, RAIT has suspended new investment activity and the Board did not declare a dividend on RAIT’s outstanding preferred shares during the previous two quarters.  

Based on proceeds generated from asset sales and loan repayments that have occurred as of the date these financial statements were issued, RAIT’s current financial condition and currently available sources of repayment would not enable RAIT to meet its obligations under the 7.125% senior notes due in August 2019.  RAIT’s ability to satisfy its obligations under the 7.125% senior notes depends on management’s ability to sell certain of RAIT’s remaining real estate assets releasing cash from those sales and/or distributions on our retained interests in our RAIT I and RAIT II securitizations, to continue to control costs, to sell certain loans, to sell retained interests in RAIT FL7 and/or RAIT FL8 and to continue to receive repayments of loans as they become due.  While controlling costs are within management’s control to some extent, selling real estate assets, selling loans, selling other assets and the timing of loan repayments involve performance by third parties.  Since many of the real estate assets, loans and other assets that management plans to sell or receive repayment from to satisfy its obligations are not subject to an executed purchase and sale agreement or other contractual agreement as of the date hereof, the sale of those assets cannot be considered probable of occurring.

If these plans or other alternative plans are not implemented as RAIT management expects, RAIT’s financial condition, liquidity and ability to continue as a going concern may be materially adversely affected. Subject to the considerations outlined in Part I, Item 1, “Financial Statements —Note 2: Summary of Significant Accounting Policies—Going Concern Considerations” and under this Part I, Item 2, “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources,” if RAIT’s plans are implemented in the normal course of business, we believe our available cash balances, proceeds from the sales of assets, and cash flows from operations will be sufficient to fund our liquidity requirements over the next twelve months.

We have engaged in discussions with various stakeholders and are pursuing or considering a number of actions, but there can be no assurance that sufficient liquidity can be obtained from one or more of these actions or that these actions can be consummated within the period needed to meet certain obligations, and we could be required to seek relief under Chapter 11 of Title 11 of the U.S. Code.  We have engaged financial and legal advisors to assist us in, among other things, analyzing various strategic alternatives to address our liquidity and capital structure, including strategic and refinancing alternatives through one or more private restructurings.

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However, a filing under Chapter 11 may be unavoidable. Seeking bankruptcy relief would have a material adverse effect on our business, financial condition, results of operations, liquidity and returns to all stakeholders.

In these discussions or through open market purchases, we may seek to acquire, redeem, repurchase, restructure, refinance or otherwise enter into transactions to satisfy our debt or redeem our preferred shares which may include any combination of material payments of cash, issuances of our debt and/or equity securities, sales or exchanges of our assets or other methods.  From time to time our indebtedness and preferred shares may trade at discounts to their respective face amounts. In order to reduce future cash interest payments, as well as future principal amounts due upon any applicable put dates, at maturity or upon redemption, or payments on preferred shares, or to otherwise benefit RAIT, we may, from time to time, purchase such indebtedness or preferred shares for cash, in exchange for our equity or debt securities, or for any combination of cash and our equity or debt securities, in each case in open market purchases, privately negotiated transactions, exchange offers and consent solicitations or otherwise. We will evaluate any such transactions in light of then-existing market conditions, contractual restrictions and other factors, taking into account our current liquidity and prospects for future access to capital. The amounts involved in any such transactions, individually or in the aggregate, may be material and may materially reduce our liquidity or reduce or eliminate our ability to convert assets into liquidity. Any material issuances of our equity securities may have a material dilutive effect on our current shareholders.

As disclosed above, the 7.625% senior notes and 7.125% senior notes contain financial covenants consisting of a maximum leverage ratio covenant and a minimum fixed charge ratio covenant.  These covenants must be met in the event RAIT or any subsidiary meeting the definition thereof in these notes’ related indentures were to incur debt, as defined in such indentures, and are measured immediately after giving pro forma effect to the incurrence of such debt and the application of the proceeds thereof.  If RAIT failed to comply with these financial covenants, that would constitute an event of default under these indentures permitting the acceleration of the applicable senior notes in defined circumstances.  If RAIT failed to repay any senior notes that were accelerated, it could trigger cross defaults under, and ultimately the acceleration of, other RAIT indebtedness.  RAIT expects that these financial covenants will restrict RAIT’s and these subsidiaries’ ability to incur such debt for the foreseeable future because RAIT does not expect that these financial covenants would be met on such pro forma basis in the event RAIT or such subsidiaries incurred debt.  RAIT and these subsidiaries do not plan to incur any such debt, absent a pro forma use of proceeds that would permit compliance with these covenants.

Cash Flows

As of September 30, 2018 and 2017, we maintained cash and cash equivalents of approximately $98.4 million and $46.0 million, respectively, and restricted cash of approximately $86.1 million and $142.5 million, respectively.  Our cash and cash equivalents were generated from the following activities (dollars in thousands):

	For the Nine Months Ended September 30,
	2018			2017
Cash flow from operating activities	$	10,231		$	10,853
Cash flow from investing activities		396,116			176,921
Cash flow from financing activities		(433,135	)		(299,976	)
Net change in cash, cash equivalents and restricted cash		(26,788	)		(112,202	)
Cash, cash equivalents and restricted cash at beginning of year		211,294			300,710
Cash, cash equivalents and restricted cash at end of year	$	184,506		$	188,508

Cash flow from operating activities for the nine months ended September 30, 2018, as compared to the same period in 2017, decreased slightly by $0.6 million primarily due by lower earnings as a result of lower loan volumes and the timing of payments for various accounts payable, accrued expenses and other liabilities partially offset by gross proceeds received of $14.3 million from the sale of loans originated for sale.

The cash inflow for investing activities for the nine months ended September 30, 2018 was primarily due to loan repayments of $274.7 million outpacing new investments in loans of $52.2 million over that period and to the gross proceeds received of $108.5 million from the sale of loans originated for investment. The cash inflow for investing activities for the nine months ended September 30, 2017 was substantially due to $384.6 million of loan repayments and $161.2 million of proceeds from real estate sales outpacing new investments in loans of $370.0 million over that period.  

The cash outflow from our financing activities during the nine months ended September 30, 2018 was primarily due to repayments of indebtedness of $359.5 million during that period. The cash outflow from our financing activities during the nine months ended September 30, 2017 was primarily due to repayments and repurchases of indebtedness of $633.3 million and distributions to shareholders of $40.9 million exceeding proceeds from the issuance of indebtedness of $293.9 million and proceeds of $97.5 related to conduit loan purchase agreements during that period.

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As a REIT, we evaluate our dividend coverage based on our cash flow from operating activities, excluding acquisition and integration expenses, the origination and sale of loans, and changes in assets and liabilities. During the nine months ended September 30, 2018, we paid distributions to our shareholders of $11.2 million and generated cash flows from operating activities, before acquisition expenses, origination and sale of loans, and changes in assets and liabilities of $(9.1) million.  The excess distributions were primarily funded through cash flow from previously available cash and proceeds from the sale of loans originated for sale, which is included in cash flows from operating activities in the consolidated statement of cash flows and totaled $14.3 million for the nine months ended September 30, 2018.

Capitalization

Refer to Note 5: Indebtedness, Note 9: Series D Preferred Shares, and Note 10: Shareholders’ Equity in the Notes to Consolidated Financial Statements, for information regarding our capitalization.

Due to the current trading levels of our publicly traded securities and other factors, we do not expect for the foreseeable future to generate liquidity from the proceeds from future offerings of our securities, including through our dividend reinvestment and share purchase plan, the 2014 Preferred ATM agreement or the COD sales agreement. With respect to sales pursuant to the 2014 Preferred ATM agreement or the COD sales agreement, these factors include our need to prepare and file a current prospectus supplement to our current universal shelf registration statement on Form S-3, or the shelf registration statement, to register any such sales and our limited eligibility to use our shelf registration statement since filing the Annual Report.  Pursuant to Instruction I.B.6 to Form S-3, or the Baby Shelf rules, since filing the Annual Report, we may not sell more than the equivalent of one-third of our public float during any 12 consecutive month period so long as our public float is less than $75.0 million, and we will not be able to rely on the Baby Shelf rules to use our universal shelf registration statement if our securities cease to be listed on a national securities exchange.  In addition, we are not an issuer eligible to use our shelf registration statement while we have dividend arrearages until we file our Annual Report for 2018.

Off-Balance Sheet Arrangements and Commitments

There have been no material changes in off-balance sheet arrangements or commitments during the three and nine months ended September 30, 2018 from the disclosures included in our Annual Report on Form 10-K for the year ended December 31, 2017.

Critical Accounting Estimates and Policies

Our Annual Report on Form 10-K for the year ended December 31, 2017 contains a discussion of our critical accounting policies. On January 1, 2018 we adopted a number of new accounting pronouncements and revised our accounting policies. See Note 2: Summary of Significant Accounting Policies in the Notes to Consolidated Financial Statements. Management discusses our critical accounting policies and management’s judgments and estimates with the audit committee of our Board.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

There have been no material changes in quantitative and qualitative market risks during the three and nine months ended September 30, 2018 from the disclosures included in our Annual Report on Form 10-K for the year ended December 31, 2017.

Item 4. Controls and Procedures

Disclosure Controls and Procedures

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports under the Securities Exchange Act of 1934, as amended, or the Exchange Act, 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.

Under the supervision of our chief executive officer and chief financial officer and with the participation of our disclosure committee, we have carried out an evaluation of the effectiveness of our disclosure controls and procedures as of the end of the period covered by this report. Based upon that evaluation, our chief executive officer and chief financial officer concluded that our disclosure

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controls and procedures are not effective at the reasonable assurance level. Based upon a previously identified material weakness in our internal control over financial reporting, as of December 31, 2017, related to an ineffective continuous risk assessment process and monitoring activities to modify financial reporting processes and related internal controls impacted by changes in the business operations which led to ineffective process level controls over the accuracy of data inputs used in the valuation of a financial liability and not investigating and resolving the difference identified by a reconciliation control related to a financial asset, our chief executive officer and chief financial officer concluded that our disclosure controls and procedures were not effective at September 30, 2018.

Management is in the process of remediating the material weakness. Management is implementing enhancements to its risk assessment process and monitoring activities to ensure timely identification of changes in the business operations such that necessary changes in financial reporting processes and related internal controls are implemented. Notwithstanding this material weakness, RAIT’s management, including the CEO and CFO, has concluded that our consolidated financial statements included in this Form 10-Q fairly present, in all material respects, our financial position, results of operations and cash flows as of the dates, and for the periods presented, in conformity with U.S. generally accepted accounting principles.

Changes in Internal Control Over Financial Reporting

Except as otherwise stated above, there were no changes in our internal control over financial reporting or in other factors during the quarter ended September 30, 2018, that have materially affected, or were reasonably likely to materially affect, our internal control over financial reporting.

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Part II. OTHER INFORMATION

Item 1. Legal Proceedings

General

We are involved from time to time in litigation on various matters, including disputes with tenants of owned properties, disputes arising out of agreements to purchase or sell properties and disputes arising out of our loan portfolio. Given the nature of our business activities, these lawsuits are considered routine to the conduct of our business. The result of any particular lawsuit cannot be predicted, because of the very nature of litigation, the litigation process and its adversarial nature, and the jury system. We do not expect that the liabilities, if any, that may ultimately result from such routine legal actions will have a material adverse effect on our consolidated financial position, results of operations or cash flows.

RAIT Preferred Funding II, Ltd. v. CWCapital Asset Management LLC, et al.–Index No. 651729/2016 (Sup. Ct. N.Y.)

On September 20, 2017, RAIT Preferred Funding II, Ltd., or RAIT II, filed an amended complaint against CWCapital Asset Management, LLC, or CWCapital, Wells Fargo Bank N.A., or Wells Fargo, and U.S. Bank N.A., or U.S. Bank. This action concerns a loan, or the mortgage loan, to a non-party borrower, or the borrower, in 2007.  RAIT II purchased $18.5 million of the mortgage loan for which it holds a promissory note, or note B.  U.S. Bank is the trustee for a securitization trust that purchased the remaining $190.0 million of the mortgage loan and for which it held a promissory note, or note A.  CWCapital is the special servicer and Wells Fargo is the master servicer for the mortgage loan (including note A and note B).  The parties’ rights and obligations are governed by, among other things, a pooling and servicing agreement and a co-lender agreement. The mortgage loan was repaid in May of 2017, and the defendants have alleged that RAIT II was not entitled to receive any payoff of principal under note B pursuant to the subordination and other provisions of the co-lender agreement.  In the amended complaint, RAIT II alleges, among other things, that the defendants breached certain of its obligations under the operative documents and RAIT II should have received, among other things, all of its $18.5 million principal under note B.  On October 11, 2017, CWCapital and U.S. Bank moved to dismiss the amended complaint and on November 13, 2017 Wells Fargo moved to dismiss the amended complaint.  RAIT II filed its opposition to the motions to dismiss on November 27, 2017.  By Decision and Order dated January 29, 2018, the Court denied the defendants’ motions to dismiss the contract claims, leaving intact RAIT II’s breach of contract claims against all defendants.  The Court dismissed RAIT II’s non-contract claims (unjust enrichment, conversion, money had and received, and declaratory judgment) as duplicative of the surviving contract claims.  The litigation is now in the discovery phase.  RAIT Partnership, L.P. serves as the collateral manager and servicer for RAIT II.  The court denied defendants’ motion to dismiss RAIT II’s amended complaint, and the parties are now in the midst of the discovery phase of the litigation.

Item 1A. Risk Factors

There have not been any material changes from the risk factors previously disclosed in Item 1A—“Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2017, except as described below.

The Reverse Stock Split may adversely affect trading in our common shares.

While we implemented the Reverse Stock Split, the trading price of our common shares has declined, and may continue to decline, after the Reverse Stock Split.  The market for our common shares has become, and may remain, less liquid as a result of the Reverse Stock Split.

RAIT’s ability to act as servicer and special servicer for RAIT FL6 and RAIT FL8 could be materially adversely affected if RAIT is unable to address DBRS’ concerns.

As described above under Part I, Item 2, “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Securitization Summary,” DBRS announced that it had placed all classes of the Floating Rate Notes issued by RAIT FL5, RAIT FL6 and RAIT FL8 under review with negative implications citing concerns over RAIT’s ability to continue to effectively service and special service these transactions due to RAIT’s announcement of the 2018 strategic steps. DBRS announced it would revisit the ratings once additional information becomes available.  RAIT’s ability to act as servicer and special servicer for the RAIT FL6 and RAIT FL8 securitizations could be materially adversely affected if RAIT is unable to address DBRS’ concerns.

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Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

We withheld the following common shares to satisfy tax withholding obligations during the quarter ending September 30, 2018 arising from the vesting of restricted share awards made pursuant to the RAIT Financial Trust 2017 Incentive Award Plan. These common shares may be deemed to be “issuer purchases” of common shares that are required to be disclosed pursuant to the item.

Period	Total Number of Shares Purchased		Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs		Maximum Number (or Approximate Dollar Value) of Shares that May Yet Be Purchased Under the Plans or Programs
07/01/2018 to 07/31/2018		-		-		-		-
08/01/2018 to 08/31/2018		48		2.65		48		-
09/01/2018 to 09/30/2018		-		-		-		-
Total		48	$	2.65		48		-

(1) The price reported is the weighted average price paid per share using our closing stock price on the NYSE on the vesting date of the relevant award.

Item 3. Defaults Upon Senior Securities

(b)  In June 2018, the Board determined to suspend the quarterly dividend on RAIT’s 7.75% Series A Cumulative Redeemable Preferred Shares, RAIT’s 8.375% Series B Cumulative Redeemable Preferred Shares, and RAIT’s 8.875% Series C Cumulative Redeemable Preferred Shares. Suspension of the dividends did not constitute an event of default under any of our indebtedness. However, as a result of such suspension, we are in arrears in the payment of dividends with respect to our preferred shares. The table below details the arrearage of our preferred stock dividends.

($ in millions)	Series A		Series B		Series C
Dividends in arrears	$	5	$	3	$	2

Item 6. Exhibits

The exhibits filed as part of this quarterly report on Form 10-Q are identified below.

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Exhibit Number	Description of Documents
3.1.1	Amended and Restated Declaration of Trust of RAIT Financial Trust (“RAIT”). Incorporated by reference to Exhibit 3.1(b) to RAIT’s Registration Statement on Form S-11 as filed with the Securities and Exchange Commission (“SEC”) on September 8, 1997 (Registration No. 333-35077).
3.1.2	Articles of Amendment to Amended and Restated Declaration of Trust of RAIT. Incorporated by reference to Exhibit 3.3.1 to RAIT’s Registration Statement on Form S-11/A as filed with the SEC on June 8, 1998 (Registration No. 333-53067).
3.1.3	Articles of Amendment to Amended and Restated Declaration of Trust of RAIT. Incorporated by reference to Exhibit 4(iii) to RAIT’s Registration Statement on Form S-2 as filed with the SEC on February 13, 2001 (Registration No. 333-55518).
3.1.4	Certificate of Correction to the Amended and Restated Declaration of Trust of RAIT. Incorporated by reference to RAIT’s Form 10-Q for the Quarterly Period ended March 31, 2002 (File No. 1-14760).
3.1.5	Articles of Amendment to Amended and Restated Declaration of Trust of RAIT. Incorporated by reference to RAIT’s Form 8-K as filed with the SEC on December 15, 2006 (File No. 1-14760).
3.1.6	Articles of Amendment to Amended and Restated Declaration of Trust of RAIT. Incorporated by reference to RAIT’s Form 8-K as filed with the SEC on July 1, 2011 (File No. 1-14760).
3.1.7	Articles Supplementary (the “Series A Articles Supplementary”) relating to the 7.75% Series A Cumulative Redeemable Preferred Shares of Beneficial Interest (the “Series A Preferred Shares”) of RAIT. Incorporated by reference to RAIT’s Form 8-K as filed with the SEC on March 18, 2004 (File No. 1-14760).
3.1.8	Certificate of Correction to the Series A Articles Supplementary. Incorporated by reference to RAIT’s Form 8-K as filed with the SEC on March 18, 2004 (File No. 1-14760).
3.1.9	Articles Supplementary relating to the 8.375% Series B Cumulative Redeemable Preferred Shares of Beneficial Interest, (the “Series B Preferred Shares”) of RAIT. Incorporated by reference to RAIT’s Form 8-K as filed with the SEC on October 1, 2004 (File No. 1-14760).
3.1.10	Articles Supplementary relating to the 8.875% Series C Cumulative Redeemable Preferred Shares of Beneficial Interest, (the “Series C Preferred Shares”) of RAIT. Incorporated by reference to RAIT’s Form 8-A as filed with the SEC on June 29, 2007 (File No. 1-14760).
3.1.11	Articles Supplementary relating to Series A Preferred Shares, Series B Preferred Shares and Series C Preferred Shares. Incorporated by reference to RAIT’s Form 8-K as filed with the SEC on May 25, 2012 (File No. 1-14760).
3.1.12	Certificate of Correction relating to Series A Preferred Shares, Series B Preferred Shares and Series C Preferred Shares. Incorporated by reference to RAIT’s Form 10-Q for the quarterly period ended June 30, 2012 (File No. 1-14760).
3.1.13	Articles Supplementary (the “Series D Articles Supplementary”) relating to the Series D Cumulative Redeemable Preferred Shares of Beneficial Interest (the “Series D Preferred Shares”) of RAIT. Incorporated by reference to RAIT’s Form 8-K as filed with the SEC on October 4, 2012 (File No. 1-14760).
3.1.14	Articles Supplementary relating to the Series E Cumulative Redeemable Preferred Shares of Beneficial Interest (the “Series E Preferred Shares”) of RAIT. Incorporated by reference to RAIT’s Form 8-K as filed with the SEC on December 4, 2012 (File No.1-14760).
3.1.15	Amendment dated November 30, 2012 to the Series D Articles Supplementary. Incorporated by reference to RAIT’s Form 8-K as filed with the SEC on December 4, 2012 (File No.1-14760).
3.1.16	Articles Supplementary relating to the Series A Preferred Shares. Incorporated by reference to RAIT’s Form 8-K as filed with the SEC on June 13, 2014 (File No. 1-14760).
3.1.17	Articles Supplementary dated June 27, 2018. Incorporated by reference to RAIT’s Form 8-K as filed with the SEC on June 28, 2018 (File No. 1-14760).
3.1.18	Articles of Amendment to Amended and Restated Declaration of Trust of RAIT dated August 6, 2018. Incorporated by reference to RAIT’s Form 10-Q for the quarterly period ended June 30, 2018. (File No. 1-14760).
3.2.1	Amended and Restated Bylaws of RAIT, as adopted on November 16, 2016. Incorporated by reference to RAIT’s Form 8-K as filed with the SEC on November 17, 2016 (File No. 1-14760).
3.2.2	First Amendment to the Amended and Restated Bylaws of RAIT. Incorporated by reference to RAIT’s Form 8-K as filed with the SEC on June 28, 2017 (File No. 1-14760).
3.2.3	Second Amendment to the Amended and Restated Bylaws of RAIT. Incorporated by reference to RAIT’s Form 8-K as filed with the SEC on August 8, 2017 (File No. 1-14760).
4.1.1	Form of Certificate for Common Shares of Beneficial Interest. Incorporated by reference to RAIT’s Form 8-K as filed with the SEC on July 1, 2011 (File No. 1-14760).

67

Exhibit Number	Description of Documents
4.1.2	Form of Certificate for the Series A Preferred Shares. Incorporated by reference to RAIT’s Form 8-K as filed with the SEC on March 22, 2004 (File No. 1-14760).
4.1.3	Form of Certificate for the Series B Preferred Shares. Incorporated by reference to RAIT’s Form 8-K as filed with the SEC on October 1, 2004 (File No. 1-14760).
4.1.4	Form of Certificate for the Series C Preferred Shares. Incorporated by reference to RAIT’s Form 8-A as filed with the SEC on June 29, 2007 (File No. 1-14760).
4.1.5	Form of Certificate for the Series D Preferred Shares. Incorporated by reference to RAIT’s Form 8-K as filed with the SEC on October 23, 2012 (File No. 1-14760).
4.1.6	Form of Certificate for the Series E Preferred Shares. Incorporated by reference to RAIT’s Form 8-K as filed with the SEC on October 23, 2012 (File No. 1-14760).
4.1.7	Form of Certificate for Common Shares of Beneficial Interest. Incorporated by reference to RAIT’s Form 8-K as filed with the SEC on August 13, 2018 (File No. 1-14760).
4.2.1	Base Indenture dated as of December 10, 2013 between RAIT, as issuer, and Wells Fargo Bank, National Association., as trustee. Incorporated by reference to RAIT’s Form 8-K as filed with the SEC on December 13, 2013 (File No. 1-14760).
4.2.2	Supplemental Indenture dated as of December 10, 2013 between RAIT, as issuer, and Wells Fargo Bank, National Association., as trustee. Incorporated by reference to RAIT’s Form 8-K as filed with the SEC on December 13, 2013 (File No. 1-14760).
4.2.3	Form of RAIT 4.00% Convertible Senior Note due 2033 (included in Exhibit 4.2.2). Incorporated by reference to RAIT’s Form 8-K as filed with the SEC on December 13, 2013 (File No. 1-14760).
4.3.1	Base Indenture dated as of March 21, 2011 between RAIT, as issuer, and Wells Fargo Bank, National Association., as trustee. Incorporated by reference to RAIT’s Form 8-K as filed with the SEC on March 22, 2011 (File No. 1-14760).
4.3.2	Supplemental Indenture dated as of March 21, 2011 between RAIT, as issuer, and Wells Fargo Bank, National Association., as trustee. Incorporated by reference to RAIT’s Form 8-K as filed with the SEC on March 22, 2011 (File No. 1-14760).
4.4	Indenture dated as of October 5, 2011 between RAIT and Wilmington Trust, National Association, as trustee. Incorporated by reference to RAIT’s Form 10-Q for the quarterly period ended September 30, 2011 (File No. 1-14760).
4.5.1	Registration Rights Agreement dated as of October 1, 2012 by and among RAIT and ARS VI Investor I, LP (“ARS VI”). Incorporated by reference to RAIT’s Form 8-K as filed with the SEC on October 4, 2012 (File No. 1-14760).
4.5.2	Amendment No. 1 to Registration Rights Agreement dated as of April 25, 2014 by and among RAIT and ARS VI. Incorporated by reference to RAIT’s Registration Statement on Form S-3 as filed with the Securities and Exchange Commission (“SEC”) on April 28, 2014 (Registration No. 333-195547).
4.5.3	Common Share Purchase Warrant No.1 dated October 17, 2012 issued by RAIT to ARS VI. Incorporated by reference to RAIT’s Form 8-K as filed with the SEC on October 23, 2012 (File No. 1-14760).
4.5.4	Common Share Appreciation Right No.1 dated October 17, 2012 issued by RAIT to ARS VI. Incorporated by reference to RAIT’s Form 8-K as filed with the SEC on October 23, 2012 (File No. 1-14760).
4.5.5	Common Share Purchase Warrant No. 2 dated November 15, 2012 issued by RAIT to ARS VI. Incorporated by reference to RAIT’s Form 8-K as filed with the SEC on November 21, 2012 (File No.1-14760).
4.5.6	Common Share Appreciation Right No. 2 dated November 15, 2012 issued by RAIT to ARS VI. Incorporated by reference to RAIT’s Form 8-K as filed with the SEC on November 21, 2012 (File No.1-14760).
4.5.7	Common Share Purchase Warrant No. 3 dated December 18, 2012 issued by RAIT to ARS VI. Incorporated by reference to RAIT’s Form 8-K as filed with the SEC on December 18, 2012 (File No.1-14760).
4.5.8	Common Share Appreciation Right No. 3 dated December 18, 2012 issued by RAIT to ARS VI. Incorporated by reference to RAIT’s Form 8-K as filed with the SEC on December 18, 2012 (File No.1-14760).
4.5.9	Common Share Purchase Warrant No. 4 dated March 27, 2014 issued by RAIT to ARS VI. Incorporated by reference to RAIT’s Form 8-K as filed with the SEC on March 27, 2014 (File No. 1-14760).
4.5.10	Common Share Appreciation Right No. 4 dated March 27, 2014 issued by RAIT to ARS VI. Incorporated by reference to RAIT’s Form 8-K as filed with the SEC on March 27, 2014 (File No. 1-14760).
4.5.11	Put Right Notice dated October 10, 2017 from ARS VI to RAIT. Incorporated by reference to RAIT’s Form 8-K as filed with the SEC on October 17, 2017 (File No. 1-14760).
4.5.12	Extension Agreement dated as of March 12, 2018 by and among ARS VI, RAIT, RAIT Partnership, L.P. Taberna Realty Finance Trust, and RAIT Asset Holdings IV, LLC. Incorporated by reference to RAIT’s Form 10-K for the fiscal year ended December 31, 2017 (File No. 1-14760).
4.5.13	Letter Agreement dated as of June 8, 2018 by and among ARS VI, RAIT, RAIT Partnership, L.P., Taberna Realty Finance Trust, and RAIT Asset Holdings IV, LLC (“NewSub”). Incorporated by reference to RAIT’s Form 8-K as filed with the SEC on June 8, 2018 (File No. 1-14760).
4.5.14	Consent and Acknowledgment dated as of June 12, 2018 by and among ARS VI, RAIT, RAIT Partnership, L.P., Taberna Realty Finance Trust and NewSub. Incorporated by reference to RAIT’s Form 8-K as filed with the SEC on June 13, 2018 (File No. 1-14760).
4.5.15	Redemption and Exchange Agreement dated as of June 27, 2018 among RAIT, NewSub and ARS VI. Incorporated by reference to RAIT’s Form 8-K as filed with the SEC on June 28, 2018 (File No. 1-14760).

68

Exhibit Number	Description of Documents
4.5.16	Termination Agreement dated as of June 27, 2018 among RAIT, RAIT Partnership, L.P., Taberna Realty Finance Trust, NewSub and ARS VI. Incorporated by reference to RAIT’s Form 8-K as filed with the SEC on June 28, 2018 (File No. 1-14760).
4.6.1	Base Indenture dated as of December 10, 2013 between RAIT, as issuer, and Wells Fargo Bank, National Association., as trustee. Incorporated by reference to RAIT’s Form 8-K as filed with the SEC on December 13, 2013 (File No. 1-14760).
4.6.2	Supplemental Indenture dated as of December 10, 2013 between RAIT, as issuer, and Wells Fargo Bank, National Association., as trustee. Incorporated by reference to RAIT’s Form 8-K as filed with the SEC on December 13, 2013 (File No. 1-14760).
4.6.3	Form of RAIT 4.00% Convertible Senior Note due 2033 (included in Exhibit 4.6.2). Incorporated by reference to RAIT’s Form 8-K as filed with the SEC on December 13, 2013 (File No. 1-14760).
4.6.4	Second Supplemental Indenture, dated as of April 14, 2014, between RAIT, as issuer, and Wells Fargo Bank, National Association, as trustee. Incorporated by reference to RAIT’s Form 8-A as filed with the SEC on April 14, 2014. (File No. 1-14760).
4.6.5	Form of 7.625% Senior Notes due 2024 (included as Exhibit A to Exhibit 4.6.4 hereto).
4.6.6	Third Supplemental Indenture, dated as of August 14, 2014, between RAIT, as Issuer, and Wells Fargo Bank, National Association, as trustee. Incorporated by reference to RAIT’s Form 8-A as filed with the SEC on August 14, 2014.
4.6.7	Form of 7.125% Senior Notes due 2019 (included as Exhibit A to Exhibit 4.6.6 hereto). Certain Instruments defining the rights of holders of long-term debt securities of the Registrant and its subsidiaries are omitted pursuant to Item 601(b)(4)(iii) of Regulation S-K. The Registrant hereby undertakes to furnish to the SEC, upon request, copies of any such instruments.
10.1	Amendment No. 7 to Master Repurchase Agreement dated as of January 19, 2018 among RAIT CRE Conduit II, LLC, as seller, UBS AG, as buyer, and RAIT, as guarantor. Incorporated by reference to RAIT’s Form 8-K as filed with the SEC on January 24, 2018 (File No. 1-14760).
10.2	Separation Agreement dated as of February 27, 2018 between RAIT and Scott L.N. Davidson. Incorporated by reference to RAIT’s Form 10-K for the fiscal year ended December 31, 2017 (File No. 1-14760).
10.3.1	Letter Agreement dated February 27, 2018 between RAIT and John J. Reyle.  Incorporated by reference to RAIT’s Form 10-K for the fiscal year ended December 31, 2017 (File No. 1-14760).
10.3.2	Amended and Restated Employment Agreement dated as of July 19, 2018 between RAIT and John J. Reyle. Incorporated by reference to RAIT’s Form 8-K as filed with the SEC on July 20, 2018 (File No. 1-14760).
10.4	Separation Agreement dated as of March 13, 2018 and accepted March 14, 2018 between RAIT and Glenn Riis. Incorporated by reference to RAIT’s Form 10-K for the fiscal year ended December 31, 2017 (File No. 1-14760).
10.5.1	Non-Executive Chairman Agreement dated as of February 27, 2018 between RAIT and Michael J. Malter. Incorporated by reference to RAIT’s Form 10-K for the fiscal year ended December 31, 2017 (File No. 1-14760).
10.5.2	Amended and Restated Non-Executive Chairman Agreement dated as of July 19, 2018 between RAIT and Michael J. Malter. Incorporated by reference to RAIT’s Form 8-K as filed with the SEC on July 20, 2018 (File No. 1-14760).
10.6.1	Letter dated as of March 30, 2018 from Libby Frischer Family Partnership (“LFFP”) to RAIT and Ledgewood, P.C.  Incorporated by reference to RAIT’s Form 8-K as filed with the SEC on April 2, 2018 (File No. 1-14760).
10.6.2	Cooperation Agreement dated as of April 6, 2018 by and among RAIT, LFFP and Charles Frischer (“Mr.  Frischer”).  Incorporated by reference to RAIT’s Form 8-K as filed with the SEC on April 9, 2018 (File No. 1-14760).
10.6.3	Letter dated as of April 6, 2018 from LFFP and Mr. Frischer to RAIT and Ledgewood, P.C.  Incorporated by reference to RAIT’s Form 8-K as filed with the SEC on April 9, 2018 (File No. 1-14760).
10.6.4	Letter dated as of May 11, 2018 from the Libby Frischer Family Partnership and Charles Frischer to RAIT and Ledgewood, P.C. Incorporated by reference to RAIT’s Form 8-K as filed with the SEC on May 11, 2018 (File No. 1-14760).
10.7	Purchase and Sale Agreement dated as of June 14, 2018 by and between NewSub, as seller, and Melody RE  II, LLC, as purchaser, and, solely as to designated provisions, Land Services USA, Inc., Melody Capital Partners Onshore Credit Fund L.P., Melody Capital Partners FDB Credit Fund LLC, Melody Special Situations Offshore Credit Mini-Master Fund, L.P. and Melody Capital Partners Offshore Credit Mini-Master Fund, L.P. Incorporated by reference to RAIT’s Form 8-K as filed with the SEC on June 15, 2018 (File No. 1-14760).
10.8	Amended and Restated Employment Agreement dated as of July 19, 2018 between RAIT and Alfred J. Dilmore. Incorporated by reference to RAIT’s Form 8-K as filed with the SEC on July 20, 2018 (File No. 1-14760).
10.9.1	Cooperation Agreement dated as of August 13, 2018 by and among RAIT Financial Trust (“RAIT”), Pleasant Lake Apartments Limited Partnership, Laughlin Holdings LLC, Ramat Securities Ltd (collectively the “Investors”) and Howard Amster (“Mr. Amster”). Incorporated by reference to RAIT’s Form 8-K as filed with the SEC on August 14, 2018 (File No. 1-14760).
10.9.2	Letter Agreement dated as of August 13, 2018 from the Investors and Mr. Amster to RAIT and Ledgewood, P.C. Incorporated by reference to RAIT’s Form 8-K as filed with the SEC on August 14, 2018 (File No. 1-14760).

69

Exhibit Number	Description of Documents
10.10.1	Cooperation Agreement dated as of October 5, 2018 by and among RAIT Financial Trust (“RAIT”), Steven D. Lebowitz, Deborah Lebowitz, Paul Lebowitz, Kathryn Lebowitz Silverberg, Lauren Lebowitz Salem, David L. Lebowitz, Andrew S. Lebowitz, Robert Lebowitz, the Lebowitz Family Trust, Lebowitz Family Stock, LLC, Lebowitz RCT, LP and The Steven and Deborah Lebowitz Foundation (collectively the “Investors”). Incorporated by reference to RAIT’s Form 8-K as filed with the SEC on October 11, 2018 (File No. 1-14760).
10.10.2	Letter Agreement dated as of October 5, 2018 from the Investors to RAIT and Ledgewood, P.C. Incorporated by reference to RAIT’s Form 8-K as filed with the SEC on October 11, 2018 (File No. 1-14760).
31.1	Rule 13a-14(a) Certification by the Chief Executive Officer of RAIT. Filed herewith.
31.2	Rule 13a-14(a) Certification by the Chief Financial Officer of RAIT. Filed herewith.
32.1	Section 1350 Certification by the Chief Executive Officer of RAIT. Filed herewith.
32.2	Section 1350 Certification by the Chief Financial Officer of RAIT. Filed herewith.
101	Pursuant to Rule 405 of Regulation S-T, the following financial information from RAIT’s Quarterly Report on Form 10-Q for the period ended September 30, 2018 is formatted in XBRL interactive data files: (i) Consolidated Statements of Operations for the three and nine months ended September 30, 2018 and 2017; (ii) Consolidated Balance Sheets as of September 30, 2018 and December 31, 2017; (iii) Consolidated Statements of Comprehensive Income (Loss) for the three and nine months ended September 30, 2018 and 2017; (iv) Consolidated Statement of Changes in Equity for the nine months ended September 30, 2018; (v) Consolidated Statements of Cash Flows for the nine months ended September 30, 2018 and 2017; and (vi) Notes to Unaudited Consolidated Financial Statements. Filed herewith.

70

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.

	RAIT FINANCIAL TRUST (Registrant)
Date: November 8, 2018	By:	/s/ John J. Reyle
		John J. Reyle, Chief Executive Officer, President and General Counsel
		(On behalf of the registrant and as its Principal Executive Officer)
Date: November 8, 2018	By:	/s/ Alfred J. Dilmore
		Alfred J. Dilmore, Chief Financial Officer, Treasurer and Chief Accounting Officer
		(On behalf of the registrant and as its Principal Financial Officer and Principal Accounting Officer)

71

EX-31.1

Exhibit 31.1

CERTIFICATION PURSUANT TO

RULES 13a-14(a) AND 15d-14(a) UNDER THE SECURITIES

EXCHANGE ACT OF 1934, AS AMENDED

I, John J. Reyle, certify that:

1. I have reviewed this quarterly report on Form 10-Q of RAIT Financial Trust;

2. Based on my knowledge, this 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 report;

3. Based on my knowledge, the financial statements, and other financial information included in this 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 report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, 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 report is being prepared;

b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c. Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: November 8, 2018		/s/ JOHN J. REYLE
	Name:	John J. Reyle
	Title:	Chief Executive Officer,
		President and General Counsel (Principal Executive Officer)

EX-31.2

Exhibit 31.2

CERTIFICATION PURSUANT TO

RULES 13a-14(a) AND 15d-14(a) UNDER THE SECURITIES

EXCHANGE ACT OF 1934, AS AMENDED

I, Alfred J. Dilmore, certify that:

1. I have reviewed this quarterly report on Form 10-Q of RAIT Financial Trust;

2. Based on my knowledge, this 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 report;

3. Based on my knowledge, the financial statements, and other financial information included in this 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 report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, 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 report is being prepared;

b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c. Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: November 8, 2018		/s/ Alfred J. Dilmore
	Name:	Alfred J. Dilmore
	Title:	Chief Financial Officer, Treasurer
		and Chief Accounting Officer (Principal Financial Officer)

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of RAIT Financial Trust (the “Company”) on Form 10-Q for the quarterly period ended September 30, 2018 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, John J. Reyle, Chief Executive Officer, President and General Counsel of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

1. The Report fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934; and

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ JOHN J. REYLE

John J. Reyle

Chief Executive Officer,

President and General Counsel

(Principal Executive Officer)

Date: November 8, 2018

EX-32.2

Exhibit 32.2

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of RAIT Financial Trust (the “Company”) on Form 10-Q for the quarterly period ended September 30, 2018 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Alfred J. Dilmore, Chief Financial Officer, Treasurer and Chief Accounting Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

1. The Report fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934; and

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ Alfred J. Dilmore

Alfred J. Dilmore

Chief Financial Officer, Treasurer and Chief Accounting Officer

(Principal Financial Officer)

Date: November 8, 2018

XML

Document and Entity Information - shares	9 Months Ended
	Sep. 30, 2018	Nov. 02, 2018
Document And Entity Information [Abstract]
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Sep. 30, 2018
Document Fiscal Year Focus	2018
Document Fiscal Period Focus	Q3
Trading Symbol	RAS
Entity Registrant Name	RAIT FINANCIAL TRUST
Entity Central Index Key	0001045425
Current Fiscal Year End Date	--12-31
Entity Filer Category	Accelerated Filer
Entity Small Business	false
Entity Emerging Growth Company	false
Entity Common Stock, Shares Outstanding		1,850,471

XML

Consolidated Balance Sheets - USD ($) $ in Thousands	Sep. 30, 2018	Dec. 31, 2017
Investment in mortgage loans, held for investment:
Commercial mortgage loans, mezzanine loans, and preferred equity interests	$ 627,910	$ 1,270,607
Allowance for loan losses	(23,617)	(14,883)
Investments in real estate, net of accumulated depreciation	123,145	245,904
Cash and cash equivalents	98,352	53,380
Restricted cash	86,154	157,914
Accrued interest receivable	24,959	29,664
Other assets	14,134	43,871
Intangible assets, net of accumulated amortization of $5,527 and $6,831, respectively	1,893	5,376
Total assets	957,603	1,791,833
Liabilities and Equity
Indebtedness, net of unamortized discounts, premiums and deferred financing costs of $17,880 and $29,465 respectively (including $560,287 and $1,038,864 held by consolidated VIEs, respectively)	814,987	1,390,188
Accrued interest payable	3,857	4,688
Accounts payable and accrued expenses	4,931	9,641
Borrowers' escrows	46,844	117,070
Deferred taxes and other liabilities	2,573	12,116
Total liabilities	873,192	1,533,703
Series D cumulative redeemable preferred shares, $0.01 par value per share, 0 and 4,000,000 shares authorized, respectively, 0 and 3,133,720 shares issued and outstanding, respectively		78,343
Shareholders’ equity:
Common shares, $1.50 par value per share, 200,000,000 shares authorized 1,850,471 and 1,860,903 issued and outstanding, respectively, including 10,264 and 24,930 unvested restricted common share awards, respectively	2,776	2,791
Additional paid in capital	2,102,170	2,094,804
Accumulated other comprehensive income (loss)	9,743
Retained earnings (deficit)	(2,030,378)	(1,921,533)
Total shareholders’ equity	84,411	176,155
Noncontrolling interests		3,632
Total equity	84,411	179,787
Total liabilities and equity	957,603	1,791,833
Held For Investment
Investment in mortgage loans, held for investment:
Investment in mortgage loans	604,293	1,255,724
Held For Sale
Investment in mortgage loans, held for investment:
Investment in mortgage loans	4,673
7.75% Series A Cumulative Redeemable Preferred Stock
Shareholders’ equity:
Preferred shares, $0.01 par value per share	57	53
Total equity	57	53
8.375% Series B Cumulative Redeemable Preferred Stock
Shareholders’ equity:
Preferred shares, $0.01 par value per share	25	23
Total equity	25	23
8.875% Series C Cumulative Redeemable Preferred Stock
Shareholders’ equity:
Preferred shares, $0.01 par value per share	18	17
Total equity	18	17
Series E Cumulative Redeemable Preferred Stock
Shareholders’ equity:
Preferred shares, $0.01 par value per share

XML

Consolidated Balance Sheets (Parenthetical) - USD ($) $ in Thousands	9 Months Ended	12 Months Ended
	Sep. 30, 2018	Dec. 31, 2017
Real estate, accumulated depreciation	$ 9,328	$ 28,768
Investments in real estate, net of accumulated depreciation	123,145	245,904
Intangible assets, accumulated amortization	5,527	6,831
Indebtedness, unamortized discounts, premiums and deferred financing costs	17,880	29,465
Indebtedness, net of unamortized discounts, premiums and deferred financing costs	$ 814,987	$ 1,390,188
Preferred shares, authorized	25,000,000	25,000,000
Cumulative redeemable preferred shares, shares outstanding	0
Common shares, par value	$ 1.50	$ 1.50
Common shares, shares authorized	200,000,000	200,000,000
Common shares, shares issued	1,850,471	1,860,903
Common shares, shares outstanding	1,850,471	1,860,903
Unvested restricted common share awards	10,264	24,930
VIE
Investment in mortgage loans	$ 599,809	$ 1,174,827
Investments in real estate, net of accumulated depreciation	18,133	18,634
Indebtedness, net of unamortized discounts, premiums and deferred financing costs	$ 560,287	$ 1,038,864
Series D Cumulative Redeemable Preferred Stock
Series D cumulative redeemable preferred shares, par value	$ 0.01	$ 0.01
Series D cumulative redeemable preferred shares, shares authorized	0	4,000,000
Series D cumulative redeemable preferred shares, shares issued	0	3,133,720
Series D cumulative redeemable preferred shares, shares outstanding	0	3,133,720
7.75% Series A Cumulative Redeemable Preferred Stock
Preferred shares, authorized	8,069,288	8,069,288
Preferred shares, dividend rate	7.75%	7.75%
Cumulative redeemable preferred shares, liquidation preference	$ 25.00	$ 25.00
Cumulative redeemable preferred shares, shares issued	5,727,500	5,344,353
Cumulative redeemable preferred shares, shares outstanding	5,727,500	5,344,353
Preferred shares, par value	$ 0.01	$ 0.01
8.375% Series B Cumulative Redeemable Preferred Stock
Preferred shares, authorized	4,300,000	4,300,000
Preferred shares, dividend rate	8.375%	8.375%
Cumulative redeemable preferred shares, liquidation preference	$ 25.00	$ 25.00
Cumulative redeemable preferred shares, shares issued	2,508,797	2,340,969
Cumulative redeemable preferred shares, shares outstanding	2,508,797	2,340,969
Preferred shares, par value	$ 0.01	$ 0.01
8.875% Series C Cumulative Redeemable Preferred Stock
Preferred shares, authorized	3,600,000	3,600,000
Preferred shares, dividend rate	8.875%	8.875%
Cumulative redeemable preferred shares, liquidation preference	$ 25.00	$ 25.00
Cumulative redeemable preferred shares, shares issued	1,758,030	1,640,425
Cumulative redeemable preferred shares, shares outstanding	1,758,030	1,640,425
Preferred shares, par value	$ 0.01	$ 0.01
Series E Cumulative Redeemable Preferred Stock
Preferred shares, authorized	0	4,000,000
Cumulative redeemable preferred shares, shares issued	0	0
Cumulative redeemable preferred shares, shares outstanding	0	0
Preferred shares, par value	$ 0.01	$ 0.01

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Consolidated Statements of Operations - USD ($) $ in Thousands		3 Months Ended		9 Months Ended
		Sep. 30, 2018	Sep. 30, 2017	Sep. 30, 2018	Sep. 30, 2017
Revenue:
Investment interest income		$ 8,353	$ 18,115	$ 43,542	$ 50,647
Investment interest expense		(5,940)	(10,236)	(26,079)	(30,555)
Net interest margin		2,413	7,879	17,463	20,092
Property income		6,332	15,012	23,814	52,023
Fee and other income		582	1,712	2,944	4,904
Total revenue		9,327	24,603	44,221	77,019
Expenses:
Interest expense		5,791	8,656	18,918	27,682
Real estate operating expense		4,311	8,313	15,503	28,456
Property management expenses		537	1,908	4,207	6,772
General and administrative expenses:
Compensation expense		2,408	3,194	8,446	10,210
Other general and administrative expense		2,847	3,233	13,270	8,627
Total general and administrative expenses		5,255	6,427	21,716	18,837
Acquisition and integration expenses			57	133	296
Provision for loan losses		7,489	5,516	30,269	27,914
Depreciation and amortization expense		1,828	6,139	8,158	23,712
IRT internalization and management transition expenses					736
Employee separation expenses			575		575
Shareholder activism expenses			155		2,464
Total expenses		25,211	37,746	98,904	137,444
Operating (Loss) Income		(15,884)	(13,143)	(54,683)	(60,425)
Interest and other income (expense), net		342	283	785	144
Gains on assets		6,440	30	2,292	22,795
Gains (losses) on deconsolidation of properties and VIEs		870	(4,035)	(7,307)	(19,982)
Gain on sale of retail property manager		1,262		1,262
Gains (losses) on extinguishments of debt		(239)	(644)	(3,668)	944
Asset impairment		(13,267)	(3,121)	(44,083)	(96,354)
Goodwill impairment					(8,342)
Change in fair value of financial instruments		(410)	4,753	(212)	6,693
Income (loss) before taxes		(20,886)	(15,877)	(105,614)	(154,527)
Income tax benefit (provision)		(152)	34	(152)	261
Net income (loss)		(21,038)	(15,843)	(105,766)	(154,266)
(Income) loss allocated to preferred shares		(5,063)	(8,387)	(4,591)	(25,730)
(Income) loss allocated to noncontrolling interests					(76)
Net income (loss) allocable to common shares		$ (26,101)	$ (24,230)	$ (110,357)	$ (180,072)
Earnings (loss) per share-Basic:
Earnings (loss) per share-Basic		$ (14.18)	$ (13.23)	$ (60.00)	$ (98.47)
Weighted-average shares outstanding-Basic	[1]	1,840,168	1,831,193	1,839,172	1,828,778
Earnings (loss) per share-Diluted:
Earnings (loss) per share-Diluted		$ (14.18)	$ (13.23)	$ (60.00)	$ (98.47)
Weighted average shares outstanding-Diluted	[1]	1,840,168	1,831,193	1,839,172	1,828,778

[1] All share and per-share amounts have been retroactively adjusted to reflect the Reverse Stock Split for all periods presented herein.

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Consolidated Statements of Comprehensive Income (Loss) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2018	Sep. 30, 2017	Sep. 30, 2018	Sep. 30, 2017
Statement Of Income And Comprehensive Income [Abstract]
Net income (loss)	$ (21,038)	$ (15,843)	$ (105,766)	$ (154,266)
Other comprehensive income (loss):
Unrealized gains (losses) from change in fair value based on instrument specific credit risk	(2,801)		486
Total other comprehensive income (loss)	(2,801)		486
Comprehensive income (loss) before allocation to noncontrolling interests	(23,839)	(15,843)	(105,280)	(154,266)
(Income) loss allocated to noncontrolling interests				(76)
Comprehensive income (loss) allocable to common shares	$ (23,839)	$ (15,843)	$ (105,280)	$ (154,342)

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Consolidated Statement of Changes in Equity - 9 months ended Sep. 30, 2018 - USD ($) $ in Thousands	Total	7.75% Series A Cumulative Redeemable Preferred Stock	8.375% Series B Cumulative Redeemable Preferred Stock	8.875% Series C Cumulative Redeemable Preferred Stock	Common Shares	Additional Paid In Capital	AOCI	Retained Earnings (Deficit)	Total Shareholders' Equity	Noncontrolling Interests
Beginning Balance at Dec. 31, 2017	$ 179,787	$ 53	$ 23	$ 17	$ 2,791	$ 2,094,804	$ 0	$ (1,921,533)	$ 176,155	$ 3,632
Beginning Balance (in shares) at Dec. 31, 2017		5,344,353	2,340,969	1,640,425	1,860,903
Cumulative effect adjustments from adoption of recently issued accounting pronouncements at Dec. 31, 2017	761						9,257	(8,496)	761
Adjusted Balance at Dec. 31, 2017	180,548	$ 53	$ 23	$ 17	$ 2,791	2,094,804	9,257	(1,930,029)	176,916	3,632
Adjusted Balance (in shares) at Dec. 31, 2017		5,344,353	2,340,969	1,640,425	1,860,903
Net income (loss)	(105,766)							(105,766)	(105,766)
Preferred shares issued, net	4,366	$ 4	$ 2	$ 1		4,359			4,366
Preferred shares issued, net (shares)		383,147	167,828	117,605
Preferred dividends paid	(6,397)							(6,397)	(6,397)
Impact of Series D redemption	11,921					(11)		11,932	11,921
Common dividends declared	(118)							(118)	(118)
Other comprehensive income (loss), net	486						486		486
Share-based compensation	(163)					(163)			(163)
Issuance of noncontrolling interests	76									76
Distribution to noncontrolling interests	(15)									(15)
Acquisition of noncontrolling interests	(343)					3,239			3,239	(3,582)
Derecognition of noncontrolling interests	(111)									$ (111)
Common shares activity related to equity compensation	(73)				$ (15)	(58)			(73)
Common shares activity related to equity compensation (in shares)					(10,432)
Ending Balance at Sep. 30, 2018	$ 84,411	$ 57	$ 25	$ 18	$ 2,776	$ 2,102,170	$ 9,743	$ (2,030,378)	$ 84,411
Ending Balance (in shares) at Sep. 30, 2018		5,727,500	2,508,797	1,758,030	1,850,471

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Consolidated Statements of Cash Flows - USD ($) $ in Thousands	9 Months Ended
	Sep. 30, 2018	Sep. 30, 2017
Operating activities:
Net income (loss)	$ (105,766)	$ (154,266)
Adjustments to reconcile net income (loss) to cash flow from operating activities:
Provision for loan losses	30,269	27,914
Share-based compensation expense	(163)	1,833
Depreciation and amortization expense	8,158	23,712
Amortization of deferred financing costs and debt discounts	8,042	10,920
Deferral of loan origination fees and costs, net	(1,175)	1,267
(Amortization) of above/below market leases	(334)	(822)
(Gains) Losses on assets	(2,292)	(22,795)
(Gains) Losses on extinguishments of debt	3,668	(944)
(Gains) Losses on deconsolidation of properties and VIEs	7,307	19,982
(Gain) on sale of retail property manager	(1,262)
Asset impairment	44,083	96,354
Goodwill impairment		8,342
Change in fair value of financial instruments	212	(6,693)
Provision (benefit) for deferred taxes		22
Changes in assets and liabilities:
Decrease in accrued interest receivable	3,514	3,966
Decrease in other assets	2,248	2,667
(Decrease) increase in accrued interest payable	(251)	3,940
(Decrease) in accounts payable and accrued expenses	(314)	(1,817)
(Decrease) increase in other liabilities	22	(2,729)
Proceeds from sale of loans originated for sale	14,265
Cash flows provided by (used in) operating activities	10,231	10,853
Investing activities:
Origination of loans for investment	(52,215)	(369,981)
Principal repayments on loans	274,702	384,567
Proceeds from sale of interests in floating rate securitizations, net of cash and restricted cash deconsolidated	31,837
Investments in real estate	(2,457)	(5,715)
Payments related to sale of retail property manager, including cash deconsolidated	(235)
Proceeds from sale of loans originated for investment	108,494
Proceeds from the disposition of real estate	83,667	161,237
(Decrease) increase in borrowers' escrows	(47,677)	6,813
Cash flows provided by (used in) investing activities	396,116	176,921
Financing activities:
Repayments on secured credit facilities and loans payable on real estate	(828)	(975)
Repayments and repurchase of CDO notes payable and floating rate securitizations	(280,890)	(576,536)
Net proceeds from issuance of CDO notes and floating rate securitizations		276,894
Repurchase of convertible notes and senior notes	(43,953)	(7,316)
Repayments of senior secured notes	(11,500)	(48,500)
Net proceeds (repayments) related to floating rate loan repurchase agreements	(22,313)	97,498
Proceeds from issuance of other indebtedness		17,022
Distribution to noncontrolling interests	(15)	(1,702)
Acquisition of noncontrolling interests	(343)
Issuance of noncontrolling interests	76	66
Payments for deferred costs		(4,435)
Common share issuance, net of costs incurred	(74)	(1,033)
Repurchase of Series D preferred shares	(62,057)	(10,057)
Distributions paid to preferred shareholders	(11,121)	(19,601)
Distributions paid to common shareholders	(117)	(21,301)
Cash flows (used in) provided by financing activities	(433,135)	(299,976)
Net change in cash, cash equivalents, and restricted cash	(26,788)	(112,202)
Cash, cash equivalents, and restricted cash at the beginning of the period	211,294	300,710
Cash, cash equivalents, and restricted cash at the end of the period	$ 184,506	$ 188,508

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THE COMPANY

9 Months Ended

Sep. 30, 2018

Nature Of Operations [Abstract]

THE COMPANY

NOTE 1: THE COMPANY

RAIT Financial Trust is a self-managed and self-advised Maryland real estate investment trust, or REIT, focused on managing a portfolio of commercial real estate, or CRE, loans and properties.  References to “RAIT”, “we”, “us”, and “our” refer to RAIT Financial Trust and its subsidiaries, unless the context otherwise requires.  

Effective after the close of trading on August 13, 2018, we completed a one for fifty reverse stock split, or the Reverse Stock Split of RAIT’s common shares, as previously authorized by RAIT’s board of trustees, or the Board, pursuant to authority granted to the Board by RAIT’s common shareholders. The par value of common shares changed to $1.50 per share after the Reverse Stock Split from $0.03 per share prior to the Reverse Stock Split and every fifty shares issued and outstanding prior to the Reverse Stock Split were combined into one common share after the Reverse Stock Split. The Reverse Stock Split did not change the number of authorized common shares. These financial statements give retroactive effect to such Reverse Stock Split and all share and per share amounts have been adjusted accordingly. The Reverse Stock Split did not affect RAIT’s preferred shares, including the number of authorized or outstanding RAIT preferred shares or the dividend rate per share of any outstanding RAIT preferred shares.

On June 27, 2018, RAIT Asset Holdings IV, LLC, or RAIT IV, a subsidiary of RAIT, completed the sale of its FL5 Interests, as defined below, and FL6 Interests, as defined below (collectively, the Interests), to Melody RE II, LLC, or the Purchaser, for an aggregate purchase price of $54,632.

Prior to the sale, RAIT IV was the holder of:

• 60% of the units, or the FL5 Interests, of RAIT – Melody 2016 Holdings, LLC, or Holdings 2016, which controls RAIT – Melody 2016 Holdings Trust. This trust owned, at the time of sale, various classes of non-investment grade bonds and the equity of RAIT 2015-FL5 Trust, or FL5, with the remaining 40% of the units of Holdings 2016 being held by affiliates of the Purchaser; and

• 60% of the units, or the FL6 Interests, of RAIT – Melody 2017 Holdings, LLC, or Holdings 2017, which controls RAIT – Melody 2017 Holdings Trust. This trust owned, at the time of sale, various classes of non-investment grade bonds and the equity of RAIT 2016-FL6 Trust, or FL6, with the remaining 40% of the units of Holdings 2017 being held by affiliates of the Purchaser.

As a result of the sale, RAIT is no longer the primary beneficiary of Holdings 2016 or Holdings 2017 (collectively, the RAIT Venture VIEs), or FL5 or FL6. Therefore, RAIT deconsolidated those entities as of June 27, 2018. See Note 8: Variable Interest Entities for more information.  After the sale of the Interests, RAIT retained its role as servicer and special servicer of the loans in FL5 and FL6.

Also on June 27, 2018, RAIT, several of RAIT’s subsidiaries, including RAIT IV, and ARS VI Investor I, LP, or the Investor, entered into a Redemption and Exchange Agreement with the Investor whereby RAIT and RAIT IV redeemed and cancelled the remaining 2,939,190 preferred units of RAIT IV, or the preferred units, and RAIT’s corresponding Series D cumulative redeemable preferred shares, or the Series D preferred shares, for $56,765 of cash received by RAIT IV from the sale of the Interests, defined available cash held by RAIT IV and $16,715 of liquidation preference of RAIT’s publicly traded Series A cumulative redeemable preferred shares, or the Series A preferred shares, Series B cumulative redeemable preferred shares, or the Series B preferred shares, and Series C cumulative redeemable preferred shares, or the Series C preferred shares.  See Note 9: Series D Preferred Shares for more information.

On September 7, 2017, we announced that our Board had formed a committee of independent trustees, or the Special Committee, to explore and evaluate a wide range of possible strategic and financial alternatives for RAIT. On February 20, 2018, we announced that the Special Committee had concluded this review and that the Board had determined that this review did not identify a strategic or financial transaction with another counterparty that was preferable to the steps described below. This review, conducted with the support of financial and legal advisors, evaluated a wide range of potential alternatives which included, but were not limited to, (i) refinements of RAIT’s operations or strategy, (ii) financial transactions, such as a recapitalization or other change to RAIT’s capital structure and (iii) strategic transactions, such as a sale of all or part of RAIT.  As a result, the Board, after considering the recommendations and advice of the Special Committee, RAIT’s management, and its legal and financial advisors, determined that RAIT should take steps to increase RAIT’s liquidity and better position RAIT to meet its financial obligations as they come due. We refer to these steps as the 2018 strategic steps and they include, but are not limited to: (i) the suspension of RAIT’s lending business along with the implementation of other steps to reduce costs within its other operating businesses; (ii) the continuation of the process of selling RAIT’s owned real estate, or REO, portfolio and selling certain of our loans, while continuing to service and manage its existing CRE loan portfolio; and (iii) the engagement of a financial advisor, M-III Advisory Partners, LP, to advise and assist RAIT in its ongoing assessment of its financial performance and financial needs and in evaluating strategic and financial transactions.

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

9 Months Ended

Sep. 30, 2018

Accounting Policies [Abstract]

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

a. Basis of Presentation

The accompanying unaudited interim consolidated financial statements have been prepared by management in accordance with U.S. generally accepted accounting principles, or GAAP. Certain information and footnote disclosures normally included in annual consolidated financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations, although we believe that the included disclosures are adequate to make the information presented not misleading. The unaudited interim consolidated financial statements should be read in conjunction with our audited financial statements as of and for the year ended December 31, 2017 included in our Annual Report on Form 10-K, or the Annual Report. In the opinion of management, all adjustments, consisting only of normal recurring adjustments, necessary to present fairly our consolidated financial position and consolidated results of operations and cash flows are included. The results of operations for the interim periods presented are not necessarily indicative of the results for the full year.

The consolidated balance sheet and consolidated statement of operations as of and for the three months ended September 30, 2018 includes the impact of correcting an error made in the determination of the amount of asset impairment that was recognized during the three months ended June 30, 2018 in the amount of $850.  The effect of this correction was an increase to investments in real estate and decrease in asset impairment.

The consolidated statement of cash flows for the nine-month period ended September 30, 2018 includes the impact of correcting the reporting of certain activity that occurred in the six-month period ended June 30, 2018 and the three-month period ended March 31, 2018.  Specifically, the correction re-classified cash proceeds from certain loan sales that were previously reported within cash flows from operating activities and should have been reported within cash flows from investing activities.  The impact of this was a decrease to cash flows from operating activities and an increase to cash flows from investing activities of $108,494 for the six-month period ended June 30, 2018 ($89,583 of which related to the three-month period ended March 31, 2018).  This correction had no impact to cash and cash equivalents as of June 30, 2018 (or March 31, 2018), nor did it impact any other consolidated financial statement amounts as of June 30, 2018 (or March 31, 2018) or for the six-month period ended June 30, 2018 (or the three-month period ended March 31, 2018).

We evaluated these error corrections and determined, based on quantitative and qualitative factors, the changes were not

material to the consolidated financial statements for any previously filed consolidated financial statements

b. Going Concern Considerations

Under the accounting guidance related to the presentation of financial statements, an entity is required to evaluate on a quarterly basis whether the entity’s current financial condition, including its liquidity sources at the date that the financial statements are issued, will enable the entity to meet its obligations arising within one year of the date the entity’s financial statements are issued and to make a determination as to whether it is probable, under the application of this accounting guidance, that the entity will be able to continue as a going concern over the applicable period.  The accompanying consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business.  The financial statements do not include any adjustments that might be necessary should RAIT be unable to continue as a going concern. As a result of the considerations articulated below, there is substantial doubt about RAIT’s ability to continue as a going concern within one year after the date that the financial statements are issued.

Analysis.  In applying the accounting guidance, management considered RAIT’s current financial condition and liquidity sources, including current funds available, forecasted future cash flows and RAIT’s conditional and unconditional obligations due over the next twelve months.  Management considered the following: i) our 7.125% senior notes which mature in August 2019 and have an unpaid principal balance of $65,356 as of September 30, 2018; ii) the financial covenant compliance requirements of RAIT’s senior notes; and (iii) RAIT’s recurring costs of operating its business.

As previously disclosed, RAIT has been notified by the staff of the New York Stock Exchange, or NYSE, that RAIT is not in compliance with certain continued listing standards of the NYSE.  As of the filing date of this report, $279 of our outstanding indebtedness contains provisions that would provide the holders thereof to require us to repurchase that indebtedness if RAIT was delisted from the NYSE. In October 2018, we exercised our right to call this indebtedness and expect to redeem it in November 2018.  

RAIT plans to control costs, to sell certain loans, to sell certain real estate properties and to continue to receive repayments of loans as they become due.  Consistent with these plans, RAIT has suspended new investment activity and the Board has not declared a dividend on RAIT’s outstanding preferred shares for the two quarters ended June 30, 2018 and September 30, 2018.  Due to the inherent risks, unknown results and significant uncertainties associated with each of these matters and the direct correlation between these matters and RAIT’s ability to satisfy its financial obligations that may arise over the applicable twelve month period, RAIT is unable to conclude that it is probable that RAIT will be able to meet its obligations arising within twelve months of the date of issuance of these financial statements under the parameters set forth in this accounting guidance.

As a result, management evaluated whether this was mitigated by RAIT’s approved plans and expectations for the applicable period under the second step of this accounting standard.

RAIT’s ability to satisfy its obligations under the 7.125% senior notes, to maintain compliance with its debt covenants and to fund recurring costs of operations depends on management’s ability to sell certain of RAIT’s remaining real estate assets releasing cash from those sales and/or distributions on our retained interests in our RAIT I and RAIT II securitizations, to continue to control costs, to sell certain loans, to sell retained interests in certain FL securitizations and to continue to receive repayments of loans as they become due.  While controlling costs are within management’s control to some extent, selling real estate assets, selling loans, selling other assets and the timing of loan repayments involve performance by third parties.  Since many of the real estate assets, loans and other assets that management plans to sell or receive repayment from to satisfy its obligations are not subject to an executed purchase and sale agreement or other contractual agreement as of the date hereof, the sale of those assets cannot be considered probable of occurring.  

c. Principles of Consolidation

The consolidated financial statements reflect our accounts and the accounts of our majority-owned and/or controlled subsidiaries. We also consolidate entities that are variable interest entities, or VIEs, where we have determined that we are the primary beneficiary of such entities. The portions of these entities that we do not own are presented as noncontrolling interests as of the dates and for the periods presented in the consolidated financial statements. All intercompany accounts and transactions have been eliminated in consolidation.

Under Financial Accounting Standards Board, or FASB, Accounting Standards Codification, or ASC, Topic 810, “Consolidation”, the determination of whether to consolidate a VIE is based on the power to direct the activities of the VIE that most significantly impact the VIE’s economic performance together with either the obligation to absorb losses or the right to receive benefits that could be significant to the VIE. We define the power to direct the activities that most significantly impact the VIE’s economic performance as the ability to buy, sell, refinance, or recapitalize assets or entities, and solely control other material operating events or items of the entity. For our commercial mortgage loans, mezzanine loans, and preferred equity investments, certain rights we hold are protective in nature and would preclude us from having the power to direct the activities that most significantly impact the VIE’s economic performance. Assuming both criteria are met, we would be considered the primary beneficiary and would consolidate the VIE. We will continually assess our involvement with VIEs and consolidate the VIEs when we are the primary beneficiary. See Note 8: Variable Interest Entities for additional disclosures pertaining to VIEs.

For entities that we do not consolidate, we account for our investment in them either under the equity method pursuant to ASC Topic 323, “Investments-Equity Method and Joint Ventures” or cost method pursuant to ASC Topic 325, “Investments – Other”.

d. Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting periods. The items that include significant estimates are fair value of financial instruments and allowance for loan losses. Actual results could differ from those estimates.

e. Cash and Cash Equivalents

Cash and cash equivalents include cash held in banks and highly liquid investments with maturities of three months or less when purchased.  Cash, including amounts restricted, may at times exceed the Federal Deposit Insurance Corporation deposit insurance limit of $250 per institution.  We attempt to mitigate credit risk by placing cash and cash equivalents with major financial institutions.  To date, we have not experienced any losses on cash and cash equivalents.

f. Restricted Cash

Restricted cash consists primarily of tenant escrows and borrowers’ funds held by us to fund certain expenditures or to be released at our discretion upon the occurrence of certain pre-specified events, and to serve as additional collateral for borrowers’ loans.  As of September 30, 2018 and December 31, 2017, we had $49,350 and $123,398 of restricted cash, respectively, which primarily relates to tenant escrows and borrowers’ funds.

Restricted cash also includes cash received from the sale, repayment and/or other disposition of assets held by the issuers of our securitizations that are awaiting to be distributed to holders of our CDO notes payable and CMBS securitizations, as well as the proceeds from the issuance of CDO notes payable by securitizations that are restricted for the purpose of funding additional investments in securities subsequent to the balance sheet date.  As of September 30, 2018 and December 31, 2017, we had $36,804 and $34,516, respectively, of restricted cash held by securitizations.

g. Investments in Commercial Mortgage Loans, Mezzanine Loans and Preferred Equity Interests

We have invested in commercial mortgage loans, mezzanine loans and preferred equity interests. We account for our investments in commercial mortgage loans, mezzanine loans and preferred equity interests that we do not have the intention or ability to sell, at amortized cost. The carrying value of these investments is adjusted for origination discounts/premiums, nonrefundable fees and direct costs for originating loans which are amortized into income on a level yield basis over the terms of the loans.

Loans that we have the intention and ability to sell are classified as held for sale, and are measured at the lower of amortized cost or fair value. If the amortized cost exceeds the loan’s fair value, we establish a valuation allowance equal to the difference between the amortized cost and fair value.

h. Allowance for Loan Losses, Impaired Loans and Non-accrual Status

We maintain an allowance for loan losses on our investments in commercial mortgage loans, mezzanine loans and preferred equity interests. Management’s periodic evaluation of the adequacy of the allowance is based upon expected and inherent risks in the portfolio, the estimated value of underlying collateral, and current economic conditions. The credit quality of our loans is monitored via quantitative and qualitative metrics.  Quantitatively we evaluate items such as the current debt service coverage ratio and annual net operating income of the underlying property.  Qualitatively we evaluate items such as recent operating performance of the underlying property and history of the borrower’s ability to provide financial support.  These items together are considered in developing our view of each loan’s risk rating which are categorized as either impaired or satisfactory. Management reviews loans for impairment and establishes specific reserves when a loss is probable under the provisions of FASB ASC Topic 310, “Receivables.” A loan is impaired when it is probable that we may not collect all principal and interest payments according to the contractual terms. As part of the detailed loan review, we consider many factors about the specific loan, including payment history, asset performance, borrower’s financial capability and other characteristics. Management evaluates loans for non-accrual status each reporting period. A loan is placed on non-accrual status when the loan payment deficiencies exceed 90 days unless it is well secured and in the process of collection, or if the collection of principal and interest in full is not probable. Payments received for non-accrual loans are applied to principal until the loan is removed from non-accrual status. Loans are generally removed from non-accrual status when they are making current interest payments. The allowance for loan losses is increased by the provision for loan losses and decreased by charge-offs (net of recoveries). We charge off a loan when we determine that all commercially reasonable means of recovering the loan balance have been exhausted.  This may occur at a variety of times, including when we receive cash or other assets in a pre-foreclosure sale or take control of the underlying collateral in full satisfaction of the loan upon foreclosure.  We consider circumstances such as these to indicate that the loan collection process has ceased and that a loan is uncollectible.

i. Investments in Real Estate

Investments in real estate are shown net of accumulated depreciation. We capitalize those costs that have been determined to improve the real property and depreciate those costs on a straight-line basis over the useful life of the asset. We depreciate real property using the following useful lives: buildings and improvements—30 to 40 years; furniture, fixtures, and equipment—5 to 10 years; and tenant improvements—shorter of the lease term or the life of the asset. Costs for ordinary maintenance and repairs are charged to expense as incurred.

Effective January 1, 2018, FASB ASC Topic 805, “Business Combinations” was amended to clarify the definition of a business by more clearly outlining the requirements for an integrated set of assets and activities to be considered a business and by establishing a practical framework to determine when the integrated set of assets and activities is a business. Prior to January 1, 2018, the properties we acquired were generally considered businesses and were accounted for as business combinations. Subsequent to January 1, 2018, we expect any properties that we acquire to generally not be considered businesses and, therefore, to be accounted for as asset acquisitions.  

Under business combination accounting, the fair value of the real estate acquired is allocated to the acquired tangible assets, generally consisting of land, building and tenant improvements, and identified intangible assets and liabilities, consisting of the value of above-market and below-market leases for acquired in-place leases and the value of tenant relationships, based, in each case, on their fair values.  Transaction costs and fees incurred related to the acquisition are expensed as incurred.  Under asset acquisition accounting, the costs to acquire real estate, including transaction costs related to the acquisition, are accumulated and then allocated to the individual assets and liabilities acquired based upon their relative fair value.  

In determining the fair value of the identified intangible assets and liabilities of an acquired property, above-market and below-market in-place lease values are recorded based on the present value (using an interest rate which reflects the risks associated with the leases acquired) of the differences between (i) the contractual amounts to be paid pursuant to the in-place leases and (ii) management’s estimate of fair market lease rates for the corresponding in-place leases, measured over a period equal to the remaining term of the lease. The capitalized above-market lease values and the capitalized below-market lease values are amortized as an adjustment to property income over the lease term.

The aggregate value of in-place leases is determined by evaluating various factors, including an estimate of carrying costs during the expected lease-up periods, current market conditions and similar leases. In estimating carrying costs, management includes real estate taxes, insurance and other operating expenses, and estimates of lost rental revenue during the expected lease-up periods based on current market demand. Management also estimates costs to execute similar leases including leasing commissions, legal and other related costs. The value assigned to this intangible asset is amortized over the assumed lease up period.

Management reviews our investments in real estate for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The review of recoverability is based on an estimate of the future undiscounted cash flows (excluding interest charges) expected to result from the long-lived asset’s use and eventual disposition. These cash flows consider factors such as expected future operating income, trends and prospects, as well as the effects of leasing demand, competition and other factors. If impairment exists due to the inability to recover the carrying value of a long-lived asset, an impairment loss is recorded to the extent that the carrying value exceeds the estimated fair value of the property.

j. Revenue Recognition

1) Interest income—We recognize interest income from investments in commercial mortgage loans, mezzanine loans, and preferred equity interests on a yield to maturity basis. Certain of our commercial mortgage loans, mezzanine loans and preferred equity interests provide for the accrual of interest at specified rates which differ from current payment terms. Interest income is recognized on such loans, the majority of which were originated prior to 2011, at the accrual rate subject to management’s determination that accrued interest and outstanding principal are ultimately collectible. Management will cease accruing interest on these loans when it determines that collection of the interest income is not probable based on the value of the underlying collateral using discounted cash flow models and market based assumptions. The accrued interest receivable associated with these loans as of September 30, 2018 and December 31, 2017 was $22,402 and $23,801, respectively. During the three months ended September 30, 2018, the accrued interest receivable of $1,964 related to one of these loans was determined to be uncollectible and was written off as a reduction to investment interest income. These loans are considered to be impaired when the total contractual amount owed exceeds the estimated value of the underlying collateral.  Four of these loans, with an unpaid principal balance of $28,873 and $28,904, were considered to be impaired as of September 30, 2018 and December 31, 2017, respectively, because the contractual amounts owed exceed the estimated value of the underlying collateral. Additionally, three and two of these loans with an unpaid principal amount of $32,664 and $30,379 were considered impaired as of September 30, 2018 and December 31, 2017, respectively, because their loan terms were modified in what constituted a troubled debt restructuring.

For investments that we do not elect to record at fair value under FASB ASC Topic 825, “Financial Instruments”, origination fees and direct loan origination costs are deferred and amortized to net investment income, using the effective interest method, over the contractual life of the underlying loan security or loan, in accordance with FASB ASC Topic 310, “Receivables.”

For investments that we elect to record at fair value under FASB ASC Topic 825, origination fees and direct loan costs are recorded in income and are not deferred.

2) Property income—We generate property income from tenant rent and other tenant-related activities at our consolidated real estate properties. For multifamily real estate properties, property income is recorded when due from residents and recognized monthly as it is earned and realizable, under lease terms which are generally for periods of one year or less. For retail and office real estate properties, property income is recognized on a straight-line basis from the later of the date of the commencement of the lease or the date of acquisition of the property subject to existing leases, which averages minimum rents over the terms of the leases. For retail and office real estate properties, leases also typically provide for tenant reimbursement of a portion of common area maintenance and other operating expenses to the extent that a tenant’s pro rata share of expenses exceeds a base year level set in the lease.

3) Fee and other income—We have generated fee and other income through our various subsidiaries by (a) funding conduit loans for sale into unaffiliated commercial mortgage-backed securities, or CMBS, securitizations, (b) providing or arranging to provide financing to our borrowers, (c) providing ongoing asset management services to investment portfolios under cancelable management agreements, and (d) providing property management services to third parties. We recognize revenue for these activities when the fees are fixed or determinable, are evidenced by an arrangement, collection is reasonably assured and the services under the arrangement have been provided. While we may receive asset management fees when they are earned, we eliminate earned asset management fee income from securitizations while such securitizations are consolidated. During the three and nine months ended September 30, 2018, we earned $129 and $443, respectively, of asset management fees, which were eliminated as they were associated with consolidated securitizations. During the three and nine months ended September 30, 2017, we earned $227 and $714, respectively, of asset management fees, which were eliminated as they were associated with consolidated securitizations.

Certain components of property income and fee and other income fall within the scope of FASB ASC Topic 606, “Revenue from Contracts with Customers”. This topic requires entities to disaggregate revenue into categories that depict how the nature, amount, timing, and uncertainty of revenue and cash flows are affected by economic factors. In the following table, revenue from contracts with customers is disaggregated by type of revenue.

	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
Revenue from Contracts with customers	2018		2017		2018		2017
Property Management Fee income	$	231	$	732	$	1,724	$	2,333
Parking		80		433		514		1,400
Leasing Commission income		78		598		742		1,765
Other miscellaneous		410		599		887		1,789
Total	$	799	$	2,362	$	3,867	$	7,287

There have been no changes in the measurement of revenue from contracts with customers resulting from the adoption of ASC 606.

k. Fair Value of Financial Instruments

In accordance with FASB ASC Topic 820, “Fair Value Measurements and Disclosures”, fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Where available, fair value is based on observable market prices or parameters or derived from such prices or parameters. Where observable prices or inputs are not available, valuation models are applied. These valuation techniques involve management estimation and judgment, the degree of which is dependent on the price transparency for the instruments or market and the instruments’ complexity for disclosure purposes. Assets and liabilities recorded at fair value in the consolidated balance sheets are categorized based upon the level of judgment associated with the inputs used to measure their value. Hierarchical levels, as defined in FASB ASC Topic 820, “Fair Value Measurements and Disclosures” and directly related to the amount of subjectivity associated with the inputs to fair valuations of these assets and liabilities, are as follows:

• Level 1: Valuations are based on unadjusted, quoted prices in active markets for identical assets or liabilities at the measurement date. The types of assets carried at Level 1 fair value generally are equity securities listed in active markets. As such, valuations of these investments do not entail a significant degree of judgment.

• Level 2: Valuations are based on quoted prices for similar instruments in active markets or quoted prices for identical or similar instruments in markets that are not active or for which all significant inputs are observable, either directly or indirectly. Fair value assets and liabilities that are generally included in this category are derivatives where the fair value is based on observable market inputs.

• Level 3: Inputs are unobservable inputs for the asset or liability, and include situations where there is little, if any, market activity for the asset or liability. In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, the level in the fair value hierarchy within which the fair value measurement in its entirety falls has been determined based on the lowest level input that is significant to the fair value measurement in its entirety. Our assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment, and considers factors specific to the asset or liability.  

The availability of observable inputs can vary depending on the financial asset or liability and is affected by a wide variety of factors, including, for example, the type of investment, whether the investment is new, whether the investment is traded on an active exchange or in the secondary market, and the current market condition. To the extent that valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment. Accordingly, the degree of judgment exercised by us in determining fair value is greatest for instruments categorized in Level 3.

Fair value is a market-based measure considered from the perspective of a market participant who holds the asset or owes the liability rather than an entity-specific measure. Therefore, even when market assumptions are not readily available, our own assumptions are set to reflect those that management believes market participants would use in pricing the asset or liability at the measurement date. We use prices and inputs that management believes are current as of the measurement date, including during periods of market dislocation. In periods of market dislocation, the observability of prices and inputs may be reduced for many instruments. This condition could cause an instrument to be transferred from Level 1 to Level 2 or Level 2 to Level 3.

Many financial instruments have bid and ask prices that can be observed in the marketplace. Bid prices reflect the highest price that buyers in the market are willing to pay for an asset. Ask prices represent the lowest price that sellers in the market are willing to accept for an asset. For financial instruments whose inputs are based on bid-ask prices, we do not require that fair value always be a predetermined point in the bid-ask range. Our policy is to allow for mid-market pricing and adjusting to the point within the bid-ask range that results in our best estimate of fair value.

Fair value for certain of our Level 3 financial instruments is derived using internal valuation models. These internal valuation models include discounted cash flow analyses developed by management using current interest rates, estimates of the term of the particular instrument, specific issuer information and other market data for securities without an active market. In accordance with FASB ASC Topic 820, “Fair Value Measurements and Disclosures”, the impact of our own credit spreads is also considered when measuring the fair value of financial assets or liabilities, including derivative contracts. Where appropriate, valuation adjustments are made to account for various factors, including bid-ask spreads, credit quality and market liquidity. These adjustments are applied on a consistent basis and are based on observable inputs where available. Management’s estimate of fair value requires significant management judgment and is subject to a high degree of variability based upon market conditions, the availability of specific issuer information and management’s assumptions.

l. Transfers of Financial Assets

We account for transfers of financial assets under FASB ASC Topic 860, “Transfers and Servicing”, as either sales or financings.  Transfers of financial assets that result in sales accounting are those in which (1) the transfer legally isolates the transferred assets from the transferor, (2) the transferee has the right to pledge or exchange the transferred assets and no condition both constrains the transferee’s right to pledge or exchange the assets and provides more than a trivial benefit to the transferor, and (3) the transferor does not maintain effective control over the transferred assets.  If the transfer does not meet these criteria, the transfer is accounted for as a financing.  Financial assets that are treated as sales are removed from our accounts with any realized gain (loss) reflected in earnings during the period of sale.  Financial assets that are treated as financings are maintained on the balance sheet with proceeds received from the legal transfer reflected as securitized borrowings or security-related receivables.

m. Deferred Financing Costs

Costs incurred in connection with debt financing are deferred and classified within indebtedness and charged to interest expense over the terms of the related debt agreements, under the effective interest method.

n. Intangible Assets

Intangible assets on our consolidated balance sheets represent identifiable intangible assets acquired in business acquisitions. We amortize identified intangible assets to expense over their estimated lives using the straight-line method. We evaluate intangible assets for impairment as events and circumstances change, in accordance with FASB ASC Topic 360, “Property, Plant, and Equipment.” The gross carrying amount for our in-place leases and above market leases was $7,420 as of September 30, 2018 and December 31, 2017, respectively.  The accumulated amortization for our intangible assets was $5,527 and $6,831 as of September 30, 2018 and December 31, 2017, respectively. We recorded amortization expense of $251 and $1,202 for the three months ended September 30, 2018 and 2017, respectively, and $1,069 and $5,763 for the nine months ended September 30, 2018 and 2017, respectively. Based on the intangible assets identified above, we expect to record amortization expense of intangible assets of $268 for the remainder of 2018, $701 for 2019, $341 for 2020, $259 for 2021, $143 for 2022 and $181 thereafter. As of September 30, 2018, we have determined that the carrying value of our intangible assets is recoverable.

o. Derivative Instruments

In accordance with FASB ASC Topic 815, “Derivatives and Hedging”, we measure each derivative instrument at fair value and record such amounts in our consolidated balance sheet as either an asset or liability. For derivatives designated as fair value hedges, derivatives not designated as hedges, or for derivatives designated as cash flow hedges associated with debt for which we elected the fair value option under FASB ASC Topic 825, “Financial Instruments”, the changes in fair value of the derivative instrument are recorded in earnings. For derivatives designated as cash flow hedges, the changes in the fair value of the effective portions of the derivative are reported in other comprehensive income. Changes in the ineffective portions of cash flow hedges, if any, are recognized in earnings.  

For derivatives cleared through the Chicago Mercantile Exchange, or CME, and the London Clearing House, or LCH, variation margin payments are considered settlements of the related derivatives.  As of September 30, 2018, we had no derivative instruments outstanding.  

p. Income Taxes

RAIT, Taberna Realty Finance Trust, or TRFT, and the RAIT Venture REITs have each elected to be taxed as a REIT and to comply with the related provisions of the Internal Revenue Code of 1986, as amended, or the Internal Revenue Code. In February 2016 and January 2017, in conjunction with the ventures described in Note 5: Indebtedness and Note 8: Variable Interest Entities, we created two new entities that elected to be taxed as REITs, which we refer to as the RAIT Venture VIEs.  These entities were created to hold the FL-5 and FL-6 junior notes for the aforementioned ventures.  Accordingly, we generally will not be subject to U.S. federal income tax to the extent of our dividends to shareholders and as long as certain asset, income and share ownership tests are met. If we were to fail to meet these requirements, we would be subject to U.S. federal income tax, which could have a material adverse impact on our results of operations and amounts available for dividends to our shareholders. Management believes that all of the criteria to maintain RAIT’s, TRFT’s and the RAIT Venture VIEs REIT qualification have been met for the applicable periods, but there can be no assurance that these criteria will continue to be met in subsequent periods.  

As discussed in Note 1: The Company, we completed the sale of our interests in the RAIT Venture VIEs on June 27, 2018, and, as a result, the purchaser is responsible for their REIT compliance from and after that date.

We maintain various taxable REIT subsidiaries, or TRSs, which may be subject to U.S. federal, state and local income taxes and foreign taxes. Current and deferred taxes are provided on the portion of earnings (losses) recognized by us with respect to our interest in domestic TRSs. Deferred income tax assets and liabilities are computed based on temporary differences between our GAAP consolidated financial statements and the federal and state income tax basis of assets and liabilities as of the consolidated balance sheet date. We evaluate the realizability of our deferred tax assets (e.g., net operating loss and capital loss carryforwards) and recognize a valuation allowance if, based on the available evidence, it is more likely than not that some portion or all of our deferred tax assets will not be realized. When evaluating the realizability of our deferred tax assets, we consider estimates of expected future taxable income, existing and projected book/tax differences, tax planning strategies available, and the general and industry specific economic outlook. This realizability analysis is inherently subjective, as it requires management to forecast our business and general economic environment in future periods. Changes in estimates of deferred tax asset realizability, if any, are included in income tax expense on the consolidated statements of operations.

In prior years, our TRS entities generated taxable revenue primarily from (i) advisory fees for services provided to IRT, (ii) property management fees for services provided to RAIT properties, IRT properties and third-party properties, and (iii) fees and other income from our CMBS lending business.  In the current year, our TRS entities generate taxable revenue primarily from (i) property management fees for services provided to RAIT properties and third-party properties, and (ii) fees and other income from our CMBS lending business. On August 1, 2018, we sold the TRS entity that generates taxable revenue from property management fees. See item (q.) below for further discussion. In consolidation, the advisory fees and property management fees related to IRT were eliminated through October 5, 2016 and property management fees related to RAIT properties were eliminated in their entirety. Nonetheless, all income taxes are expensed and are paid by the TRSs in the year in which the revenue is received. These income taxes are not eliminated when the related revenue is eliminated in consolidation.

The TRS entities may be subject to tax laws that are complex and potentially subject to different interpretations by the taxpayer and the relevant governmental taxing authorities. In establishing a provision for income tax expense, we must make judgments and interpretations about the application of these inherently complex tax laws. Actual income taxes paid may vary from estimates depending upon changes in income tax laws, actual results of operations, and the final audit of tax returns by taxing authorities. Tax assessments may arise several years after tax returns have been filed. We review the tax balances of our TRS entities quarterly and, as new information becomes available, the balances are adjusted as appropriate.

As part of our change in strategic direction during the year ended December 31, 2016 and to decrease administrative processes, we moved our active TRS entities under a single holding company. We elected a November 30^th taxable year end for the TRS holding company. We estimated the effective tax rate and current income tax liability as of December 31, 2016 by projecting activity for the full taxable year ended November 30, 2017. As we projected ordinary taxable income for the TRS holding company for its taxable year ended November 30, 2017, we recognized a current income tax liability as of December 31, 2016. During the nine months ended September 30, 2017, we updated our projections for 2017, which indicated an ordinary loss position for taxable year 2017 for the TRS holding company. As a result, we reversed the current income tax liability accrued as of December 31, 2016, which generated a current income tax benefit of $249 for the nine months ended September 30, 2017. During the three months ended September 30, 2018, a current income tax provision of $152 was recognized related to our TRS entities.

q. Sale of Retail Property Manager

On August 1, 2018, we completed the sale of our retail property management subsidiary for nominal consideration. We recognized a gain of $1,262 during the three months ended September 30, 2018 related to the sale as the liabilities associated with this business exceeded its assets.

r. Recent Accounting Pronouncements

Adopted within these Financial Statements

In May 2014, the FASB issued an accounting standard classified under FASB ASC Topic 606, “Revenue from Contracts with Customers”. This accounting standard establishes a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes the most current revenue recognition guidance, including industry-specific guidance. This accounting standard generally replaces existing guidance by requiring an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. This accounting standard applies to all contracts with customers, except those that are within the scope of other Topics in the FASB ASC. During 2016 and 2017, the FASB issued multiple amendments to this accounting standard that provide further clarification to this accounting standard.  In February 2017, the FASB issued an accounting standard classified under FASB ASC Subtopic 610-20, “Other Income – Gains and Losses from the Derecognition of Nonfinancial Assets”. The amendments in this accounting standard clarify what constitutes an “in substance nonfinancial asset” and changes the accounting for partial sales of nonfinancial assets to be more consistent with the accounting for a sale of a business. The amendments in this accounting standard also provide further guidance on accounting for the derecognition of non-financial assets by generally requiring the revenue recognition model under FASB ASC Topic 606 to be applied, which may allow for earlier gain recognition for certain sale transactions pursuant to which we have continuing involvement with the asset.  These standards were effective for annual reporting periods beginning after December 15, 2017. We have adopted this new standard as of January 1, 2018, and have applied the modified retrospective method.  The adoption of FASB ASC Topic 606 did not change our measurement of revenue from contracts with customers.  The adoption of FASB ASC Subtopic 610-20 resulted in a cumulative effect adjustment as an increase to shareholders’ equity in the amount of $761 as of the adoption date.  This adjustment is related to a previously deferred gain on the sale of two land parcels in 2017 that would have qualified for recognition under this accounting standard.

In January 2016, the FASB issued an accounting standard classified under FASB ASC Topic 825, “Financial Instruments”. This accounting standard addresses certain aspects of recognition, measurement, presentation, and disclosure of financial instruments.  Among other things, the amendment (i) eliminates certain disclosure requirements for financial instruments measured at amortized cost; (ii) requires the use of the exit price notion when measuring the fair value of financial instruments for disclosure purposes; (iii) requires separate presentation, in other comprehensive income, of the change in fair value of a liability, when the fair value option has been elected, resulting from a change in the instrument-specific credit risk; and (iv) requires separate presentation of financial instruments by measurement category and form.  This standard is effective for annual periods beginning after December 15, 2017, including interim periods within those fiscal years.  Early adoption is permitted for the separate presentation of changes in fair value due to changes in instrument-specific credit risk. We have adopted this new standard as of January 1, 2018, and have applied the modified retrospective method, which resulted in a cumulative effect adjustment as an increase to accumulated other comprehensive income (loss) and a decrease to retained earnings (deficit) in the amount of $9,257 as of the adoption date. This adjustment relates to the separate presentation of changes in instrument-specific credit risk on our junior subordinated notes, at fair value.

In August 2016, the FASB issued an accounting standard classified under FASB ASC Topic 230, “Statement of Cash Flows”.  This accounting standard provides guidance on eight specific cash flow issues; (i) debt prepayment or debt extinguishment costs; (ii) settlement of zero-coupon debt instruments or other debt instruments with coupon interest rates that are insignificant in relation to the effective interest rate of the borrowing; (iii) contingent consideration payments made after a business combination; (iv) proceeds from the settlement of insurance claims; (v) proceeds from the settlement of corporate-owned life insurance policies, including bank-owned life insurance policies; (vi) distributions received from equity method investees; (vii) beneficial interests in securitization transactions; and (viii) separately identifiable cash flows and application of the predominance principle. The amendments are effective for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years.  Early adoption is permitted, including adoption in an interim period. This standard did not have an impact on our consolidated financial statements.

In October 2016, the FASB issued an accounting standard classified under FASB ASC Topic 740, “Income Taxes”.  The amendments in this accounting standard provide that the current and deferred income tax consequences of an intra-entity transfer of an asset other than inventory should be recognized when the transfer occurs rather than when the asset has been sold to an outside party.   Two common examples of assets included in the scope of this accounting standard are intellectual property and property, plant, and equipment.  The amendments in this standard are effective for annual reporting periods beginning after December 15, 2017, including interim reporting periods within those annual reporting periods.  Early adoption is permitted for all entities as of the beginning of an annual reporting period for which financial statements (interim or annual) have not been issued.  The amendments in this accounting standard should be applied on a modified retrospective basis through a cumulative-effect adjustment directly to retained earnings as of the beginning of the period of adoption. This standard did not have an impact on our consolidated financial statements.

In November 2016, the FASB issued an accounting standard classified under FASB ASC Topic 230, “Statement of Cash Flows”.  The amendments in this accounting standard require that the statement of cash flows explain the change during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents.  Amounts generally described as restricted cash and restricted cash equivalents should be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows.  The amendments in this update are effective for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years.  Early adoption is permitted, including adoption in an interim period.  We have adopted this new standard as of January 1, 2018 and have utilized a retrospective transition method for each period presented in our consolidated financial statements. The adoption of this standard has resulted in the presentation of additional details regarding the changes in restricted cash in the consolidated statements of cash flows.

In January 2017, the FASB issued an accounting standard classified under FASB ASC Topic 805, “Business Combinations”. The amendments in this accounting standard clarify the definition of a business by more clearly outlining the requirements for an integrated set of assets and activities to be considered a business and by establishing a practical framework to determine when the integrated set of assets and activities is a business. The amendments in this accounting standard are effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. Early adoption is permitted for transactions not yet reflected in the financial statements. We have adopted this new standard as of January 1, 2018 although it has not yet had an impact on our consolidated financial statements as no acquisition transactions have been completed as of September 30, 2018.

In May 2017, the FASB issued an accounting standard classified under FASB ASC Subtopic 718, “Compensation – Stock Compensation”. The amendments in this accounting standard are to provide guidance about which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting in Topic 718.  The amendments in this accounting standard are effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. Early adoption of the amendments in this standard is permitted.  This standard did not have an impact on our consolidated financial statements.

Not Yet Adopted Within These Financial Statements

In February 2016, the FASB issued an accounting standard classified under FASB ASC Topic 842, “Leases”.  This accounting standard states that a lessee should recognize the assets and liabilities that arise from all leases with a term greater than 12 months. The core principle requires the lessee to recognize a liability to make lease payments and a right-of-use (“ROU”) asset. The accounting applied by the lessor is relatively unchanged. During 2017 and 2018, the FASB issued multiple amendments to this accounting standard that provide further clarification to this accounting standard. The new standard is effective for us on January 1, 2019, with early adoption permitted. A modified retrospective transition approach is required, applying the new standard to all leases existing at the date of initial application. An entity may choose to use either (1) its effective date or (2) the beginning of the earliest comparative period presented in the financial statements as its date of initial application. We expect to adopt the new standard on January 1, 2019 and use the effective date as our date of initial application. The new standard provides a number of optional practical expedients in transition. We expect to elect the “package of practical expedients” for all our leases that exist at the date of initial application. This package permits us not to reassess under the new standard our prior conclusions about lease identification, lease classification and initial direct costs. We also currently expect to elect the practical expedient to not separate lease and non-lease components for all of our leases. Management is currently evaluating the impact that this standard will have on our consolidated financial statements. We currently expect to recognize a lease liability and an offsetting ROU asset for one of our real estate operating leases for which we are the lessee. We do not expect the standard to have a significant impact on any of our real estate leases for which we are the lessor.

In June 2016, the FASB issued an accounting standard classified under FASB ASC Topic 326, “Financial Instruments-Credit Losses”.  The amendments in this standard provide an approach based on expected losses to estimate credit losses on certain types of financial instruments.  The amendments also modify the impairment model for available-for-sale debt securities and provides for a simplified accounting model for purchased financial assets with credit deterioration since their origination.  The amendments in this standard expand the disclosure requirements regarding an entity’s assumptions, models, and methods for estimating the allowance for loan and lease losses.  In addition, public business entities will need to disclose the amortized cost balance for each class of financial asset by credit quality indicator, disaggregated by the year of origination.  This standard is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years.  Early application of the guidance will be permitted for all entities for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years.  Management is currently evaluating the impact that this standard will have on our consolidated financial statements.

In July 2017, the FASB issued an accounting standard classified under FASB ASC Subtopic 260, “Earnings per Share”, Subtopic 480, “Distinguishing Liabilities from Equity”, and Subtopic 815, “Derivatives and Hedging”. The amendments in this accounting standard change the classification analysis of certain equity-linked financial instruments (or embedded features) with down round features and recharacterize the indefinite deferral of certain provisions of Topic 480 to a scope exception. The amendments in this accounting standard are effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Early adoption of the amendments in this standard is permitted. Management is currently evaluating the impact that this standard may have on our consolidated financial statements.

In August 2017, the FASB issued an accounting standard classified under FASB ASC Topic 815, “Derivatives and Hedging”.  This accounting standard states specific limitations in current GAAP by expanding hedge accounting for both nonfinancial and financial risk components and by refining the measurement of hedge results to better reflect an entity’s hedging strategies. The amendments in this accounting standard are effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Early adoption of the amendments in this standard is permitted. Management is currently evaluating the impact that this standard may have on our consolidated financial statements.

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INVESTMENTS IN COMMERCIAL MORTGAGE LOANS, MEZZANINE LOANS AND PREFERRED EQUITY INTERESTS

9 Months Ended

Sep. 30, 2018

Receivables [Abstract]

INVESTMENTS IN COMMERCIAL MORTGAGES, MEZZANINE LOANS AND PREFERRED EQUITY INTERESTS

NOTE 3: INVESTMENTS IN COMMERCIAL MORTGAGE LOANS, MEZZANINE LOANS AND PREFERRED EQUITY INTERESTS

Loans Held for Investment

The following table summarizes our investments in commercial mortgage loans, mezzanine loans and preferred equity interests held for investment as of September 30, 2018:

	Unpaid Principal Balance			Unamortized (Discounts) Premiums			Carrying Amount			Number of Loans		Weighted- Average Coupon (1)			Range of Maturity Dates
Commercial Real Estate (CRE)
Commercial mortgage loans	$	574,896		$	(546	)	$	574,350			42		6.5	%	Oct. 2018 to Jun. 2025
Mezzanine loans		21,122			164			21,286			2		13.3	%	Jun. 2020 to Mar. 2023
Preferred equity interests		33,279			(1	)		33,278			15		6.7	%	Nov. 2018 to Jan. 2029
Total CRE (2)		629,297			(383	)		628,914			59		6.8	%
Deferred fees and costs, net (3)		(1,004	)		-			(1,004	)
Total	$	628,293		$	(383	)	$	627,910

(1) Weighted-average coupon is calculated on the unpaid principal balance, which does not necessarily correspond to the carrying amount.

(2) Includes $100,442 of cash flow loans, of which $49,690 are commercial mortgage loans, $21,122 are mezzanine loans and $29,630 are preferred equity interests. See Note 2: Summary of Significant Accounting Policies, (j) Revenue Recognition, for further discussion of our cash flow loans.

(3) Includes $3,822 of deferred fees, net of $2,818 of deferred costs.

The following table summarizes our investments in commercial mortgage loans, mezzanine loans and preferred equity interests held for investment as of December 31, 2017:

	Unpaid Principal Balance			Unamortized (Discounts) Premiums			Carrying Amount			Number of Loans		Weighted- Average Coupon (1)			Range of Maturity Dates
Commercial Real Estate (CRE)
Commercial mortgage loans	$	1,194,735		$	(719	)	$	1,194,016			95		6.3	%	Jan. 2018 to Dec. 2025
Mezzanine loans		45,488			164			45,652			13		11.2	%	May 2018 to May 2025
Preferred equity interests		33,284			(1	)		33,283			15		9.1	%	Nov. 2018 to Jan. 2029
Total CRE (2)		1,273,507			(556	)		1,272,951			123		6.5	%
Deferred fees and costs, net (3)		(2,344	)		-			(2,344	)
Total	$	1,271,163		$	(556	)	$	1,270,607

(1) Weighted-average coupon is calculated on the unpaid principal balance, which does not necessarily correspond to the carrying amount.

(2) Includes $106,136 of cash flow loans, of which $55,353 are commercial mortgage loans, $21,149 are mezzanine loans and $29,634 are preferred equity interests. See Note 2: Summary of Significant Accounting Policies, (j) Revenue Recognition, for further discussion of our cash flow loans.

(3) Includes $8,497 of deferred fees, net of $6,153 of deferred costs.

A loan is placed on non-accrual status if it is delinquent for 90 days or more or if there is uncertainty over full collection of principal and interest, which generally includes our impaired loans that have reserves. The following table summarizes the delinquency statistics of our commercial real estate loans held for investment as of September 30, 2018 and December 31, 2017:

	As of September 30, 2018
Delinquency Status	Current		30 to 59 days		60 to 89 days		90 days or more		Total		Non-accrual (1)
Commercial mortgage loans	$	508,978	$	8,892	$	17,466	$	39,560	$	574,896	$	106,860
Mezzanine loans		21,122		—		—		—		21,122		8,253
Preferred equity interests		33,279		—		—		—		33,279		8,350
Total	$	563,379	$	8,892	$	17,466	$	39,560	$	629,297	$	123,463

(1) Includes six loans that are current, one loan that is 30 to 59 days or more past due, and one loan that is 60 to 89 days or more past due, but are on non-accrual due to uncertainty over whether we will fully collect principal and interest.  Also includes one loan that is 90 days or more past due in accordance with its terms.

	As of December 31, 2017
Delinquency Status	Current		30 to 59 days		60 to 89 days		90 days or more		Total		Non-Accrual (1)
Commercial mortgage loans	$	1,149,501	$	—	$	—	$	45,234	$	1,194,735	$	81,443
Mezzanine loans		40,258		—		—		5,230		45,488		13,510
Preferred equity interests		33,284		—		—		—		33,284		3,650
Total	$	1,223,043	$	—	$	—	$	50,464	$	1,273,507	$	98,603

(1)      Includes five loans that were current in accordance with their terms, but are on non-accrual due to uncertainty over whether we will fully collect principal and interest, and two loans that are 90 days or more past due in accordance with their terms.

As of September 30, 2018 and December 31, 2017, all of our commercial mortgage loans, mezzanine loans and preferred equity interests that were 90 days or more past due or in foreclosure were on non-accrual status.  It is noted that as of September 30, 2018, $100,442 of our loans are cash flow loans, which provide for the accrual of interest at specified rates which differ from current payment terms, and in some cases, do not require current payments. See Note 2: Summary of Significant Accounting Policies, (j) Revenue Recognition, for further discussion of our cash flow loans. As of September 30, 2018 and December 31, 2017, $123,463 and $98,603, respectively, of our commercial real estate loans were on non-accrual status and had a weighted-average interest rate of 6.8% and 6.1%, respectively. Also, as of September 30, 2018 and December 31, 2017, two, and three loans with unpaid principal balances of $15,919 and $20,624, respectively, and weighted average interest rate of 13.5% and 12.9%, respectively, were not recognizing interest based on the estimated value of the underlying collateral. Additionally, as of September 30, 2018, one loan, with an unpaid principal balance of $7,948, which had previously been restructured in a troubled debt restricting, or TDR, did not accrue interest in accordance with its restructured terms.

Allowance For Loan Losses And Impaired Loans

During the three and nine months ended September 30, 2018, we recognized provision for loan losses of $7,489 and $30,269.  Our provision for loan losses during the three and nine months ended September 30, 2018 was primarily driven by two and seven loans, respectively, where the borrower and/or property experienced an unfavorable event or events during the period, which resulted in probable, incurred losses and credit related impairments recognized on the loans transferred to loans held for sale that are further discussed below.

We closely monitor our loans, which require evaluation for loan loss in two categories: satisfactory and watchlist. Loans classified as satisfactory are loans that are performing consistent with our expectations. Loans classified as watchlist are generally loans that have performed below our expectations, have credit weaknesses or in which the credit quality of the collateral has deteriorated. This is determined by evaluating quantitative factors including debt service coverage ratios, net operating income of the underlying collateral and qualitative factors such as current performance of the underlying collateral. We have classified our loans held for investment by credit risk category as of September 30, 2018 and December 31, 2017 as follows:

	As of September 30, 2018
Credit Status	Commercial Mortgage Loans		Mezzanine Loans		Preferred Equity		Total
Satisfactory	$	428,646	$	—	$	13,930	$	442,576
Watchlist (1)		146,250		21,122		19,349		186,721
Total	$	574,896	$	21,122	$	33,279	$	629,297

(1) Includes $154,581 of loans that are considered to be impaired and $32,140 of loans that are not considered to be impaired.  

	As of December 31, 2017
Credit Status	Commercial Mortgage Loans		Mezzanine Loans		Preferred Equity		Total
Satisfactory	$	1,083,741	$	19,109	$	21,879	$	1,124,729
Watchlist (1)		110,994		26,379		11,405		148,778
Total	$	1,194,735	$	45,488	$	33,284	$	1,273,507

(1) Includes $126,478 of loans that are considered to be impaired and $22,300 of loans that are not considered impaired.

The following tables provide a roll-forward of our allowance for loan losses for our commercial mortgage loans, mezzanine loans and preferred equity interests held for investment for the three months ended September 30, 2018 and 2017:

	For the Three Months Ended September 30, 2018
	Commercial Mortgage Loans			Mezzanine Loans		Preferred Equity		Total
Beginning balance	$	11,226		$	5,231	$	242	$	16,699
Provision (benefit) for loan losses		5,506			1,258		725		7,489
Charge-offs, net of recoveries		(571	)		—		—		(571	)
Ending balance	$	16,161		$	6,489	$	967	$	23,617

	For the Three Months Ended September 30, 2017
	Commercial Mortgage Loans		Mezzanine Loans			Preferred Equity		Total
Beginning balance	$	12,722	$	9,092		$	1,700	$	23,514
Provision (benefit) for loan losses		3,368		2,148			—		5,516
Charge-offs, net of recoveries		—		(3,890	)		—		(3,890	)
Ending balance	$	16,090	$	7,350		$	1,700	$	25,140

The following tables provide a roll-forward of our allowance for loan losses for our commercial mortgage loans, mezzanine loans and preferred equity interests held for investment for the nine months ended September 30, 2018 and 2017:

	For the Nine Months Ended September 30, 2018
	Commercial Mortgage Loans			Mezzanine Loans			Preferred Equity		Total
Beginning balance	$	9,019		$	5,622		$	242	$	14,883
Provision (benefit) for loan losses		25,502			4,042			725		30,269
Charge-offs, net of recoveries (1)		(18,360	)		(3,175	)		—		(21,535	)
Ending balance	$	16,161		$	6,489		$	967	$	23,617

(1) Includes $5,331 of charge-offs related to loans transferred to held for sale during the nine months ended September 30, 2018.

	For the Nine Months Ended September 30, 2017
	Commercial Mortgage Loans			Mezzanine Loans			Preferred Equity			Total
Beginning balance	$	10,640		$	—		$	1,714		$	12,354
Provision (benefit) for loan losses		16,690			11,238			(14	)		27,914
Charge-offs, net of recoveries		(11,240	)		(3,888	)		—		$	(15,128	)
Ending balance	$	16,090		$	7,350		$	1,700		$	25,140

Information on those loans considered to be impaired as of September 30, 2018 and December 31, 2017 was as follows:

	As of September 30, 2018
Impaired Loans	Commercial Mortgage Loans		Mezzanine Loans		Preferred Equity		Total
Impaired loans expecting full recovery	$	11,164	$	12,869	$	10,999	$	35,032
Impaired loans with reserves		102,946		8,253		8,350		119,549
Total Impaired Loans (1)		114,110		21,122		19,349		154,581
Allowance for loan losses	$	16,161	$	6,489	$	967	$	23,617

(1)  As of September 30, 2018, there was no unpaid principal relating to previously identified TDRs that are on accrual status.

	As of December 31, 2017
Impaired Loans	Commercial Mortgage Loans		Mezzanine Loans		Preferred Equity		Total
Impaired loans expecting full recovery	$	14,321	$	12,869	$	7,756	$	34,946
Impaired loans with reserves		74,372		13,510		3,650		91,532
Total Impaired Loans (1)		88,693		26,379		11,406		126,478
Allowance for loan losses	$	9,019	$	5,622	$	242	$	14,883

(1) As of December 31, 2017, there was no unpaid principal relating to previously identified TDRs that are on accrual status.

The average unpaid principal balance and recorded investment of total impaired loans was $141,524 and $157,649 during the three months ended September 30, 2018 and 2017, respectively and $133,201 and $153,707 for the nine months ended September 30, 2018 and 2017, respectively. We recorded interest income from impaired loans of $479 and $138 for the three months ended September 30, 2018 and 2017, respectively. We recorded interest income from impaired loans of $919 and $1,140 for the nine months ended September 30, 2018 and 2017, respectively.

We have evaluated modifications to our commercial real estate loans to determine if the modification constitutes a troubled debt restructuring, or TDR, under FASB ASC Topic 310, “Receivables”. During the three months ended September 30, 2018, there were no restructurings of our commercial real estate loans that constituted a TDR. During the nine months ended September 30, 2018, we determined that restructuring of one commercial real estate loan with an unpaid principal balance totaling $7,948 constituted a TDR as the interest payment rate was decreased to zero percent and the maturity date was extended. During the three and nine months ended September 30, 2017, there were no restructurings of our commercial real estate loans that constituted a TDR.  During the nine months ended September 30, 2018, and September 30, 2017, there were no TDRs that subsequently defaulted for restructurings that had been entered into within the previous 12 months.

Loans Held for Sale

In February 2018, we began to pursue a sale of certain loans. In March 2018, we sold these loans, which had unpaid principal balance of $90,260 and received proceeds of $43,384 after repayment of $45,850 of secured warehouse facility debt and $349 of interest. We recognized a loss of $930 on the sale of these loans.

During March 2018, we transferred nine additional loans to held for sale as we had the intention and ability to sell these loans. The transfer was made at the lower of cost or fair value for each respective loan. During the nine months ended September 30, 2018, six of these loans were sold or repaid, resulting in a net loss of $3,280.  As of September 30, 2018, the three remaining loans held for sale were measured at the lower of cost or fair value, resulting in a loss of $1,524 for three months ended September 30, 2018. As of September 30, 2018, these loans had an unpaid principal balance of $7,015 and a carrying amount of $4,673.

In May 2018, we began to pursue a sale of one additional loan. In June 2018, we sold this loan, which had unpaid principal balance of $13,000 and received proceeds of $11,577. We recognized a provision for loan loss of $1,423 on the transfer of this loan to loans held for sale.

Loan-to-Real Estate Conversion

In October 2018, we completed the conversion of one commercial mortgage loan with a carrying value of $5,096 to real estate owned property.

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INVESTMENTS IN REAL ESTATE

9 Months Ended

Sep. 30, 2018

Banking And Thrift [Abstract]

INVESTMENTS IN REAL ESTATE

NOTE 4: INVESTMENTS IN REAL ESTATE

The table below summarizes our investments in real estate:

	Book Value
	As of September 30, 2018			As of December 31, 2017
Multifamily real estate properties	$	—		$	17,163
Office real estate properties		51,460			130,125
Retail real estate properties		60,446			106,817
Parcels of land		20,567			20,567
Subtotal		132,473			274,672
Less: Accumulated depreciation and amortization		(9,328	)		(28,768	)
Investments in real estate, net (1)	$	123,145		$	245,904

(1) As of September 30, 2018 and December 31, 2017, there were no properties considered held-for-sale.

As of September 30, 2018, our investments in real estate were comprised of land of $41,407 and buildings and improvements of $91,066. As of December 31, 2017, our investments in real estate were comprised of land of $73,003 and buildings and improvements of $201,669.

As of September 30, 2018, our investments in real estate of $132,473 were financed through $40,906 of mortgage loans or other debt held by third parties and $133,525 of mortgage loans held directly by RAIT or through our RAIT I and RAIT II CDO securitizations. As of December 31, 2017, our investments in real estate of $274,672 were financed through $62,297 of mortgage loans or other debt held by third parties and $298,050 of mortgage loans held directly by RAIT or through our RAIT I and RAIT II CDO securitizations. Together, along with commercial real estate loans held by RAIT I and RAIT II, these mortgage loans serve as collateral for the CDO notes payable issued by the RAIT I and RAIT II CDO securitizations. All intercompany balances and interest charges are eliminated in consolidation.

Property Sales:

During the nine months ended September 30, 2018, we sold two office properties, one multifamily, and one retail property. We also recognized $6 of losses on sales related to properties sold in the prior year, as we settled remaining amounts with third parties subsequent to the sale date. The below table summarizes our property sales for the current year and also presents each property’s contribution to net income (loss) allocable to common shares, excluding the impact of the gain (loss) on sale:

							Net income (loss) allocable to common shares
Property Name	Property Type	Date of Sale	Sale Price		Gain (loss) on sale		For the Three Months Ended September 30, 2018			For the Nine Months Ended September30, 2018
1501 Yamato Road (1)	Office	6/15/2018	$	42,050	$	906	$	-		$	(259	)
Erieview Tower & Parking (2)	Office	8/1/2018		28,901		-		(22	)		(10	)
Erieview Galleria	Retail	8/1/2018		1,099		-		1			(9	)
Lexington	Multifamily	8/31/2018		21,150		7,964		194			609
Total			$	93,200	$	8,870	$	173		$	331

(1) We also recognized a loss on extinguishment of debt related to the sale of this property, resulting from a defeasance premium of $1,943.

(2)  This property was previously impaired.

Impairment:

During the three and nine months ended September 30, 2018, we recognized impairment charges related to certain real estate assets of $13,267 and $44,083, respectively, as it was more likely than not that we would dispose of the assets before the end of their previously estimated useful lives and a portion of our recorded investment in these assets was determined to not be recoverable.

During the three months ended September 30, 2018, due to the current conditions affecting one of our retail properties in its local market, we recognized an impairment charge on one of our retail properties. The analysis performed, which included a third-party appraisal, resulted in an impairment charge of $13,482.  We also recognized impairment charges of $635 on three other assets based on the status of negotiations for the sale of the assets.  As discussed in Note 2: Summary of Significant Accounting Policies, we also corrected an error which resulted in the reversal of $850 of asset impairment during the three months ended September 30, 2018.

During the nine months ended September 30, 2018, we recognized impairment charges on six of our real estate assets of $44,083.  Due to the current conditions affecting one of our retail properties in its local market, we recognized an impairment of $13,482 based on a third-party appraisal.  Due to the current conditions affecting one of our retail properties in its local market as well as our current efforts to increase our liquidity, we accepted an offer to purchase this asset which resulted in an impairment charge of $17,249 based on an executed purchase and sale agreement. We recognized impairment charges of $9,754 on three assets based on the status of negotiations for the sale of the assets. An impairment charge of $3,598 on the sixth asset was driven by a default on the asset’s associated ground lease.

See Note 7: Fair Value of Financial Instruments for further information regarding our non-recurring fair value measurements.

Other Dispositions:

During the three months ended September 30, 2018, we recognized a non-cash gain on deconsolidation of properties of $907 relating to the voluntary surrender of a ground leasehold interest in one of our retail properties. The ground leasehold interest was held by one of our wholly owned subsidiaries, whose only assets were those relating to owning its ground leasehold interest in and operating the property. The gain on deconsolidation resulted from the derecognition of certain liabilities related to the ground lease, as the leasehold improvements had previously been reduced to $0 as a result of the ground lease default.

During the nine months ended September 30, 2017, we incurred a non-cash loss on deconsolidation of properties of $20,660 relating to an industrial real estate portfolio containing ten properties with carrying value of $82,501 of investments in real estate and $81,941 of related cross-collateralized non-recourse debt as of December 31, 2016. During the nine months ended September 30, 2017, the senior lender foreclosed on the mortgage liens encumbering eight of these industrial properties and disposed of the properties through auction processes.  These eight properties, including other assets, net of related liabilities, had an aggregate carrying value of $67,726. Upon foreclosure, we derecognized these net assets and extinguished related debt of $27,067 based on the proceeds received by the senior lender at the auctions. The difference between the net carrying value and the debt extinguished resulted in the non-cash loss noted above as full release of the remaining cross-collateralized non-recourse debt had not yet been received. The remaining two of these industrial properties had a carrying value of $13,909 of investments in real estate and $34,874 of related cross-collateralized non-recourse debt as of September 30, 2017. During the remainder of 2017, the remaining properties within this portfolio were foreclosed upon and, as a result, there were no assets or liabilities related to this portfolio on our balance sheet as of December 31, 2017.

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INDEBTEDNESS

9 Months Ended

Sep. 30, 2018

Debt Disclosure [Abstract]

INDEBTEDNESS

NOTE 5: INDEBTEDNESS

We maintain various forms of short-term and long-term financing arrangements. Generally, these financing agreements are collateralized by assets within securitizations.

The following table summarizes our total recourse and non-recourse indebtedness as of September 30, 2018:

Description	Unpaid Principal Balance		Unamortized Discount/Premium and Deferred Financing Costs			Carrying Amount		Weighted- Average Interest Rate			Contractual Maturity
Recourse indebtedness:
7.0% convertible senior notes (1)	$	871	$	(35	)	$	836		7.0	%	Apr. 2031 (1)
4.0% convertible senior notes (2)		68,222		(1,648	)		66,574		4.0	%	Oct. 2033 (2)
7.625% senior notes		56,324		(1,282	)		55,042		7.6	%	Apr. 2024
7.125% senior notes		65,356		(492	)		64,864		7.1	%	Aug. 2019
Junior subordinated notes, at fair value (3)		18,671		(10,348	)		8,323		6.3	%	Mar. 2035
Junior subordinated notes, at amortized cost		25,100		—			25,100		4.8	%	Apr. 2037
Total recourse indebtedness		234,544		(13,805	)		220,739		6.0	%
Non-recourse indebtedness:
CDO notes payable, at amortized cost (4)(5)		152,710		(264	)		152,446		2.9	%	Jun. 2045 to Nov. 2046
CMBS securitizations (6)(7)		404,707		(3,567	)		401,140		3.6	%	Jun. 2037 to Dec. 2037
Loans payable on real estate		40,906		(244	)		40,662		4.7	%	Oct. 2021 to Dec. 2021
Total non-recourse indebtedness		598,323		(4,075	)		594,248		3.5	%
Total indebtedness	$	832,867	$	(17,880	)	$	814,987		4.2	%

(1) In October 2018, we exercised our right to optionally redeem and cancel the remaining 7.0% convertible senior notes at par.

(2) Our 4.0% convertible senior notes are redeemable at par, at the option of the holder, in October 2018, October 2023, and October 2028. On October 1, 2018, we repurchased $67,943 in principal amount of the 4.0% convertible senior notes at par pursuant to the exercise by the holders of these notes of their redemption option, leaving $279 aggregate principal amount outstanding. On October 2, 2018, we notified the Trustee for the 4% convertible senior notes that we would exercise our right to optionally redeem and cancel the remaining $279 on November 16, 2018.

(3) Relates to liabilities which we elected to record at fair value under FASB ASC Topic 825.

(4) Excludes CDO notes payable purchased by us which are eliminated in consolidation.

(5) Collateralized by $299,250 principal amount of commercial mortgage loans, mezzanine loans, other loans and preferred equity interests, $162,116 of which is eliminated in consolidation.  These obligations were issued by separate legal entities and consequently the assets of the special purpose entities that collateralize these obligations are not available to our creditors.

(6) Excludes CMBS securitization notes purchased by us which are eliminated in consolidation.

(7) Collateralized by $481,600 principal amount of commercial mortgage loans and participation interests. These obligations were issued by separate legal entities and consequently the assets of the special purpose entities that collateralize these obligations are not available to our creditors.

The following table summarizes our total recourse and non-recourse indebtedness as of December 31, 2017:

Description	Unpaid Principal Balance		Unamortized Discount/Premium and Deferred Financing Costs			Carrying Amount		Weighted- Average Interest Rate			Contractual Maturity
Recourse indebtedness:
7.0% convertible senior notes (1)	$	871	$	(38	)	$	833		7.0	%	Apr. 2031 (1)
4.0% convertible senior notes (2)		110,513		(3,713	)		106,800		4.0	%	Oct. 2033 (2)
7.625% senior notes		56,324		(1,457	)		54,867		7.6	%	Apr. 2024
7.125% senior notes		68,408		(934	)		67,474		7.1	%	Aug. 2019
Senior secured notes		11,500		(437	)		11,063		7.3	%	Apr. 2019
Junior subordinated notes, at fair value (3)		18,671		(10,550	)		8,121		5.3	%	Mar. 2035
Junior subordinated notes, at amortized cost		25,100		—			25,100		3.9	%	Apr. 2037
Secured warehouse facilities		22,313		(570	)		21,743		3.5	%	Jan.2018 to Jul. 2018
Total recourse indebtedness		313,700		(17,699	)		296,001		5.5	%
Non-recourse indebtedness:
CDO notes payable, at amortized cost (4)(5)		258,063		(3,339	)		254,724		2.2	%	Jun. 2045 to Nov. 2046
CMBS securitizations (6)(7)		744,763		(8,177	)		736,586		3.4	%	Jan. 2031 to Dec. 2037
Loans payable on real estate		62,297		(375	)		61,922		5.2	%	May 2021 to Dec. 2021
Total non-recourse indebtedness		1,065,123		(11,891	)		1,053,232		3.2	%
Other indebtedness (8)		40,830		125			40,955		—			—
Total indebtedness	$	1,419,653	$	(29,465	)	$	1,390,188		3.7	%

(1) Our 7.0% convertible senior notes are redeemable at par, at the option of the holder, in April 2021, and April 2026.

(2) Our 4.0% convertible senior notes are redeemable at par, at the option of the holder, in October 2018, October 2023, and October 2028.

(3) Relates to liabilities which we elected to record at fair value under FASB ASC Topic 825.

(4) Excludes CDO notes payable purchased by us which are eliminated in consolidation.  

(5) Collateralized by $507,306 principal amount of commercial mortgage loans, mezzanine loans, other loans and preferred equity interests, $274,629 of which is eliminated in consolidation.  These obligations were issued by separate legal entities and consequently the assets of the special purpose entities that collateralize these obligations are not available to our creditors.

(6) Excludes CMBS securitization notes purchased by us which are eliminated in consolidation.

(7) Collateralized by $944,894 principal amount of commercial mortgage loans and participation interests in commercial mortgage loans. These obligations were issued by separate legal entities and consequently the assets of the special purpose entities that collateralize these obligations are not available to our creditors.    

(8) Represents two 40% interests issued to an unaffiliated third party in two ventures to which we contributed the junior notes and equity of two floating rate securitizations. Together these ventures are referred to as the RAIT Venture VIEs.  The first of these ventures, the 2016 RAIT Venture VIE, was formed in 2016.  The second, the 2017 RAIT Venture VIE, was formed in 2017. We retained a 60% interest in these ventures, and, as a result of our controlling financial interest, we consolidated the ventures. We received approximately $41,689 of proceeds as a result of issuing these 40% interests, which have an unpaid principal balance of $40,830. These 40% interests have no stated maturity date and do not provide for mandatory redemption or any required return or interest payment. These ventures allocate the distributions on such junior notes and equity when made between the parties to the ventures.

Recourse indebtedness refers to indebtedness that is recourse to our general assets, including the loans payable on real estate that are guaranteed by us. Non-recourse indebtedness consists of indebtedness of consolidated securitizations and loans payable on real estate which is recourse only to specific assets pledged as collateral to the lenders. The creditors of each consolidated securitization have no recourse to our general credit.

The current status or activity in our financing arrangements occurring as of or during the nine months ended September 30, 2018 is as follows:

Recourse Indebtedness

7.0% convertible senior notes. The 7.0% convertible senior notes are convertible at the option of the holder at a current conversion rate of 4.1217 common shares per $1 principal amount of 7.0% convertible senior notes (equivalent to a current conversion price of $242.6 per common share). As of September 30, 2018, $871 of the 7.0% convertible notes remain outstanding.  The 7.0% convertible senior notes are redeemable at par, at the option of the holder, in April 2021, and April 2026. During the nine months ended September 30, 2018, there was no activity other than recurring interest during the current period. These notes do not contain financial covenants.

In October 2018, we exercised our right to optionally redeem and cancel the remaining 7.0% convertible senior notes at a redemption price equal to the principal amount of $871 plus accrued and unpaid interest.

4.0% convertible senior notes. The 4.0% convertible senior notes are convertible at the option of the holder at a current conversion rate of 2.1716 common shares per $1 principal amount of 4.0% convertible senior notes (equivalent to a current conversion price of $460.5 per common share). The 4.0% convertible senior notes are redeemable at par, at the option of the holder, in October 2018, October 2023, and October 2028. These notes do not contain financial covenants.

During the three months ended March 31, 2018, we repurchased $6,000 in principal amount of the 4% convertible senior notes for $5,708. During the three months ended June 30, 2018, we repurchased $36,291 in principal amount of the 4% convertible senior notes for $35,319. As of September 30, 2018, $68,222 of the 4.0% convertible senior notes remain outstanding.

On October 1, 2018, we repurchased $67,943 in principal amount of the 4.0% convertible senior notes at par pursuant to the exercise by the holders of these notes of their redemption option, leaving $279 aggregate principal amount outstanding. On October 2, 2018, we notified the Trustee for the 4% convertible senior notes that we would exercise our right to optionally redeem and cancel the remaining $279 on November 16, 2018.

7.625% senior notes.  During the nine months ended September 30, 2018, there was no activity other than recurring interest. As of September 30, 2018, $56,324 of the 7.625% senior notes remain outstanding. These notes contain financial covenants that are applicable upon the incurrence of debt as defined in the notes’ related indenture including a maximum leverage ratio covenant and a minimum fixed charge ratio covenant. We have not incurred debt, as defined in this indenture, since the three months ended March 31, 2018. As of March 31, 2018, the leverage ratio, calculated in accordance with the indenture, was 74.6% as compared to a maximum leverage ratio not to exceed 80%, and for the preceding four quarters, the fixed charge coverage ratio, calculated in accordance with the indenture, was 1.34x as compared to a minimum fixed charge coverage ratio of no less than 1.20x.

7.125% senior notes.  During the three months ended September 30, 2018, we repurchased $3,051 in principal amount of the 7.125% convertible senior notes for $2,852. As of September 30, 2018, $65,356 of the 7.125% senior notes remain outstanding. These notes contain financial covenants that are applicable upon the incurrence of debt as defined in the notes’ related indenture including a maximum leverage ratio covenant and a minimum fixed charge ratio covenant. We have not incurred debt, as defined in this indenture, since the three months ended March 31, 2018.  As of March 31, 2018, the leverage ratio, calculated in accordance with the indenture, was 74.6% as compared to a maximum leverage ratio not to exceed 80%, and for the preceding four quarters, the fixed charge coverage ratio, calculated in accordance with the indenture, was 1.34x as compared to a minimum fixed charge coverage ratio of no less than 1.20x.

Senior secured notes. During the three months ended March 31, 2018, we repaid $2,000 of the senior secured notes. During the three and nine months ended September 30, 2018, we redeemed the remaining $9,500 of the senior secured notes at a redemption price equal to the principal amount plus accrued and unpaid interest. These notes did not contain financial covenants.

Junior subordinated notes, at fair value. At issuance, we elected to record the $18,671 junior subordinated notes at fair value under FASB ASC Topic 825. As of September 30, 2018, the fair value, or carrying amount, of this indebtedness was $8,323. These notes do not contain financial covenants.

Junior subordinated notes, at amortized cost.  During the nine months ended September 30, 2018, there was no activity other than recurring interest. These notes do not contain financial covenants.

Secured warehouse facilities. As of September 30, 2018, we had $0 of outstanding secured warehouse borrowings and $0 of outstanding commercial mortgage borrowings under the amended and restated master repurchase agreement, or the Amended MRA.  The Amended MRA had a capacity of $150,000 with a limit of $100,000 for floating rate loans. This facility was not renewed after its maturity in July 2018 and it has terminated.

As of September 30, 2018, we had $0 of outstanding borrowings under the $75,000 commercial mortgage facility. This facility was not renewed after its June 2018 maturity and it has terminated.   

As of September 30, 2018, we had $0 of outstanding borrowings under the $150,000 commercial mortgage facility. This facility was not renewed after its June 2018 maturity and it has terminated.   

Non-Recourse Indebtedness

CDO notes payable, at amortized cost. CDO notes payable at amortized cost represent notes issued by consolidated CDO securitizations which were used to finance the acquisition of unsecured REIT notes, CMBS securities, commercial mortgage loans and mezzanine loans in our commercial real estate portfolio. Generally, CDO notes payable are comprised of various classes of notes payable, with each class bearing interest at variable or fixed rates. Both RAIT I and RAIT II are meeting all of their over collateralization, or OC, and interest coverage, or IC, trigger tests as of September 30, 2018.

CMBS securitizations

On June 27, 2018, RAIT IV, a subsidiary of RAIT, completed the sale of its FL5 Interests and FL6 Interests to Melody RE II, LLC. As a result of the sale, we determined that RAIT is no longer the primary beneficiary of the RAIT Venture VIEs, FL5 or FL6 (each as defined in Note 8: Variable Interest Entities). Therefore, we deconsolidated those entities as of June 27, 2018. See Note 8: Variable Interest Entities for more information regarding this transaction.

As of September 30, 2018, our subsidiary, RAIT 2017-FL7 Trust, or RAIT FL7, had $258,404 of total collateral at par value, none of which was defaulted. As of November 2018, $9,000 of this collateral is in default.  As of September 30, 2018, RAIT FL7 had classes of investment grade senior notes with an aggregate principal balance outstanding of approximately $225,847 to investors. We currently own the unrated classes of junior notes, including classes with an aggregate principal balance of $65,479, and the equity, or the retained interests, of RAIT FL7. RAIT FL7 does not have OC triggers or IC triggers.  

As of September 30, 2018, our subsidiary, RAIT 2017-FL8 Trust, or RAIT FL8, had $223,196 of total collateral at par value, none of which was defaulted. As of September 30, 2018, RAIT FL8 had classes of investment grade senior notes with an aggregate principal balance outstanding of approximately $178,860 to investors. We currently own the unrated classes of junior notes, including a class with an aggregate principal balance of $44,162, and the equity, or the retained interests, of RAIT FL8. RAIT FL8 does not have OC triggers or IC triggers.  

The junior notes that we have retained in our CMBS securitizations include the class of junior notes that is subject to the first dollar of loss.

Loans payable on real estate

As of September 30, 2018, and December 31, 2017, we had $40,906 and $62,297, respectively, of other indebtedness outstanding relating to loans payable on consolidated real estate. These loans are secured by specific consolidated real estate assets included in our consolidated balance sheets.

Maturity of Indebtedness

Generally, the majority of our indebtedness is payable in full upon the maturity or termination date of the underlying indebtedness. The following table displays the aggregate contractual maturities of our indebtedness, outstanding as of September 30, 2018, on or before December 31 by year:

	Recourse indebtedness		Non-recourse indebtedness
2018	$	-	$	183
2019		65,356		749
2020		-		779
2021		-		39,195
2022		-		-
Thereafter (1)		169,188		557,417
Total	$	234,544	$	598,323

(1) Includes $871 of our 7.0% convertible senior notes which were fully redeemed at par in October 2018. Includes $68,222 of our 4.0% convertible senior notes which are redeemable, at par at the option of the holder in October 2018, October 2023, and October 2028. On October 1, 2018, we repurchased $67,943 in principal amount of the 4.0% convertible senior notes at par pursuant to the exercise by the holders of these notes of their redemption option, leaving $279 aggregate principal amount outstanding. On October 2, 2018, we notified the Trustee for the 4% convertible senior notes that we would exercise our right to optionally redeem and cancel the remaining $279 on November 16, 2018.

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DERIVATIVE FINANCIAL INSTRUMENTS

9 Months Ended

Sep. 30, 2018

Derivative Instruments And Hedging Activities Disclosure [Abstract]

DERIVATIVE FINANCIAL INSTRUMENTS

NOTE 6: DERIVATIVE FINANCIAL INSTRUMENTS

We may use derivative financial instruments to hedge all or a portion of the interest rate risk associated with our borrowings or fixed rate assets. The principal objective of such arrangements is to minimize the risks and/or costs associated with our operating and financial structure as well as to hedge specific anticipated transactions.  While these instruments may impact our periodic cash flows, they benefit us by minimizing the risks and/or costs previously described.  The counterparties to these contractual arrangements are major financial institutions with which we and our affiliates may also have other financial relationships. In the event of nonperformance by the counterparties, we are potentially exposed to credit loss. However, because of the high credit ratings of the counterparties, we do not anticipate that any of the counterparties will fail to meet their obligations.

Interest Rate Derivatives

We have historically entered into various interest rate swap contracts to hedge interest rate exposure on floating rate indebtedness.

We designate interest rate hedge agreements at inception and determine whether or not the interest rate hedge agreement is highly effective in offsetting interest rate fluctuations associated with the identified indebtedness. We use regression analysis to assess the effectiveness of our hedging relationship and use the hypothetical derivative method to measure any ineffectiveness at each reporting period. As of September 30, 2018, all of our cash flow hedge interest rate swaps had reached maturity. As of September 30, 2018, no new cash flow hedge interest rate swaps have been entered into.

The following table summarizes the aggregate notional amount and estimated net fair value of our derivative instruments as of September 30, 2018 and December 31, 2017:

	As of September 30, 2018						As of December 31, 2017
	Notional		Fair Value of Assets		Fair Value of Liabilities		Notional		Fair Value of Assets		Fair Value of Liabilities
Interest rate caps	$	—	$	—	$	—	$	—	$	—	$	—
Interest rate swaps		—		—		—		12,650		11		—
Net fair value	$	—	$	—	$	—	$	12,650	$	11	$	—

Changes in fair value on our other interest rate derivatives are reported in change in fair value of financial instruments in the Consolidated Statements of Operations.  

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FAIR VALUE OF FINANCIAL INSTRUMENTS

9 Months Ended

Sep. 30, 2018

Fair Value Disclosures [Abstract]

FAIR VALUE OF FINANCIAL INSTRUMENTS

NOTE 7: FAIR VALUE OF FINANCIAL INSTRUMENTS

Fair Value of Financial Instruments

FASB ASC Topic 825, “Financial Instruments” requires disclosure of the fair value of financial instruments for which it is practicable to estimate that value. The fair value of investments in mortgage loans, mezzanine loans, preferred equity interests, CDO notes payable, convertible senior notes, junior subordinated notes, and derivative assets and liabilities is based on significant observable and unobservable inputs. The fair value of cash and cash equivalents, restricted cash, CMBS facilities, and other indebtedness approximates their carrying amount or unpaid principal balance due to the nature of these instruments.

Fair Value of Investment in Mortgage Loans, Held for Investment

The fair value of mortgage loans held for investment is determined using an exit price notion. Prior to adopting the January 2016 amendment to FASB ASC Topic 825, we measured the fair value of mortgage loans held for investment under an entry price notion. The entry price notion previously applied used a discounted cash flows technique to calculate the present value of expected future cash flows for a financial instrument. The exit price notion uses the same approach, but also incorporates other factors, such as enhanced credit risk, illiquidity risk, and market factors. We determined the fair value on substantially all of our loans for disclosure purposes, on an individual loan basis. The discount rates reflect current market rates for loans with similar terms to borrowers having similar credit quality on an exit price basis.

The following table summarizes the carrying amount and the fair value of our financial instruments as of September 30, 2018:

Financial Instrument	Carrying Amount		Estimated Fair Value
Assets
Total investment in mortgage loans, held for investment, net	$	604,293	$	579,874
Investment in mortgage loans, held for sale		4,673		4,673
Cash and cash equivalents		98,352		98,352
Restricted cash		86,154		86,154
Liabilities
Recourse indebtedness:
7.0% convertible senior notes		836		579
4.0% convertible senior notes		66,574		68,817
7.625% senior notes		55,042		44,338
7.125% senior notes		64,864		63,619
Junior subordinated notes, at fair value		8,323		8,323
Junior subordinated notes, at amortized cost		25,100		9,210
Non-recourse indebtedness:
CDO notes payable, at amortized cost		152,446		123,453
CMBS securitizations		401,140		404,046
Loans payable on real estate		40,662		40,289

The following table summarizes the carrying amount and the fair value of our financial instruments as of December 31, 2017:

Financial Instrument	Carrying Amount		Estimated Fair Value
Assets
Total investment in mortgage loans, held for investment, net	$	1,255,723	$	1,252,780
Cash and cash equivalents		53,380		53,380
Restricted cash		157,914		157,914
Derivative assets		11		11
Liabilities
Recourse indebtedness:
7.0% convertible senior notes		833		533
4.0% convertible senior notes		106,800		103,457
7.625% senior notes		54,867		43,009
7.125% senior notes		67,474		61,567
Senior secured notes		11,063		11,197
Junior subordinated notes, at fair value		8,121		8,121
Junior subordinated notes, at amortized cost		25,100		8,849
Secured warehouse facilities		21,743		22,313
Non-recourse indebtedness:
CDO notes payable, at amortized cost		254,724		196,212
CMBS securitizations		736,586		744,359
Loans payable on real estate		61,922		64,377
Other indebtedness		40,955		40,830

Fair Value Measurements

The following table summarizes information about our liabilities measured at fair value on a recurring basis as of September 30, 2018, and indicate the fair value hierarchy of the valuation techniques utilized to determine such fair value:

Liabilities:	Quoted Prices in Active Markets for Identical Assets (Level 1) (1)		Significant Other Observable Inputs (Level 2) (1)		Significant Unobservable Inputs (Level 3) (1)		Balance as of September 30, 2018
Junior subordinated notes, at fair value	$	—	$	—	$	8,323	$	8,323
Total liabilities	$	—	$	—	$	8,323	$	8,323

(1) During the nine months ended September 30, 2018, there were no transfers between Level 1 and Level 2, and there were no transfers into and/or out of Level 3.

The following tables summarize information about our assets and liabilities measured at fair value on a recurring basis as of December 31, 2017, and indicate the fair value hierarchy of the valuation techniques utilized to determine such fair value:

Assets:	Quoted Prices in Active Markets for Identical Assets (Level 1) (1)		Significant Other Observable Inputs (Level 2) (1)		Significant Unobservable Inputs (Level 3) (1)		Balance as of December 31, 2017
Derivative assets	$	—	$	11	$	—	$	11
Total assets	$	—	$	11	$	—	$	11

Liabilities:	Quoted Prices in Active Markets for Identical Assets (Level 1) (1)		Significant Other Observable Inputs (Level 2) (1)		Significant Unobservable Inputs (Level 3) (1)		Balance as of December 31, 2017
Junior subordinated notes, at fair value	$	—	$	—	$	8,121	$	8,121
Total liabilities	$	—	$	—	$	8,121	$	8,121

(1) During the year ended December 31, 2017, there were no transfers between Level 1 and Level 2, and there were no transfers into and/or out of Level 3.

When estimating the fair value of our Level 3 financial instruments, management uses various observable and unobservable inputs. These inputs include yields, credit spreads, duration, effective dollar prices and overall market conditions on not only the exact financial instrument for which management is estimating the fair value, but also financial instruments that are similar or issued by the same issuer when such inputs are unavailable. Generally, an increase in the yields, credit spreads or estimated duration will decrease the fair value of our financial instruments. Due to the inherent uncertainty of determining the fair value of investments that do not have a readily available market value, the fair value, as determined by management, may fluctuate from period to period and any ultimate liquidation or sale of the investment may result in proceeds that may be significantly different than fair value. For the fair value of our junior subordinated notes, at fair value, we estimate the fair value of these financial instruments using significant unobservable inputs. For the junior subordinated notes, at fair value, a discounted cash flow model was used as the valuation technique and the significant unobservable inputs as of September 30, 2018 include a discount rate of 20% and as of December 31, 2017 include discount rates ranging from 18.01% to 18.21%. The gains attributable to changes in instrument-specific credit risk were determined by discounting the future cash flows of the notes at base market interest rates and subtracting this amount from the total fair value of the instrument.

The following table summarizes additional information about assets and liabilities that are measured at fair value on a recurring basis for which we have utilized level 3 inputs to determine fair value for the nine months ended September 30, 2018: 

Liabilities	Junior Subordinated Notes, at Fair Value		Total Level 3 Liabilities
Balance, as of December 31, 2017	$	8,121	$	8,121
Change in fair value of financial instruments		202		202
Balance, as of September 30, 2018	$	8,323	$	8,323

The following table summarizes additional information about assets and liabilities that are measured at fair value on a recurring basis for which we have utilized level 3 inputs to determine fair value for the three months ended September 30, 2018:

Liabilities	Junior Subordinated Notes, at Fair Value		Total Level 3 Liabilities
Balance, as of June 30, 2018	$	5,111	$	5,111
Change in fair value of financial instruments		3,212		3,212
Balance, as of September 30, 2018	$	8,323	$	8,323

Non-Recurring Fair Value Measurements

As of September 30, 2018, we measured two of our real estate assets at a fair value of $31,252 in our consolidated balance sheets as they were impaired.  The fair values were based on an executed purchase and sale agreement and the status of negotiations to sell the real estate asset and was classified within Level 2 of the fair value hierarchy.  The significant input was the purchase price derived by the potential buyer.

As of September 30, 2018, we measured one of our real estate assets at a fair value of $10,100 as it was impaired.  The fair value was based on an appraisal received on the property and was classified within Level 3 of the fair value hierarchy.  The significant inputs were the terminal capitalization rate of 9% and discount rate of 12.25%.

Our other non-recurring fair value measurements relate primarily to our commercial real estate loans that are considered impaired. In evaluating our impaired loans, we estimate the fair value of the underlying collateral of the respective commercial real estate loan and compare that fair value to our total investment in the loan. When estimating the fair value of the underlying collateral of the commercial real estate loan, management uses discounted cash flow analyses and/or direct capitalization valuation analyses. The significant inputs to these valuations are capitalization rates and discount rates and are based on market information and comparable sales of similar properties.  As of September 30, 2018, we measured the underlying collateral of nine of our loans at a fair value of $101,450 in our consolidated balance sheet as they were impaired.

Fair Value of Financial Instruments

The following tables summarize the valuation technique and the level of the fair value hierarchy for financial instruments that are not fair valued in the accompanying consolidated balance sheets but for which fair value is required to be disclosed. The fair value of cash and cash equivalents, restricted cash, secured warehouse facilities, commercial mortgage facilities and other indebtedness approximates cost due to the nature of these instruments and are not included in the tables below.

	Carrying Amount as of September 30, 2018		Estimated Fair Value as of September 30, 2018		Valuation Technique	Level in Fair Value Hierarchy
Total investment in mortgage loans, held for investment, net	$	604,293	$	579,874	Discountedcash flows	Three
Investment in mortgage loans, held for sale		4,673		4,673	Discounted cash flows	Three
7.0% convertible senior notes		836		579	Trading price	Two
4.0% convertible senior notes		66,574		68,817	Trading price	Two
7.625% senior notes		55,042		44,338	Trading price	Two
7.125% senior notes		64,864		63,619	Trading price	Two
Junior subordinated notes, at amortized cost		25,100		9,210	Discounted cash flows	Three
CDO notes payable, at amortized cost		152,446		123,453	Discounted cash flows	Three
CMBS securitizations		401,140		404,046	Discounted cash flows	Three
Loans payable on real estate		40,662		40,289	Discounted cash flows	Three

	Carrying Amount as of December 31, 2017		Estimated Fair Value as of December 31, 2017		Valuation Technique	Level in Fair Value Hierarchy
Total investment in mortgage loans, held for investment, net	$	1,255,723	$	1,252,780	Discounted cash flows	Three
7.0% convertible senior notes		833		533	Trading price	Two
4.0% convertible senior notes		106,800		103,457	Trading price	Two
7.625% senior notes		54,867		43,009	Trading price	Two
7.125% senior notes		67,474		61,567	Trading price	Two
Senior secured notes		11,063		11,197	Discounted cash flows	Three
Junior subordinated notes, at amortized cost		25,100		8,849	Discounted cash flows	Three
CDO notes payable, at amortized cost		254,724		196,212	Discounted cash flows	Three
CMBS securitizations		736,586		744,359	Discounted cash flows	Three
Loans payable on real estate		61,922		64,377	Discounted cash flows	Three
Other indebtedness		40,955		40,830	Discounted cash flows	Three

The following table summarizes realized and unrealized gains and losses on assets and liabilities for which we elected the fair value option of FASB ASC Topic 825, “Financial Instruments” and derivatives as reported in change in fair value of financial instruments in the accompanying consolidated statements of operations:

	For the Three Months Ended September 30,						For the Nine Months Ended September 30,
Description	2018			2017			2018			2017
Change in fair value of junior subordinated notes	$	(410	)	$	3,270		$	(682	)	$	2,568
Change in fair value of derivatives		—			(17	)		470			(275	)
Change in fair value of warrants and investors SARs		—			1,500			—			4,400
Change in fair value of financial instruments	$	(410	)	$	4,753		$	(212	)	$	6,693

The changes in the fair value for the junior subordinated notes for which the fair value option was elected for the three and nine months ended September 30, 2018 was primarily attributable to changes in base market interest rates. The changes in the fair value for the junior subordinated notes for which the fair value option was elected for the three and nine months ended September 30, 2017 was primarily attributable to changes in base market interest rates and instrument specific credit risks. The changes in the fair value of derivatives for the three and nine months ended September 30, 2018 and 2017 was primarily attributable to changes in interest rates. The changes in fair value of the warrants and investor SARs for the three and nine months ended September 30, 2017 was primarily attributable to changes in the reference stock price and volatility.

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VARIABLE INTEREST ENTITIES

9 Months Ended

Sep. 30, 2018

Organization Consolidation And Presentation Of Financial Statements [Abstract]

VARIABLE INTEREST ENTITIES

NOTE 8: VARIABLE INTEREST ENTITIES

The determination of when to consolidate a VIE is based on the power to direct the activities of the VIE that most significantly impact the VIE’s economic performance together with either the obligation to absorb losses or the right to receive benefits that could be significant to the VIE. We evaluated our investments and determined that, as of September 30, 2018, our consolidated VIEs were: RAIT I, RAIT II, RAIT FL7, RAIT FL8, and the RAIT VIE Properties (Willow Grove and Cherry Hill).  As of December 31, 2017, our consolidated VIEs included the aforementioned VIEs and the two ventures described in Note 5: Indebtedness (RAIT Venture VIEs).

We consolidate the securitizations that we sponsor for which we have retained interests in and control the significant decisions regarding the collateral in these entities, such as the approval of loan workouts.  As of September 30, 2018, we consolidated the VIE properties as we own a majority of these entities and control the significant capital and operating decisions regarding the properties. 

The following tables present the assets and liabilities of our consolidated VIEs as of each respective date. Certain amounts included in the tables below are eliminated upon consolidation with our other subsidiaries that maintain investments in the debt or equity securities issued by these entities.

	As of September 30, 2018
	RAIT Securitizations		RAIT VIE Properties			Total
Assets
Investments in commercial mortgage loans, mezzanine loans and preferred equity interests	$	756,004	$	—		$	756,004
Investments in real estate		—		18,133			18,133
Cash and cash equivalents		—		197			197
Restricted cash		36,512		302			36,814
Accrued interest receivable		26,286		—			26,286
Other assets		72		3,971			4,043
Total assets	$	818,874	$	22,603		$	841,477
Liabilities and Equity
Indebtedness, net	$	784,873	$	19,530		$	804,403
Accrued interest payable		1,769		5,748			7,517
Accounts payable and accrued expenses		69		3,257			3,326
Deferred taxes, borrowers’ escrows and other liabilities		—		197			197
Total liabilities		786,711		28,732			815,443
Equity:
Shareholders’ equity:
RAIT investment and Retained earnings (deficit)		32,163		(6,129	)		26,034
Total shareholders’ equity		32,163		(6,129	)		26,034
Total liabilities and equity	$	818,874	$	22,603		$	841,477

	As of December 31, 2017
	RAIT Securitizations		RAIT VIE Properties			RAIT Venture VIE			Total
Assets
Investments in commercial mortgage loans, mezzanine loans and preferred equity interests	$	1,082,528	$	—		$	349,924		$	1,432,452
Investments in real estate		—		18,634			—			18,634
Cash and cash equivalents		—		283			92			375
Restricted cash		1,068		237			10			1,315
Accrued interest receivable		41,639		—			2,462			44,101
Other assets		16,860		3,954			—			20,814
Total assets	$	1,142,095	$	23,108		$	352,488		$	1,517,691
Liabilities and Equity
Indebtedness, net	$	1,034,750	$	19,630		$	354,835		$	1,409,215
Accrued interest payable		1,869		5,356			1,111			8,336
Accounts payable and accrued expenses		23		3,274			—			3,297
Deferred taxes, borrowers’ escrows and other liabilities		—		184			643			827
Total liabilities		1,036,642		28,444			356,589			1,421,675
Equity:
Shareholders’ equity:
RAIT investment and Retained earnings (deficit)		105,453		(5,336	)		(4,140	)		95,978
Total shareholders’ equity		105,453		(5,336	)		(4,140	)		95,977
Noncontrolling Interests		—		—			39			39
Total liabilities and equity	$	1,142,095	$	23,108		$	352,488		$	1,517,691

The assets of the VIEs can only be used to settle obligations of the VIEs and are not available to our creditors. The amounts that eliminate in consolidation include $156,195 of total investments in mortgage loans and $244,116 of indebtedness as of September30, 2018 and $257,625 of total investments in mortgage loans and $370,351 of indebtedness as of December 31, 2017. We do not have any contractual obligation to provide the VIEs listed above with any financial support. We have not and do not intend to provide financial support to these VIEs that we were not previously contractually required to provide.

Deconsolidation of RAIT Venture VIEs and RAIT FL5 & RAIT FL6

On June 27, 2018, RAIT IV completed the sale of its FL5 Interests, as defined below, and FL6 Interests, as defined below (collectively, the Interests), to Melody RE II, LLC, or the Purchaser, for an aggregate purchase price of $54,632.

Prior to the sale, RAIT IV was the holder of:

• 60% of the units, or the FL5 Interests, of Holdings 2016, which controls RAIT – Melody 2016 Holdings Trust. This trust owned, at the time of sale, various classes of non-investment grade bonds and the equity of FL5 with the remaining 40% of the units of Holdings 2016 being held by affiliates of the Purchaser; and

• 60% of the units, or the FL6 Interests, of Holdings 2017, which controls RAIT – Melody 2017 Holdings Trust. This trust owned, at the time of sale, various classes of non-investment grade bonds and the equity of FL6 with the remaining 40% of the units of Holdings 2017 being held by affiliates of the Purchaser.

Holdings 2016 and Holdings 2017, have been referred to as the RAIT Venture VIEs.  As a result of the sale, RAIT is no longer the primary beneficiary of the RAIT Venture VIEs, FL5 or FL6.  Therefore, RAIT deconsolidated those entities as of June 27, 2018.

The following table summarizes the effects of deconsolidating the RAIT Venture VIEs, RAIT FL5 and RAIT FL6 from our balance sheet as of June 27, 2018:

	As of June 27, 2018
Assets
Commercial mortgage loans, mezzanine loans, and preferred equity interests	$	266,502
Cash and cash equivalents		189
Restricted cash		22,569
Accrued interest receivable		1,191
Other assets		1,233
Total assets	$	291,684
Liabilities
Indebtedness, net	$	205,137
Accrued interest payable		502
Accounts payable and accrued expenses		45
Borrowers' escrows		22,549
Deferred taxes and other liabilities		531
Total liabilities		228,764
Equity:
Stockholders' equity:
Noncontrolling interests		111
Total liabilities and equity	$	228,875
RAIT IV's net investment in RAIT FL5 & RAIT FL6	$	62,809
Purchase price for RAIT IV's FL5 Interests & FL6 Interests		54,632
Loss on deconsolidation of RAIT Venture VIEs, RAIT FL5 & RAIT FL6	$	(8,177	)

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SERIES D PREFERRED SHARES

9 Months Ended

Sep. 30, 2018

Temporary Equity Disclosure [Abstract]

SERIES D PREFERRED SHARES

NOTE 9: SERIES D PREFERRED SHARES

On October 1, 2012, we entered into a Securities Purchase Agreement, or the purchase agreement, with ARS VI Investor I, LLC, or the Investor, an affiliate of Almanac Realty Investors, LLC, or Almanac. During the period from the effective date of the purchase agreement through March 2014, we sold to the Investor on a private placement basis in four separate sales for an aggregate purchase price of $100,000, or the total commitment, the following securities: (i) 4,000,000 of our Series D Cumulative Redeemable Preferred Shares of Beneficial Interest, par value $0.01 per share, or the Series D preferred shares, (ii) common share purchase warrants, or the warrants, exercisable for 9,931,000 of our common shares, or the common shares (which had subsequently adjusted to 11,035,875 shares), and (iii) common share appreciation rights, or the Investor SARs, with respect to up to 6,735,667 common shares (which had subsequently adjusted to 7,485,045 shares).  

All transactions involving the issuance, repurchase, redemption and/or exchange of the Series D preferred shares discussed herein also involved the corresponding preferred units of RAIT IV, and with respect to the redemption on June 27, 2018 in connection with the below referenced Redemption and Exchange Agreement, resulted from the redemption of the linked preferred units of RAIT IV.

In September 2015, we amended the purchase agreement with Almanac related to the Series D preferred shares.  This amendment changed two of the covenants therein.  As consideration for this amendment, we paid the Investor $450. We accounted for this amendment as a modification of the Series D preferred shares.

On December 7, 2016, we entered into a securities repurchase agreement with the Investor pursuant to which we repurchased and cancelled 464,000 Series D preferred shares at par for a purchase price of $11,600 which resulted in a decrease from 4,000,000 Series D preferred shares issued and outstanding to 3,536,000 Series D preferred shares issued and outstanding.

On June 22, 2017, we entered into a securities repurchase agreement with the Investor pursuant to which we repurchased and cancelled 402,280 Series D preferred shares at par for a purchase price of $10,057 which resulted in a decrease from 3,536,000 Series D preferred shares issued and outstanding to 3,133,720 Series D preferred shares issued and outstanding.

On March 19, 2018, we redeemed and cancelled 194,530 Series D preferred shares at par for a purchase price of $4,863 which resulted in a decrease from 3,133,720 Series D preferred shares issued and outstanding to 2,939,190 Series D preferred shares issued and outstanding.

As discussed in Note 1: The Company, on June 27, 2018, we entered into a Redemption and Exchange Agreement with the Investor whereby we redeemed and cancelled the remaining 2,939,190 preferred units of RAIT IV and RAIT’s corresponding Series D preferred shares for $56,765 of cash received by RAIT IV from the sale of the Interests, defined available cash held by RAIT IV and $16,715 of liquidation preference of RAIT’s publicly traded Series A preferred shares, Series B preferred shares and Series C preferred shares.  Accordingly, the Investor received 383,147 of RAIT’s Series A preferred shares, 167,828 of RAIT’s Series B preferred shares, and 117,605 of RAIT’s Series C preferred shares.  In addition, RAIT paid the Investor an exchange fee of $418.  The Redemption and Exchange Agreement also provided for the termination of the Securities Purchase Agreement and mutual releases between RAIT and the Investor of the previously reported dispute between the two parties.

This transaction is accounted for as an extinguishment of Series D preferred shares of RAIT and issuance of Series A, Series B and Series C preferred shares, in each case, of RAIT.  Accordingly, the difference between the fair value of the consideration transferred to the Investor (i.e., cash and RAIT’s Series A, Series B and Series C preferred shares) and the carrying amount of the Series D preferred shares that were redeemed and exchanged represents a return from the Investor.  The following table summarizes the transaction:

Liquidation preference of Series D preferred shares of RAIT prior to June 27, 2018					$	73,480
Cash received for sale of RAIT IV's interests in Holdings 2016 and Holdings 2017	$	54,632
Defined available cash held by RAIT IV		2,133
Total par amount of Series D preferred shares of RAIT redeemed	$	56,765
Fair value of Series A preferred shares of RAIT issued in exchange		2,498	(1	)
Fair value of Series B preferred shares of RAIT issued in exchange		1,091	(2	)
Fair value of Series C preferred shares of RAIT issued in exchange		776	(3	)
Total fair value of Series A, Series B and Series C preferred shares exchanged	$	4,365
Cash exchange fee	$	418
Total consideration transferred in redemption and exchange					$	61,548
Net increase to equity as a result of redemption					$	11,932

(1) Represents the fair value of 383,147 shares of Series A preferred that were issued to the Investor.  The fair value is based upon $6.52 per share, which was the closing price of the Series A preferred shares on June 27, 2018.

(2) Represents the fair value of 167,828 shares of Series B preferred that were issued to the Investor.  The fair value is based upon $6.50 per share, which was the closing price of the Series B preferred shares on June 27, 2018.

(3) Represents the fair value of 117,605 shares of Series C preferred that were issued to the Investor.  The fair value is based upon $6.60 per share, which was the closing price of the Series C preferred shares on June 27, 2018.

On October 11, 2017, we received a put right notice from the Investor exercising the Investor’s right to require us to purchase for $20,500 all the previous warrants and Investor SARs.  On October 17, 2017, RAIT purchased all of the warrants and Investor SARs.  As a result, RAIT had no further obligations beyond October 17, 2017 relating to the warrants and Investor SARs and none remain outstanding, respectively, as of that date.

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SHAREHOLDERS' EQUITY

9 Months Ended

Sep. 30, 2018

Equity [Abstract]

SHAREHOLDERS' EQUITY

NOTE 10: SHAREHOLDERS’ EQUITY

Preferred Shares

Dividends:

RAIT’s Board determined that it would suspend the dividend on RAIT’s outstanding preferred shares on June 12, 2018. The Board considers dividends on a quarterly basis.

The following table summarizes the dividends we declared and paid on the preferred shares for the nine months ended September30, 2018:

	March 31, 2018
Series A Preferred Shares
Date declared	3/13/2018
Record date	3/23/2018
Date paid	3/30/2018
Total dividend amount	$	2,589
Series B Preferred Shares
Date declared	3/13/2018
Record date	3/23/2018
Date paid	3/30/2018
Total dividend amount	$	1,225
Series C Preferred Shares
Date declared	3/13/2018
Record date	3/23/2018
Date paid	3/30/2018
Total dividend amount	$	910
Series D Preferred Shares
Date declared	3/13/2018
Record date	3/23/2018
Date paid	3/30/2018
Total dividend amount	$	1,665

On March 19, 2018, we redeemed and cancelled 194,530 Series D preferred shares. The Series D Preferred Shares had a $1,665 total dividend declared on March 13, 2018 with a record date of March 23, 2018 which included a $103 payment on March 19, 2018 and a $1,562 payment on March 30, 2018.

As discussed in Note 9: Series D Preferred Shares, on June 27, 2018, we redeemed and cancelled the remaining 2,939,190 preferred units of RAIT IV and RAIT’s corresponding Series D preferred shares for $56,765 of cash received by RAIT IV from the sale of the Interests, defined available cash held by RAIT IV and $16,715 of liquidation preference of RAIT’s publicly traded Series A preferred shares, Series B preferred shares, and Series C preferred shares (383,147 of Series A preferred shares, 167,828 of Series B preferred shares and 117,605 of Series C preferred shares).  Upon issuance, the Series A preferred shares had a fair value of $2,498, the Series B preferred shares had a fair value of $1,091 and the Series C preferred shares had a fair value of $776, based on the closing prices of the respective shares on June 27, 2018.

In the second quarter of 2018, the Board elected not to declare a dividend on RAIT’s Series A, B and C preferred shares. As of September 30, 2018, $10,125 of dividends on these shares were unpaid and in arrears. These dividends in arrears are included in (income) loss allocated to preferred shares on our consolidated statements of operations since they represent a claim on earnings superior to common shareholders, but have not been accrued as a liability since they have not been declared.

At Market Issuance Sales Agreement (ATM):

On June 13, 2014, we entered into an At Market Issuance Sales Agreement, or the 2014 Preferred ATM agreement, with MLV & Co. LLC, or MLV, providing that, from time to time during the term of the 2014 Preferred ATM agreement, on the terms and subject to the conditions set forth therein, we may issue and sell through MLV up to $150,000 aggregate amount of preferred shares.

With respect to each series of preferred shares, the maximum amount issuable is as follows: 4,000,000 Series A Preferred Shares, 1,000,000 Series B Preferred Shares, and 1,000,000 Series C Preferred Shares. Unless the 2014 Preferred ATM agreement is earlier terminated by MLV or us, the 2014 Preferred ATM agreement automatically terminates upon the issuance and sale of all of the Series A Preferred Shares, Series B Preferred Shares, and Series C Preferred Shares.

As of September30, 2018, while 2,724,935 Series A Preferred Shares, 947,496 Series B Preferred Shares, and 999,675 Series C Preferred Shares had not been issued under the 2014 Preferred ATM agreement, we would need to register them for sale under the Securities Act of 1933, as amended, prior to issuing any such securities.

Common Shares

Dividends:

RAIT’s Board determined that it would suspend the dividend on RAIT’s outstanding common shares on November 1, 2017.  The Board considers dividends on a quarterly basis.

During the three and nine months ended September30, 2018, we paid $12 and $117, respectively, of dividends on restricted common share awards that vested in each respective period. These dividends were declared during the vesting period but remained forfeitable prior to vesting and became payable upon vesting in accordance with the terms of these awards.

Dividend Reinvestment and Share Purchase Plan (DRSPP):

We have a dividend reinvestment and share purchase plan, or DRSPP, under which we registered and reserved for issuance, in the aggregate, 210,000 common shares, which has been adjusted for the Reverse Stock Split. During the nine months ended September30, 2018, we issued a total of zero common shares. As of September30, 2018, 154,783 common shares, in the aggregate, remain available for issuance under the DRSPP.

Capital on Demand™ Sales Agreement (COD):

On November 21, 2012, we entered into a Capital on Demand™ Sales Agreement, or the COD sales agreement, with JonesTrading Institutional Services LLC, or JonesTrading, pursuant to which we may issue and sell up to 200,000 of our common shares, which has been adjusted for the reverse stock split, from time to time through JonesTrading acting as agent and/or principal, subject to the terms and conditions of the COD sales agreement. Unless the COD sales agreement is earlier terminated by JonesTrading or us, the COD sales agreement automatically terminates upon the issuance and sale of all of the common shares subject to the COD sales agreement. During the nine months ended September30, 2018, we did not issue any common shares pursuant to this agreement. As of September30, 2018, while 158,378 common shares, in the aggregate, which has been adjusted for the Reverse Stock Split, had not been issued under the COD sales agreement, we would need to register them for sale under the Securities Act of 1933, as amended, prior to issuing any such securities.

Shareholders’ Equity Attributable to Common Shares:

As of September30, 2018, total shareholders’ equity attributable to common shares was a deficit of $165,447.

Non-Controlling Interests

RAIT Venture VIEs:

During the nine months ended September30, 2018, the 2017 RAIT Venture VIE, which elected to be taxed as a REIT and that was formed in 2017 to hold the junior subordinated notes of FL-6, sold 125 preferred shares of the 2017 RAIT Venture VIE to unaffiliated purchasers.  The price was $1,000 per share and the 2017 RAIT Venture VIE received $76 of net proceeds. During the nine months ended September30, 2018, we distributed $15 to the non-controlling interest holders of the RAIT Venture VIEs. Refer to Note 2: Summary of Significant Accounting Policies, (p) Income Taxes, and Note 5: Indebtedness for further discussion about these entities.

On June 27, 2018, RAIT IV, a subsidiary of RAIT, completed the sale of its FL5 Interests and FL6 Interests to Melody RE II, LLC. As a result of the sale, we deconsolidated the RAIT Venture VIEs which resulted in the derecognition of $111 of noncontrolling interests related to the RAIT Venture VIEs. See Note 8: Variable Interest Entities for more information regarding this transaction.

Acquisition of noncontrolling interests related to PlazAmericas Mall:

On March 16, 2018, we acquired the noncontrolling interests related to PlazAmericas Mall, a retail real estate property, for $343, including transaction costs.  These noncontrolling interests had a carrying amount of $3,582.  As we previously held a controlling financial interest in PlazAmericas Mall, we accounted for the acquisition of the noncontrolling interests as an equity transaction.

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EARNINGS (LOSS) PER SHARE

9 Months Ended

Sep. 30, 2018

Earnings Per Share [Abstract]

EARNINGS (LOSS) PER SHARE

NOTE 11: EARNINGS (LOSS) PER SHARE

The following table presents a reconciliation of basic and diluted earnings (loss) per share for the three and nine months ended September30, 2018 and 2017:

	For the Three Months Ended September 30,						For the Nine Months Ended September 30,
	2018			2017			2018			2017
Income (loss)	$	(21,038	)	$	(15,843	)	$	(105,766	)	$	(154,266	)
(Income) loss allocated to preferred shares		(5,063	)		(8,387	)		(4,591	)		(25,730	)
(Income) loss allocated to noncontrolling interests		—			—			—			(76	)
Net income (loss) allocable to common shares		(26,101	)		(24,230	)		(110,357	)		(180,072	)
Weighted-average shares outstanding—Basic (1)		1,840,168			1,831,193			1,839,172			1,828,778
Dilutive securities		—			—			—			—
Weighted-average shares outstanding—Diluted (1)		1,840,168			1,831,193			1,839,172			1,828,778
Earnings (loss) per share—Basic:
Earnings (loss) per share—Basic	$	(14.18	)	$	(13.23	)	$	(60.00	)	$	(98.47	)
Earnings (loss) per share—Diluted:
Earnings (loss) per share—Diluted	$	(14.18	)	$	(13.23	)	$	(60.00	)	$	(98.47	)

(1) All share and per-share amounts have been retroactively adjusted to reflect the Reverse Stock Split for all periods presented herein.

For the three and nine months ended September30, 2018, securities convertible into 162,170 and 164,786 common shares, respectively, were excluded from the earnings (loss) per share computations because their effect would have been anti-dilutive. For the three and nine months ended September30, 2017, securities convertible into 523,243 and 520,507 common shares, respectively, were excluded from the earnings (loss) per share computations because their effect would have been anti-dilutive.

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RELATED PARTY TRANSACTIONS

9 Months Ended

Sep. 30, 2018

Related Party Transactions [Abstract]

RELATED PARTY TRANSACTIONS

NOTE 12: RELATED PARTY TRANSACTIONS

In the ordinary course of our business operations, we have ongoing relationships and have engaged in transactions with the related entities described below. All of these relationships and transactions were approved or ratified by our audit committee as being on terms comparable to those available from an unaffiliated third party or otherwise not creating a conflict of interest.

Almanac Realty

On June 27, 2018, the purchase agreement that previously provided for Andrew M. Silberstein to serve as a trustee on our board was terminated as part of the Redemption and Exchange Agreement that was entered into with the Investor on June 27, 2018.  As part of the Redemption and Exchange Agreement, Mr. Silberstein resigned as a trustee.  While Mr. Silberstein was a trustee, his trustee fees were paid to the Investor.  Mr. Silberstein is an equity owner of Almanac and an officer of the Investor and holds indirect equity interests in the Investor. The transactions completed pursuant to the purchase agreement are described above in Note 9: Series D Preferred Shares.  Subsequent to June 27, 2018, Almanac is not considered a related party.

Ballard Spahr LLP

On June 27, 2017, Justin P. Klein was appointed as a trustee on our board.  Mr. Klein is a partner at Ballard Spahr LLP. RAIT has paid Ballard Spahr LLP $3 and $88 during the three and nine months ended September30, 2018. The approximate dollar value of Mr. Klein’s interest in these fees was less than $1 for the nine months ended September30, 2018, based on Mr. Klein’s Ballard partnership interest.

Charles Frischer and the Libby Frischer Family Partnership

On March 30, 2018, the Libby Frischer Family Partnership, or LFFP, Charles F. Frischer, or Mr. Frischer, and RAIT signed a letter which provided that RAIT would exempt LFFP from RAIT’s common share ownership limit up to an amount equal to 12.5%. Mr. Frischer is the general partner of LFFP.

On April 6, 2018, RAIT, LFFP and Mr. Frischer entered into a cooperation agreement which sets forth certain transfer restrictions and standstill provisions, among other things, for a period of time. Subsequent to entering into the cooperation agreement, on April 6, 2018, LFFP, and Mr. Frischer and RAIT signed a letter agreement which provided that RAIT would exempt LFFP from RAIT’s common share and preferred share ownership limits up to an amount equal to 15.0% with respect to each class of shares.  

On May 11, 2018, RAIT, LFFP and Mr. Frischer entered into a letter agreement which provided that RAIT would exempt LFFP from RAIT’s common share and preferred share ownership limits up to an amount equal to 20.0% with respect to each class of shares.

Highland Capital Management, L.P.

On May 26, 2017, RAIT entered into a previously disclosed cooperation agreement with Highland Capital Management, L.P. and its affiliates (Highland), which remains in effect.

IRT

During 2017, RAIT engaged in transactions with a former related party, Independence Realty Trust, or IRT. RAIT ended its last arrangement with IRT as of December 20, 2017 and does not consider IRT to be a related party after that date. The following are the transactions with IRT for the nine months ended September30, 2017:

Pursuant to a shared services agreement, IRT reimbursed RAIT $727 for general and administrative services for the nine months ended September30, 2017.  In addition, during the nine months ended September30, 2017, IRT reimbursed RAIT for $155 of general and administrative items that were paid on IRT’s behalf.

Pursuant to property management agreements with IRT with respect to RAIT’s multifamily properties, RAIT paid IRT $239 of property management fees for the nine months ended September30, 2017.  This is reflected within real estate operating expense in our consolidated statements of operations.

Other

On December 20, 2016, Scott F. Schaeffer resigned from his position as Chief Executive Officer of RAIT and became the full-time Chief Executive Officer of IRT.  On the same date, Scott F. Schaeffer entered into a one year consulting agreement with RAIT for which he received compensation of $375.  For the nine months ended September30, 2017, $282 was earned and paid related to this consulting agreement, which is reflected in general and administrative expenses in our consolidated statements of operations. In accordance with the Memorandum of Understanding dated September 26, 2016, which memorialized the terms of Scott F. Schaeffer’s resignation, RAIT granted Scott F. Schaeffer 150,000 unvested shares of common stock on December 23, 2016, and made a $500 cash payment in January 2017.  The shares vested 50% on the six month anniversary and 50% on the one year anniversary of the grant date.

In accordance with the Memorandum of Understanding dated September 26, 2016, which memorialized the terms of James J. Sebra’s resignation, he was owed a cash bonus, payable in 2017, equal to 25% of his cash bonus for the year ended December 31, 2016.  As of September30, 2017, $110 had been accrued as a payable for this cash bonus, which was subsequently paid.

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SUPPLEMENTAL DISCLOSURE TO STATEMENT OF CASH FLOWS

9 Months Ended

Sep. 30, 2018

Supplemental Cash Flow Elements [Abstract]

SUPPLEMENTAL DISCLOSURE TO STATEMENT OF CASH FLOWS

NOTE 13: SUPPLEMENTAL DISCLOSURE TO STATEMENT OF CASH FLOWS

The following are supplemental disclosures to the statements of cash flows for the nine months ended September30, 2018 and 2017: 

	For the Nine Months Ended September 30,
	2018			2017
Cash paid for interest	$	37,487		$	45,197
Cash paid (refunds received) for taxes		(1	)		(70	)
Non-cash increase in investments in real estate, intangible assets, and other liabilities from conversion of loans		—			1,590
Non-cash increase (decrease) in investments in real estate, restricted cash, other assets, intangible assets, accounts payable and accrued expenses, and other liabilities from deconsolidation of properties		907			(84,285	)
Non-cash increase (decrease) in indebtedness from debt extinguishments		(1,464	)		(4,640	)
Non-cash increase (decrease) to noncontrolling interests from distribution of limited partnership units on South Terrace		—			(1,618	)
Non-cash increase (decrease) in indebtedness from deconsolidation of properties		—			(64,790	)

For a discussion of the non-cash changes in indebtedness and investments in real estate, restricted cash, other assets, intangible assets, accounts payable and accrued expenses, and other liabilities that occurred during the nine months ended September30, 2018, see Note 4: Investments in Real Estate and Note 5: Indebtedness.

During the nine months ended September30, 2018, we transferred nine loans to held for sale as we had the intention and ability to sell these loans. The transfer was made at the lower of cost or fair value for each respective loan. During the nine months ended September30, 2018, we sold six loans, which had an unpaid principal balance and carrying amount of $31,377. See Note 3: Investment in Commercial Mortgage Loans, Mezzanine Loans, and Preferred Equity Interests for further discussion.

During the nine months ended September 30, 2018, we acquired the noncontrolling interests related to PlazAmericas Mall for $343, including transaction costs. See Note 10: Shareholders’ Equity for further discussion.

During the nine months ended September 30, 2018, we redeemed and cancelled the remaining 2,939,190 preferred units of RAIT IV and the corresponding Series D preferred shares for $56,765 of cash from RAIT IV’s sale of the Interests, $2,133 of other cash held by RAIT IV and $16,715 of liquidation preference of RAIT’s publicly traded Series A preferred shares, Series B preferred shares and Series C preferred shares. See Note 9: Series D Preferred Shares for further discussion.

The following table summarizes our cash and cash equivalents and restricted cash balances as of September 30, 2018 and September 30, 2017:

	As of September 30, 2018		As of September 30, 2017
Cash and cash equivalents	$	98,352	$	46,019
Restricted cash		86,154		142,489
Total cash and cash equivalents and restricted cash	$	184,506	$	188,508

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COMMITMENTS AND CONTINGENCIES

9 Months Ended

Sep. 30, 2018

Commitments And Contingencies Disclosure [Abstract]

COMMITMENTS AND CONTINGENCIES

NOTE 14: COMMITMENTS AND CONTINGENCIES

General

We are involved from time to time in litigation on various matters, including disputes with tenants of owned properties, disputes arising out of agreements to purchase or sell properties, disputes arising out of our loan portfolio, negligence, and similar tort claims related to owned properties or employment related disputes. Given the nature of our business activities, these lawsuits are considered routine to the conduct of our business. The result of any particular lawsuit cannot be predicted, because of the very nature of litigation, the litigation process and its adversarial nature, and the jury system. We do not expect that the liabilities, if any, that may ultimately result from such routine legal actions will have a material adverse effect on our consolidated financial position, results of operations or cash flows, except as described below.

Employment Related Commitments and Contingencies

On February 21, 2018, Scott L.N. Davidson, our former Chief Executive Officer and President, pursuant to his previously disclosed employment agreement with us provided notice to RAIT of his intent to resign from his employment with RAIT for “Good Reason” (as defined in his employment agreement). While RAIT and Mr. Davidson entered into a separation agreement, under which Mr. Davidson’s employment with RAIT terminated effective February 28, 2018, each reserved their respective rights as to whether “Good Reason” exists.  On May 16, 2018, Mr. Davidson filed for arbitration against RAIT and, on June 14, 2018, against the trustees for RAIT's alleged non-payment of post-resignation compensation which he claims he is entitled to under his employment contract in the amount of $4,547 and alleged that the non-payment also constituted a breach of the Pennsylvania Wage Payment and Collection Law which he claims entitles him to interest, attorney’s fees, costs and liquidated damages. We have not accrued any liability related to this matter as we have concluded it is not probable that a loss has been incurred.We may incur additional expenses and costs in connection with Mr. Davidson’s separation from RAIT.

During the nine months ended September30, 2017, we reached an agreement in principle to settle a matter with a former employee for $175.  This amount had been accrued as a liability as of June 30, 2017 and was subsequently paid during the third quarter of 2017.

RAIT Preferred Funding II, Ltd. v. CWCapital Asset Management LLC, et al.–Index No. 651729/2016 (Sup. Ct. N.Y.)

On September 20, 2017, RAIT Preferred Funding II, Ltd., or RAIT II, filed an amended complaint against CWCapital Asset Management, LLC, or CWCapital, Wells Fargo Bank N.A., or Wells Fargo, and U.S. Bank N.A., or U.S. Bank. This action concerns a loan, or the mortgage loan, to a non-party borrower, or the borrower, made in 2007.  RAIT II purchased $18,500 of the mortgage loan for which it holds a promissory note, or note B.  U.S. Bank is the trustee for a securitization trust that purchased the remaining $190,000 of the mortgage loan and for which it held a promissory note, or note A.  CWCapital is the special servicer and Wells Fargo is the master servicer for the mortgage loan (including note A and note B).  The parties’ rights and obligations are governed by, among other things, a pooling and servicing agreement and a co-lender agreement.  The mortgage loan was repaid in May of 2017, and the defendants have alleged that RAIT II was not entitled to receive any payoff of principal under note B pursuant to the subordination and other provisions of the co-lender agreement.  RAIT charged off its $18,500 note B during the year ended December 31, 2017.  In the amended complaint, RAIT II alleges, among other things, that the defendants breached certain of their obligations under the operative documents and RAIT II should have received, among other things, all of its $18,500 principal under note B.  The court denied defendants’ motion to dismiss RAIT II’s amended complaint, and the parties are now in the midst of the discovery phase of the litigation.

Loan Funding Commitments

Certain of the existing mortgage loans that we previously originated contain commitments to fund certain amounts that were not funded upon the origination of the mortgage loan. Senior participation interests in these loans are held by certain of our FL securitizations and these FL securitizations are required to purchase additional participation interests in these loans that include the funded portions of these funding commitments from us and at our direction as the commitments are funded by us and as funds become available from loan payoffs in the FL securitization. As of September 30, 2018, our total outstanding funding commitment was $9,990.

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SUBSEQUENT EVENTS

9 Months Ended

Sep. 30, 2018

Subsequent Events [Abstract]

SUBSEQUENT EVENTS

NOTE 15: SUBSEQUENT EVENTS

We have evaluated subsequent events or transactions that have occurred after the consolidated balance sheet date of September 30, 2018, but prior to the filing of the consolidated financial statements on this Quarterly Report on Form 10-Q. We have determined that, except as disclosed within this Note and other Notes, there are no subsequent events that require disclosure in this Quarterly Report on Form 10-Q.

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies)

9 Months Ended

Sep. 30, 2018

Accounting Policies [Abstract]

Basis of Presentation

a. Basis of Presentation

The accompanying unaudited interim consolidated financial statements have been prepared by management in accordance with U.S. generally accepted accounting principles, or GAAP. Certain information and footnote disclosures normally included in annual consolidated financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations, although we believe that the included disclosures are adequate to make the information presented not misleading. The unaudited interim consolidated financial statements should be read in conjunction with our audited financial statements as of and for the year ended December 31, 2017 included in our Annual Report on Form 10-K, or the Annual Report. In the opinion of management, all adjustments, consisting only of normal recurring adjustments, necessary to present fairly our consolidated financial position and consolidated results of operations and cash flows are included. The results of operations for the interim periods presented are not necessarily indicative of the results for the full year.

The consolidated balance sheet and consolidated statement of operations as of and for the three months ended September 30, 2018 includes the impact of correcting an error made in the determination of the amount of asset impairment that was recognized during the three months ended June 30, 2018 in the amount of $850.  The effect of this correction was an increase to investments in real estate and decrease in asset impairment.

The consolidated statement of cash flows for the nine-month period ended September 30, 2018 includes the impact of correcting the reporting of certain activity that occurred in the six-month period ended June 30, 2018 and the three-month period ended March 31, 2018.  Specifically, the correction re-classified cash proceeds from certain loan sales that were previously reported within cash flows from operating activities and should have been reported within cash flows from investing activities.  The impact of this was a decrease to cash flows from operating activities and an increase to cash flows from investing activities of $108,494 for the six-month period ended June 30, 2018 ($89,583 of which related to the three-month period ended March 31, 2018).  This correction had no impact to cash and cash equivalents as of June 30, 2018 (or March 31, 2018), nor did it impact any other consolidated financial statement amounts as of June 30, 2018 (or March 31, 2018) or for the six-month period ended June 30, 2018 (or the three-month period ended March 31, 2018).

We evaluated these error corrections and determined, based on quantitative and qualitative factors, the changes were not

material to the consolidated financial statements for any previously filed consolidated financial statements

Going Concern Considerations

b. Going Concern Considerations

Under the accounting guidance related to the presentation of financial statements, an entity is required to evaluate on a quarterly basis whether the entity’s current financial condition, including its liquidity sources at the date that the financial statements are issued, will enable the entity to meet its obligations arising within one year of the date the entity’s financial statements are issued and to make a determination as to whether it is probable, under the application of this accounting guidance, that the entity will be able to continue as a going concern over the applicable period.  The accompanying consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business.  The financial statements do not include any adjustments that might be necessary should RAIT be unable to continue as a going concern. As a result of the considerations articulated below, there is substantial doubt about RAIT’s ability to continue as a going concern within one year after the date that the financial statements are issued.

Analysis.  In applying the accounting guidance, management considered RAIT’s current financial condition and liquidity sources, including current funds available, forecasted future cash flows and RAIT’s conditional and unconditional obligations due over the next twelve months.  Management considered the following: i) our 7.125% senior notes which mature in August 2019 and have an unpaid principal balance of $65,356 as of September 30, 2018; ii) the financial covenant compliance requirements of RAIT’s senior notes; and (iii) RAIT’s recurring costs of operating its business.

As previously disclosed, RAIT has been notified by the staff of the New York Stock Exchange, or NYSE, that RAIT is not in compliance with certain continued listing standards of the NYSE.  As of the filing date of this report, $279 of our outstanding indebtedness contains provisions that would provide the holders thereof to require us to repurchase that indebtedness if RAIT was delisted from the NYSE. In October 2018, we exercised our right to call this indebtedness and expect to redeem it in November 2018.  

RAIT plans to control costs, to sell certain loans, to sell certain real estate properties and to continue to receive repayments of loans as they become due.  Consistent with these plans, RAIT has suspended new investment activity and the Board has not declared a dividend on RAIT’s outstanding preferred shares for the two quarters ended June 30, 2018 and September 30, 2018.  Due to the inherent risks, unknown results and significant uncertainties associated with each of these matters and the direct correlation between these matters and RAIT’s ability to satisfy its financial obligations that may arise over the applicable twelve month period, RAIT is unable to conclude that it is probable that RAIT will be able to meet its obligations arising within twelve months of the date of issuance of these financial statements under the parameters set forth in this accounting guidance.

As a result, management evaluated whether this was mitigated by RAIT’s approved plans and expectations for the applicable period under the second step of this accounting standard.

RAIT’s ability to satisfy its obligations under the 7.125% senior notes, to maintain compliance with its debt covenants and to fund recurring costs of operations depends on management’s ability to sell certain of RAIT’s remaining real estate assets releasing cash from those sales and/or distributions on our retained interests in our RAIT I and RAIT II securitizations, to continue to control costs, to sell certain loans, to sell retained interests in certain FL securitizations and to continue to receive repayments of loans as they become due.  While controlling costs are within management’s control to some extent, selling real estate assets, selling loans, selling other assets and the timing of loan repayments involve performance by third parties.  Since many of the real estate assets, loans and other assets that management plans to sell or receive repayment from to satisfy its obligations are not subject to an executed purchase and sale agreement or other contractual agreement as of the date hereof, the sale of those assets cannot be considered probable of occurring.  

Principles of Consolidation

c. Principles of Consolidation

The consolidated financial statements reflect our accounts and the accounts of our majority-owned and/or controlled subsidiaries. We also consolidate entities that are variable interest entities, or VIEs, where we have determined that we are the primary beneficiary of such entities. The portions of these entities that we do not own are presented as noncontrolling interests as of the dates and for the periods presented in the consolidated financial statements. All intercompany accounts and transactions have been eliminated in consolidation.

Under Financial Accounting Standards Board, or FASB, Accounting Standards Codification, or ASC, Topic 810, “Consolidation”, the determination of whether to consolidate a VIE is based on the power to direct the activities of the VIE that most significantly impact the VIE’s economic performance together with either the obligation to absorb losses or the right to receive benefits that could be significant to the VIE. We define the power to direct the activities that most significantly impact the VIE’s economic performance as the ability to buy, sell, refinance, or recapitalize assets or entities, and solely control other material operating events or items of the entity. For our commercial mortgage loans, mezzanine loans, and preferred equity investments, certain rights we hold are protective in nature and would preclude us from having the power to direct the activities that most significantly impact the VIE’s economic performance. Assuming both criteria are met, we would be considered the primary beneficiary and would consolidate the VIE. We will continually assess our involvement with VIEs and consolidate the VIEs when we are the primary beneficiary. See Note 8: Variable Interest Entities for additional disclosures pertaining to VIEs.

For entities that we do not consolidate, we account for our investment in them either under the equity method pursuant to ASC Topic 323, “Investments-Equity Method and Joint Ventures” or cost method pursuant to ASC Topic 325, “Investments – Other”.

Use of Estimates

d. Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting periods. The items that include significant estimates are fair value of financial instruments and allowance for loan losses. Actual results could differ from those estimates.

Cash and Cash Equivalents

e. Cash and Cash Equivalents

Cash and cash equivalents include cash held in banks and highly liquid investments with maturities of three months or less when purchased.  Cash, including amounts restricted, may at times exceed the Federal Deposit Insurance Corporation deposit insurance limit of $250 per institution.  We attempt to mitigate credit risk by placing cash and cash equivalents with major financial institutions.  To date, we have not experienced any losses on cash and cash equivalents.

Restricted Cash

f. Restricted Cash

Restricted cash consists primarily of tenant escrows and borrowers’ funds held by us to fund certain expenditures or to be released at our discretion upon the occurrence of certain pre-specified events, and to serve as additional collateral for borrowers’ loans.  As of September 30, 2018 and December 31, 2017, we had $49,350 and $123,398 of restricted cash, respectively, which primarily relates to tenant escrows and borrowers’ funds.

Restricted cash also includes cash received from the sale, repayment and/or other disposition of assets held by the issuers of our securitizations that are awaiting to be distributed to holders of our CDO notes payable and CMBS securitizations, as well as the proceeds from the issuance of CDO notes payable by securitizations that are restricted for the purpose of funding additional investments in securities subsequent to the balance sheet date.  As of September 30, 2018 and December 31, 2017, we had $36,804 and $34,516, respectively, of restricted cash held by securitizations.

Investments in Commercial Mortgage Loans, Mezzanine Loans and Preferred Equity Interests

g. Investments in Commercial Mortgage Loans, Mezzanine Loans and Preferred Equity Interests

We have invested in commercial mortgage loans, mezzanine loans and preferred equity interests. We account for our investments in commercial mortgage loans, mezzanine loans and preferred equity interests that we do not have the intention or ability to sell, at amortized cost. The carrying value of these investments is adjusted for origination discounts/premiums, nonrefundable fees and direct costs for originating loans which are amortized into income on a level yield basis over the terms of the loans.

Loans that we have the intention and ability to sell are classified as held for sale, and are measured at the lower of amortized cost or fair value. If the amortized cost exceeds the loan’s fair value, we establish a valuation allowance equal to the difference between the amortized cost and fair value.

Allowance for Loan Losses, Impaired Loans and Non-accrual Status

h. Allowance for Loan Losses, Impaired Loans and Non-accrual Status

We maintain an allowance for loan losses on our investments in commercial mortgage loans, mezzanine loans and preferred equity interests. Management’s periodic evaluation of the adequacy of the allowance is based upon expected and inherent risks in the portfolio, the estimated value of underlying collateral, and current economic conditions. The credit quality of our loans is monitored via quantitative and qualitative metrics.  Quantitatively we evaluate items such as the current debt service coverage ratio and annual net operating income of the underlying property.  Qualitatively we evaluate items such as recent operating performance of the underlying property and history of the borrower’s ability to provide financial support.  These items together are considered in developing our view of each loan’s risk rating which are categorized as either impaired or satisfactory. Management reviews loans for impairment and establishes specific reserves when a loss is probable under the provisions of FASB ASC Topic 310, “Receivables.” A loan is impaired when it is probable that we may not collect all principal and interest payments according to the contractual terms. As part of the detailed loan review, we consider many factors about the specific loan, including payment history, asset performance, borrower’s financial capability and other characteristics. Management evaluates loans for non-accrual status each reporting period. A loan is placed on non-accrual status when the loan payment deficiencies exceed 90 days unless it is well secured and in the process of collection, or if the collection of principal and interest in full is not probable. Payments received for non-accrual loans are applied to principal until the loan is removed from non-accrual status. Loans are generally removed from non-accrual status when they are making current interest payments. The allowance for loan losses is increased by the provision for loan losses and decreased by charge-offs (net of recoveries). We charge off a loan when we determine that all commercially reasonable means of recovering the loan balance have been exhausted.  This may occur at a variety of times, including when we receive cash or other assets in a pre-foreclosure sale or take control of the underlying collateral in full satisfaction of the loan upon foreclosure.  We consider circumstances such as these to indicate that the loan collection process has ceased and that a loan is uncollectible.

Investments in Real Estate

i. Investments in Real Estate

Investments in real estate are shown net of accumulated depreciation. We capitalize those costs that have been determined to improve the real property and depreciate those costs on a straight-line basis over the useful life of the asset. We depreciate real property using the following useful lives: buildings and improvements—30 to 40 years; furniture, fixtures, and equipment—5 to 10 years; and tenant improvements—shorter of the lease term or the life of the asset. Costs for ordinary maintenance and repairs are charged to expense as incurred.

Effective January 1, 2018, FASB ASC Topic 805, “Business Combinations” was amended to clarify the definition of a business by more clearly outlining the requirements for an integrated set of assets and activities to be considered a business and by establishing a practical framework to determine when the integrated set of assets and activities is a business. Prior to January 1, 2018, the properties we acquired were generally considered businesses and were accounted for as business combinations. Subsequent to January 1, 2018, we expect any properties that we acquire to generally not be considered businesses and, therefore, to be accounted for as asset acquisitions.  

Under business combination accounting, the fair value of the real estate acquired is allocated to the acquired tangible assets, generally consisting of land, building and tenant improvements, and identified intangible assets and liabilities, consisting of the value of above-market and below-market leases for acquired in-place leases and the value of tenant relationships, based, in each case, on their fair values.  Transaction costs and fees incurred related to the acquisition are expensed as incurred.  Under asset acquisition accounting, the costs to acquire real estate, including transaction costs related to the acquisition, are accumulated and then allocated to the individual assets and liabilities acquired based upon their relative fair value.  

In determining the fair value of the identified intangible assets and liabilities of an acquired property, above-market and below-market in-place lease values are recorded based on the present value (using an interest rate which reflects the risks associated with the leases acquired) of the differences between (i) the contractual amounts to be paid pursuant to the in-place leases and (ii) management’s estimate of fair market lease rates for the corresponding in-place leases, measured over a period equal to the remaining term of the lease. The capitalized above-market lease values and the capitalized below-market lease values are amortized as an adjustment to property income over the lease term.

The aggregate value of in-place leases is determined by evaluating various factors, including an estimate of carrying costs during the expected lease-up periods, current market conditions and similar leases. In estimating carrying costs, management includes real estate taxes, insurance and other operating expenses, and estimates of lost rental revenue during the expected lease-up periods based on current market demand. Management also estimates costs to execute similar leases including leasing commissions, legal and other related costs. The value assigned to this intangible asset is amortized over the assumed lease up period.

Management reviews our investments in real estate for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The review of recoverability is based on an estimate of the future undiscounted cash flows (excluding interest charges) expected to result from the long-lived asset’s use and eventual disposition. These cash flows consider factors such as expected future operating income, trends and prospects, as well as the effects of leasing demand, competition and other factors. If impairment exists due to the inability to recover the carrying value of a long-lived asset, an impairment loss is recorded to the extent that the carrying value exceeds the estimated fair value of the property.

Revenue Recognition

j. Revenue Recognition

1) Interest income—We recognize interest income from investments in commercial mortgage loans, mezzanine loans, and preferred equity interests on a yield to maturity basis. Certain of our commercial mortgage loans, mezzanine loans and preferred equity interests provide for the accrual of interest at specified rates which differ from current payment terms. Interest income is recognized on such loans, the majority of which were originated prior to 2011, at the accrual rate subject to management’s determination that accrued interest and outstanding principal are ultimately collectible. Management will cease accruing interest on these loans when it determines that collection of the interest income is not probable based on the value of the underlying collateral using discounted cash flow models and market based assumptions. The accrued interest receivable associated with these loans as of September 30, 2018 and December 31, 2017 was $22,402 and $23,801, respectively. During the three months ended September 30, 2018, the accrued interest receivable of $1,964 related to one of these loans was determined to be uncollectible and was written off as a reduction to investment interest income. These loans are considered to be impaired when the total contractual amount owed exceeds the estimated value of the underlying collateral.  Four of these loans, with an unpaid principal balance of $28,873 and $28,904, were considered to be impaired as of September 30, 2018 and December 31, 2017, respectively, because the contractual amounts owed exceed the estimated value of the underlying collateral. Additionally, three and two of these loans with an unpaid principal amount of $32,664 and $30,379 were considered impaired as of September 30, 2018 and December 31, 2017, respectively, because their loan terms were modified in what constituted a troubled debt restructuring.

For investments that we do not elect to record at fair value under FASB ASC Topic 825, “Financial Instruments”, origination fees and direct loan origination costs are deferred and amortized to net investment income, using the effective interest method, over the contractual life of the underlying loan security or loan, in accordance with FASB ASC Topic 310, “Receivables.”

For investments that we elect to record at fair value under FASB ASC Topic 825, origination fees and direct loan costs are recorded in income and are not deferred.

2) Property income—We generate property income from tenant rent and other tenant-related activities at our consolidated real estate properties. For multifamily real estate properties, property income is recorded when due from residents and recognized monthly as it is earned and realizable, under lease terms which are generally for periods of one year or less. For retail and office real estate properties, property income is recognized on a straight-line basis from the later of the date of the commencement of the lease or the date of acquisition of the property subject to existing leases, which averages minimum rents over the terms of the leases. For retail and office real estate properties, leases also typically provide for tenant reimbursement of a portion of common area maintenance and other operating expenses to the extent that a tenant’s pro rata share of expenses exceeds a base year level set in the lease.

3) Fee and other income—We have generated fee and other income through our various subsidiaries by (a) funding conduit loans for sale into unaffiliated commercial mortgage-backed securities, or CMBS, securitizations, (b) providing or arranging to provide financing to our borrowers, (c) providing ongoing asset management services to investment portfolios under cancelable management agreements, and (d) providing property management services to third parties. We recognize revenue for these activities when the fees are fixed or determinable, are evidenced by an arrangement, collection is reasonably assured and the services under the arrangement have been provided. While we may receive asset management fees when they are earned, we eliminate earned asset management fee income from securitizations while such securitizations are consolidated. During the three and nine months ended September 30, 2018, we earned $129 and $443, respectively, of asset management fees, which were eliminated as they were associated with consolidated securitizations. During the three and nine months ended September 30, 2017, we earned $227 and $714, respectively, of asset management fees, which were eliminated as they were associated with consolidated securitizations.

Certain components of property income and fee and other income fall within the scope of FASB ASC Topic 606, “Revenue from Contracts with Customers”. This topic requires entities to disaggregate revenue into categories that depict how the nature, amount, timing, and uncertainty of revenue and cash flows are affected by economic factors. In the following table, revenue from contracts with customers is disaggregated by type of revenue.

	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
Revenue from Contracts with customers	2018		2017		2018		2017
Property Management Fee income	$	231	$	732	$	1,724	$	2,333
Parking		80		433		514		1,400
Leasing Commission income		78		598		742		1,765
Other miscellaneous		410		599		887		1,789
Total	$	799	$	2,362	$	3,867	$	7,287

There have been no changes in the measurement of revenue from contracts with customers resulting from the adoption of ASC 606.

Fair Value of Financial Instruments

k. Fair Value of Financial Instruments

In accordance with FASB ASC Topic 820, “Fair Value Measurements and Disclosures”, fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Where available, fair value is based on observable market prices or parameters or derived from such prices or parameters. Where observable prices or inputs are not available, valuation models are applied. These valuation techniques involve management estimation and judgment, the degree of which is dependent on the price transparency for the instruments or market and the instruments’ complexity for disclosure purposes. Assets and liabilities recorded at fair value in the consolidated balance sheets are categorized based upon the level of judgment associated with the inputs used to measure their value. Hierarchical levels, as defined in FASB ASC Topic 820, “Fair Value Measurements and Disclosures” and directly related to the amount of subjectivity associated with the inputs to fair valuations of these assets and liabilities, are as follows:

• Level 1: Valuations are based on unadjusted, quoted prices in active markets for identical assets or liabilities at the measurement date. The types of assets carried at Level 1 fair value generally are equity securities listed in active markets. As such, valuations of these investments do not entail a significant degree of judgment.

• Level 2: Valuations are based on quoted prices for similar instruments in active markets or quoted prices for identical or similar instruments in markets that are not active or for which all significant inputs are observable, either directly or indirectly. Fair value assets and liabilities that are generally included in this category are derivatives where the fair value is based on observable market inputs.

• Level 3: Inputs are unobservable inputs for the asset or liability, and include situations where there is little, if any, market activity for the asset or liability. In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, the level in the fair value hierarchy within which the fair value measurement in its entirety falls has been determined based on the lowest level input that is significant to the fair value measurement in its entirety. Our assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment, and considers factors specific to the asset or liability.  

The availability of observable inputs can vary depending on the financial asset or liability and is affected by a wide variety of factors, including, for example, the type of investment, whether the investment is new, whether the investment is traded on an active exchange or in the secondary market, and the current market condition. To the extent that valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment. Accordingly, the degree of judgment exercised by us in determining fair value is greatest for instruments categorized in Level 3.

Fair value is a market-based measure considered from the perspective of a market participant who holds the asset or owes the liability rather than an entity-specific measure. Therefore, even when market assumptions are not readily available, our own assumptions are set to reflect those that management believes market participants would use in pricing the asset or liability at the measurement date. We use prices and inputs that management believes are current as of the measurement date, including during periods of market dislocation. In periods of market dislocation, the observability of prices and inputs may be reduced for many instruments. This condition could cause an instrument to be transferred from Level 1 to Level 2 or Level 2 to Level 3.

Many financial instruments have bid and ask prices that can be observed in the marketplace. Bid prices reflect the highest price that buyers in the market are willing to pay for an asset. Ask prices represent the lowest price that sellers in the market are willing to accept for an asset. For financial instruments whose inputs are based on bid-ask prices, we do not require that fair value always be a predetermined point in the bid-ask range. Our policy is to allow for mid-market pricing and adjusting to the point within the bid-ask range that results in our best estimate of fair value.

Fair value for certain of our Level 3 financial instruments is derived using internal valuation models. These internal valuation models include discounted cash flow analyses developed by management using current interest rates, estimates of the term of the particular instrument, specific issuer information and other market data for securities without an active market. In accordance with FASB ASC Topic 820, “Fair Value Measurements and Disclosures”, the impact of our own credit spreads is also considered when measuring the fair value of financial assets or liabilities, including derivative contracts. Where appropriate, valuation adjustments are made to account for various factors, including bid-ask spreads, credit quality and market liquidity. These adjustments are applied on a consistent basis and are based on observable inputs where available. Management’s estimate of fair value requires significant management judgment and is subject to a high degree of variability based upon market conditions, the availability of specific issuer information and management’s assumptions.

Transfers of Financial Assets

l. Transfers of Financial Assets

We account for transfers of financial assets under FASB ASC Topic 860, “Transfers and Servicing”, as either sales or financings.  Transfers of financial assets that result in sales accounting are those in which (1) the transfer legally isolates the transferred assets from the transferor, (2) the transferee has the right to pledge or exchange the transferred assets and no condition both constrains the transferee’s right to pledge or exchange the assets and provides more than a trivial benefit to the transferor, and (3) the transferor does not maintain effective control over the transferred assets.  If the transfer does not meet these criteria, the transfer is accounted for as a financing.  Financial assets that are treated as sales are removed from our accounts with any realized gain (loss) reflected in earnings during the period of sale.  Financial assets that are treated as financings are maintained on the balance sheet with proceeds received from the legal transfer reflected as securitized borrowings or security-related receivables.

Deferred Financing Costs

m. Deferred Financing Costs

Costs incurred in connection with debt financing are deferred and classified within indebtedness and charged to interest expense over the terms of the related debt agreements, under the effective interest method.

Intangible Assets

n. Intangible Assets

Intangible assets on our consolidated balance sheets represent identifiable intangible assets acquired in business acquisitions. We amortize identified intangible assets to expense over their estimated lives using the straight-line method. We evaluate intangible assets for impairment as events and circumstances change, in accordance with FASB ASC Topic 360, “Property, Plant, and Equipment.” The gross carrying amount for our in-place leases and above market leases was $7,420 as of September 30, 2018 and December 31, 2017, respectively.  The accumulated amortization for our intangible assets was $5,527 and $6,831 as of September 30, 2018 and December 31, 2017, respectively. We recorded amortization expense of $251 and $1,202 for the three months ended September 30, 2018 and 2017, respectively, and $1,069 and $5,763 for the nine months ended September 30, 2018 and 2017, respectively. Based on the intangible assets identified above, we expect to record amortization expense of intangible assets of $268 for the remainder of 2018, $701 for 2019, $341 for 2020, $259 for 2021, $143 for 2022 and $181 thereafter. As of September 30, 2018, we have determined that the carrying value of our intangible assets is recoverable.

Derivative Instruments

o. Derivative Instruments

In accordance with FASB ASC Topic 815, “Derivatives and Hedging”, we measure each derivative instrument at fair value and record such amounts in our consolidated balance sheet as either an asset or liability. For derivatives designated as fair value hedges, derivatives not designated as hedges, or for derivatives designated as cash flow hedges associated with debt for which we elected the fair value option under FASB ASC Topic 825, “Financial Instruments”, the changes in fair value of the derivative instrument are recorded in earnings. For derivatives designated as cash flow hedges, the changes in the fair value of the effective portions of the derivative are reported in other comprehensive income. Changes in the ineffective portions of cash flow hedges, if any, are recognized in earnings.  

For derivatives cleared through the Chicago Mercantile Exchange, or CME, and the London Clearing House, or LCH, variation margin payments are considered settlements of the related derivatives.  As of September 30, 2018, we had no derivative instruments outstanding.  

Income Taxes

p. Income Taxes

RAIT, Taberna Realty Finance Trust, or TRFT, and the RAIT Venture REITs have each elected to be taxed as a REIT and to comply with the related provisions of the Internal Revenue Code of 1986, as amended, or the Internal Revenue Code. In February 2016 and January 2017, in conjunction with the ventures described in Note 5: Indebtedness and Note 8: Variable Interest Entities, we created two new entities that elected to be taxed as REITs, which we refer to as the RAIT Venture VIEs.  These entities were created to hold the FL-5 and FL-6 junior notes for the aforementioned ventures.  Accordingly, we generally will not be subject to U.S. federal income tax to the extent of our dividends to shareholders and as long as certain asset, income and share ownership tests are met. If we were to fail to meet these requirements, we would be subject to U.S. federal income tax, which could have a material adverse impact on our results of operations and amounts available for dividends to our shareholders. Management believes that all of the criteria to maintain RAIT’s, TRFT’s and the RAIT Venture VIEs REIT qualification have been met for the applicable periods, but there can be no assurance that these criteria will continue to be met in subsequent periods.  

As discussed in Note 1: The Company, we completed the sale of our interests in the RAIT Venture VIEs on June 27, 2018, and, as a result, the purchaser is responsible for their REIT compliance from and after that date.

We maintain various taxable REIT subsidiaries, or TRSs, which may be subject to U.S. federal, state and local income taxes and foreign taxes. Current and deferred taxes are provided on the portion of earnings (losses) recognized by us with respect to our interest in domestic TRSs. Deferred income tax assets and liabilities are computed based on temporary differences between our GAAP consolidated financial statements and the federal and state income tax basis of assets and liabilities as of the consolidated balance sheet date. We evaluate the realizability of our deferred tax assets (e.g., net operating loss and capital loss carryforwards) and recognize a valuation allowance if, based on the available evidence, it is more likely than not that some portion or all of our deferred tax assets will not be realized. When evaluating the realizability of our deferred tax assets, we consider estimates of expected future taxable income, existing and projected book/tax differences, tax planning strategies available, and the general and industry specific economic outlook. This realizability analysis is inherently subjective, as it requires management to forecast our business and general economic environment in future periods. Changes in estimates of deferred tax asset realizability, if any, are included in income tax expense on the consolidated statements of operations.

In prior years, our TRS entities generated taxable revenue primarily from (i) advisory fees for services provided to IRT, (ii) property management fees for services provided to RAIT properties, IRT properties and third-party properties, and (iii) fees and other income from our CMBS lending business.  In the current year, our TRS entities generate taxable revenue primarily from (i) property management fees for services provided to RAIT properties and third-party properties, and (ii) fees and other income from our CMBS lending business. On August 1, 2018, we sold the TRS entity that generates taxable revenue from property management fees. See item (q.) below for further discussion. In consolidation, the advisory fees and property management fees related to IRT were eliminated through October 5, 2016 and property management fees related to RAIT properties were eliminated in their entirety. Nonetheless, all income taxes are expensed and are paid by the TRSs in the year in which the revenue is received. These income taxes are not eliminated when the related revenue is eliminated in consolidation.

The TRS entities may be subject to tax laws that are complex and potentially subject to different interpretations by the taxpayer and the relevant governmental taxing authorities. In establishing a provision for income tax expense, we must make judgments and interpretations about the application of these inherently complex tax laws. Actual income taxes paid may vary from estimates depending upon changes in income tax laws, actual results of operations, and the final audit of tax returns by taxing authorities. Tax assessments may arise several years after tax returns have been filed. We review the tax balances of our TRS entities quarterly and, as new information becomes available, the balances are adjusted as appropriate.

As part of our change in strategic direction during the year ended December 31, 2016 and to decrease administrative processes, we moved our active TRS entities under a single holding company. We elected a November 30^th taxable year end for the TRS holding company. We estimated the effective tax rate and current income tax liability as of December 31, 2016 by projecting activity for the full taxable year ended November 30, 2017. As we projected ordinary taxable income for the TRS holding company for its taxable year ended November 30, 2017, we recognized a current income tax liability as of December 31, 2016. During the nine months ended September 30, 2017, we updated our projections for 2017, which indicated an ordinary loss position for taxable year 2017 for the TRS holding company. As a result, we reversed the current income tax liability accrued as of December 31, 2016, which generated a current income tax benefit of $249 for the nine months ended September 30, 2017. During the three months ended September 30, 2018, a current income tax provision of $152 was recognized related to our TRS entities.

Sale of Retail Property Manager

q. Sale of Retail Property Manager

On August 1, 2018, we completed the sale of our retail property management subsidiary for nominal consideration. We recognized a gain of $1,262 during the three months ended September 30, 2018 related to the sale as the liabilities associated with this business exceeded its assets.

Recent Accounting Pronouncements

r. Recent Accounting Pronouncements

Adopted within these Financial Statements

In May 2014, the FASB issued an accounting standard classified under FASB ASC Topic 606, “Revenue from Contracts with Customers”. This accounting standard establishes a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes the most current revenue recognition guidance, including industry-specific guidance. This accounting standard generally replaces existing guidance by requiring an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. This accounting standard applies to all contracts with customers, except those that are within the scope of other Topics in the FASB ASC. During 2016 and 2017, the FASB issued multiple amendments to this accounting standard that provide further clarification to this accounting standard.  In February 2017, the FASB issued an accounting standard classified under FASB ASC Subtopic 610-20, “Other Income – Gains and Losses from the Derecognition of Nonfinancial Assets”. The amendments in this accounting standard clarify what constitutes an “in substance nonfinancial asset” and changes the accounting for partial sales of nonfinancial assets to be more consistent with the accounting for a sale of a business. The amendments in this accounting standard also provide further guidance on accounting for the derecognition of non-financial assets by generally requiring the revenue recognition model under FASB ASC Topic 606 to be applied, which may allow for earlier gain recognition for certain sale transactions pursuant to which we have continuing involvement with the asset.  These standards were effective for annual reporting periods beginning after December 15, 2017. We have adopted this new standard as of January 1, 2018, and have applied the modified retrospective method.  The adoption of FASB ASC Topic 606 did not change our measurement of revenue from contracts with customers.  The adoption of FASB ASC Subtopic 610-20 resulted in a cumulative effect adjustment as an increase to shareholders’ equity in the amount of $761 as of the adoption date.  This adjustment is related to a previously deferred gain on the sale of two land parcels in 2017 that would have qualified for recognition under this accounting standard.

In January 2016, the FASB issued an accounting standard classified under FASB ASC Topic 825, “Financial Instruments”. This accounting standard addresses certain aspects of recognition, measurement, presentation, and disclosure of financial instruments.  Among other things, the amendment (i) eliminates certain disclosure requirements for financial instruments measured at amortized cost; (ii) requires the use of the exit price notion when measuring the fair value of financial instruments for disclosure purposes; (iii) requires separate presentation, in other comprehensive income, of the change in fair value of a liability, when the fair value option has been elected, resulting from a change in the instrument-specific credit risk; and (iv) requires separate presentation of financial instruments by measurement category and form.  This standard is effective for annual periods beginning after December 15, 2017, including interim periods within those fiscal years.  Early adoption is permitted for the separate presentation of changes in fair value due to changes in instrument-specific credit risk. We have adopted this new standard as of January 1, 2018, and have applied the modified retrospective method, which resulted in a cumulative effect adjustment as an increase to accumulated other comprehensive income (loss) and a decrease to retained earnings (deficit) in the amount of $9,257 as of the adoption date. This adjustment relates to the separate presentation of changes in instrument-specific credit risk on our junior subordinated notes, at fair value.

In August 2016, the FASB issued an accounting standard classified under FASB ASC Topic 230, “Statement of Cash Flows”.  This accounting standard provides guidance on eight specific cash flow issues; (i) debt prepayment or debt extinguishment costs; (ii) settlement of zero-coupon debt instruments or other debt instruments with coupon interest rates that are insignificant in relation to the effective interest rate of the borrowing; (iii) contingent consideration payments made after a business combination; (iv) proceeds from the settlement of insurance claims; (v) proceeds from the settlement of corporate-owned life insurance policies, including bank-owned life insurance policies; (vi) distributions received from equity method investees; (vii) beneficial interests in securitization transactions; and (viii) separately identifiable cash flows and application of the predominance principle. The amendments are effective for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years.  Early adoption is permitted, including adoption in an interim period. This standard did not have an impact on our consolidated financial statements.

In October 2016, the FASB issued an accounting standard classified under FASB ASC Topic 740, “Income Taxes”.  The amendments in this accounting standard provide that the current and deferred income tax consequences of an intra-entity transfer of an asset other than inventory should be recognized when the transfer occurs rather than when the asset has been sold to an outside party.   Two common examples of assets included in the scope of this accounting standard are intellectual property and property, plant, and equipment.  The amendments in this standard are effective for annual reporting periods beginning after December 15, 2017, including interim reporting periods within those annual reporting periods.  Early adoption is permitted for all entities as of the beginning of an annual reporting period for which financial statements (interim or annual) have not been issued.  The amendments in this accounting standard should be applied on a modified retrospective basis through a cumulative-effect adjustment directly to retained earnings as of the beginning of the period of adoption. This standard did not have an impact on our consolidated financial statements.

In November 2016, the FASB issued an accounting standard classified under FASB ASC Topic 230, “Statement of Cash Flows”.  The amendments in this accounting standard require that the statement of cash flows explain the change during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents.  Amounts generally described as restricted cash and restricted cash equivalents should be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows.  The amendments in this update are effective for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years.  Early adoption is permitted, including adoption in an interim period.  We have adopted this new standard as of January 1, 2018 and have utilized a retrospective transition method for each period presented in our consolidated financial statements. The adoption of this standard has resulted in the presentation of additional details regarding the changes in restricted cash in the consolidated statements of cash flows.

In January 2017, the FASB issued an accounting standard classified under FASB ASC Topic 805, “Business Combinations”. The amendments in this accounting standard clarify the definition of a business by more clearly outlining the requirements for an integrated set of assets and activities to be considered a business and by establishing a practical framework to determine when the integrated set of assets and activities is a business. The amendments in this accounting standard are effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. Early adoption is permitted for transactions not yet reflected in the financial statements. We have adopted this new standard as of January 1, 2018 although it has not yet had an impact on our consolidated financial statements as no acquisition transactions have been completed as of September 30, 2018.

In May 2017, the FASB issued an accounting standard classified under FASB ASC Subtopic 718, “Compensation – Stock Compensation”. The amendments in this accounting standard are to provide guidance about which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting in Topic 718.  The amendments in this accounting standard are effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. Early adoption of the amendments in this standard is permitted.  This standard did not have an impact on our consolidated financial statements.

Not Yet Adopted Within These Financial Statements

In February 2016, the FASB issued an accounting standard classified under FASB ASC Topic 842, “Leases”.  This accounting standard states that a lessee should recognize the assets and liabilities that arise from all leases with a term greater than 12 months. The core principle requires the lessee to recognize a liability to make lease payments and a right-of-use (“ROU”) asset. The accounting applied by the lessor is relatively unchanged. During 2017 and 2018, the FASB issued multiple amendments to this accounting standard that provide further clarification to this accounting standard. The new standard is effective for us on January 1, 2019, with early adoption permitted. A modified retrospective transition approach is required, applying the new standard to all leases existing at the date of initial application. An entity may choose to use either (1) its effective date or (2) the beginning of the earliest comparative period presented in the financial statements as its date of initial application. We expect to adopt the new standard on January 1, 2019 and use the effective date as our date of initial application. The new standard provides a number of optional practical expedients in transition. We expect to elect the “package of practical expedients” for all our leases that exist at the date of initial application. This package permits us not to reassess under the new standard our prior conclusions about lease identification, lease classification and initial direct costs. We also currently expect to elect the practical expedient to not separate lease and non-lease components for all of our leases. Management is currently evaluating the impact that this standard will have on our consolidated financial statements. We currently expect to recognize a lease liability and an offsetting ROU asset for one of our real estate operating leases for which we are the lessee. We do not expect the standard to have a significant impact on any of our real estate leases for which we are the lessor.

In June 2016, the FASB issued an accounting standard classified under FASB ASC Topic 326, “Financial Instruments-Credit Losses”.  The amendments in this standard provide an approach based on expected losses to estimate credit losses on certain types of financial instruments.  The amendments also modify the impairment model for available-for-sale debt securities and provides for a simplified accounting model for purchased financial assets with credit deterioration since their origination.  The amendments in this standard expand the disclosure requirements regarding an entity’s assumptions, models, and methods for estimating the allowance for loan and lease losses.  In addition, public business entities will need to disclose the amortized cost balance for each class of financial asset by credit quality indicator, disaggregated by the year of origination.  This standard is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years.  Early application of the guidance will be permitted for all entities for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years.  Management is currently evaluating the impact that this standard will have on our consolidated financial statements.

In July 2017, the FASB issued an accounting standard classified under FASB ASC Subtopic 260, “Earnings per Share”, Subtopic 480, “Distinguishing Liabilities from Equity”, and Subtopic 815, “Derivatives and Hedging”. The amendments in this accounting standard change the classification analysis of certain equity-linked financial instruments (or embedded features) with down round features and recharacterize the indefinite deferral of certain provisions of Topic 480 to a scope exception. The amendments in this accounting standard are effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Early adoption of the amendments in this standard is permitted. Management is currently evaluating the impact that this standard may have on our consolidated financial statements.

In August 2017, the FASB issued an accounting standard classified under FASB ASC Topic 815, “Derivatives and Hedging”.  This accounting standard states specific limitations in current GAAP by expanding hedge accounting for both nonfinancial and financial risk components and by refining the measurement of hedge results to better reflect an entity’s hedging strategies. The amendments in this accounting standard are effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Early adoption of the amendments in this standard is permitted. Management is currently evaluating the impact that this standard may have on our consolidated financial statements.

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Tables)

9 Months Ended

Sep. 30, 2018

Revenue From Contract With Customer [Abstract]

Summary of Revenue from Contracts with Customers Disaggregated by Type of Revenue

Certain components of property income and fee and other income fall within the scope of FASB ASC Topic 606, “Revenue from Contracts with Customers”. This topic requires entities to disaggregate revenue into categories that depict how the nature, amount, timing, and uncertainty of revenue and cash flows are affected by economic factors. In the following table, revenue from contracts with customers is disaggregated by type of revenue.

	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
Revenue from Contracts with customers	2018		2017		2018		2017
Property Management Fee income	$	231	$	732	$	1,724	$	2,333
Parking		80		433		514		1,400
Leasing Commission income		78		598		742		1,765
Other miscellaneous		410		599		887		1,789
Total	$	799	$	2,362	$	3,867	$	7,287

There have been no changes in the measurement of revenue from contracts with customers resulting from the adoption of ASC 606.

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INVESTMENTS IN COMMERCIAL MORTGAGE LOANS, MEZZANINE LOANS AND PREFERRED EQUITY INTERESTS (Tables)

9 Months Ended

Sep. 30, 2018

Receivables [Abstract]

Loans Held for Investment

Loans Held for Investment

The following table summarizes our investments in commercial mortgage loans, mezzanine loans and preferred equity interests held for investment as of September 30, 2018:

	Unpaid Principal Balance			Unamortized (Discounts) Premiums			Carrying Amount			Number of Loans		Weighted- Average Coupon (1)			Range of Maturity Dates
Commercial Real Estate (CRE)
Commercial mortgage loans	$	574,896		$	(546	)	$	574,350			42		6.5	%	Oct. 2018 to Jun. 2025
Mezzanine loans		21,122			164			21,286			2		13.3	%	Jun. 2020 to Mar. 2023
Preferred equity interests		33,279			(1	)		33,278			15		6.7	%	Nov. 2018 to Jan. 2029
Total CRE (2)		629,297			(383	)		628,914			59		6.8	%
Deferred fees and costs, net (3)		(1,004	)		-			(1,004	)
Total	$	628,293		$	(383	)	$	627,910

(1) Weighted-average coupon is calculated on the unpaid principal balance, which does not necessarily correspond to the carrying amount.

(2) Includes $100,442 of cash flow loans, of which $49,690 are commercial mortgage loans, $21,122 are mezzanine loans and $29,630 are preferred equity interests. See Note 2: Summary of Significant Accounting Policies, (j) Revenue Recognition, for further discussion of our cash flow loans.

(3) Includes $3,822 of deferred fees, net of $2,818 of deferred costs.

The following table summarizes our investments in commercial mortgage loans, mezzanine loans and preferred equity interests held for investment as of December 31, 2017:

	Unpaid Principal Balance			Unamortized (Discounts) Premiums			Carrying Amount			Number of Loans		Weighted- Average Coupon (1)			Range of Maturity Dates
Commercial Real Estate (CRE)
Commercial mortgage loans	$	1,194,735		$	(719	)	$	1,194,016			95		6.3	%	Jan. 2018 to Dec. 2025
Mezzanine loans		45,488			164			45,652			13		11.2	%	May 2018 to May 2025
Preferred equity interests		33,284			(1	)		33,283			15		9.1	%	Nov. 2018 to Jan. 2029
Total CRE (2)		1,273,507			(556	)		1,272,951			123		6.5	%
Deferred fees and costs, net (3)		(2,344	)		-			(2,344	)
Total	$	1,271,163		$	(556	)	$	1,270,607

(1) Weighted-average coupon is calculated on the unpaid principal balance, which does not necessarily correspond to the carrying amount.

(2) Includes $106,136 of cash flow loans, of which $55,353 are commercial mortgage loans, $21,149 are mezzanine loans and $29,634 are preferred equity interests. See Note 2: Summary of Significant Accounting Policies, (j) Revenue Recognition, for further discussion of our cash flow loans.

(3) Includes $8,497 of deferred fees, net of $6,153 of deferred costs.

Delinquency Statistics of Commercial Real Estate Loan Held for Investment

The following table summarizes the delinquency statistics of our commercial real estate loans held for investment as of September 30, 2018 and December 31, 2017:

	As of September 30, 2018
Delinquency Status	Current		30 to 59 days		60 to 89 days		90 days or more		Total		Non-accrual (1)
Commercial mortgage loans	$	508,978	$	8,892	$	17,466	$	39,560	$	574,896	$	106,860
Mezzanine loans		21,122		—		—		—		21,122		8,253
Preferred equity interests		33,279		—		—		—		33,279		8,350
Total	$	563,379	$	8,892	$	17,466	$	39,560	$	629,297	$	123,463

(1) Includes six loans that are current, one loan that is 30 to 59 days or more past due, and one loan that is 60 to 89 days or more past due, but are on non-accrual due to uncertainty over whether we will fully collect principal and interest.  Also includes one loan that is 90 days or more past due in accordance with its terms.

	As of December 31, 2017
Delinquency Status	Current		30 to 59 days		60 to 89 days		90 days or more		Total		Non-Accrual (1)
Commercial mortgage loans	$	1,149,501	$	—	$	—	$	45,234	$	1,194,735	$	81,443
Mezzanine loans		40,258		—		—		5,230		45,488		13,510
Preferred equity interests		33,284		—		—		—		33,284		3,650
Total	$	1,223,043	$	—	$	—	$	50,464	$	1,273,507	$	98,603

(1)      Includes five loans that were current in accordance with their terms, but are on non-accrual due to uncertainty over whether we will fully collect principal and interest, and two loans that are 90 days or more past due in accordance with their terms.

Loans Held for Investment by Credit Risk Category

We have classified our loans held for investment by credit risk category as of September 30, 2018 and December 31, 2017 as follows:

	As of September 30, 2018
Credit Status	Commercial Mortgage Loans		Mezzanine Loans		Preferred Equity		Total
Satisfactory	$	428,646	$	—	$	13,930	$	442,576
Watchlist (1)		146,250		21,122		19,349		186,721
Total	$	574,896	$	21,122	$	33,279	$	629,297

(1) Includes $154,581 of loans that are considered to be impaired and $32,140 of loans that are not considered to be impaired.  

	As of December 31, 2017
Credit Status	Commercial Mortgage Loans		Mezzanine Loans		Preferred Equity		Total
Satisfactory	$	1,083,741	$	19,109	$	21,879	$	1,124,729
Watchlist (1)		110,994		26,379		11,405		148,778
Total	$	1,194,735	$	45,488	$	33,284	$	1,273,507

(1) Includes $126,478 of loans that are considered to be impaired and $22,300 of loans that are not considered impaired.

Roll-Forwards of Allowance for Loan Losses for Commercial Mortgage Loans, Mezzanine Loans and Preferred Equity Interests

The following tables provide a roll-forward of our allowance for loan losses for our commercial mortgage loans, mezzanine loans and preferred equity interests held for investment for the three months ended September 30, 2018 and 2017:

	For the Three Months Ended September 30, 2018
	Commercial Mortgage Loans			Mezzanine Loans		Preferred Equity		Total
Beginning balance	$	11,226		$	5,231	$	242	$	16,699
Provision (benefit) for loan losses		5,506			1,258		725		7,489
Charge-offs, net of recoveries		(571	)		—		—		(571	)
Ending balance	$	16,161		$	6,489	$	967	$	23,617

	For the Three Months Ended September 30, 2017
	Commercial Mortgage Loans		Mezzanine Loans			Preferred Equity		Total
Beginning balance	$	12,722	$	9,092		$	1,700	$	23,514
Provision (benefit) for loan losses		3,368		2,148			—		5,516
Charge-offs, net of recoveries		—		(3,890	)		—		(3,890	)
Ending balance	$	16,090	$	7,350		$	1,700	$	25,140

The following tables provide a roll-forward of our allowance for loan losses for our commercial mortgage loans, mezzanine loans and preferred equity interests held for investment for the nine months ended September 30, 2018 and 2017:

	For the Nine Months Ended September 30, 2018
	Commercial Mortgage Loans			Mezzanine Loans			Preferred Equity		Total
Beginning balance	$	9,019		$	5,622		$	242	$	14,883
Provision (benefit) for loan losses		25,502			4,042			725		30,269
Charge-offs, net of recoveries (1)		(18,360	)		(3,175	)		—		(21,535	)
Ending balance	$	16,161		$	6,489		$	967	$	23,617

(1) Includes $5,331 of charge-offs related to loans transferred to held for sale during the nine months ended September 30, 2018.

	For the Nine Months Ended September 30, 2017
	Commercial Mortgage Loans			Mezzanine Loans			Preferred Equity			Total
Beginning balance	$	10,640		$	—		$	1,714		$	12,354
Provision (benefit) for loan losses		16,690			11,238			(14	)		27,914
Charge-offs, net of recoveries		(11,240	)		(3,888	)		—		$	(15,128	)
Ending balance	$	16,090		$	7,350		$	1,700		$	25,140

Loans Considered to be Impaired

Information on those loans considered to be impaired as of September 30, 2018 and December 31, 2017 was as follows:

	As of September 30, 2018
Impaired Loans	Commercial Mortgage Loans		Mezzanine Loans		Preferred Equity		Total
Impaired loans expecting full recovery	$	11,164	$	12,869	$	10,999	$	35,032
Impaired loans with reserves		102,946		8,253		8,350		119,549
Total Impaired Loans (1)		114,110		21,122		19,349		154,581
Allowance for loan losses	$	16,161	$	6,489	$	967	$	23,617

(1)  As of September 30, 2018, there was no unpaid principal relating to previously identified TDRs that are on accrual status.

	As of December 31, 2017
Impaired Loans	Commercial Mortgage Loans		Mezzanine Loans		Preferred Equity		Total
Impaired loans expecting full recovery	$	14,321	$	12,869	$	7,756	$	34,946
Impaired loans with reserves		74,372		13,510		3,650		91,532
Total Impaired Loans (1)		88,693		26,379		11,406		126,478
Allowance for loan losses	$	9,019	$	5,622	$	242	$	14,883

(1) As of December 31, 2017, there was no unpaid principal relating to previously identified TDRs that are on accrual status.

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INVESTMENTS IN REAL ESTATE (Tables)

9 Months Ended

Sep. 30, 2018

Banking And Thrift [Abstract]

Summary of Investments in Real Estate

The table below summarizes our investments in real estate:

	Book Value
	As of September 30, 2018			As of December 31, 2017
Multifamily real estate properties	$	—		$	17,163
Office real estate properties		51,460			130,125
Retail real estate properties		60,446			106,817
Parcels of land		20,567			20,567
Subtotal		132,473			274,672
Less: Accumulated depreciation and amortization		(9,328	)		(28,768	)
Investments in real estate, net (1)	$	123,145		$	245,904

(1) As of September 30, 2018 and December 31, 2017, there were no properties considered held-for-sale.

Summary of Disposition and Each Property's Contribution

The below table summarizes our property sales for the current year and also presents each property’s contribution to net income (loss) allocable to common shares, excluding the impact of the gain (loss) on sale

							Net income (loss) allocable to common shares
Property Name	Property Type	Date of Sale	Sale Price		Gain (loss) on sale		For the Three Months Ended September 30, 2018			For the Nine Months Ended September30, 2018
1501 Yamato Road (1)	Office	6/15/2018	$	42,050	$	906	$	-		$	(259	)
Erieview Tower & Parking (2)	Office	8/1/2018		28,901		-		(22	)		(10	)
Erieview Galleria	Retail	8/1/2018		1,099		-		1			(9	)
Lexington	Multifamily	8/31/2018		21,150		7,964		194			609
Total			$	93,200	$	8,870	$	173		$	331

(1) We also recognized a loss on extinguishment of debt related to the sale of this property, resulting from a defeasance premium of $1,943.

(2)  This property was previously impaired.

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INDEBTEDNESS (Tables)

9 Months Ended

Sep. 30, 2018

Debt Disclosure [Abstract]

Summary of Total Recourse and Non-Recourse Indebtedness

The following table summarizes our total recourse and non-recourse indebtedness as of September 30, 2018:

Description	Unpaid Principal Balance		Unamortized Discount/Premium and Deferred Financing Costs			Carrying Amount		Weighted- Average Interest Rate			Contractual Maturity
Recourse indebtedness:
7.0% convertible senior notes (1)	$	871	$	(35	)	$	836		7.0	%	Apr. 2031 (1)
4.0% convertible senior notes (2)		68,222		(1,648	)		66,574		4.0	%	Oct. 2033 (2)
7.625% senior notes		56,324		(1,282	)		55,042		7.6	%	Apr. 2024
7.125% senior notes		65,356		(492	)		64,864		7.1	%	Aug. 2019
Junior subordinated notes, at fair value (3)		18,671		(10,348	)		8,323		6.3	%	Mar. 2035
Junior subordinated notes, at amortized cost		25,100		—			25,100		4.8	%	Apr. 2037
Total recourse indebtedness		234,544		(13,805	)		220,739		6.0	%
Non-recourse indebtedness:
CDO notes payable, at amortized cost (4)(5)		152,710		(264	)		152,446		2.9	%	Jun. 2045 to Nov. 2046
CMBS securitizations (6)(7)		404,707		(3,567	)		401,140		3.6	%	Jun. 2037 to Dec. 2037
Loans payable on real estate		40,906		(244	)		40,662		4.7	%	Oct. 2021 to Dec. 2021
Total non-recourse indebtedness		598,323		(4,075	)		594,248		3.5	%
Total indebtedness	$	832,867	$	(17,880	)	$	814,987		4.2	%

(1) In October 2018, we exercised our right to optionally redeem and cancel the remaining 7.0% convertible senior notes at par.

(2) Our 4.0% convertible senior notes are redeemable at par, at the option of the holder, in October 2018, October 2023, and October 2028. On October 1, 2018, we repurchased $67,943 in principal amount of the 4.0% convertible senior notes at par pursuant to the exercise by the holders of these notes of their redemption option, leaving $279 aggregate principal amount outstanding. On October 2, 2018, we notified the Trustee for the 4% convertible senior notes that we would exercise our right to optionally redeem and cancel the remaining $279 on November 16, 2018.

(3) Relates to liabilities which we elected to record at fair value under FASB ASC Topic 825.

(4) Excludes CDO notes payable purchased by us which are eliminated in consolidation.

(5) Collateralized by $299,250 principal amount of commercial mortgage loans, mezzanine loans, other loans and preferred equity interests, $162,116 of which is eliminated in consolidation.  These obligations were issued by separate legal entities and consequently the assets of the special purpose entities that collateralize these obligations are not available to our creditors.

(6) Excludes CMBS securitization notes purchased by us which are eliminated in consolidation.

(7) Collateralized by $481,600 principal amount of commercial mortgage loans and participation interests. These obligations were issued by separate legal entities and consequently the assets of the special purpose entities that collateralize these obligations are not available to our creditors.

The following table summarizes our total recourse and non-recourse indebtedness as of December 31, 2017:

Description	Unpaid Principal Balance		Unamortized Discount/Premium and Deferred Financing Costs			Carrying Amount		Weighted- Average Interest Rate			Contractual Maturity
Recourse indebtedness:
7.0% convertible senior notes (1)	$	871	$	(38	)	$	833		7.0	%	Apr. 2031 (1)
4.0% convertible senior notes (2)		110,513		(3,713	)		106,800		4.0	%	Oct. 2033 (2)
7.625% senior notes		56,324		(1,457	)		54,867		7.6	%	Apr. 2024
7.125% senior notes		68,408		(934	)		67,474		7.1	%	Aug. 2019
Senior secured notes		11,500		(437	)		11,063		7.3	%	Apr. 2019
Junior subordinated notes, at fair value (3)		18,671		(10,550	)		8,121		5.3	%	Mar. 2035
Junior subordinated notes, at amortized cost		25,100		—			25,100		3.9	%	Apr. 2037
Secured warehouse facilities		22,313		(570	)		21,743		3.5	%	Jan.2018 to Jul. 2018
Total recourse indebtedness		313,700		(17,699	)		296,001		5.5	%
Non-recourse indebtedness:
CDO notes payable, at amortized cost (4)(5)		258,063		(3,339	)		254,724		2.2	%	Jun. 2045 to Nov. 2046
CMBS securitizations (6)(7)		744,763		(8,177	)		736,586		3.4	%	Jan. 2031 to Dec. 2037
Loans payable on real estate		62,297		(375	)		61,922		5.2	%	May 2021 to Dec. 2021
Total non-recourse indebtedness		1,065,123		(11,891	)		1,053,232		3.2	%
Other indebtedness (8)		40,830		125			40,955		—			—
Total indebtedness	$	1,419,653	$	(29,465	)	$	1,390,188		3.7	%

(1) Our 7.0% convertible senior notes are redeemable at par, at the option of the holder, in April 2021, and April 2026.

(2) Our 4.0% convertible senior notes are redeemable at par, at the option of the holder, in October 2018, October 2023, and October 2028.

(3) Relates to liabilities which we elected to record at fair value under FASB ASC Topic 825.

(4) Excludes CDO notes payable purchased by us which are eliminated in consolidation.  

(5) Collateralized by $507,306 principal amount of commercial mortgage loans, mezzanine loans, other loans and preferred equity interests, $274,629 of which is eliminated in consolidation.  These obligations were issued by separate legal entities and consequently the assets of the special purpose entities that collateralize these obligations are not available to our creditors.

(6) Excludes CMBS securitization notes purchased by us which are eliminated in consolidation.

(7) Collateralized by $944,894 principal amount of commercial mortgage loans and participation interests in commercial mortgage loans. These obligations were issued by separate legal entities and consequently the assets of the special purpose entities that collateralize these obligations are not available to our creditors.    

(8) Represents two 40% interests issued to an unaffiliated third party in two ventures to which we contributed the junior notes and equity of two floating rate securitizations. Together these ventures are referred to as the RAIT Venture VIEs.  The first of these ventures, the 2016 RAIT Venture VIE, was formed in 2016.  The second, the 2017 RAIT Venture VIE, was formed in 2017. We retained a 60% interest in these ventures, and, as a result of our controlling financial interest, we consolidated the ventures. We received approximately $41,689 of proceeds as a result of issuing these 40% interests, which have an unpaid principal balance of $40,830. These 40% interests have no stated maturity date and do not provide for mandatory redemption or any required return or interest payment. These ventures allocate the distributions on such junior notes and equity when made between the parties to the ventures.

Aggregate Contractual Maturities of Indebtedness by Year

The following table displays the aggregate contractual maturities of our indebtedness, outstanding as of September 30, 2018, on or before December 31 by year:

	Recourse indebtedness		Non-recourse indebtedness
2018	$	-	$	183
2019		65,356		749
2020		-		779
2021		-		39,195
2022		-		-
Thereafter (1)		169,188		557,417
Total	$	234,544	$	598,323

(1) Includes $871 of our 7.0% convertible senior notes which were fully redeemed at par in October 2018. Includes $68,222 of our 4.0% convertible senior notes which are redeemable, at par at the option of the holder in October 2018, October 2023, and October 2028. On October 1, 2018, we repurchased $67,943 in principal amount of the 4.0% convertible senior notes at par pursuant to the exercise by the holders of these notes of their redemption option, leaving $279 aggregate principal amount outstanding. On October 2, 2018, we notified the Trustee for the 4% convertible senior notes that we would exercise our right to optionally redeem and cancel the remaining $279 on November 16, 2018.

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DERIVATIVE FINANCIAL INSTRUMENTS (Tables)

9 Months Ended

Sep. 30, 2018

Derivative Instruments And Hedging Activities Disclosure [Abstract]

Aggregate Notional Amount and Estimated Net Fair Value of Derivative Instruments

The following table summarizes the aggregate notional amount and estimated net fair value of our derivative instruments as of September 30, 2018 and December 31, 2017:

	As of September 30, 2018						As of December 31, 2017
	Notional		Fair Value of Assets		Fair Value of Liabilities		Notional		Fair Value of Assets		Fair Value of Liabilities
Interest rate caps	$	—	$	—	$	—	$	—	$	—	$	—
Interest rate swaps		—		—		—		12,650		11		—
Net fair value	$	—	$	—	$	—	$	12,650	$	11	$	—

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FAIR VALUE OF FINANCIAL INSTRUMENTS (Tables)

9 Months Ended

Sep. 30, 2018

Fair Value Disclosures [Abstract]

Carrying Amount and Fair Value of Financial Instruments

The following table summarizes the carrying amount and the fair value of our financial instruments as of September 30, 2018:

Financial Instrument	Carrying Amount		Estimated Fair Value
Assets
Total investment in mortgage loans, held for investment, net	$	604,293	$	579,874
Investment in mortgage loans, held for sale		4,673		4,673
Cash and cash equivalents		98,352		98,352
Restricted cash		86,154		86,154
Liabilities
Recourse indebtedness:
7.0% convertible senior notes		836		579
4.0% convertible senior notes		66,574		68,817
7.625% senior notes		55,042		44,338
7.125% senior notes		64,864		63,619
Junior subordinated notes, at fair value		8,323		8,323
Junior subordinated notes, at amortized cost		25,100		9,210
Non-recourse indebtedness:
CDO notes payable, at amortized cost		152,446		123,453
CMBS securitizations		401,140		404,046
Loans payable on real estate		40,662		40,289

The following table summarizes the carrying amount and the fair value of our financial instruments as of December 31, 2017:

Financial Instrument	Carrying Amount		Estimated Fair Value
Assets
Total investment in mortgage loans, held for investment, net	$	1,255,723	$	1,252,780
Cash and cash equivalents		53,380		53,380
Restricted cash		157,914		157,914
Derivative assets		11		11
Liabilities
Recourse indebtedness:
7.0% convertible senior notes		833		533
4.0% convertible senior notes		106,800		103,457
7.625% senior notes		54,867		43,009
7.125% senior notes		67,474		61,567
Senior secured notes		11,063		11,197
Junior subordinated notes, at fair value		8,121		8,121
Junior subordinated notes, at amortized cost		25,100		8,849
Secured warehouse facilities		21,743		22,313
Non-recourse indebtedness:
CDO notes payable, at amortized cost		254,724		196,212
CMBS securitizations		736,586		744,359
Loans payable on real estate		61,922		64,377
Other indebtedness		40,955		40,830

Information of Assets and Liabilities Measured at Fair Value on Recurring Basis

The following table summarizes information about our liabilities measured at fair value on a recurring basis as of September 30, 2018, and indicate the fair value hierarchy of the valuation techniques utilized to determine such fair value:

Liabilities:	Quoted Prices in Active Markets for Identical Assets (Level 1) (1)		Significant Other Observable Inputs (Level 2) (1)		Significant Unobservable Inputs (Level 3) (1)		Balance as of September 30, 2018
Junior subordinated notes, at fair value	$	—	$	—	$	8,323	$	8,323
Total liabilities	$	—	$	—	$	8,323	$	8,323

(1) During the nine months ended September 30, 2018, there were no transfers between Level 1 and Level 2, and there were no transfers into and/or out of Level 3.

The following tables summarize information about our assets and liabilities measured at fair value on a recurring basis as of December 31, 2017, and indicate the fair value hierarchy of the valuation techniques utilized to determine such fair value:

Assets:	Quoted Prices in Active Markets for Identical Assets (Level 1) (1)		Significant Other Observable Inputs (Level 2) (1)		Significant Unobservable Inputs (Level 3) (1)		Balance as of December 31, 2017
Derivative assets	$	—	$	11	$	—	$	11
Total assets	$	—	$	11	$	—	$	11

Liabilities:	Quoted Prices in Active Markets for Identical Assets (Level 1) (1)		Significant Other Observable Inputs (Level 2) (1)		Significant Unobservable Inputs (Level 3) (1)		Balance as of December 31, 2017
Junior subordinated notes, at fair value	$	—	$	—	$	8,121	$	8,121
Total liabilities	$	—	$	—	$	8,121	$	8,121

(1) During the year ended December 31, 2017, there were no transfers between Level 1 and Level 2, and there were no transfers into and/or out of Level 3.

Rollforward of Level 3 Liabilities

The following table summarizes additional information about assets and liabilities that are measured at fair value on a recurring basis for which we have utilized level 3 inputs to determine fair value for the nine months ended September 30, 2018: 

Liabilities	Junior Subordinated Notes, at Fair Value		Total Level 3 Liabilities
Balance, as of December 31, 2017	$	8,121	$	8,121
Change in fair value of financial instruments		202		202
Balance, as of September 30, 2018	$	8,323	$	8,323

The following table summarizes additional information about assets and liabilities that are measured at fair value on a recurring basis for which we have utilized level 3 inputs to determine fair value for the three months ended September 30, 2018:

Liabilities	Junior Subordinated Notes, at Fair Value		Total Level 3 Liabilities
Balance, as of June 30, 2018	$	5,111	$	5,111
Change in fair value of financial instruments		3,212		3,212
Balance, as of September 30, 2018	$	8,323	$	8,323

Fair Value Hierarchy for Financial Instruments Not Fair Valued but For Which Fair Value Is Required To Be Disclosed

The following tables summarize the valuation technique and the level of the fair value hierarchy for financial instruments that are not fair valued in the accompanying consolidated balance sheets but for which fair value is required to be disclosed. The fair value of cash and cash equivalents, restricted cash, secured warehouse facilities, commercial mortgage facilities and other indebtedness approximates cost due to the nature of these instruments and are not included in the tables below.

	Carrying Amount as of September 30, 2018		Estimated Fair Value as of September 30, 2018		Valuation Technique	Level in Fair Value Hierarchy
Total investment in mortgage loans, held for investment, net	$	604,293	$	579,874	Discountedcash flows	Three
Investment in mortgage loans, held for sale		4,673		4,673	Discounted cash flows	Three
7.0% convertible senior notes		836		579	Trading price	Two
4.0% convertible senior notes		66,574		68,817	Trading price	Two
7.625% senior notes		55,042		44,338	Trading price	Two
7.125% senior notes		64,864		63,619	Trading price	Two
Junior subordinated notes, at amortized cost		25,100		9,210	Discounted cash flows	Three
CDO notes payable, at amortized cost		152,446		123,453	Discounted cash flows	Three
CMBS securitizations		401,140		404,046	Discounted cash flows	Three
Loans payable on real estate		40,662		40,289	Discounted cash flows	Three

	Carrying Amount as of December 31, 2017		Estimated Fair Value as of December 31, 2017		Valuation Technique	Level in Fair Value Hierarchy
Total investment in mortgage loans, held for investment, net	$	1,255,723	$	1,252,780	Discounted cash flows	Three
7.0% convertible senior notes		833		533	Trading price	Two
4.0% convertible senior notes		106,800		103,457	Trading price	Two
7.625% senior notes		54,867		43,009	Trading price	Two
7.125% senior notes		67,474		61,567	Trading price	Two
Senior secured notes		11,063		11,197	Discounted cash flows	Three
Junior subordinated notes, at amortized cost		25,100		8,849	Discounted cash flows	Three
CDO notes payable, at amortized cost		254,724		196,212	Discounted cash flows	Three
CMBS securitizations		736,586		744,359	Discounted cash flows	Three
Loans payable on real estate		61,922		64,377	Discounted cash flows	Three
Other indebtedness		40,955		40,830	Discounted cash flows	Three

Summary of Realized and Unrealized Gains and Losses on Assets and Liabilities

The following table summarizes realized and unrealized gains and losses on assets and liabilities for which we elected the fair value option of FASB ASC Topic 825, “Financial Instruments” and derivatives as reported in change in fair value of financial instruments in the accompanying consolidated statements of operations:

	For the Three Months Ended September 30,						For the Nine Months Ended September 30,
Description	2018			2017			2018			2017
Change in fair value of junior subordinated notes	$	(410	)	$	3,270		$	(682	)	$	2,568
Change in fair value of derivatives		—			(17	)		470			(275	)
Change in fair value of warrants and investors SARs		—			1,500			—			4,400
Change in fair value of financial instruments	$	(410	)	$	4,753		$	(212	)	$	6,693

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VARIABLE INTEREST ENTITIES (Tables)

9 Months Ended

Sep. 30, 2018

Organization Consolidation And Presentation Of Financial Statements [Abstract]

Assets and Liabilities of Consolidated Variable Interest Entities

The following tables present the assets and liabilities of our consolidated VIEs as of each respective date. Certain amounts included in the tables below are eliminated upon consolidation with our other subsidiaries that maintain investments in the debt or equity securities issued by these entities.

	As of September 30, 2018
	RAIT Securitizations		RAIT VIE Properties			Total
Assets
Investments in commercial mortgage loans, mezzanine loans and preferred equity interests	$	756,004	$	—		$	756,004
Investments in real estate		—		18,133			18,133
Cash and cash equivalents		—		197			197
Restricted cash		36,512		302			36,814
Accrued interest receivable		26,286		—			26,286
Other assets		72		3,971			4,043
Total assets	$	818,874	$	22,603		$	841,477
Liabilities and Equity
Indebtedness, net	$	784,873	$	19,530		$	804,403
Accrued interest payable		1,769		5,748			7,517
Accounts payable and accrued expenses		69		3,257			3,326
Deferred taxes, borrowers’ escrows and other liabilities		—		197			197
Total liabilities		786,711		28,732			815,443
Equity:
Shareholders’ equity:
RAIT investment and Retained earnings (deficit)		32,163		(6,129	)		26,034
Total shareholders’ equity		32,163		(6,129	)		26,034
Total liabilities and equity	$	818,874	$	22,603		$	841,477

	As of December 31, 2017
	RAIT Securitizations		RAIT VIE Properties			RAIT Venture VIE			Total
Assets
Investments in commercial mortgage loans, mezzanine loans and preferred equity interests	$	1,082,528	$	—		$	349,924		$	1,432,452
Investments in real estate		—		18,634			—			18,634
Cash and cash equivalents		—		283			92			375
Restricted cash		1,068		237			10			1,315
Accrued interest receivable		41,639		—			2,462			44,101
Other assets		16,860		3,954			—			20,814
Total assets	$	1,142,095	$	23,108		$	352,488		$	1,517,691
Liabilities and Equity
Indebtedness, net	$	1,034,750	$	19,630		$	354,835		$	1,409,215
Accrued interest payable		1,869		5,356			1,111			8,336
Accounts payable and accrued expenses		23		3,274			—			3,297
Deferred taxes, borrowers’ escrows and other liabilities		—		184			643			827
Total liabilities		1,036,642		28,444			356,589			1,421,675
Equity:
Shareholders’ equity:
RAIT investment and Retained earnings (deficit)		105,453		(5,336	)		(4,140	)		95,978
Total shareholders’ equity		105,453		(5,336	)		(4,140	)		95,977
Noncontrolling Interests		—		—			39			39
Total liabilities and equity	$	1,142,095	$	23,108		$	352,488		$	1,517,691

Assets and Liabilities of Deconsolidated Variable Interest Entities

The following table summarizes the effects of deconsolidating the RAIT Venture VIEs, RAIT FL5 and RAIT FL6 from our balance sheet as of June 27, 2018:

	As of June 27, 2018
Assets
Commercial mortgage loans, mezzanine loans, and preferred equity interests	$	266,502
Cash and cash equivalents		189
Restricted cash		22,569
Accrued interest receivable		1,191
Other assets		1,233
Total assets	$	291,684
Liabilities
Indebtedness, net	$	205,137
Accrued interest payable		502
Accounts payable and accrued expenses		45
Borrowers' escrows		22,549
Deferred taxes and other liabilities		531
Total liabilities		228,764
Equity:
Stockholders' equity:
Noncontrolling interests		111
Total liabilities and equity	$	228,875
RAIT IV's net investment in RAIT FL5 & RAIT FL6	$	62,809
Purchase price for RAIT IV's FL5 Interests & FL6 Interests		54,632
Loss on deconsolidation of RAIT Venture VIEs, RAIT FL5 & RAIT FL6	$	(8,177	)

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SERIES D PREFERRED SHARES (Tables)

9 Months Ended

Sep. 30, 2018

Temporary Equity Disclosure [Abstract]

Summary of Difference Between Fair Value of Consideration Transferred and Carrying Amount of Shares that were Redeemed and Exchanged

This transaction is accounted for as an extinguishment of Series D preferred shares of RAIT and issuance of Series A, Series B and Series C preferred shares, in each case, of RAIT.  Accordingly, the difference between the fair value of the consideration transferred to the Investor (i.e., cash and RAIT’s Series A, Series B and Series C preferred shares) and the carrying amount of the Series D preferred shares that were redeemed and exchanged represents a return from the Investor.  The following table summarizes the transaction:

Liquidation preference of Series D preferred shares of RAIT prior to June 27, 2018					$	73,480
Cash received for sale of RAIT IV's interests in Holdings 2016 and Holdings 2017	$	54,632
Defined available cash held by RAIT IV		2,133
Total par amount of Series D preferred shares of RAIT redeemed	$	56,765
Fair value of Series A preferred shares of RAIT issued in exchange		2,498	(1	)
Fair value of Series B preferred shares of RAIT issued in exchange		1,091	(2	)
Fair value of Series C preferred shares of RAIT issued in exchange		776	(3	)
Total fair value of Series A, Series B and Series C preferred shares exchanged	$	4,365
Cash exchange fee	$	418
Total consideration transferred in redemption and exchange					$	61,548
Net increase to equity as a result of redemption					$	11,932

(1) Represents the fair value of 383,147 shares of Series A preferred that were issued to the Investor.  The fair value is based upon $6.52 per share, which was the closing price of the Series A preferred shares on June 27, 2018.

(2) Represents the fair value of 167,828 shares of Series B preferred that were issued to the Investor.  The fair value is based upon $6.50 per share, which was the closing price of the Series B preferred shares on June 27, 2018.

(3) Represents the fair value of 117,605 shares of Series C preferred that were issued to the Investor.  The fair value is based upon $6.60 per share, which was the closing price of the Series C preferred shares on June 27, 2018.

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SHAREHOLDERS' EQUITY (Tables)

9 Months Ended

Sep. 30, 2018

Equity [Abstract]

Dividends Declared and Paid on Preferred Shares

The following table summarizes the dividends we declared and paid on the preferred shares for the nine months ended September30, 2018:

	March 31, 2018
Series A Preferred Shares
Date declared	3/13/2018
Record date	3/23/2018
Date paid	3/30/2018
Total dividend amount	$	2,589
Series B Preferred Shares
Date declared	3/13/2018
Record date	3/23/2018
Date paid	3/30/2018
Total dividend amount	$	1,225
Series C Preferred Shares
Date declared	3/13/2018
Record date	3/23/2018
Date paid	3/30/2018
Total dividend amount	$	910
Series D Preferred Shares
Date declared	3/13/2018
Record date	3/23/2018
Date paid	3/30/2018
Total dividend amount	$	1,665

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EARNINGS (LOSS) PER SHARE (Tables)

9 Months Ended

Sep. 30, 2018

Earnings Per Share [Abstract]

Reconciliation of Basic and Diluted Earnings (Loss) Per Share

The following table presents a reconciliation of basic and diluted earnings (loss) per share for the three and nine months ended September30, 2018 and 2017:

	For the Three Months Ended September 30,						For the Nine Months Ended September 30,
	2018			2017			2018			2017
Income (loss)	$	(21,038	)	$	(15,843	)	$	(105,766	)	$	(154,266	)
(Income) loss allocated to preferred shares		(5,063	)		(8,387	)		(4,591	)		(25,730	)
(Income) loss allocated to noncontrolling interests		—			—			—			(76	)
Net income (loss) allocable to common shares		(26,101	)		(24,230	)		(110,357	)		(180,072	)
Weighted-average shares outstanding—Basic (1)		1,840,168			1,831,193			1,839,172			1,828,778
Dilutive securities		—			—			—			—
Weighted-average shares outstanding—Diluted (1)		1,840,168			1,831,193			1,839,172			1,828,778
Earnings (loss) per share—Basic:
Earnings (loss) per share—Basic	$	(14.18	)	$	(13.23	)	$	(60.00	)	$	(98.47	)
Earnings (loss) per share—Diluted:
Earnings (loss) per share—Diluted	$	(14.18	)	$	(13.23	)	$	(60.00	)	$	(98.47	)

(1) All share and per-share amounts have been retroactively adjusted to reflect the Reverse Stock Split for all periods presented herein.

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SUPPLEMENTAL DISCLOSURE TO CONSOLIDATED STATEMENTS OF CASH FLOWS (Tables)

9 Months Ended

Sep. 30, 2018

Supplemental Cash Flow Elements [Abstract]

Schedule of Supplemental Disclosures to Statements of Cash Flows

The following are supplemental disclosures to the statements of cash flows for the nine months ended September30, 2018 and 2017: 

	For the Nine Months Ended September 30,
	2018			2017
Cash paid for interest	$	37,487		$	45,197
Cash paid (refunds received) for taxes		(1	)		(70	)
Non-cash increase in investments in real estate, intangible assets, and other liabilities from conversion of loans		—			1,590
Non-cash increase (decrease) in investments in real estate, restricted cash, other assets, intangible assets, accounts payable and accrued expenses, and other liabilities from deconsolidation of properties		907			(84,285	)
Non-cash increase (decrease) in indebtedness from debt extinguishments		(1,464	)		(4,640	)
Non-cash increase (decrease) to noncontrolling interests from distribution of limited partnership units on South Terrace		—			(1,618	)
Non-cash increase (decrease) in indebtedness from deconsolidation of properties		—			(64,790	)

Summary of Cash and Cash Equivalents and Restricted Cash Balances

The following table summarizes our cash and cash equivalents and restricted cash balances as of September 30, 2018 and September 30, 2017:

	As of September 30, 2018		As of September 30, 2017
Cash and cash equivalents	$	98,352	$	46,019
Restricted cash		86,154		142,489
Total cash and cash equivalents and restricted cash	$	184,506	$	188,508

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The Company - Additional Information (Detail) $ / shares in Units, $ in Thousands							9 Months Ended
	Aug. 14, 2018 $ / shares	Jun. 27, 2018 USD ($) shares	Jun. 26, 2018 USD ($)	Mar. 19, 2018 USD ($)	Jun. 22, 2017 USD ($)	Dec. 07, 2016 USD ($)	Sep. 30, 2018 USD ($) $ / shares shares	Aug. 13, 2018 $ / shares	Dec. 31, 2017 $ / shares
Nature Of Operations [Line Items]
Reverse stock split, conversion ratio	0.02
Common shares, par value | $ / shares	$ 1.50						$ 1.50	$ 0.03	$ 1.50
Reverse stock split, description							Effective after the close of trading on August 13, 2018, we completed a one for fifty reverse stock split, or the Reverse Stock Split of RAIT’s common shares, as previously authorized by RAIT’s board of trustees, or the Board, pursuant to authority granted to the Board by RAIT’s common shareholders. The par value of common shares changed to $1.50 per share after the Reverse Stock Split from $0.03 per share prior to the Reverse Stock Split and every fifty shares issued and outstanding prior to the Reverse Stock Split were combined into one common share after the Reverse Stock Split. The Reverse Stock Split did not change the number of authorized common shares. These financial statements give retroactive effect to such Reverse Stock Split and all share and per share amounts have been adjusted accordingly. The Reverse Stock Split did not affect RAIT’s preferred shares, including the number of authorized or outstanding RAIT preferred shares or the dividend rate per share of any outstanding RAIT preferred shares.
Preferred Series D
Nature Of Operations [Line Items]
Proceeds from sale of investment		$ 56,765		$ 4,863	$ 10,057	$ 11,600
Liquidation preference			$ 73,480
Variable Interest Entity, Not Primary Beneficiary | RAIT FL5 & FL6 | Preferred Series D
Nature Of Operations [Line Items]
Shares repurchased and cancelled, shares | shares		2,939,190					2,939,190
Proceeds from sale of investment		$ 56,765					$ 56,765
Variable Interest Entity, Not Primary Beneficiary | RAIT FL5 & FL6 | Preferred Series A, B, and C
Nature Of Operations [Line Items]
Liquidation preference		16,715					$ 16,715
Variable Interest Entity, Not Primary Beneficiary | RAIT FL5 | Melody 2016 Holdings, LLC
Nature Of Operations [Line Items]
Sale of Interest owned in joint venture			60.00%
Percentage of interest issued to affliated of purchaser			40.00%
Variable Interest Entity, Not Primary Beneficiary | RAIT FL6 | Melody 2017 Holdings, LLC
Nature Of Operations [Line Items]
Sale of Interest owned in joint venture			60.00%
Percentage of interest issued to affliated of purchaser			40.00%
Variable Interest Entity, Not Primary Beneficiary | RAIT IV | RAIT FL5 & FL6
Nature Of Operations [Line Items]
Aggregate purchase price		$ 54,632

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Summary of Significant Accounting Policies - Additional Information (Detail)	3 Months Ended				6 Months Ended		9 Months Ended		12 Months Ended
	Sep. 30, 2018 USD ($) Loan Instrument Property shares	Jun. 30, 2018 USD ($) shares	Mar. 31, 2018 USD ($)	Sep. 30, 2017 USD ($)	Sep. 30, 2018 USD ($) Loan Instrument Property shares	Jun. 30, 2018 USD ($) shares	Sep. 30, 2018 USD ($) Loan Instrument Property shares	Sep. 30, 2017 USD ($)	Dec. 31, 2017 USD ($) Loan LandParcel	Nov. 30, 2018 USD ($)	Jan. 01, 2018 USD ($)
Significant Accounting Policies [Line Items]
Asset impairment	$ (13,267,000)			$ (3,121,000)			$ (44,083,000)	$ (96,354,000)
Decrease to cash flows from operating activities						$ (108,494,000)
Increase to cash flows from investing activities						108,494,000
Proceeds from sale of loans originated for sale			$ 89,583,000				14,265,000
Unpaid Principal Balance	$ 832,867,000				$ 832,867,000		832,867,000		$ 1,419,653,000
Preferred dividends declared					$ 0	$ 0	$ 6,397,000
Cumulative redeemable preferred shares, shares outstanding | shares	0	0			0	0	0
Federal deposit insurance corporation, insurance limit per institution	$ 250,000				$ 250,000		$ 250,000
Restricted cash	86,154,000			142,489,000	86,154,000		86,154,000	142,489,000	157,914,000
Accrued interest receivable	24,959,000				24,959,000		24,959,000		29,664,000
Earned asset management fees from consolidated securitizations, eliminated	129,000			227,000			443,000	714,000
Intangible assets, accumulated amortization	5,527,000				5,527,000		5,527,000		6,831,000
Intangible assets, amortization expenses	251,000			1,202,000			1,069,000	5,763,000
Expected amortization expense of intangible assets, remainder of 2018	268,000				268,000		268,000
Expected amortization expense of intangible assets in 2019	701,000				701,000		701,000
Expected amortization expense of intangible assets in 2020	341,000				341,000		341,000
Expected amortization expense of intangible assets in 2021	259,000				259,000		259,000
Expected amortization expense of intangible assets in 2022	143,000				143,000		143,000
Expected amortization expense of intangible assets thereafter	$ 181,000				$ 181,000		$ 181,000
Number of derivative instruments outstanding | Instrument	0				0		0
Reversal of accrued current income tax liability				$ 249,000				$ 249,000
Gain on sale of retail property management	$ 1,262,000						$ 1,262,000
Cumulative effect adjustment as an increase to shareholders' equity									$ 180,548,000
Number of land parcels sold | LandParcel									2
Revenue from Contracts with Customers | Difference between Revenue Guidance in Effect before and after Topic 606
Significant Accounting Policies [Line Items]
Cumulative effect adjustment as an increase to shareholders' equity											$ 761,000
Financial Instruments
Significant Accounting Policies [Line Items]
Cumulative effect adjustment increase to accumulated other comprehensive income (loss) and decrease to retained earnings (deficit)											$ 9,257,000
Topic 842
Significant Accounting Policies [Line Items]
Number of real estate operating leases expected to recognize as lease liability and offsetting ROU asset | Property	1				1		1
TRS Enitities
Significant Accounting Policies [Line Items]
Income tax provision	$ 152,000
In-place leases
Significant Accounting Policies [Line Items]
Intangible assets, gross carrying amount	7,420,000				$ 7,420,000		$ 7,420,000		$ 7,420,000
Loans and Finance Receivables
Significant Accounting Policies [Line Items]
Accrued interest receivable	$ 22,402,000				$ 22,402,000		22,402,000		23,801,000
Impairment of loans							$ 28,873,000		28,904,000
Number of impaired loans | Loan	4				4		4
Loans and Finance Receivables | Uncollectible and Written Off
Significant Accounting Policies [Line Items]
Accrued interest receivable written off as reduction to investment interest income	$ 1,964,000
Loans and Finance Receivables | Troubled Debt Restructured Loans
Significant Accounting Policies [Line Items]
Impairment of loans							$ 32,664,000		$ 30,379,000
Number of impaired loans | Loan	3				3		3		2
Building and Building Improvements | Minimum
Significant Accounting Policies [Line Items]
Property, useful lives							30 years
Building and Building Improvements | Maximum
Significant Accounting Policies [Line Items]
Property, useful lives							40 years
Furniture, fixtures, and equipment | Minimum
Significant Accounting Policies [Line Items]
Property, useful lives							5 years
Furniture, fixtures, and equipment | Maximum
Significant Accounting Policies [Line Items]
Property, useful lives							10 years
Tenant escrows and borrowers' funds
Significant Accounting Policies [Line Items]
Restricted cash	$ 49,350,000				$ 49,350,000		$ 49,350,000		$ 123,398,000
Securitizations
Significant Accounting Policies [Line Items]
Restricted cash	36,804,000				36,804,000		36,804,000		34,516,000
Scenario Forecast
Significant Accounting Policies [Line Items]
Debt instrument redemption amount										$ 279,000
Recourse Indebtedness
Significant Accounting Policies [Line Items]
Unpaid Principal Balance	$ 234,544,000				$ 234,544,000		$ 234,544,000		$ 313,700,000
Recourse Indebtedness | 7.125% senior notes
Significant Accounting Policies [Line Items]
Stated interest rate	7.125%				7.125%		7.125%
Unpaid Principal Balance	$ 65,356,000				$ 65,356,000		$ 65,356,000
Contractual Maturity, month and year							2019-08
Restatement Adjustment
Significant Accounting Policies [Line Items]
Asset impairment		$ 850,000

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Summary of Significant Accounting Policies - Summary of Revenue from Contracts with Customers Disaggregated by Type of Revenue (Detail) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2018	Sep. 30, 2017	Sep. 30, 2018	Sep. 30, 2017
Disaggregation Of Revenue [Line Items]
Revenue from Contracts with customers	$ 799	$ 2,362	$ 3,867	$ 7,287
Property Management Fee income
Disaggregation Of Revenue [Line Items]
Revenue from Contracts with customers	231	732	1,724	2,333
Parking
Disaggregation Of Revenue [Line Items]
Revenue from Contracts with customers	80	433	514	1,400
Leasing Commission income
Disaggregation Of Revenue [Line Items]
Revenue from Contracts with customers	78	598	742	1,765
Other miscellaneous
Disaggregation Of Revenue [Line Items]
Revenue from Contracts with customers	$ 410	$ 599	$ 887	$ 1,789

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Loans Held for Investment (Detail) $ in Thousands		9 Months Ended		12 Months Ended
		Sep. 30, 2018 USD ($) Loan		Dec. 31, 2017 USD ($) Loan		Jun. 30, 2018 USD ($)	Mar. 31, 2018 USD ($)
Mortgage Loans On Real Estate [Line Items]
Unpaid Principal Balance						$ 13,000	$ 90,260
Carrying Amount		$ 7,015
Number of Loans | Loan		9
Commercial Portfolio Segment
Mortgage Loans On Real Estate [Line Items]
Unpaid Principal Balance		$ 629,297	[1]	$ 1,273,507	[2]
Total investment in loans, Unamortized (Discounts) Premiums		(383)	[1]	(556)	[2]
Carrying Amount		$ 628,914	[1]	$ 1,272,951	[2]
Number of Loans | Loan		59	[1]	123	[2]
Weighted-Average Coupon	[3]	6.80%	[1]	6.50%	[2]
Deferred fees and costs, net		$ (1,004)	[4]	$ (2,344)	[5]
Total investments in loans, Unpaid Principal Balance		628,293		1,271,163
Commercial mortgages, mezzanine loans and other loans, Carrying Amount		627,910		1,270,607
Commercial mortgage loans | Commercial Portfolio Segment
Mortgage Loans On Real Estate [Line Items]
Unpaid Principal Balance		574,896		1,194,735
Total investment in loans, Unamortized (Discounts) Premiums		(546)		(719)
Carrying Amount		$ 574,350		$ 1,194,016
Number of Loans | Loan		42		95
Weighted-Average Coupon	[3]	6.50%		6.30%
Range of Maturity Dates, Minimum		Oct. 31, 2018		Jan. 31, 2018
Range of Maturity Dates, Maximum		Jun. 30, 2025		Dec. 31, 2025
Mezzanine Loans | Commercial Portfolio Segment
Mortgage Loans On Real Estate [Line Items]
Unpaid Principal Balance		$ 21,122		$ 45,488
Total investment in loans, Unamortized (Discounts) Premiums		164		164
Carrying Amount		$ 21,286		$ 45,652
Number of Loans | Loan		2		13
Weighted-Average Coupon	[3]	13.30%		11.20%
Range of Maturity Dates, Minimum		Jun. 30, 2020		May 31, 2018
Range of Maturity Dates, Maximum		Mar. 31, 2023		May 31, 2025
Preferred Equity Interests | Commercial Portfolio Segment
Mortgage Loans On Real Estate [Line Items]
Unpaid Principal Balance		$ 33,279		$ 33,284
Total investment in loans, Unamortized (Discounts) Premiums		(1)		(1)
Carrying Amount		$ 33,278		$ 33,283
Number of Loans | Loan		15		15
Weighted-Average Coupon	[3]	6.70%		9.10%
Range of Maturity Dates, Minimum		Nov. 30, 2018		Nov. 30, 2018
Range of Maturity Dates, Maximum		Jan. 31, 2029		Jan. 31, 2029

[1] Includes $100,442 of cash flow loans, of which $49,690 are commercial mortgage loans, $21,122 are mezzanine loans and $29,630 are preferred equity interests. See Note 2: Summary of Significant Accounting Policies, (j) Revenue Recognition, for further discussion of our cash flow loans.

[2] Includes $106,136 of cash flow loans, of which $55,353 are commercial mortgage loans, $21,149 are mezzanine loans and $29,634 are preferred equity interests. See Note 2: Summary of Significant Accounting Policies, (j) Revenue Recognition, for further discussion of our cash flow loans.

[3] Weighted-average coupon is calculated on the unpaid principal balance, which does not necessarily correspond to the carrying amount.

[4] Includes $3,822 of deferred fees, net of $2,818 of deferred costs.

[5] Includes $8,497 of deferred fees, net of $6,153 of deferred costs.

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Loans Held for Investment (Parenthetical) (Detail) - USD ($) $ in Thousands	9 Months Ended		12 Months Ended
	Sep. 30, 2018		Dec. 31, 2017
Mortgage Loans On Real Estate [Line Items]
Carrying Amount	$ 7,015
Commercial Portfolio Segment
Mortgage Loans On Real Estate [Line Items]
Carrying Amount	628,914	[1]	$ 1,272,951	[2]
Commercial Portfolio Segment | Cash Flow Loans
Mortgage Loans On Real Estate [Line Items]
Carrying Amount	100,442		106,136
Commercial Portfolio Segment | Commercial mortgage loans
Mortgage Loans On Real Estate [Line Items]
Carrying Amount	574,350		1,194,016
Commercial Portfolio Segment | Commercial mortgage loans | Cash Flow Loans
Mortgage Loans On Real Estate [Line Items]
Carrying Amount	49,690		55,353
Commercial Portfolio Segment | Commercial mortgage loans | Conduit Loans
Mortgage Loans On Real Estate [Line Items]
Deferred fees	3,822		8,497
Deferred costs	2,818		6,153
Commercial Portfolio Segment | Mezzanine Loans
Mortgage Loans On Real Estate [Line Items]
Carrying Amount	21,286		45,652
Commercial Portfolio Segment | Mezzanine Loans | Cash Flow Loans
Mortgage Loans On Real Estate [Line Items]
Carrying Amount	21,122		21,149
Commercial Portfolio Segment | Preferred Equity Interests
Mortgage Loans On Real Estate [Line Items]
Carrying Amount	33,278		33,283
Commercial Portfolio Segment | Preferred Equity Interests | Cash Flow Loans
Mortgage Loans On Real Estate [Line Items]
Carrying Amount	$ 29,630		$ 29,634

[1] Includes $100,442 of cash flow loans, of which $49,690 are commercial mortgage loans, $21,122 are mezzanine loans and $29,630 are preferred equity interests. See Note 2: Summary of Significant Accounting Policies, (j) Revenue Recognition, for further discussion of our cash flow loans.

[2] Includes $106,136 of cash flow loans, of which $55,353 are commercial mortgage loans, $21,149 are mezzanine loans and $29,634 are preferred equity interests. See Note 2: Summary of Significant Accounting Policies, (j) Revenue Recognition, for further discussion of our cash flow loans.

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Delinquency Statistics of Commercial Real Estate Loan Held for Investment (Detail) - USD ($) $ in Thousands	Sep. 30, 2018		Dec. 31, 2017
Mortgage Loans On Real Estate [Line Items]
Delinquency statistics, Total	$ 629,297		$ 1,273,507
Commercial Mortgage Loans
Mortgage Loans On Real Estate [Line Items]
Delinquency statistics, Total	574,896		1,194,735
Mezzanine Loans
Mortgage Loans On Real Estate [Line Items]
Delinquency statistics, Total	21,122		45,488
Preferred Equity Interests
Mortgage Loans On Real Estate [Line Items]
Delinquency statistics, Total	33,279		33,284
Current
Mortgage Loans On Real Estate [Line Items]
Delinquency statistics, Total	563,379		1,223,043
Current | Commercial Mortgage Loans
Mortgage Loans On Real Estate [Line Items]
Delinquency statistics, Total	508,978		1,149,501
Current | Mezzanine Loans
Mortgage Loans On Real Estate [Line Items]
Delinquency statistics, Total	21,122		40,258
Current | Preferred Equity Interests
Mortgage Loans On Real Estate [Line Items]
Delinquency statistics, Total	33,279		33,284
30 to 59 days
Mortgage Loans On Real Estate [Line Items]
Delinquency statistics, Total	8,892
30 to 59 days | Commercial Mortgage Loans
Mortgage Loans On Real Estate [Line Items]
Delinquency statistics, Total	8,892
60 to 89 days
Mortgage Loans On Real Estate [Line Items]
Delinquency statistics, Total	17,466
60 to 89 days | Commercial Mortgage Loans
Mortgage Loans On Real Estate [Line Items]
Delinquency statistics, Total	17,466
90 days or more
Mortgage Loans On Real Estate [Line Items]
Delinquency statistics, Total	39,560		50,464
90 days or more | Commercial Mortgage Loans
Mortgage Loans On Real Estate [Line Items]
Delinquency statistics, Total	39,560		45,234
90 days or more | Mezzanine Loans
Mortgage Loans On Real Estate [Line Items]
Delinquency statistics, Total			5,230
Non-accrual
Mortgage Loans On Real Estate [Line Items]
Delinquency statistics, Total	123,463	[1]	98,603	[2]
Non-accrual | Commercial Mortgage Loans
Mortgage Loans On Real Estate [Line Items]
Delinquency statistics, Total	106,860	[1]	81,443	[2]
Non-accrual | Mezzanine Loans
Mortgage Loans On Real Estate [Line Items]
Delinquency statistics, Total	8,253	[1]	13,510	[2]
Non-accrual | Preferred Equity Interests
Mortgage Loans On Real Estate [Line Items]
Delinquency statistics, Total	$ 8,350	[1]	$ 3,650	[2]

[1] Includes six loans that are current, one loan that is 30 to 59 days or more past due, and one loan that is 60 to 89 days or more past due, but are on non-accrual due to uncertainty over whether we will fully collect principal and interest. Also includes one loan that is 90 days or more past due in accordance with its terms

[2] Includes five loans that were current in accordance with their terms, but are on non-accrual due to uncertainty over whether we will fully collect principal and interest, and two loans that are 90 days or more past due in accordance with their terms.

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Investments in Commercial Mortgage Loans, Mezzanine Loans and Preferred Equity Interests - Additional Information (Detail) $ in Thousands	1 Months Ended				3 Months Ended			9 Months Ended			12 Months Ended
	Oct. 31, 2018 USD ($) Loan	Jun. 30, 2018 USD ($)	May 31, 2018 Loan	Mar. 31, 2018 USD ($)	Sep. 30, 2018 USD ($) Loan		Sep. 30, 2017 USD ($) Loan	Sep. 30, 2018 USD ($) Loan		Sep. 30, 2017 USD ($) Loan	Dec. 31, 2017 USD ($) Loan
Accounts Notes And Loans Receivable [Line Items]
Principal balance					$ 7,015			$ 7,015
Number of Loans | Loan								9
Unpaid Principal Balance		$ 13,000		$ 90,260
Carrying amount of loans					4,673			$ 4,673
Provision for loan losses					7,489		$ 5,516	30,269		$ 27,914
Average impaired loans unpaid balance					141,524		157,649	133,201		153,707
Interest income from impaired loans					479		138	$ 919		1,140
Proceeds from sale of loans held-for-sale		11,577		43,384
Loss on sale of loans		$ 1,423		930
Number of loans sold | Loan			1					6
Net loss on sale of loans								$ 3,280
Number of loans available for sale | Loan								3
Loss on loans available for sale					1,524
Commercial Mortgage Loans
Accounts Notes And Loans Receivable [Line Items]
Provision for loan losses					5,506		$ 3,368	$ 25,502		$ 16,690
Commercial Mortgage Loans | Subsequent Event
Accounts Notes And Loans Receivable [Line Items]
Number of Loans | Loan	1
Carrying Value, Transfer of commercial real estate loan to real estate owned	$ 5,096
Secured warehouse facility
Accounts Notes And Loans Receivable [Line Items]
Repayments of debt				45,850
Interest paid				$ 349
Commercial Portfolio Segment
Accounts Notes And Loans Receivable [Line Items]
Principal balance					628,914	[1]		$ 628,914	[1]		$ 1,272,951	[2]
Number of Loans | Loan								59	[1]		123	[2]
Unpaid Principal Balance					$ 629,297	[1]		$ 629,297	[1]		$ 1,273,507	[2]
Modification troubled debt restructuring, subsequently defaulted, number of loans | Loan								0		0
Modification troubled debt restructuring, number of loans | Loan					0		0	0		0
Commercial Portfolio Segment | Commercial Mortgage Loans
Accounts Notes And Loans Receivable [Line Items]
Principal balance					$ 574,350			$ 574,350			$ 1,194,016
Number of Loans | Loan								42			95
Unpaid Principal Balance					574,896			$ 574,896			$ 1,194,735
Commercial Portfolio Segment | One Commercial Mortgage Loan
Accounts Notes And Loans Receivable [Line Items]
Modification troubled debt restructuring, number of loans | Loan								1
Unpaid principal balance constituted a TDR					$ 7,948			$ 7,948
Percentage of interest payment rate					0.00%			0.00%
Commercial Portfolio Segment | Cash Flow Loans
Accounts Notes And Loans Receivable [Line Items]
Principal balance					$ 100,442			$ 100,442			106,136
Commercial Portfolio Segment | Cash Flow Loans | Commercial Mortgage Loans
Accounts Notes And Loans Receivable [Line Items]
Principal balance					49,690			$ 49,690			$ 55,353
Minimum | Commercial Portfolio Segment
Accounts Notes And Loans Receivable [Line Items]
Loan maturity								90 days			90 days
90 days or more | Commercial Portfolio Segment
Accounts Notes And Loans Receivable [Line Items]
Commercial real estate loans on non-accrual status					$ 123,463			$ 123,463			$ 98,603
Weighted-average interest rate					6.80%			6.80%			6.10%
Recognizing interest on the cash basis | Commercial Portfolio Segment
Accounts Notes And Loans Receivable [Line Items]
Weighted-average interest rate					13.50%			13.50%			12.90%
Number of Loans | Loan								2			3
Unpaid Principal Balance					$ 15,919			$ 15,919			$ 20,624
Troubled Debt Restructured Loans | Commercial Portfolio Segment
Accounts Notes And Loans Receivable [Line Items]
Number of Loans | Loan								1
Carrying amount of loans					$ 7,948			$ 7,948
Loans Originated Prior to 2010
Accounts Notes And Loans Receivable [Line Items]
Number of Loans | Loan					2			7
Provision for loan losses					$ 7,489			$ 30,269

[1] Includes $100,442 of cash flow loans, of which $49,690 are commercial mortgage loans, $21,122 are mezzanine loans and $29,630 are preferred equity interests. See Note 2: Summary of Significant Accounting Policies, (j) Revenue Recognition, for further discussion of our cash flow loans.

[2] Includes $106,136 of cash flow loans, of which $55,353 are commercial mortgage loans, $21,149 are mezzanine loans and $29,634 are preferred equity interests. See Note 2: Summary of Significant Accounting Policies, (j) Revenue Recognition, for further discussion of our cash flow loans.

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Loans Held for Investment by Credit Risk Category (Detail) - USD ($) $ in Thousands	Sep. 30, 2018		Jun. 30, 2018	Mar. 31, 2018	Dec. 31, 2017
Financing Receivable Recorded Investment [Line Items]
Unpaid Principal Balance			$ 13,000	$ 90,260
Commercial Portfolio Segment
Financing Receivable Recorded Investment [Line Items]
Unpaid Principal Balance	$ 629,297	[1]			$ 1,273,507	[2]
Commercial Portfolio Segment | Commercial Mortgage Loans
Financing Receivable Recorded Investment [Line Items]
Unpaid Principal Balance	574,896				1,194,735
Commercial Portfolio Segment | Mezzanine Loans
Financing Receivable Recorded Investment [Line Items]
Unpaid Principal Balance	21,122				45,488
Commercial Portfolio Segment | Preferred Equity Interests
Financing Receivable Recorded Investment [Line Items]
Unpaid Principal Balance	33,279				33,284
Commercial Portfolio Segment | Satisfactory
Financing Receivable Recorded Investment [Line Items]
Unpaid Principal Balance	442,576				1,124,729
Commercial Portfolio Segment | Satisfactory | Commercial Mortgage Loans
Financing Receivable Recorded Investment [Line Items]
Unpaid Principal Balance	428,646				1,083,741
Commercial Portfolio Segment | Satisfactory | Mezzanine Loans
Financing Receivable Recorded Investment [Line Items]
Unpaid Principal Balance					19,109
Commercial Portfolio Segment | Satisfactory | Preferred Equity Interests
Financing Receivable Recorded Investment [Line Items]
Unpaid Principal Balance	13,930				21,879
Commercial Portfolio Segment | Watchlist
Financing Receivable Recorded Investment [Line Items]
Unpaid Principal Balance	186,721	[3]			148,778	[4]
Commercial Portfolio Segment | Watchlist | Commercial Mortgage Loans
Financing Receivable Recorded Investment [Line Items]
Unpaid Principal Balance	146,250	[3]			110,994	[4]
Commercial Portfolio Segment | Watchlist | Mezzanine Loans
Financing Receivable Recorded Investment [Line Items]
Unpaid Principal Balance	21,122	[3]			26,379	[4]
Commercial Portfolio Segment | Watchlist | Preferred Equity Interests
Financing Receivable Recorded Investment [Line Items]
Unpaid Principal Balance	$ 19,349	[3]			$ 11,405	[4]

[1] Includes $100,442 of cash flow loans, of which $49,690 are commercial mortgage loans, $21,122 are mezzanine loans and $29,630 are preferred equity interests. See Note 2: Summary of Significant Accounting Policies, (j) Revenue Recognition, for further discussion of our cash flow loans.

[2] Includes $106,136 of cash flow loans, of which $55,353 are commercial mortgage loans, $21,149 are mezzanine loans and $29,634 are preferred equity interests. See Note 2: Summary of Significant Accounting Policies, (j) Revenue Recognition, for further discussion of our cash flow loans.

[3] Includes $154,581 of loans that are considered to be impaired and $32,140 of loans that are not considered to be impaired.

[4] Includes $126,478 of loans that are considered to be impaired and $22,300 of loans that are not considered impaired.

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Loans Held for Investment by Credit Risk Category (Parenthetical) (Detail) - Watchlist - USD ($) $ in Thousands	Sep. 30, 2018	Dec. 31, 2017
Financing Receivable Recorded Investment [Line Items]
Total Impaired Loans	$ 154,581	$ 126,478
Loans not impaired	$ 32,140	$ 22,300

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Roll-Forwards of Allowance for Loan Losses for Commercial Mortgage Loans, Mezzanine Loans and Preferred Equity Interests Held for Investment (Detail) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2018	Sep. 30, 2017	Sep. 30, 2018		Sep. 30, 2017
Mortgage Loans On Real Estate [Line Items]
Beginning balance	$ 16,699	$ 23,514	$ 14,883		$ 12,354
Provision (benefit) for loan losses	7,489	5,516	30,269		27,914
Charge-offs, net of recoveries	(571)	(3,890)	(21,535)	[1]	(15,128)
Ending balance	23,617	25,140	23,617		25,140
Commercial Mortgage Loans
Mortgage Loans On Real Estate [Line Items]
Beginning balance	11,226	12,722	9,019		10,640
Provision (benefit) for loan losses	5,506	3,368	25,502		16,690
Charge-offs, net of recoveries	(571)		(18,360)	[1]	(11,240)
Ending balance	16,161	16,090	16,161		16,090
Mezzanine Loans
Mortgage Loans On Real Estate [Line Items]
Beginning balance	5,231	9,092	5,622
Provision (benefit) for loan losses	1,258	2,148	4,042		11,238
Charge-offs, net of recoveries		(3,890)	(3,175)	[1]	(3,888)
Ending balance	6,489	7,350	6,489		7,350
Preferred Equity Interests
Mortgage Loans On Real Estate [Line Items]
Beginning balance	242	1,700	242		1,714
Provision (benefit) for loan losses	725		725		(14)
Ending balance	$ 967	$ 1,700	$ 967		$ 1,700

[1] Includes $5,331 of charge-offs related to loans transferred to held for sale during the nine months ended September 30, 2018.

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Roll-Forwards of Allowance for Loan Losses for Commercial Mortgage Loans, Mezzanine Loans and Preferred Equity Interests Held for Investment (Parenthetical) (Detail) $ in Thousands	9 Months Ended
	Sep. 30, 2018 USD ($)
Receivables [Abstract]
Impairments related to loans transferred to held for sale	$ 5,331

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Loans Considered to be Impaired (Detail) - USD ($) $ in Thousands	Sep. 30, 2018		Jun. 30, 2018	Dec. 31, 2017		Sep. 30, 2017	Jun. 30, 2017	Dec. 31, 2016
Financing Receivable Impaired [Line Items]
Impaired loans expecting full recovery	$ 35,032			$ 34,946
Impaired loans with reserves	119,549			91,532
Total Impaired Loans	154,581	[1]		126,478	[2]
Allowance for loan losses	23,617		$ 16,699	14,883		$ 25,140	$ 23,514	$ 12,354
Commercial Mortgage Loans
Financing Receivable Impaired [Line Items]
Impaired loans expecting full recovery	11,164			14,321
Impaired loans with reserves	102,946			74,372
Total Impaired Loans	114,110	[1]		88,693	[2]
Allowance for loan losses	16,161		11,226	9,019		16,090	12,722	10,640
Mezzanine Loans
Financing Receivable Impaired [Line Items]
Impaired loans expecting full recovery	12,869			12,869
Impaired loans with reserves	8,253			13,510
Total Impaired Loans	21,122	[1]		26,379	[2]
Allowance for loan losses	6,489		5,231	5,622		7,350	9,092
Preferred Equity Interests
Financing Receivable Impaired [Line Items]
Impaired loans expecting full recovery	10,999			7,756
Impaired loans with reserves	8,350			3,650
Total Impaired Loans	19,349	[1]		11,406	[2]
Allowance for loan losses	$ 967		$ 242	$ 242		$ 1,700	$ 1,700	$ 1,714

[1] As of September 30, 2018, there was no unpaid principal relating to previously identified TDRs that are on accrual status.

[2] As of December 31, 2017, there was no unpaid principal relating to previously identified TDRs that are on accrual status.

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Loans Considered to be Impaired (Parenthetical) (Detail) - USD ($) $ in Thousands	Sep. 30, 2018	Dec. 31, 2017
Receivables [Abstract]
Unpaid principal relating to previously identified TDRs that are on accrual status	$ 0	$ 0

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Summary of Investments in Real Estate (Detail) - USD ($) $ in Thousands	Sep. 30, 2018	Dec. 31, 2017
Real Estate Properties [Line Items]
Investments in real estate, Book Value	$ 132,473	$ 274,672
Less: Accumulated depreciation and amortization	(9,328)	(28,768)
Investments in real estate, net	123,145	245,904
Multifamily real estate properties
Real Estate Properties [Line Items]
Investments in real estate, Book Value		17,163
Office real estate properties
Real Estate Properties [Line Items]
Investments in real estate, Book Value	51,460	130,125
Retail real estate properties
Real Estate Properties [Line Items]
Investments in real estate, Book Value	60,446	106,817
Parcels of land
Real Estate Properties [Line Items]
Investments in real estate, Book Value	$ 20,567	$ 20,567

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Summary of Investments in Real Estate (Parenthetical) (Detail) - Property	Sep. 30, 2018	Dec. 31, 2017
Accounting Policies [Abstract]
Number of real estate properties held for sale	0	0

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Investments in Real Estate - Additional Information (Detail) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2018 USD ($)	Sep. 30, 2017 USD ($)	Sep. 30, 2018 USD ($) Property	Sep. 30, 2017 USD ($) Property	Dec. 31, 2017 USD ($)	Dec. 31, 2016 USD ($)
Real Estate Properties [Line Items]
Investments in real estate, net, Book Value	$ 123,145		$ 123,145		$ 245,904
Investments in real estate	132,473		132,473		274,672
Mortgages loans or other debt held by third parties	40,906		40,906		62,297
Mortgages loans held by consolidated securitizations	133,525		$ 133,525		298,050
Number of multifamily disposed | Property			1
Number of retail properties disposed | Property			1
Gain (loss) on sale	1,262		$ 1,262
Impairment charges on real estate assets	13,267		44,083
Reversal of asset impairment charges	850
Gains (losses) on deconsolidation of properties	870	$ (4,035)	(7,307)	$ (19,982)
Prior Year Disposal Group Held For Sale Or Disposed Of By Sale Not Discontinued Operations
Real Estate Properties [Line Items]
Gain (loss) on sale			(6)
Office
Real Estate Properties [Line Items]
Investments in real estate	51,460		$ 51,460		130,125
Number of real estate properties disposed | Property			2
One Retail Property
Real Estate Properties [Line Items]
Impairment charges on real estate assets	13,482
Gains (losses) on deconsolidation of properties	907
Three Other Assets Real Estate Properties
Real Estate Properties [Line Items]
Impairment charges on real estate assets	635
Six Real Estate Assets
Real Estate Properties [Line Items]
Impairment charges on real estate assets			$ 44,083
One Real Estate Retail Property | Third-Party Appraisal
Real Estate Properties [Line Items]
Impairment charges on real estate assets			13,482
One Real Estate Retail Property | Purchase and Sale Agreement
Real Estate Properties [Line Items]
Impairment charges on real estate assets			17,249
Three Assets Real Estate Properties
Real Estate Properties [Line Items]
Impairment charges on real estate assets			9,754
Sixth Assets Real Estate Properties
Real Estate Properties [Line Items]
Impairment charges on real estate assets			3,598
Industrial real estate properties | Non Recourse Indebtedness | Loan Payable On Real Estate
Real Estate Properties [Line Items]
Gains (losses) on deconsolidation of properties				$ (20,660)
Number of industrial real estate properties deconsolidated | Property				10
Deconsolidation of properties, carrying value		13,909		$ 13,909		$ 82,501
Cross-collateralized non-recourse debt related to deconsolidation of property		34,874		$ 34,874		$ 81,941
Number of mortgage liens properties | Property				8
Carrying value of asset held for sale		$ 67,726		$ 67,726
Extinguishment of debt				$ 27,067
Remaining Number Of Industrial Real Estate Properties | Property				2
Land
Real Estate Properties [Line Items]
Investments in real estate, net, Book Value	41,407		41,407		73,003
Building and Building Improvements
Real Estate Properties [Line Items]
Investments in real estate, net, Book Value	91,066		$ 91,066		$ 201,669
Leasehold Improvements
Real Estate Properties [Line Items]
Gains (losses) on deconsolidation of properties	$ 0

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Summary of Disposition and Each Property's Contribution (Detail) - USD ($) $ in Thousands		3 Months Ended		9 Months Ended
		Sep. 30, 2018	Sep. 30, 2017	Sep. 30, 2018	Sep. 30, 2017
Real Estate Properties [Line Items]
Gain (loss) on sale		$ 1,262		$ 1,262
Net income (loss) allocable to common shares		(26,101)	$ (24,230)	(110,357)	$ (180,072)
Disposal Group Held For Sale Or Disposed Of By Sale Not Discontinued Operations
Real Estate Properties [Line Items]
Sale Price				93,200
Gain (loss) on sale				8,870
Net income (loss) allocable to common shares		173		$ 331
Disposal Group Held For Sale Or Disposed Of By Sale Not Discontinued Operations | Office | 1501 Yamato Road
Real Estate Properties [Line Items]
Date of Sale	[1]			Jun. 15, 2018
Sale Price	[1]			$ 42,050
Gain (loss) on sale	[1]			906
Net income (loss) allocable to common shares	[1]			$ (259)
Disposal Group Held For Sale Or Disposed Of By Sale Not Discontinued Operations | Office | Erieview Tower & Parking
Real Estate Properties [Line Items]
Date of Sale	[2]			Aug. 01, 2018
Sale Price	[2]			$ 28,901
Net income (loss) allocable to common shares	[2]	(22)		$ (10)
Disposal Group Held For Sale Or Disposed Of By Sale Not Discontinued Operations | Retail | Erieview Galleria
Real Estate Properties [Line Items]
Date of Sale				Aug. 01, 2018
Sale Price				$ 1,099
Net income (loss) allocable to common shares		1		$ (9)
Disposal Group Held For Sale Or Disposed Of By Sale Not Discontinued Operations | Multifamily | Lexington
Real Estate Properties [Line Items]
Date of Sale				Aug. 31, 2018
Sale Price				$ 21,150
Gain (loss) on sale				7,964
Net income (loss) allocable to common shares		$ 194		$ 609

[1] We also recognized a loss on extinguishment of debt related to the sale of this property, resulting from a defeasance premium of $1,943.

[2] This property was previously impaired.

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Summary of Disposition and Each Property's Contribution (Parenthetical) (Detail) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2018	Sep. 30, 2017	Sep. 30, 2018	Sep. 30, 2017
Real Estate Properties [Line Items]
Gains (losses) on extinguishments of debt	$ 239	$ 644	$ 3,668	$ (944)
1501 Yamato Road | Office
Real Estate Properties [Line Items]
Gains (losses) on extinguishments of debt			$ 1,943

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Summary of Total Recourse and Non-Recourse Indebtedness (Detail) - USD ($) $ in Thousands		9 Months Ended		12 Months Ended
		Sep. 30, 2018		Dec. 31, 2017
Debt Instrument [Line Items]
Unpaid Principal Balance		$ 832,867		$ 1,419,653
Unamortized Discount/Premium and Deferred Financing Costs		(17,880)		(29,465)
Indebtedness		$ 814,987		$ 1,390,188
Weighted-Average Interest Rate		4.20%		3.70%
Recourse Indebtedness
Debt Instrument [Line Items]
Unpaid Principal Balance		$ 234,544		$ 313,700
Unamortized Discount/Premium and Deferred Financing Costs		(13,805)		(17,699)
Indebtedness		$ 220,739		$ 296,001
Weighted-Average Interest Rate		6.00%		5.50%
Non Recourse Indebtedness
Debt Instrument [Line Items]
Unpaid Principal Balance		$ 598,323		$ 1,065,123
Unamortized Discount/Premium and Deferred Financing Costs		(4,075)		(11,891)
Indebtedness		$ 594,248		$ 1,053,232
Weighted-Average Interest Rate		3.50%		3.20%
7.0% convertible senior notes | Recourse Indebtedness
Debt Instrument [Line Items]
Unpaid Principal Balance		$ 871	[1]	$ 871	[2]
Unamortized Discount/Premium and Deferred Financing Costs		(35)	[1]	(38)	[2]
Indebtedness		$ 836	[1]	$ 833	[2]
Weighted-Average Interest Rate		7.00%	[1]	7.00%	[2]
Contractual Maturity, month and year		2031-04	[1]	2031-04	[2]
4.0% convertible senior notes | Recourse Indebtedness
Debt Instrument [Line Items]
Unpaid Principal Balance		$ 68,222	[3]	$ 110,513	[4]
Unamortized Discount/Premium and Deferred Financing Costs		(1,648)	[3]	(3,713)	[4]
Indebtedness		$ 66,574	[3]	$ 106,800	[4]
Weighted-Average Interest Rate		4.00%	[3]	4.00%	[4]
Contractual Maturity, month and year		2033-10	[3]	2033-10	[4]
7.625% senior notes due 2024 | Recourse Indebtedness
Debt Instrument [Line Items]
Unpaid Principal Balance		$ 56,324		$ 56,324
Unamortized Discount/Premium and Deferred Financing Costs		(1,282)		(1,457)
Indebtedness		$ 55,042		$ 54,867
Weighted-Average Interest Rate		7.60%		7.60%
Contractual Maturity, month and year		2024-04		2024-04
7.125% Senior Notes due 2019 | Recourse Indebtedness
Debt Instrument [Line Items]
Unpaid Principal Balance		$ 65,356		$ 68,408
Unamortized Discount/Premium and Deferred Financing Costs		(492)		(934)
Indebtedness		$ 64,864		$ 67,474
Weighted-Average Interest Rate		7.10%		7.10%
Contractual Maturity, month and year		2019-08		2019-08
Junior Subordinated Notes, at Fair Value | Recourse Indebtedness
Debt Instrument [Line Items]
Unpaid Principal Balance	[5]	$ 18,671		$ 18,671
Unamortized Discount/Premium and Deferred Financing Costs	[5]	(10,348)		(10,550)
Indebtedness	[5]	$ 8,323		$ 8,121
Weighted-Average Interest Rate	[5]	6.30%		5.30%
Contractual Maturity, month and year	[5]	2035-03		2035-03
Junior subordinated notes, at amortized cost | Recourse Indebtedness
Debt Instrument [Line Items]
Unpaid Principal Balance		$ 25,100		$ 25,100
Indebtedness		$ 25,100		$ 25,100
Weighted-Average Interest Rate		4.80%		3.90%
Contractual Maturity, month and year		2037-04		2037-04
CDO notes payable, at amortized cost | Non Recourse Indebtedness
Debt Instrument [Line Items]
Unpaid Principal Balance		$ 152,710	[6],[7]	$ 258,063	[8],[9]
Unamortized Discount/Premium and Deferred Financing Costs		(264)	[6],[7]	(3,339)	[8],[9]
Indebtedness		$ 152,446	[6],[7]	$ 254,724	[8],[9]
Weighted-Average Interest Rate		2.90%	[6],[7]	2.20%	[8],[9]
CDO notes payable, at amortized cost | Non Recourse Indebtedness | Minimum
Debt Instrument [Line Items]
Contractual Maturity, month and year		2045-06	[6],[7]	2045-06	[8],[9]
CDO notes payable, at amortized cost | Non Recourse Indebtedness | Maximum
Debt Instrument [Line Items]
Contractual Maturity, month and year		2046-11	[6],[7]	2046-11	[8],[9]
Loan Payable On Real Estate | Non Recourse Indebtedness
Debt Instrument [Line Items]
Unpaid Principal Balance		$ 40,906		$ 62,297
Unamortized Discount/Premium and Deferred Financing Costs		(244)		(375)
Indebtedness		$ 40,662		$ 61,922
Weighted-Average Interest Rate		4.70%		5.20%
Loan Payable On Real Estate | Non Recourse Indebtedness | Minimum
Debt Instrument [Line Items]
Contractual Maturity, month and year		2021-10		2021-05
Loan Payable On Real Estate | Non Recourse Indebtedness | Maximum
Debt Instrument [Line Items]
Contractual Maturity, month and year		2021-12		2021-12
Senior Secured Notes | Recourse Indebtedness
Debt Instrument [Line Items]
Unpaid Principal Balance				$ 11,500
Unamortized Discount/Premium and Deferred Financing Costs				(437)
Indebtedness				$ 11,063
Weighted-Average Interest Rate				7.30%
Contractual Maturity, month and year				2019-04
Secured warehouse facilities | Recourse Indebtedness
Debt Instrument [Line Items]
Unpaid Principal Balance				$ 22,313
Unamortized Discount/Premium and Deferred Financing Costs				(570)
Indebtedness				$ 21,743
Weighted-Average Interest Rate				3.50%
Secured warehouse facilities | Recourse Indebtedness | Minimum
Debt Instrument [Line Items]
Contractual Maturity, month and year				2018-01
Secured warehouse facilities | Recourse Indebtedness | Maximum
Debt Instrument [Line Items]
Contractual Maturity, month and year				2018-07
Other indebtedness
Debt Instrument [Line Items]
Unpaid Principal Balance	[10]			$ 40,830
Unamortized Discount/Premium and Deferred Financing Costs	[10]			125
Indebtedness	[10]			40,955
CMBS securitizations | Non Recourse Indebtedness
Debt Instrument [Line Items]
Unpaid Principal Balance	[12]	$ 404,707	[11]	744,763	[13]
Unamortized Discount/Premium and Deferred Financing Costs	[12]	(3,567)	[11]	(8,177)	[13]
Indebtedness	[12]	$ 401,140	[11]	$ 736,586	[13]
Weighted-Average Interest Rate	[12]	3.60%	[11]	3.40%	[13]
CMBS securitizations | Non Recourse Indebtedness | Minimum
Debt Instrument [Line Items]
Contractual Maturity, month and year	[12]	2037-06	[11]	2031-01	[13]
CMBS securitizations | Non Recourse Indebtedness | Maximum
Debt Instrument [Line Items]
Contractual Maturity, month and year	[12]	2037-12	[11]	2037-12	[13]

[1] In October 2018, we exercised our right to optionally redeem and cancel the remaining 7.0% convertible senior notes at par.

[2] Our 7.0% convertible senior notes are redeemable at par, at the option of the holder, in April 2021, and April 2026.

[3] Our 4.0% convertible senior notes are redeemable at par, at the option of the holder, in October 2018, October 2023, and October 2028. On October 1, 2018, we repurchased $67,943 in principal amount of the 4.0% convertible senior notes at par pursuant to the exercise by the holders of these notes of their redemption option, leaving $279 aggregate principal amount outstanding. On October 2, 2018, we notified the Trustee for the 4% convertible senior notes that we would exercise our right to optionally redeem and cancel the remaining $279 on November 16, 2018.

[4] Our 4.0% convertible senior notes are redeemable at par, at the option of the holder, in October 2018, October 2023, and October 2028.

[5] Relates to liabilities which we elected to record at fair value under FASB ASC Topic 825.

[6] Collateralized by $299,250 principal amount of commercial mortgage loans, mezzanine loans, other loans and preferred equity interests, $162,116 of which is eliminated in consolidation. These obligations were issued by separate legal entities and consequently the assets of the special purpose entities that collateralize these obligations are not available to our creditors.

[7] Excludes CDO notes payable purchased by us which are eliminated in consolidation.

[8] Collateralized by $507,306 principal amount of commercial mortgage loans, mezzanine loans, other loans and preferred equity interests, $274,629 of which is eliminated in consolidation. These obligations were issued by separate legal entities and consequently the assets of the special purpose entities that collateralize these obligations are not available to our creditors.

[9] Excludes CDO notes payable purchased by us which are eliminated in consolidation.

[10] Represents two 40% interests issued to an unaffiliated third party in two ventures to which we contributed the junior notes and equity of two floating rate securitizations. Together these ventures are referred to as the RAIT Venture VIEs. The first of these ventures, the 2016 RAIT Venture VIE, was formed in 2016. The second, the 2017 RAIT Venture VIE, was formed in 2017. We retained a 60% interest in these ventures, and, as a result of our controlling financial interest, we consolidated the ventures. We received approximately $41,689 of proceeds as a result of issuing these 40% interests, which have an unpaid principal balance of $40,830. These 40% interests have no stated maturity date and do not provide for mandatory redemption or any required return or interest payment. These ventures allocate the distributions on such junior notes and equity when made between the parties to the ventures.

[11] Collateralized by $481,600 principal amount of commercial mortgage loans and participation interests. These obligations were issued by separate legal entities and consequently the assets of the special purpose entities that collateralize these obligations are not available to our creditors.

[12] Excludes CMBS securitization notes purchased by us which are eliminated in consolidation.

[13] Collateralized by $944,894 principal amount of commercial mortgage loans and participation interests in commercial mortgage loans. These obligations were issued by separate legal entities and consequently the assets of the special purpose entities that collateralize these obligations are not available to our creditors.

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Summary of Total Recourse and Non-Recourse Indebtedness (Parenthetical) (Detail) $ in Thousands		9 Months Ended		12 Months Ended
		Sep. 30, 2018 USD ($) Venture		Dec. 31, 2017 USD ($) Venture		Nov. 30, 2018 USD ($)	Nov. 16, 2018 USD ($)	Jun. 30, 2018
Debt Instrument [Line Items]
Unpaid Principal Balance		$ 832,867		$ 1,419,653
Number of joint venture | Venture				2
Scenario Forecast
Debt Instrument [Line Items]
Debt instrument redemption amount						$ 279
Recourse Indebtedness
Debt Instrument [Line Items]
Unpaid Principal Balance		234,544		$ 313,700
Non Recourse Indebtedness
Debt Instrument [Line Items]
Unpaid Principal Balance		598,323		1,065,123
Non Recourse Indebtedness | CMBS securitizations
Debt Instrument [Line Items]
Underlying collateral		481,600		944,894
Unpaid Principal Balance	[2]	404,707	[1]	744,763	[3]
Non Recourse Indebtedness | Consolidation Eliminations
Debt Instrument [Line Items]
Underlying collateral		$ 162,116		$ 274,629
7.0% convertible senior notes | Recourse Indebtedness
Debt Instrument [Line Items]
Stated interest rate		7.00%		7.00%
Unpaid Principal Balance		$ 871	[4]	$ 871	[5]
4.0% convertible senior notes | Recourse Indebtedness
Debt Instrument [Line Items]
Stated interest rate		4.00%		4.00%				4.00%
Unpaid Principal Balance		$ 68,222	[6]	$ 110,513	[7]
4.0% convertible senior notes | Recourse Indebtedness | Scenario Forecast
Debt Instrument [Line Items]
Debt instrument redemption amount							$ 279
CDO notes payable, at amortized cost | Non Recourse Indebtedness
Debt Instrument [Line Items]
Underlying collateral		299,250		507,306
Unpaid Principal Balance		$ 152,710	[8],[9]	$ 258,063	[10],[11]
Other indebtedness
Debt Instrument [Line Items]
Percentage of interest issued to unaffiliated third party				40.00%
Proceeds from issuance of joint venture interests accounted for as indebtedness				$ 41,689
Unpaid Principal Balance	[12]			$ 40,830
Interest owned in joint venture				60.00%
Number of joint venture | Venture		2

[1] Collateralized by $481,600 principal amount of commercial mortgage loans and participation interests. These obligations were issued by separate legal entities and consequently the assets of the special purpose entities that collateralize these obligations are not available to our creditors.

[2] Excludes CMBS securitization notes purchased by us which are eliminated in consolidation.

[3] Collateralized by $944,894 principal amount of commercial mortgage loans and participation interests in commercial mortgage loans. These obligations were issued by separate legal entities and consequently the assets of the special purpose entities that collateralize these obligations are not available to our creditors.

[4] In October 2018, we exercised our right to optionally redeem and cancel the remaining 7.0% convertible senior notes at par.

[5] Our 7.0% convertible senior notes are redeemable at par, at the option of the holder, in April 2021, and April 2026.

[6] Our 4.0% convertible senior notes are redeemable at par, at the option of the holder, in October 2018, October 2023, and October 2028. On October 1, 2018, we repurchased $67,943 in principal amount of the 4.0% convertible senior notes at par pursuant to the exercise by the holders of these notes of their redemption option, leaving $279 aggregate principal amount outstanding. On October 2, 2018, we notified the Trustee for the 4% convertible senior notes that we would exercise our right to optionally redeem and cancel the remaining $279 on November 16, 2018.

[7] Our 4.0% convertible senior notes are redeemable at par, at the option of the holder, in October 2018, October 2023, and October 2028.

[8] Collateralized by $299,250 principal amount of commercial mortgage loans, mezzanine loans, other loans and preferred equity interests, $162,116 of which is eliminated in consolidation. These obligations were issued by separate legal entities and consequently the assets of the special purpose entities that collateralize these obligations are not available to our creditors.

[9] Excludes CDO notes payable purchased by us which are eliminated in consolidation.

[10] Collateralized by $507,306 principal amount of commercial mortgage loans, mezzanine loans, other loans and preferred equity interests, $274,629 of which is eliminated in consolidation. These obligations were issued by separate legal entities and consequently the assets of the special purpose entities that collateralize these obligations are not available to our creditors.

[11] Excludes CDO notes payable purchased by us which are eliminated in consolidation.

[12] Represents two 40% interests issued to an unaffiliated third party in two ventures to which we contributed the junior notes and equity of two floating rate securitizations. Together these ventures are referred to as the RAIT Venture VIEs. The first of these ventures, the 2016 RAIT Venture VIE, was formed in 2016. The second, the 2017 RAIT Venture VIE, was formed in 2017. We retained a 60% interest in these ventures, and, as a result of our controlling financial interest, we consolidated the ventures. We received approximately $41,689 of proceeds as a result of issuing these 40% interests, which have an unpaid principal balance of $40,830. These 40% interests have no stated maturity date and do not provide for mandatory redemption or any required return or interest payment. These ventures allocate the distributions on such junior notes and equity when made between the parties to the ventures.

XML

Indebtedness - Recourse Indebtedness - Additional Information (Detail)	3 Months Ended	9 Months Ended
	Mar. 31, 2018 USD ($)	Sep. 30, 2018 USD ($) $ / shares		Nov. 30, 2018 USD ($)	Nov. 16, 2018 USD ($)	Oct. 31, 2018 USD ($)	Oct. 01, 2018 USD ($)	Jun. 30, 2018 USD ($)	Dec. 31, 2017 USD ($)
Debt Instrument [Line Items]
Unpaid Principal Balance		$ 832,867,000							$ 1,419,653,000
Scenario Forecast
Debt Instrument [Line Items]
Debt instrument redemption amount				$ 279,000
Recourse Indebtedness
Debt Instrument [Line Items]
Unpaid Principal Balance		234,544,000							$ 313,700,000
Recourse Indebtedness | Seventy Five Thousand CMF [Member] | Secured warehouse facilities
Debt Instrument [Line Items]
Unpaid Principal Balance		0
Line of credit facility, borrowing capacity		$ 75,000,000
Debt instrument, financial covenant compliance		This facility was not renewed after its June 2018 maturity and it has terminated.
Recourse Indebtedness | One Hundred Fifty Thousand CMF Two [Member] | Secured warehouse facilities
Debt Instrument [Line Items]
Unpaid Principal Balance		$ 0
Line of credit facility, borrowing capacity		$ 150,000,000
Debt instrument, financial covenant compliance		This facility was not renewed after its June 2018 maturity and it has terminated.
Recourse Indebtedness | 7.0% convertible senior notes
Debt Instrument [Line Items]
Stated interest rate		7.00%							7.00%
Convertible note conversion rate		4.1217
Principal amount of convertible note, conversion rate		$ 1,000
Initial conversion price | $ / shares		$ 242.6
Unpaid Principal Balance		$ 871,000	[1]						$ 871,000	[2]
Recourse Indebtedness | 7.0% convertible senior notes | Subsequent Event
Debt Instrument [Line Items]
Stated interest rate						7.00%
Debt instrument redemption amount						$ 871,000
Recourse Indebtedness | 4.0% convertible senior notes
Debt Instrument [Line Items]
Stated interest rate		4.00%						4.00%	4.00%
Convertible note conversion rate		2.1716
Principal amount of convertible note, conversion rate		$ 1,000
Initial conversion price | $ / shares		$ 460.5
Unpaid Principal Balance		$ 68,222,000	[3]						$ 110,513,000	[4]
Principal amount repurchase convertible senior notes	$ 6,000,000							$ 36,291,000
Consideration from repurchase convertible senior notes	$ 5,708,000							$ 35,319,000
Recourse Indebtedness | 4.0% convertible senior notes | Scenario Forecast
Debt Instrument [Line Items]
Debt instrument redemption amount					$ 279,000
Remaining outstanding amount option to redeem and cancel					$ 279,000
Recourse Indebtedness | 4.0% convertible senior notes | Subsequent Event
Debt Instrument [Line Items]
Stated interest rate							4.00%
Unpaid Principal Balance							$ 279,000
Principal amount repurchase convertible senior notes							$ 67,943,000
Recourse Indebtedness | 7.625% senior notes due 2024
Debt Instrument [Line Items]
Stated interest rate		7.625%
Unpaid Principal Balance		$ 56,324,000							56,324,000
Covenant leverage ratio	74.60%
Covenant fixed charge coverage ratio	134.00%
Recourse Indebtedness | 7.625% senior notes due 2024 | Maximum
Debt Instrument [Line Items]
Covenant leverage ratio	80.00%
Recourse Indebtedness | 7.625% senior notes due 2024 | Minimum
Debt Instrument [Line Items]
Covenant fixed charge coverage ratio	120.00%
Recourse Indebtedness | 7.125% Senior Notes due 2019
Debt Instrument [Line Items]
Stated interest rate		7.125%
Unpaid Principal Balance		$ 65,356,000							68,408,000
Principal amount repurchase convertible senior notes		3,051,000
Consideration from repurchase convertible senior notes		2,852,000
Covenant leverage ratio	74.60%
Covenant fixed charge coverage ratio	134.00%
Recourse Indebtedness | 7.125% Senior Notes due 2019 | Maximum
Debt Instrument [Line Items]
Covenant leverage ratio	80.00%
Recourse Indebtedness | 7.125% Senior Notes due 2019 | Minimum
Debt Instrument [Line Items]
Covenant fixed charge coverage ratio	120.00%
Recourse Indebtedness | Senior Secured Notes
Debt Instrument [Line Items]
Unpaid Principal Balance									11,500,000
Debt instrument redemption amount		9,500,000
Payment of notes	$ 2,000,000
Recourse Indebtedness | Junior subordinated notes, at fair value
Debt Instrument [Line Items]
Aggregate principal amount of notes issued		18,671,000
Fair value of indebtedness		8,323,000
Recourse Indebtedness | Secured warehouse facilities
Debt Instrument [Line Items]
Unpaid Principal Balance									$ 22,313,000
Recourse Indebtedness | Secured warehouse facilities | CMBS Borrowings
Debt Instrument [Line Items]
Unpaid Principal Balance		0
Recourse Indebtedness | Secured warehouse facilities | Commercial mortgage loans
Debt Instrument [Line Items]
Unpaid Principal Balance		0
Line of credit facility, borrowing capacity		150,000,000
Recourse Indebtedness | Secured warehouse facilities | Floating Rate Loans
Debt Instrument [Line Items]
Line of credit facility, borrowing capacity		$ 100,000,000
Convertible notes redemption period One | Recourse Indebtedness | 7.0% convertible senior notes
Debt Instrument [Line Items]
Convertible senior notes redemption period		2021-04
Convertible notes redemption period Two | Recourse Indebtedness | 7.0% convertible senior notes
Debt Instrument [Line Items]
Convertible senior notes redemption period		2026-04

[1] In October 2018, we exercised our right to optionally redeem and cancel the remaining 7.0% convertible senior notes at par.

[2] Our 7.0% convertible senior notes are redeemable at par, at the option of the holder, in April 2021, and April 2026.

[3] Our 4.0% convertible senior notes are redeemable at par, at the option of the holder, in October 2018, October 2023, and October 2028. On October 1, 2018, we repurchased $67,943 in principal amount of the 4.0% convertible senior notes at par pursuant to the exercise by the holders of these notes of their redemption option, leaving $279 aggregate principal amount outstanding. On October 2, 2018, we notified the Trustee for the 4% convertible senior notes that we would exercise our right to optionally redeem and cancel the remaining $279 on November 16, 2018.

[4] Our 4.0% convertible senior notes are redeemable at par, at the option of the holder, in October 2018, October 2023, and October 2028.

XML

Indebtedness - Non-Recourse Indebtedness - Additional Information (Detail) - USD ($) $ in Thousands		Nov. 30, 2018	Sep. 30, 2018		Dec. 31, 2017
Debt Instrument [Line Items]
Unpaid Principal Balance			$ 832,867		$ 1,419,653
Non Recourse Indebtedness
Debt Instrument [Line Items]
Unpaid Principal Balance			598,323		1,065,123
Non Recourse Indebtedness | Loan Payable On Real Estate
Debt Instrument [Line Items]
Unpaid Principal Balance			40,906		62,297
CMBS securitizations | Non Recourse Indebtedness
Debt Instrument [Line Items]
Underlying collateral			481,600		944,894
Unpaid Principal Balance	[2]		404,707	[1]	$ 744,763	[3]
CMBS securitizations | Non Recourse Indebtedness | R A I T F L Seven
Debt Instrument [Line Items]
Underlying collateral			258,404
Unpaid Principal Balance			225,847
CMBS securitizations | Non Recourse Indebtedness | R A I T F L Seven | Scenario Forecast
Debt Instrument [Line Items]
Collateral default amount		$ 9,000
CMBS securitizations | Non Recourse Indebtedness | R A I T F L Seven | Junior Notes
Debt Instrument [Line Items]
Owned unrated classes of junior notes			65,479
CMBS securitizations | Non Recourse Indebtedness | RAIT FL Eight
Debt Instrument [Line Items]
Underlying collateral			223,196
Unpaid Principal Balance			178,860
CMBS securitizations | Non Recourse Indebtedness | RAIT FL Eight | Junior Notes
Debt Instrument [Line Items]
Owned unrated classes of junior notes			$ 44,162

[1] Collateralized by $481,600 principal amount of commercial mortgage loans and participation interests. These obligations were issued by separate legal entities and consequently the assets of the special purpose entities that collateralize these obligations are not available to our creditors.

[2] Excludes CMBS securitization notes purchased by us which are eliminated in consolidation.

[3] Collateralized by $944,894 principal amount of commercial mortgage loans and participation interests in commercial mortgage loans. These obligations were issued by separate legal entities and consequently the assets of the special purpose entities that collateralize these obligations are not available to our creditors.

XML

Aggregate Contractual Maturities of Indebtedness by Year (Detail) - USD ($) $ in Thousands	Sep. 30, 2018	Dec. 31, 2017
Extinguishment Of Debt [Line Items]
Total	$ 832,867	$ 1,419,653
Recourse Indebtedness
Extinguishment Of Debt [Line Items]
2019	65,356
Thereafter	169,188
Total	234,544	313,700
Non Recourse Indebtedness
Extinguishment Of Debt [Line Items]
2018	183
2019	749
2020	779
2021	39,195
Thereafter	557,417
Total	$ 598,323	$ 1,065,123

XML

Aggregate Contractual Maturities of Indebtedness by Year (Parenthetical) (Detail) - USD ($) $ in Thousands	Nov. 30, 2018	Nov. 16, 2018	Sep. 30, 2018		Jun. 30, 2018	Dec. 31, 2017
Extinguishment Of Debt [Line Items]
Unpaid Principal Balance			$ 832,867			$ 1,419,653
Scenario Forecast
Extinguishment Of Debt [Line Items]
Debt instrument redemption amount	$ 279
Recourse Indebtedness
Extinguishment Of Debt [Line Items]
Unpaid Principal Balance			234,544			313,700
Recourse Indebtedness | 7.0% convertible senior notes
Extinguishment Of Debt [Line Items]
Unpaid Principal Balance			$ 871	[1]		$ 871	[2]
Convertible senior notes interest rate			7.00%			7.00%
Recourse Indebtedness | 4.0% convertible senior notes
Extinguishment Of Debt [Line Items]
Unpaid Principal Balance			$ 68,222	[3]		$ 110,513	[4]
Convertible senior notes interest rate			4.00%		4.00%	4.00%
Recourse Indebtedness | 4.0% convertible senior notes | Scenario Forecast
Extinguishment Of Debt [Line Items]
Debt instrument redemption amount		$ 279

[1] In October 2018, we exercised our right to optionally redeem and cancel the remaining 7.0% convertible senior notes at par.

[2] Our 7.0% convertible senior notes are redeemable at par, at the option of the holder, in April 2021, and April 2026.

[3] Our 4.0% convertible senior notes are redeemable at par, at the option of the holder, in October 2018, October 2023, and October 2028. On October 1, 2018, we repurchased $67,943 in principal amount of the 4.0% convertible senior notes at par pursuant to the exercise by the holders of these notes of their redemption option, leaving $279 aggregate principal amount outstanding. On October 2, 2018, we notified the Trustee for the 4% convertible senior notes that we would exercise our right to optionally redeem and cancel the remaining $279 on November 16, 2018.

[4] Our 4.0% convertible senior notes are redeemable at par, at the option of the holder, in October 2018, October 2023, and October 2028.

XML

Aggregate Notional Amount and Estimated Net Fair Value of Derivative Instruments (Detail)	Dec. 31, 2017 USD ($)
Derivative [Line Items]
Notional amount	$ 12,650,000
Fair Value of Assets	11,000
Interest rate swaps
Derivative [Line Items]
Notional amount	12,650,000
Fair Value of Assets	$ 11,000

XML

Carrying Amount and Fair Value of Financial Instruments (Detail) - USD ($) $ in Thousands	Sep. 30, 2018	Dec. 31, 2017
Assets
Derivative assets		$ 11
Liabilities
Junior subordinated notes	$ 8,323	8,121
Carrying Amount
Assets
Total investment in mortgage loans, held for investment, net	604,293	1,255,723
Investment in mortgage loans, held for sale	4,673
Cash and cash equivalents	98,352	53,380
Restricted cash	86,154	157,914
Derivative assets		11
Carrying Amount | 7.0% convertible senior notes
Liabilities
Convertible senior notes	836	833
Carrying Amount | 4.0% convertible senior notes
Liabilities
Convertible senior notes	66,574	106,800
Carrying Amount | 7.625% senior notes due 2024
Liabilities
Indebtedness	55,042	54,867
Carrying Amount | 7.125% Senior Notes due 2019
Liabilities
Indebtedness	64,864	67,474
Carrying Amount | Senior Secured Notes
Liabilities
Indebtedness		11,063
Carrying Amount | Junior subordinated notes, at amortized cost
Liabilities
Junior subordinated notes	25,100	25,100
Carrying Amount | CDO notes payable, at amortized cost
Liabilities
Notes payable	152,446	254,724
Carrying Amount | Loan Payable On Real Estate
Liabilities
Loans payable on real estate	40,662	61,922
Carrying Amount | Recourse Indebtedness | 7.0% convertible senior notes
Liabilities
Convertible senior notes	836	833
Carrying Amount | Recourse Indebtedness | 4.0% convertible senior notes
Liabilities
Convertible senior notes	66,574	106,800
Carrying Amount | Recourse Indebtedness | 7.625% senior notes due 2024
Liabilities
Indebtedness	55,042	54,867
Carrying Amount | Recourse Indebtedness | 7.125% Senior Notes due 2019
Liabilities
Indebtedness	64,864	67,474
Carrying Amount | Recourse Indebtedness | Senior Secured Notes
Liabilities
Indebtedness		11,063
Carrying Amount | Recourse Indebtedness | Junior subordinated notes, at amortized cost
Liabilities
Junior subordinated notes	25,100	25,100
Carrying Amount | Non Recourse Indebtedness | CDO notes payable, at amortized cost
Liabilities
Notes payable	152,446	254,724
Carrying Amount | Non Recourse Indebtedness | Loan Payable On Real Estate
Liabilities
Loans payable on real estate	40,662	61,922
Carrying Amount | Other indebtedness
Liabilities
Indebtedness		40,955
Carrying Amount | CMBS securitizations
Liabilities
Notes payable	401,140	736,586
Carrying Amount | CMBS securitizations | Non Recourse Indebtedness
Liabilities
Notes payable	401,140	736,586
Carrying Amount | Junior subordinated notes, at fair value | Recourse Indebtedness
Liabilities
Junior subordinated notes	8,323	8,121
Carrying Amount | Secured warehouse facilities
Liabilities
Indebtedness		21,743
Estimated Fair Value
Assets
Total investment in mortgage loans, held for investment, net	579,874	1,252,780
Investment in mortgage loans, held for sale	4,673
Cash and cash equivalents	98,352	53,380
Restricted cash	86,154	157,914
Derivative assets		11
Estimated Fair Value | Recourse Indebtedness | 7.0% convertible senior notes
Liabilities
Convertible senior notes	579	533
Estimated Fair Value | Recourse Indebtedness | 4.0% convertible senior notes
Liabilities
Convertible senior notes	68,817	103,457
Estimated Fair Value | Recourse Indebtedness | 7.625% senior notes due 2024
Liabilities
Indebtedness	44,338	43,009
Estimated Fair Value | Recourse Indebtedness | 7.125% Senior Notes due 2019
Liabilities
Indebtedness	63,619	61,567
Estimated Fair Value | Recourse Indebtedness | Senior Secured Notes
Liabilities
Indebtedness		11,197
Estimated Fair Value | Recourse Indebtedness | Junior subordinated notes, at amortized cost
Liabilities
Junior subordinated notes	9,210	8,849
Estimated Fair Value | Non Recourse Indebtedness | CDO notes payable, at amortized cost
Liabilities
Notes payable	123,453	196,212
Estimated Fair Value | Non Recourse Indebtedness | Loan Payable On Real Estate
Liabilities
Loans payable on real estate	40,289	64,377
Estimated Fair Value | Other indebtedness
Liabilities
Indebtedness		40,830
Estimated Fair Value | CMBS securitizations | Non Recourse Indebtedness
Liabilities
Notes payable	404,046	744,359
Estimated Fair Value | Junior subordinated notes, at fair value | Recourse Indebtedness
Liabilities
Junior subordinated notes	$ 8,323	8,121
Estimated Fair Value | Secured warehouse facilities
Liabilities
Indebtedness		$ 22,313

XML

Information of Assets and Liabilities Measured at Fair Value on Recurring Basis (Detail) - USD ($) $ in Thousands		Sep. 30, 2018		Dec. 31, 2017
Assets:
Derivative assets				$ 11
Total assets				11
Liabilities:
Junior subordinated notes, at fair value		$ 8,323		8,121
Total liabilities		8,323		8,121
Significant Other Observable Inputs (Level 2)
Assets:
Derivative assets	[1]			11
Total assets	[1]			11
Significant Unobservable Inputs (Level 3)
Liabilities:
Junior subordinated notes, at fair value		8,323	[2]	8,121	[1]
Total liabilities		$ 8,323	[2]	$ 8,121	[1]

[1] During the year ended December 31, 2017, there were no transfers between Level 1 and Level 2, and there were no transfers into and/or out of Level 3.

[2] During the nine months ended September 30, 2018, there were no transfers between Level 1 and Level 2, and there were no transfers into and/or out of Level 3.

XML

Information of Assets and Liabilities Measured at Fair Value on Recurring Basis (Parenthetical) (Detail) - USD ($)	Sep. 30, 2018	Dec. 31, 2017
Fair Value Disclosures [Abstract]
Fair value, assets, Level 1 to Level 2 transfers, amount	$ 0	$ 0
Fair value, liabilities, Level 1 to Level 2 transfers, amount	0	0
Fair value, assets and liabilities, Level 3 into and out transfers, amount	$ 0	$ 0

XML

Fair Value of Financial Instruments - Additional Information (Detail) $ in Thousands		9 Months Ended
		Sep. 30, 2018 USD ($) Loan Property	Dec. 31, 2017 USD ($)
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Assets Fair Value Disclosure			$ 11
Number of Loans | Loan		9
Non-Recurring Fair Value Measurements | Commercial Real Estate
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Assets Fair Value Disclosure		$ 101,450
Number of Loans | Loan		9
Significant Unobservable Inputs (Level 3) | Non-Recurring Fair Value Measurements | Appraisal Received on Property
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Assets Fair Value Disclosure		$ 10,100
Number real estate asset | Property		1
Significant Unobservable Inputs (Level 3) | Non-Recurring Fair Value Measurements | Appraisal Received on Property | Terminal Capitalization Rate
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Real estate assets, fair value measurement rate		0.09
Significant Unobservable Inputs (Level 3) | Non-Recurring Fair Value Measurements | Appraisal Received on Property | Discount Rate
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Real estate assets, fair value measurement rate		0.1225
Significant Other Observable Inputs (Level 2)
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Assets Fair Value Disclosure	[1]		$ 11
Significant Other Observable Inputs (Level 2) | Non-Recurring Fair Value Measurements | Purchase and Sale Agreement
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Assets Fair Value Disclosure		$ 31,252
Number real estate asset | Property		2
Junior Subordinated Notes, at Fair Value
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Debt Instrument, Valuation Technique [Extensible List]		us-gaap:ValuationTechniqueDiscountedCashFlowMember	us-gaap:ValuationTechniqueDiscountedCashFlowMember
Debt Instrument, Measurement Input [Extensible List]		us-gaap:MeasurementInputDiscountRateMember	us-gaap:MeasurementInputDiscountRateMember
Junior Subordinated Notes, at Fair Value | Significant Unobservable Inputs (Level 3)
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Discount rate		0.20
Junior Subordinated Notes, at Fair Value | Significant Unobservable Inputs (Level 3) | Minimum
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Discount rate			0.1801
Junior Subordinated Notes, at Fair Value | Significant Unobservable Inputs (Level 3) | Maximum
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Discount rate			0.1821

[1] During the year ended December 31, 2017, there were no transfers between Level 1 and Level 2, and there were no transfers into and/or out of Level 3.

XML

Additional Information about Assets and Liabilities That Are Measured at Fair Value on Recurring Basis (Detail) - USD ($) $ in Thousands	3 Months Ended	9 Months Ended
	Sep. 30, 2018	Sep. 30, 2018
Fair Value, Assets and Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]
Beginning Balance	$ 5,111	$ 8,121
Change in fair value of financial instruments	3,212	202
Ending Balance	8,323	8,323
Junior Subordinated Notes, at Fair Value
Fair Value, Assets and Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]
Beginning Balance	5,111	8,121
Change in fair value of financial instruments	3,212	202
Ending Balance	$ 8,323	$ 8,323

XML

Fair Value Hierarchy for Financial Instruments Not Fair Valued but For Which Fair Value Is Required To Be Disclosed (Detail) - USD ($) $ in Thousands	Sep. 30, 2018		Dec. 31, 2017
Fair Value Measurement Inputs Disclosure [Line Items]
Junior subordinated notes	$ 8,323		$ 8,121
Significant Unobservable Inputs (Level 3)
Fair Value Measurement Inputs Disclosure [Line Items]
Junior subordinated notes	$ 8,323	[1]	$ 8,121	[2]
Total investment in mortgage loans, held for investment, net, Valuation Technique	us-gaap:ValuationTechniqueDiscountedCashFlowMember
Investment in mortgage loans, held for sale, Valuation Technique	us-gaap:ValuationTechniqueDiscountedCashFlowMember		us-gaap:ValuationTechniqueDiscountedCashFlowMember
Significant Unobservable Inputs (Level 3) | Other indebtedness
Fair Value Measurement Inputs Disclosure [Line Items]
Indebtedness, Valuation Technique			us-gaap:ValuationTechniqueDiscountedCashFlowMember
CMBS securitizations | Significant Unobservable Inputs (Level 3)
Fair Value Measurement Inputs Disclosure [Line Items]
Indebtedness, Valuation Technique	us-gaap:ValuationTechniqueDiscountedCashFlowMember		us-gaap:ValuationTechniqueDiscountedCashFlowMember
Carrying Amount
Fair Value Measurement Inputs Disclosure [Line Items]
Total investment in mortgage loans, held for investment, net	$ 604,293		$ 1,255,723
Investment in mortgage loans, held for sale	4,673
Carrying Amount | Other indebtedness
Fair Value Measurement Inputs Disclosure [Line Items]
Indebtedness			40,955
Carrying Amount | CMBS securitizations
Fair Value Measurement Inputs Disclosure [Line Items]
Notes payable	401,140		736,586
Estimated Fair Value
Fair Value Measurement Inputs Disclosure [Line Items]
Total investment in mortgage loans, held for investment, net	579,874		1,252,780
Investment in mortgage loans, held for sale	4,673
Estimated Fair Value | Significant Unobservable Inputs (Level 3)
Fair Value Measurement Inputs Disclosure [Line Items]
Total investment in mortgage loans, held for investment, net	579,874		1,252,780
Investment in mortgage loans, held for sale	4,673
Estimated Fair Value | Significant Unobservable Inputs (Level 3) | Other indebtedness
Fair Value Measurement Inputs Disclosure [Line Items]
Indebtedness			40,830
Estimated Fair Value | CMBS securitizations | Significant Unobservable Inputs (Level 3)
Fair Value Measurement Inputs Disclosure [Line Items]
Notes payable	$ 404,046		$ 744,359
7.0% convertible senior notes | Significant Other Observable Inputs (Level 2)
Fair Value Measurement Inputs Disclosure [Line Items]
Indebtedness, Valuation Technique	ras:ValuationTechniqueTradingPricingMember		ras:ValuationTechniqueTradingPricingMember
7.0% convertible senior notes | Carrying Amount
Fair Value Measurement Inputs Disclosure [Line Items]
Convertible senior notes	$ 836		$ 833
7.0% convertible senior notes | Estimated Fair Value | Significant Other Observable Inputs (Level 2)
Fair Value Measurement Inputs Disclosure [Line Items]
Convertible senior notes	$ 579		$ 533
4.0% convertible senior notes | Significant Other Observable Inputs (Level 2)
Fair Value Measurement Inputs Disclosure [Line Items]
Indebtedness, Valuation Technique	ras:ValuationTechniqueTradingPricingMember		ras:ValuationTechniqueTradingPricingMember
4.0% convertible senior notes | Carrying Amount
Fair Value Measurement Inputs Disclosure [Line Items]
Convertible senior notes	$ 66,574		$ 106,800
4.0% convertible senior notes | Estimated Fair Value | Significant Other Observable Inputs (Level 2)
Fair Value Measurement Inputs Disclosure [Line Items]
Convertible senior notes	$ 68,817		$ 103,457
7.625% senior notes due 2024 | Significant Other Observable Inputs (Level 2)
Fair Value Measurement Inputs Disclosure [Line Items]
Indebtedness, Valuation Technique	ras:ValuationTechniqueTradingPricingMember		ras:ValuationTechniqueTradingPricingMember
7.625% senior notes due 2024 | Carrying Amount
Fair Value Measurement Inputs Disclosure [Line Items]
Indebtedness	$ 55,042		$ 54,867
7.625% senior notes due 2024 | Estimated Fair Value | Significant Other Observable Inputs (Level 2)
Fair Value Measurement Inputs Disclosure [Line Items]
Indebtedness	$ 44,338		$ 43,009
7.125% Senior Notes due 2019 | Significant Other Observable Inputs (Level 2)
Fair Value Measurement Inputs Disclosure [Line Items]
Indebtedness, Valuation Technique	ras:ValuationTechniqueTradingPricingMember		ras:ValuationTechniqueTradingPricingMember
7.125% Senior Notes due 2019 | Carrying Amount
Fair Value Measurement Inputs Disclosure [Line Items]
Indebtedness	$ 64,864		$ 67,474
7.125% Senior Notes due 2019 | Estimated Fair Value | Significant Other Observable Inputs (Level 2)
Fair Value Measurement Inputs Disclosure [Line Items]
Indebtedness	$ 63,619		$ 61,567
Senior Secured Notes | Significant Unobservable Inputs (Level 3)
Fair Value Measurement Inputs Disclosure [Line Items]
Indebtedness, Valuation Technique			us-gaap:ValuationTechniqueDiscountedCashFlowMember
Senior Secured Notes | Carrying Amount
Fair Value Measurement Inputs Disclosure [Line Items]
Indebtedness			$ 11,063
Senior Secured Notes | Estimated Fair Value | Significant Unobservable Inputs (Level 3)
Fair Value Measurement Inputs Disclosure [Line Items]
Indebtedness			$ 11,197
Junior subordinated notes, at amortized cost | Significant Unobservable Inputs (Level 3)
Fair Value Measurement Inputs Disclosure [Line Items]
Indebtedness, Valuation Technique	us-gaap:ValuationTechniqueDiscountedCashFlowMember		us-gaap:ValuationTechniqueDiscountedCashFlowMember
Junior subordinated notes, at amortized cost | Carrying Amount
Fair Value Measurement Inputs Disclosure [Line Items]
Junior subordinated notes	$ 25,100		$ 25,100
Junior subordinated notes, at amortized cost | Estimated Fair Value | Significant Unobservable Inputs (Level 3)
Fair Value Measurement Inputs Disclosure [Line Items]
Junior subordinated notes	$ 9,210		$ 8,849
CDO notes payable, at amortized cost | Significant Unobservable Inputs (Level 3)
Fair Value Measurement Inputs Disclosure [Line Items]
Indebtedness, Valuation Technique	us-gaap:ValuationTechniqueDiscountedCashFlowMember		us-gaap:ValuationTechniqueDiscountedCashFlowMember
CDO notes payable, at amortized cost | Carrying Amount
Fair Value Measurement Inputs Disclosure [Line Items]
Notes payable	$ 152,446		$ 254,724
CDO notes payable, at amortized cost | Estimated Fair Value | Significant Unobservable Inputs (Level 3)
Fair Value Measurement Inputs Disclosure [Line Items]
Notes payable	$ 123,453		$ 196,212
Loan Payable On Real Estate | Significant Unobservable Inputs (Level 3)
Fair Value Measurement Inputs Disclosure [Line Items]
Indebtedness, Valuation Technique	us-gaap:ValuationTechniqueDiscountedCashFlowMember		us-gaap:ValuationTechniqueDiscountedCashFlowMember
Loan Payable On Real Estate | Carrying Amount
Fair Value Measurement Inputs Disclosure [Line Items]
Loans payable on real estate	$ 40,662		$ 61,922
Loan Payable On Real Estate | Estimated Fair Value | Significant Unobservable Inputs (Level 3)
Fair Value Measurement Inputs Disclosure [Line Items]
Loans payable on real estate	$ 40,289		$ 64,377

[1] During the nine months ended September 30, 2018, there were no transfers between Level 1 and Level 2, and there were no transfers into and/or out of Level 3.

[2] During the year ended December 31, 2017, there were no transfers between Level 1 and Level 2, and there were no transfers into and/or out of Level 3.

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Realized and Unrealized Gains and Losses on Assets and Liabilities (Detail) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2018	Sep. 30, 2017	Sep. 30, 2018	Sep. 30, 2017
Fair Value Assets And Liabilities Measured On Unobservable Inputs [Line Items]
Change in fair value of financial instruments, Liabilities	$ 3,212		$ 202
Change in fair value of financial instruments	(410)	$ 4,753	(212)	$ 6,693
Junior subordinated notes
Fair Value Assets And Liabilities Measured On Unobservable Inputs [Line Items]
Change in fair value of financial instruments, Liabilities	$ (410)	3,270	(682)	2,568
Derivative
Fair Value Assets And Liabilities Measured On Unobservable Inputs [Line Items]
Change in fair value of financial instruments, Liabilities		(17)	$ 470	(275)
Fair Value, Measurements, Recurring | Warrants and investor SARs
Fair Value Assets And Liabilities Measured On Unobservable Inputs [Line Items]
Change in fair value of financial instruments, Liabilities		$ 1,500		$ 4,400

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Variable Interest Entities - Additional Information (Detail) $ in Thousands		12 Months Ended
	Jun. 26, 2018	Dec. 31, 2017 USD ($) Venture	Sep. 30, 2018 USD ($)	Jun. 27, 2018 USD ($)
Variable Interest Entity [Line Items]
Number of joint venture | Venture		2
Indebtedness		$ 1,390,188	$ 814,987
VIE
Variable Interest Entity [Line Items]
Total investment in mortgages and loans,net		1,174,827	599,809
Indebtedness		1,038,864	560,287
VIE | Consolidation Eliminations
Variable Interest Entity [Line Items]
Total investment in mortgages and loans,net		257,625	156,195
Indebtedness		$ 370,351	$ 244,116
Variable Interest Entity, Not Primary Beneficiary | RAIT FL5 | Melody 2016 Holdings, LLC
Variable Interest Entity [Line Items]
Sale of Interest owned in joint venture	60.00%
Percentage of interest issued to affliated of purchaser	40.00%
Variable Interest Entity, Not Primary Beneficiary | RAIT FL6 | Melody 2017 Holdings, LLC
Variable Interest Entity [Line Items]
Sale of Interest owned in joint venture	60.00%
Percentage of interest issued to affliated of purchaser	40.00%
Variable Interest Entity, Not Primary Beneficiary | RAIT IV | RAIT FL5 & FL6
Variable Interest Entity [Line Items]
Aggregate purchase price				$ 54,632

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Assets and Liabilities of Consolidated Variable Interest Entities (Detail) - USD ($) $ in Thousands	Sep. 30, 2018	Dec. 31, 2017	Sep. 30, 2017
Assets
Investments in real estate, net	$ 123,145	$ 245,904
Cash and cash equivalents	98,352	53,380	$ 46,019
Restricted cash	86,154	157,914	$ 142,489
Accrued interest receivable	24,959	29,664
Other assets	14,134	43,871
Total assets	957,603	1,791,833
Liabilities and Equity
Accrued interest payable	3,857	4,688
Accounts payable and accrued expenses	4,931	9,641
Total liabilities	873,192	1,533,703
Shareholders’ equity:
Total shareholders’ equity	84,411	176,155
Noncontrolling Interests		3,632
Total liabilities and equity	957,603	1,791,833
VIE
Assets
Investments in commercial mortgage loans, mezzanine loans and preferred equity interests	756,004	1,432,452
Investments in real estate, net	18,133	18,634
Cash and cash equivalents	197	375
Restricted cash	36,814	1,315
Accrued interest receivable	26,286	44,101
Other assets	4,043	20,814
Total assets	841,477	1,517,691
Liabilities and Equity
Indebtedness, net	804,403	1,409,215
Accrued interest payable	7,517	8,336
Accounts payable and accrued expenses	3,326	3,297
Deferred taxes, borrowers’ escrows and other liabilities	197	827
Total liabilities	815,443	1,421,675
Shareholders’ equity:
RAIT investment and Retained earnings (deficit)	26,034	95,978
Total shareholders’ equity	26,034	95,977
Noncontrolling Interests		39
Total liabilities and equity	841,477	1,517,691
VIE | RAIT Securitizations
Assets
Investments in commercial mortgage loans, mezzanine loans and preferred equity interests	756,004	1,082,528
Restricted cash	36,512	1,068
Accrued interest receivable	26,286	41,639
Other assets	72	16,860
Total assets	818,874	1,142,095
Liabilities and Equity
Indebtedness, net	784,873	1,034,750
Accrued interest payable	1,769	1,869
Accounts payable and accrued expenses	69	23
Total liabilities	786,711	1,036,642
Shareholders’ equity:
RAIT investment and Retained earnings (deficit)	32,163	105,453
Total shareholders’ equity	32,163	105,453
Total liabilities and equity	818,874	1,142,095
VIE | RAIT VIE Properties
Assets
Investments in real estate, net	18,133	18,634
Cash and cash equivalents	197	283
Restricted cash	302	237
Other assets	3,971	3,954
Total assets	22,603	23,108
Liabilities and Equity
Indebtedness, net	19,530	19,630
Accrued interest payable	5,748	5,356
Accounts payable and accrued expenses	3,257	3,274
Deferred taxes, borrowers’ escrows and other liabilities	197	184
Total liabilities	28,732	28,444
Shareholders’ equity:
RAIT investment and Retained earnings (deficit)	(6,129)	(5,336)
Total shareholders’ equity	(6,129)	(5,336)
Total liabilities and equity	$ 22,603	23,108
VIE | RAIT Joint Venture VIE
Assets
Investments in commercial mortgage loans, mezzanine loans and preferred equity interests		349,924
Cash and cash equivalents		92
Restricted cash		10
Accrued interest receivable		2,462
Total assets		352,488
Liabilities and Equity
Indebtedness, net		354,835
Accrued interest payable		1,111
Deferred taxes, borrowers’ escrows and other liabilities		643
Total liabilities		356,589
Shareholders’ equity:
RAIT investment and Retained earnings (deficit)		(4,140)
Total shareholders’ equity		(4,140)
Noncontrolling Interests		39
Total liabilities and equity		$ 352,488

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Assets and Liabilities of Deconsolidated Variable Interest Entities (Detail) - USD ($) $ in Thousands		3 Months Ended		9 Months Ended
	Jun. 27, 2018	Sep. 30, 2018	Sep. 30, 2017	Sep. 30, 2018	Sep. 30, 2017	Dec. 31, 2017
Assets
Commercial mortgage loans, mezzanine loans, and preferred equity interests		$ 627,910		$ 627,910		$ 1,270,607
Cash and cash equivalents		98,352	$ 46,019	98,352	$ 46,019	53,380
Restricted cash		86,154	142,489	86,154	142,489	157,914
Accrued interest receivable		24,959		24,959		29,664
Other assets		14,134		14,134		43,871
Liabilities and Equity
Accrued interest payable		3,857		3,857		4,688
Accounts payable and accrued expenses		4,931		4,931		9,641
Borrowers' escrows		46,844		46,844		117,070
Deferred taxes and other liabilities		2,573		2,573		12,116
Shareholders’ equity:
Noncontrolling interests						3,632
Total liabilities and equity		957,603		957,603		$ 1,791,833
Loss on deconsolidation of RAIT Venture VIEs, RAIT FL5 & RAIT FL6		$ 870	$ (4,035)	$ (7,307)	$ (19,982)
Variable Interest Entity, Not Primary Beneficiary
Shareholders’ equity:
RAIT IV's net investment in RAIT FL5 & RAIT FL6	$ 62,809
Purchase price for RAIT IV's FL5 Interests & FL6 Interests	54,632
Loss on deconsolidation of RAIT Venture VIEs, RAIT FL5 & RAIT FL6	(8,177)
Variable Interest Entity, Not Primary Beneficiary | RAIT Joint Venture VIE | RAIT FL5 & FL6
Assets
Commercial mortgage loans, mezzanine loans, and preferred equity interests	266,502
Cash and cash equivalents	189
Restricted cash	22,569
Accrued interest receivable	1,191
Other assets	1,233
Total assets	291,684
Liabilities and Equity
Indebtedness, net	205,137
Accrued interest payable	502
Accounts payable and accrued expenses	45
Borrowers' escrows	22,549
Deferred taxes and other liabilities	531
Total liabilities	228,764
Shareholders’ equity:
Noncontrolling interests	111
Total liabilities and equity	$ 228,875

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Series D Preferred Shares - Additional Information (Detail)					9 Months Ended
	Jun. 27, 2018 USD ($) shares	Mar. 19, 2018 USD ($) shares	Jun. 22, 2017 USD ($) shares	Dec. 07, 2016 USD ($) shares	Sep. 30, 2018 $ / shares shares	Jun. 26, 2018 USD ($)	Dec. 31, 2017 $ / shares shares	Oct. 18, 2017 USD ($)	Oct. 17, 2017 USD ($)	Oct. 11, 2017 USD ($)	Dec. 31, 2015 shares	Sep. 30, 2015 USD ($) Covenant	Oct. 01, 2012 USD ($) $ / shares shares
Temporary Equity [Line Items]
Stock Appreciation Rights													6,735,667
Share repurchase, exchange fees | $	$ 418,000
Redemption and Exchange Agreement
Temporary Equity [Line Items]
Share repurchase, exchange fees | $	418,000
Adjusted
Temporary Equity [Line Items]
Warrants exercisable for common shares					11,035,875
Stock Appreciation Rights					7,485,045
ARS VI
Temporary Equity [Line Items]
Aggregate purchase price under Securities Purchase Agreement | $													$ 100,000,000
ARS VI | Warrants and investor SARs
Temporary Equity [Line Items]
Class of warrant and right exercise of purchase value. | $										$ 20,500,000
Fair value adjustment of warrants and investor rights obligation | $								$ 0
Warrants and rights outstanding | $									$ 0
Preferred Series D
Temporary Equity [Line Items]
Cumulative redeemable preferred shares, shares issued		2,939,190	3,133,720	3,536,000			3,133,720				4,000,000
Preferred shares with warrants													9,931,000
Shares repurchased and cancelled, shares		194,530	402,280	464,000
Proceeds from sale of investment | $	56,765,000	$ 4,863,000	$ 10,057,000	$ 11,600,000
Cumulative redeemable preferred shares, shares outstanding		2,939,190	3,133,720	3,536,000			3,133,720				4,000,000
Liquidation preference | $						$ 73,480,000
Preferred Series D | Redemption and Exchange Agreement
Temporary Equity [Line Items]
Proceeds from sale of investment | $	$ 56,765,000
Shares repurchased and cancelled, shares	2,939,190
Preferred Series D | ARS VI
Temporary Equity [Line Items]
Cumulative redeemable preferred shares, shares issued													4,000,000
Cumulative Redeemable Preferred Shares, par value | $ / shares													$ 0.01
Number of covenants | Covenant												2
Consideration paid under Securities Purchase Agreement | $												$ 450,000
Preferred Series A, B, and C | Redemption and Exchange Agreement
Temporary Equity [Line Items]
Liquidation preference | $	$ 16,715,000
7.75% Series A Cumulative Redeemable Preferred Stock
Temporary Equity [Line Items]
Cumulative Redeemable Preferred Shares, par value | $ / shares					$ 0.01		$ 0.01
Preferred shares issued, net (shares)	383,147				383,147
7.75% Series A Cumulative Redeemable Preferred Stock | Redemption and Exchange Agreement
Temporary Equity [Line Items]
Preferred shares issued, net (shares)	383,147
8.375% Series B Cumulative Redeemable Preferred Stock
Temporary Equity [Line Items]
Cumulative Redeemable Preferred Shares, par value | $ / shares					$ 0.01		0.01
Preferred shares issued, net (shares)	167,828				167,828
8.375% Series B Cumulative Redeemable Preferred Stock | Redemption and Exchange Agreement
Temporary Equity [Line Items]
Preferred shares issued, net (shares)	167,828
8.875% Series C Cumulative Redeemable Preferred Stock
Temporary Equity [Line Items]
Cumulative Redeemable Preferred Shares, par value | $ / shares					$ 0.01		$ 0.01
Preferred shares issued, net (shares)	117,605				117,605
8.875% Series C Cumulative Redeemable Preferred Stock | Redemption and Exchange Agreement
Temporary Equity [Line Items]
Preferred shares issued, net (shares)	117,605

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Summary of Difference Between Fair Value of Consideration Transferred and Carrying Amount of Shares that were Redeemed and Exchanged (Detail) - USD ($) $ in Thousands						9 Months Ended
		Jun. 27, 2018	Mar. 19, 2018	Jun. 22, 2017	Dec. 07, 2016	Sep. 30, 2018	Jun. 26, 2018
Temporary Equity [Line Items]
Share repurchase, exchange fees		$ 418
Total consideration transferred in redemption and exchange		61,548
Net increase to equity as a result of redemption		11,932				$ 11,921
Preferred Series D
Temporary Equity [Line Items]
Liquidation preference of Series D preferred shares of RAIT prior to June 27, 2018							$ 73,480
Cash received for sale of RAIT IV's interests in Holdings 2016 and Holdings 2017		54,632
Defined available cash held by RAIT IV		2,133
Total par amount of Series D preferred shares of RAIT redeemed		56,765	$ 4,863	$ 10,057	$ 11,600
7.75% Series A Cumulative Redeemable Preferred Stock
Temporary Equity [Line Items]
Total fair value of series preferred shares exchanged	[1]	2,498
8.375% Series B Cumulative Redeemable Preferred Stock
Temporary Equity [Line Items]
Total fair value of series preferred shares exchanged	[2]	1,091
8.875% Series C Cumulative Redeemable Preferred Stock
Temporary Equity [Line Items]
Total fair value of series preferred shares exchanged	[3]	776
Preferred Series A, B, and C
Temporary Equity [Line Items]
Total fair value of series preferred shares exchanged		$ 4,365

[1] Represents the fair value of 383,147 shares of Series A preferred that were issued to the Investor. The fair value is based upon $6.52 per share, which was the closing price of the Series A preferred shares on June 27, 2018.

[2] Represents the fair value of 167,828 shares of Series B preferred that were issued to the Investor. The fair value is based upon $6.50 per share, which was the closing price of the Series B preferred shares on June 27, 2018.

[3] Represents the fair value of 117,605 shares of Series C preferred that were issued to the Investor. The fair value is based upon $6.60 per share, which was the closing price of the Series C preferred shares on June 27, 2018.

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Summary of Difference Between Fair Value of Consideration Transferred and Carrying Amount of Shares that were Redeemed and Exchanged (Parenthetical) (Detail) - $ / shares		9 Months Ended
	Jun. 27, 2018	Sep. 30, 2018
7.75% Series A Cumulative Redeemable Preferred Stock
Temporary Equity [Line Items]
Preferred shares issued, net (shares)	383,147	383,147
Fair value of preferred share price per share	$ 6.52
8.375% Series B Cumulative Redeemable Preferred Stock
Temporary Equity [Line Items]
Preferred shares issued, net (shares)	167,828	167,828
Fair value of preferred share price per share	$ 6.50
8.875% Series C Cumulative Redeemable Preferred Stock
Temporary Equity [Line Items]
Preferred shares issued, net (shares)	117,605	117,605
Fair value of preferred share price per share	$ 6.60

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Dividends Declared and Paid on Preferred Shares (Detail) - USD ($)		6 Months Ended		9 Months Ended
	Mar. 19, 2018	Sep. 30, 2018	Jun. 30, 2018	Sep. 30, 2018
Dividends [Line Items]
Total dividend amount		$ 0	$ 0	$ 6,397,000
Preferred Stock | 7.75% Series A Cumulative Redeemable Preferred Stock
Dividends [Line Items]
Date declared				Mar. 13, 2018
Record date				Mar. 23, 2018
Date paid				Mar. 30, 2018
Total dividend amount				$ 2,589,000
Preferred Stock | 8.375% Series B Cumulative Redeemable Preferred Stock
Dividends [Line Items]
Date declared				Mar. 13, 2018
Record date				Mar. 23, 2018
Date paid				Mar. 30, 2018
Total dividend amount				$ 1,225,000
Preferred Stock | 8.875% Series C Cumulative Redeemable Preferred Stock
Dividends [Line Items]
Date declared				Mar. 13, 2018
Record date				Mar. 23, 2018
Date paid				Mar. 30, 2018
Total dividend amount				$ 910,000
Preferred Stock | Series D Cumulative Redeemable Preferred Shares
Dividends [Line Items]
Date declared	Mar. 13, 2018			Mar. 13, 2018
Record date	Mar. 23, 2018			Mar. 23, 2018
Date paid				Mar. 30, 2018
Total dividend amount	$ 1,665,000			$ 1,665,000

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Shareholders' Equity - Additional Information (Detail) - USD ($)								3 Months Ended	6 Months Ended		9 Months Ended
		Jun. 27, 2018	Mar. 30, 2018	Mar. 19, 2018	Mar. 16, 2018	Jun. 22, 2017	Dec. 07, 2016	Sep. 30, 2018	Sep. 30, 2018	Jun. 30, 2018	Sep. 30, 2018	Sep. 30, 2017	Jun. 26, 2018	Dec. 31, 2017	Jun. 13, 2014	Nov. 21, 2012
Class Of Stock [Line Items]
Total dividend amount									$ 0	$ 0	$ 6,397,000
Distributions paid to preferred shareholders											11,121,000	$ 19,601,000
Common stock, dividend paid											$ 118,000
Common shares remaining available under the DRSPP								154,783	154,783		154,783
Total shareholders’ equity								$ 84,411,000	$ 84,411,000		$ 84,411,000			$ 176,155,000
Distributed to non-controlling interests											15,000
Derecognition of noncontrolling interests											(111,000)
Plaz America
Class Of Stock [Line Items]
Acquired the non-controlling interests					$ 343,000						343,000
Acquired the non-controlling interests carrying amount					$ 3,582,000
RAIT Joint Venture VIE
Class Of Stock [Line Items]
Distributed to non-controlling interests											$ 15,000
Derecognition of noncontrolling interests		$ 111,000
Jones Trading Institutional Services LLC
Class Of Stock [Line Items]
Common shares issued, net (in shares)											0
Common shares remaining available for issuance											158,378
Jones Trading Institutional Services LLC | Maximum
Class Of Stock [Line Items]
Common shares to be issued and sold																200,000
Restricted Stock
Class Of Stock [Line Items]
Common stock, dividend paid								$ 12,000			$ 117,000
Dividend Reinvestment And Share Purchase Plan
Class Of Stock [Line Items]
Registered and reserved common shares								210,000	210,000		210,000
Common shares issued, net (in shares)											0
Preferred Series D
Class Of Stock [Line Items]
Proceeds from sale of investment		$ 56,765,000		$ 4,863,000		$ 10,057,000	$ 11,600,000
Liquidation preference													$ 73,480,000
Preferred Series D | RAIT IV | Variable Interest Entity, Not Primary Beneficiary
Class Of Stock [Line Items]
Shares repurchased and cancelled, shares		2,939,190
Proceeds from sale of investment		$ 56,765,000
7.75% Series A Cumulative Redeemable Preferred Stock
Class Of Stock [Line Items]
Preferred shares issued, net		383,147
Total fair value of series preferred shares exchanged	[1]	$ 2,498,000
Preferred shares issued, net (shares)		383,147									383,147
Preferred Series A, B, and C
Class Of Stock [Line Items]
Total fair value of series preferred shares exchanged		$ 4,365,000
Dividends unpaid and arrears								$ 10,125,000	$ 10,125,000		$ 10,125,000
Preferred Series A, B, and C | RAIT IV | Variable Interest Entity, Not Primary Beneficiary
Class Of Stock [Line Items]
Liquidation preference		$ 16,715,000
8.375% Series B Cumulative Redeemable Preferred Stock
Class Of Stock [Line Items]
Preferred shares issued, net		167,828
Total fair value of series preferred shares exchanged	[2]	$ 1,091,000
Preferred shares issued, net (shares)		167,828									167,828
8.875% Series C Cumulative Redeemable Preferred Stock
Class Of Stock [Line Items]
Preferred shares issued, net		117,605
Total fair value of series preferred shares exchanged	[3]	$ 776,000
Preferred shares issued, net (shares)		117,605									117,605
Preferred Stock
Class Of Stock [Line Items]
Preferred shares aggregate amount to be issued and sold															$ 150,000,000
Preferred Stock | RAIT Joint Venture VIE
Class Of Stock [Line Items]
Preferred shares issued, net (shares)											125
Weighted-average price per share											$ 1,000
Preferred share issuance, net of costs incurred											$ 76,000
Preferred Stock | Preferred Series D
Class Of Stock [Line Items]
Shares redeem and cancel, shares				194,530
Total dividend amount				$ 1,665,000							$ 1,665,000
Date declared				Mar. 13, 2018							Mar. 13, 2018
Record date				Mar. 23, 2018							Mar. 23, 2018
Distributions paid to preferred shareholders			$ 1,562,000	$ 103,000
Preferred Stock | 7.75% Series A Cumulative Redeemable Preferred Shares
Class Of Stock [Line Items]
Total dividend amount											$ 2,589,000
Date declared											Mar. 13, 2018
Record date											Mar. 23, 2018
Preferred shares authorized to be issued under agreement															4,000,000
Aggregate of Series A,B,C Preferred Shares not been issued								2,724,935	2,724,935		2,724,935
Preferred Stock | 8.375% Series B Cumulative Redeemable Preferred Shares
Class Of Stock [Line Items]
Total dividend amount											$ 1,225,000
Date declared											Mar. 13, 2018
Record date											Mar. 23, 2018
Preferred shares authorized to be issued under agreement															1,000,000
Aggregate of Series A,B,C Preferred Shares not been issued								947,496	947,496		947,496
Preferred Stock | 8.875% Series C Cumulative Redeemable Preferred Shares
Class Of Stock [Line Items]
Total dividend amount											$ 910,000
Date declared											Mar. 13, 2018
Record date											Mar. 23, 2018
Preferred shares authorized to be issued under agreement															1,000,000
Aggregate of Series A,B,C Preferred Shares not been issued								999,675	999,675		999,675
Common Shares
Class Of Stock [Line Items]
Total shareholders’ equity								$ 165,447,000	$ 165,447,000		$ 165,447,000

[1] Represents the fair value of 383,147 shares of Series A preferred that were issued to the Investor. The fair value is based upon $6.52 per share, which was the closing price of the Series A preferred shares on June 27, 2018.

[2] Represents the fair value of 167,828 shares of Series B preferred that were issued to the Investor. The fair value is based upon $6.50 per share, which was the closing price of the Series B preferred shares on June 27, 2018.

[3] Represents the fair value of 117,605 shares of Series C preferred that were issued to the Investor. The fair value is based upon $6.60 per share, which was the closing price of the Series C preferred shares on June 27, 2018.

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Reconciliation of Basic and Diluted Earnings (Loss) Per Share (Detail) - USD ($) $ / shares in Units, $ in Thousands		3 Months Ended		9 Months Ended
		Sep. 30, 2018	Sep. 30, 2017	Sep. 30, 2018	Sep. 30, 2017
Earnings Per Share [Abstract]
Income (loss)		$ (21,038)	$ (15,843)	$ (105,766)	$ (154,266)
(Income) loss allocated to preferred shares		(5,063)	(8,387)	(4,591)	(25,730)
(Income) loss allocated to noncontrolling interests					(76)
Net income (loss) allocable to common shares		$ (26,101)	$ (24,230)	$ (110,357)	$ (180,072)
Weighted-average shares outstanding-Basic	[1]	1,840,168	1,831,193	1,839,172	1,828,778
Weighted-average shares outstanding—Diluted	[1]	1,840,168	1,831,193	1,839,172	1,828,778
Earnings (loss) per share-Basic:
Earnings (loss) per share-Basic		$ (14.18)	$ (13.23)	$ (60.00)	$ (98.47)
Earnings (loss) per share-Diluted:
Earnings (loss) per share-Diluted		$ (14.18)	$ (13.23)	$ (60.00)	$ (98.47)

[1] All share and per-share amounts have been retroactively adjusted to reflect the Reverse Stock Split for all periods presented herein.

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Earnings (Loss) Per Share - Additional Information (Detail) - shares	3 Months Ended		9 Months Ended
	Sep. 30, 2018	Sep. 30, 2017	Sep. 30, 2018	Sep. 30, 2017
Earnings Per Share [Abstract]
Anti-dilutive shares not included in computation of earnings per common share	162,170	523,243	164,786	520,507

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Related Party Transactions - Additional Information (Detail) - USD ($) $ in Thousands					1 Months Ended	3 Months Ended		9 Months Ended		12 Months Ended
	May 11, 2018	Apr. 06, 2018	Dec. 23, 2016	Dec. 20, 2016	Jan. 31, 2017	Sep. 30, 2018	Sep. 30, 2017	Sep. 30, 2018	Sep. 30, 2017	Dec. 31, 2017	Mar. 30, 2018
Related Party Transaction [Line Items]
Reimbursed for general and administrative expense paid on IRT						$ 2,408	$ 3,194	$ 8,446	$ 10,210
Ballard Spahr LLP
Related Party Transaction [Line Items]
Trustee fee paid						$ 3		88
Ballard Spahr LLP | Maximum
Related Party Transaction [Line Items]
Interest on trustee fee								$ 1
Libby Frischer Family Partnership
Related Party Transaction [Line Items]
Maximum common shares ownership percentage that would exempt common share ownership limit											12.50%
LFFP and Mr. Frischer | Cooperation Agreement
Related Party Transaction [Line Items]
Related party transaction agreement date		Apr. 06, 2018
Maximum common shares and preferred shares ownership percentage that would exempt ownership limit		15.00%
LFFP and Mr. Frischer | Letter Agreement
Related Party Transaction [Line Items]
Related party transaction agreement date	May 11, 2018
Maximum common shares and preferred shares ownership percentage that would exempt ownership limit	20.00%
Highland Capital Management, L. P.
Related Party Transaction [Line Items]
Related party transaction agreement date								May 26, 2017
IRT
Related Party Transaction [Line Items]
Reimbursed for general and administrative services									727
Reimbursed for general and administrative expense paid on IRT									155
Payments for property management fees									239
Earned and paid on consulting agreement									282
IRT | Chief Executive Officer
Related Party Transaction [Line Items]
Compensation received				$ 375
Number of shares awarded, share			150,000
Cash payments					$ 500
IRT | Chief Executive Officer | Six Month Anniversary
Related Party Transaction [Line Items]
Vesting percentage			50.00%
IRT | Chief Executive Officer | One Year Anniversary
Related Party Transaction [Line Items]
Vesting percentage			50.00%
IRT | James J. Sebra's
Related Party Transaction [Line Items]
Percentage of cash bonus										25.00%
Bonus							$ 110		$ 110

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Schedule of Supplemental Disclosures to Statements of Cash Flows (Detail) (Detail) - USD ($) $ in Thousands	9 Months Ended
	Sep. 30, 2018	Sep. 30, 2017
Cash Flow Supplemental Disclosures [Line Items]
Cash paid for interest	$ 37,487	$ 45,197
Cash paid (refunds received) for taxes	(1)	(70)
Non-cash increase in investments in real estate, intangible assets, and other liabilities from conversion of loans		1,590
Non-cash increase (decrease) in investments in real estate, restricted cash, other assets, intangible assets, accounts payable and accrued expenses, and other liabilities from deconsolidation of properties	907	(84,285)
Non-cash increase (decrease) in indebtedness from debt extinguishments	$ (1,464)	(4,640)
Non-cash increase (decrease) in indebtedness from deconsolidation of properties		(64,790)
South Terrace
Cash Flow Supplemental Disclosures [Line Items]
Non-cash increase (decrease) to noncontrolling interests from distribution of limited partnership units on South Terrace		$ (1,618)

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Supplemental Disclosure to Consolidated Statements of Cash Flows - Additional Information (Detail) $ in Thousands						1 Months Ended	9 Months Ended		12 Months Ended
	Jun. 27, 2018 USD ($) shares	Mar. 19, 2018 USD ($)	Mar. 16, 2018 USD ($)	Jun. 22, 2017 USD ($)	Dec. 07, 2016 USD ($)	May 31, 2018 Loan	Sep. 30, 2018 USD ($) Loan shares		Dec. 31, 2017 USD ($) Loan	[2]	Jun. 30, 2018 USD ($)	Jun. 26, 2018 USD ($)	Mar. 31, 2018 USD ($)
Cash Flow Supplemental Disclosures [Line Items]
Number of Loans | Loan							9
Number of loans sold | Loan						1	6
Unpaid principal balance											$ 13,000		$ 90,260
Principal balance							$ 7,015
Preferred Series D
Cash Flow Supplemental Disclosures [Line Items]
Proceeds from sale of interests	$ 56,765	$ 4,863		$ 10,057	$ 11,600
Liquidation preference												$ 73,480
Variable Interest Entity, Not Primary Beneficiary | Preferred Series D | RAIT FL5 & FL6
Cash Flow Supplemental Disclosures [Line Items]
Shares repurchased and cancelled, shares | shares	2,939,190						2,939,190
Proceeds from sale of interests	$ 56,765						$ 56,765
Other cash held							2,133
Variable Interest Entity, Not Primary Beneficiary | Preferred Series A, B, and C | RAIT FL5 & FL6
Cash Flow Supplemental Disclosures [Line Items]
Liquidation preference	$ 16,715						16,715
Plaz America
Cash Flow Supplemental Disclosures [Line Items]
Acquired the non-controlling interests			$ 343				$ 343
Commercial Portfolio Segment
Cash Flow Supplemental Disclosures [Line Items]
Number of Loans | Loan							59	[1]	123
Unpaid principal balance							$ 629,297	[1]	$ 1,273,507
Principal balance							628,914	[1]	$ 1,272,951
Commercial Portfolio Segment | Commercial Mortgage Loans Sold
Cash Flow Supplemental Disclosures [Line Items]
Unpaid principal balance							31,377
Principal balance							$ 31,377

[1] Includes $100,442 of cash flow loans, of which $49,690 are commercial mortgage loans, $21,122 are mezzanine loans and $29,630 are preferred equity interests. See Note 2: Summary of Significant Accounting Policies, (j) Revenue Recognition, for further discussion of our cash flow loans.

[2] Includes $106,136 of cash flow loans, of which $55,353 are commercial mortgage loans, $21,149 are mezzanine loans and $29,634 are preferred equity interests. See Note 2: Summary of Significant Accounting Policies, (j) Revenue Recognition, for further discussion of our cash flow loans.

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Summary of Cash and Cash Equivalents and Restricted Cash Balances (Detail) - USD ($) $ in Thousands	Sep. 30, 2018	Dec. 31, 2017	Sep. 30, 2017
Supplemental Cash Flow Elements [Abstract]
Cash and cash equivalents	$ 98,352	$ 53,380	$ 46,019
Restricted cash	86,154	$ 157,914	142,489
Total cash and cash equivalents and restricted cash	$ 184,506		$ 188,508

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Commitments and Contingencies - Additional Information (Detail) - USD ($) $ in Thousands		9 Months Ended	12 Months Ended
	Sep. 20, 2017	Sep. 30, 2017	Dec. 31, 2017	Sep. 30, 2018	Jun. 14, 2018
Commitment And Contingencies [Line Items]
Non-payment of post-resignation compensation claims entitlement under employment contract					$ 4,547
Outstanding funding commitment			$ 1,390,188	$ 814,987
Lending Arrangements
Commitment And Contingencies [Line Items]
Outstanding funding commitment				9,990
Note B
Commitment And Contingencies [Line Items]
Payment to purchase mortgage loan	$ 18,500
Mortgage loan charged off			$ 18,500
Mortgage loan principal to be received				$ 18,500
Note A
Commitment And Contingencies [Line Items]
Payment to purchase mortgage loan	$ 190,000
Former Employee
Commitment And Contingencies [Line Items]
Principle to settle former employee		$ 175