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 March 31, 2019

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

Securities registered pursuant to Section 12(b) of the Act: None

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Not applicable	Not applicable	Not applicable

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 ☒ 

Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes ☐    No ☒

A total of 1,849,252 common shares of beneficial interest, par value $1.50 per share, of the registrant were outstanding as of November 1, 2019.

RAIT FINANCIAL TRUST

TABLE OF CONTENTS

		Page
	PART I—FINANCIAL INFORMATION
Item 1.	Financial Statements (unaudited)	1
	Consolidated Balance Sheets as of March 31, 2019 and December 31, 2018	1
	Consolidated Statements of Operations for the Three Months Ended March 31, 2019 and 2018	2
	Consolidated Statements of Comprehensive Income (Loss) for the Three Months Ended March 31, 2019 and 2018	3
	Consolidated Statement of Changes in Equity for the Three Months Ended March 31, 2019 and 2018	4
	Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2019 and 2018	5
	Notes to Consolidated Financial Statements	6
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	37
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	48
Item 4.	Controls and Procedures	49
	PART II—OTHER INFORMATION
Item 1.	Legal Proceedings	50
Item 1A.	Risk Factors	51
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	53
Item 3.	Defaults Upon Senior Securities	53
Item 6.	Exhibits	54
	SIGNATURES	58

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 March 31, 2019			As of December 31, 2018
Assets
Investment in mortgage loans, held for investment:
Commercial mortgage loans, mezzanine loans, and preferred equity interests	$	438,244		$	502,397
Allowance for loan losses		(20,727	)		(22,336	)
Total investment in mortgage loans, held for investment, net (including $409,041 and $467,656 held by consolidated VIEs, respectively)		417,517			480,061
Investment in mortgage loans, held for sale		5,131			4,873
Investments in real estate, net of accumulated depreciation of $9,742 and $8,768, respectively (including $25,264 and $18,020 held by consolidated VIEs, respectively)		106,996			107,824
Investments in real estate, held for sale		7,448			4,918
Cash and cash equivalents		39,139			42,453
Restricted cash		65,000			63,067
Accrued interest receivable		17,399			18,044
Other assets		13,608			10,807
Intangible assets, net of accumulated amortization of $5,876 and $5,703, respectively		1,544			1,717
Total assets	$	673,782		$	733,764
Liabilities and Shareholders' Equity
Indebtedness, net of unamortized discounts, premiums and deferred financing costs of $16,033 and $16,643 respectively (including $390,675 and $440,776 held by consolidated VIEs, respectively)	$	575,263		$	625,916
Accrued interest payable		2,352			2,401
Accounts payable and accrued expenses		2,671			3,330
Borrowers' escrows		26,074			31,343
Other liabilities		4,479			2,268
Total liabilities		610,839			665,258
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 5,727,500 shares issued and outstanding, respectively		57			57
8.375% Series B cumulative redeemable preferred shares, liquidation preference $25.00 per share, 4,300,000 shares authorized, 2,508,797 and 2,508,797 shares issued and outstanding, respectively		25			25
8.875% Series C cumulative redeemable preferred shares, liquidation preference $25.00 per share, 3,600,000 shares authorized, 1,758,030 and 1,758,030 shares issued and outstanding, respectively		18			18
Common shares, $1.50 par value per share, 200,000,000 shares authorized 1,849,530 and 1,850,451 issued and outstanding, respectively, including 4,997 and 6,844 unvested restricted common share awards, respectively		2,774			2,776
Additional paid in capital		2,102,363			2,102,274
Accumulated other comprehensive income (loss)		12,053			11,473
Retained earnings (deficit)		(2,054,347	)		(2,048,117	)
Total shareholders' equity		62,943			68,506
Total liabilities and shareholders' equity	$	673,782		$	733,764

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 March 31,
	2019			2018
Revenue:
Investment interest income	$	6,921		$	18,865
Investment interest expense		(4,163	)		(10,549	)
Net interest margin		2,758			8,316
Property income		3,307			8,816
Fee and other income		88			1,209
Total revenue		6,153			18,341
Expenses:
Interest expense		3,996			6,771
Real estate operating expense		2,003			5,790
Property management expenses		-			1,931
General and administrative expenses:
Compensation expense		2,229			2,925
Other general and administrative expense		3,451			6,338
Total general and administrative expenses		5,680			9,263
Acquisition and integration expenses		-			133
Provision (benefit) for loan losses		(583	)		8,032
Depreciation and amortization expense		1,384			3,443
Total expenses		12,480			35,363
Operating (Loss) Income		(6,327	)		(17,022	)
Interest and other income (expense), net		104			349
Gains (losses) on assets		303			(937	)
Gains (losses) on extinguishments of debt		(285	)		(991	)
Asset impairment		(26	)		(9,191	)
Change in fair value of financial instruments		30			87
Income (loss) before taxes		(6,201	)		(27,705	)
Income tax benefit (provision)		-			-
Net income (loss)		(6,201	)		(27,705	)
(Income) loss allocated to preferred shares		(5,063	)		(6,389	)
Net income (loss) allocable to common shares	$	(11,264	)	$	(34,094	)
Earnings (loss) per share-Basic:
Earnings (loss) per share-Basic	$	(6.11	)	$	(18.55	)
Weighted-average shares outstanding-Basic		1,844,037			1,837,493
Earnings (loss) per share-Diluted:
Earnings (loss) per share-Diluted	$	(6.11	)	$	(18.55	)
Weighted average shares outstanding-Diluted		1,844,037			1,837,493

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 March 31,
	2019			2018
Net income (loss)	$	(6,201	)	$	(27,705	)
Other comprehensive income (loss):
Unrealized gains (losses) from change in fair value based on instrument specific credit risk		580			1,266
Total other comprehensive income (loss)		580			1,266
Comprehensive income (loss)	$	(5,621	)	$	(26,439	)

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)

For the Three Months Ended March 31, 2019
	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			Total Equity
Balance, December 31, 2018		5,727,500	$	57		2,508,797	$	25		1,758,030	$	18		1,850,451		$	2,776		$	2,102,274	$	11,473	$	(2,048,117	)	$	68,506		$	68,506
Net income (loss)																								(6,201	)		(6,201	)		(6,201	)
Common dividends declared																								(29	)		(29	)		(29	)
Other comprehensive income (loss), net																						580					580			580
Share-based compensation																				89							89			89
Common shares activity related to equity compensation														(921	)		(2	)									(2	)		(2	)
Balance, March 31, 2019		5,727,500	$	57		2,508,797	$	25		1,758,030	$	18		1,849,530		$	2,774		$	2,102,363	$	12,053	$	(2,054,347	)	$	62,943		$	62,943

For the Three Months Ended March 31, 2018
	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)																									(27,705	)		(27,705	)					(27,705	)
Preferred dividends paid																									(6,389	)		(6,389	)					(6,389	)
Common dividends declared																									(105	)		(105	)					(105	)
Other comprehensive income (loss), net																							1,266					1,266						1,266
Share-based compensation																				(539	)							(539	)					(539	)
Issuance of noncontrolling interests																															76			76
Acquisition of noncontrolling interests																				3,239								3,239			(3,582	)		(343	)
Common shares activity related to equity compensation														(9,369	)		(14	)		(57	)							(71	)					(71	)
Balance, March 31, 2018		5,344,353	$	53		2,340,969	$	23		1,640,425	$	17		1,851,535		$	2,777		$	2,097,447		$	10,523	$	(1,964,228	)	$	146,612		$	126		$	146,738

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 Three Months Ended March 31,
	2019			2018
Operating activities:
Net income (loss)	$	(6,201	)	$	(27,705	)
Adjustments to reconcile net income (loss) to cash flow from operating activities:
Provision (benefit) for loan losses		(583	)		8,032
Share-based compensation expense		89			(539	)
Depreciation and amortization expense		1,384			3,443
Amortization of deferred financing costs and debt discounts		933			3,046
(Amortization) of loan origination fees and costs, net		(280	)		(383	)
(Amortization) of above/below market leases		(16	)		(146	)
(Gains) Losses on assets		(303	)		937
(Gains) Losses on extinguishments of debt		285			991
Asset impairment		26			9,191
Change in fair value of financial instruments		(30	)		(87	)
Changes in assets and liabilities:
Decrease in accrued interest receivable		645			317
(Increase) decrease in other assets		(774	)		1,054
(Decrease) increase in accrued interest payable		(49	)		984
(Decrease) in accounts payable and accrued expenses		(695	)		(1,427	)
(Decrease) increase in other liabilities		(130	)		(22	)
Cash flows provided by (used in) operating activities		(5,699	)		(2,314	)
Investing activities:
Origination of loans for investment		(4,442	)		(50,492	)
Principal repayments on loans		60,027			136,664
Investments in real estate		(147	)		(828	)
Proceeds from sale of loans originated for investment		—			89,583
Proceeds from the disposition of real estate		4,918			16,607
(Decrease) in borrowers' escrows		(4,745	)		(25,487	)
Cash flows provided by (used in) investing activities		55,611			166,047
Financing activities:
Repayments on secured credit facilities and loans payable on real estate		(189	)		(332	)
Repayments and repurchase of CDO notes payable and floating rate securitizations		(51,073	)		(90,796	)
Repurchase of convertible notes and senior notes		—			(5,722	)
Repayments of senior secured notes		—			(2,000	)
Net proceeds (repayments) related to floating rate loan repurchase agreements		—			(22,313	)
Acquisition of noncontrolling interests		—			(343	)
Issuance of noncontrolling interests		—			76
Common share issuance, net of costs incurred		(2	)		(71	)
Repurchase of Series D preferred shares		—			(4,863	)
Distributions paid to preferred shareholders		—			(11,113	)
Distributions paid to common shareholders		(29	)		(105	)
Cash flows (used in) provided by financing activities		(51,293	)		(137,582	)
Net change in cash, cash equivalents, and restricted cash		(1,381	)		26,151
Cash, cash equivalents, and restricted cash at the beginning of the period		105,520			211,294
Cash, cash equivalents, and restricted cash at the end of the period	$	104,139		$	237,445

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

5

RAIT Financial Trust

Notes to Consolidated Financial Statements

As of March 31, 2019

(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.  

On August 30, 2019, RAIT and its affiliates RAIT Funding LLC (“RAIT Funding”), RAIT General, Inc. (“RAIT General”), RAIT Limited, Inc. (“RAIT Limited”), Taberna Realty Finance Trust (“TRFT”), RAIT JV TRS, LLC, and RAIT JV TRS Sub, LLC (each, a “Debtor”, and together, the “Debtors”) filed voluntary bankruptcy cases (the “Chapter 11 Cases”) under chapter 11, Title 11 of the U.S. Code (the “Bankruptcy Code”) in the United States Bankruptcy Court for the District of Delaware (the “Bankruptcy Court”). No other subsidiaries of RAIT filed for bankruptcy protection. The Chapter 11 Cases are jointly administered under the caption In re: RAIT Funding, LLC, a Delaware limited liability company, et. al. Each of the Debtors will continue to operate its business as a “debtor in possession” under the jurisdiction of the Bankruptcy Court and in accordance with the applicable provisions of the Bankruptcy Code and the orders of the Bankruptcy Court. The Bankruptcy Court entered orders approving a variety of first-day relief designed primarily to minimize the impact of the Chapter 11 Cases on our operations and employees. We expect to continue our operations during the pendency of the Chapter 11 Cases.

Immediately prior to the filing of the Chapter 11 Cases, on August 30, 2019, RAIT, RAIT General, RAIT Limited and TRFT (together, the “Sellers”), entered into an Equity and Asset Purchase Agreement (the “Purchase Agreement”) with CF RFP Holdings LLC, a Delaware limited liability company and an entity owned by funds managed by affiliates of Fortress Investment Group LLC (“Buyer”), pursuant to which, among other things, Buyer agreed to purchase certain subsidiaries and assets of the Sellers (together, the “Purchased Assets”) for a purchase price of $174,424, as adjusted pursuant to a cash adjustment (the “Purchase Price”), including the assumption of certain liabilities. Buyer deposited $8,721 as an earnest money deposit. The transactions contemplated by the Purchase Agreement (the “Transactions”) will be effected pursuant to a sale process under Section 363 of the Bankruptcy Code.   On October 4, 2019, RAIT and the Sellers and the Buyer entered into Amendment No. 1 (the “Amendment”) to the Purchase Agreement which, among other things, (i) provided for an additional deposit by the Buyer in the amount of $8,721 if Buyer is the winning bidder or back-up bidder in the auction contemplated by the Purchase Agreement or if there is no such auction and (ii) added a mechanism to adjust the Purchase Price for approved expenses associated with certain new, renewed, modified or amended leases that with the consent of Buyer are entered into by a Seller or an affiliate of Seller after the date of the Amendment and prior to the closing of the transactions contemplated by the Purchase Agreement. The Amendment further provided that if Buyer does not approve a proposed new, renewed, modified or amended lease or, if Buyer approves a proposed new, renewed, modified or amended lease, but does not approve all expenses associated therewith, the Sellers will not be in breach of the Purchase Agreement for the consequences of the determination not to enter into such new, renewed, modified or amended lease or make such unapproved payments, as applicable.

On August 29, 2019, RAIT entered into a Restructuring and Plan Support Agreement with TRFT and TP Management LLC, an affiliate of Buyer, in its capacity as delegate collateral manager (“TPM”) (the “Taberna RSA”). On August 31, 2019, RAIT entered into a Restructuring and Plan Support Agreement with RAIT Funding and Kodiak CDO I., Ltd., as holder of certain preferred securities (“Kodiak”, and together with TPM, the “RSA Counterparties”) (the “Kodiak RSA”, and together with the Taberna RSA, the “RSAs”). TPM is the collateral manager and Kodiak is the holder of certain securities that are collateralized by the 2035 Note (defined below, and also referred to as the junior subordinated note, at fair value) and the 2037 Note (defined below, and also referred to as the junior subordinated note, at amortized cost), respectively. Pursuant to the RSAs, each of the RSA Counterparties agreed, among other things, to support, and take reasonable necessary actions in furtherance of, the Transactions, including, among other things, the consummation of the sale of the Purchased Assets under Section 363 of the Bankruptcy Code and support the confirmation of a plan of reorganization of the Debtors. Pursuant to the RSAs, each of the RSA Counterparties has agreed, subject to certain conditions, to accept less than the total unpaid amounts due under the 2035 Note and the 2037 Note. The RSAs contain customary representations and warranties by RAIT, the applicable RAIT subsidiary and the applicable RSA Counterparty. RAIT, the applicable RAIT subsidiary and the applicable RSA Counterparty may terminate their respective RSA under certain circumstances, including, among other things, (a) the failure to satisfy certain bankruptcy-related milestones, (b) the entry of certain orders by, or upon certain actions taken by, the Bankruptcy Court, (c) breaches of representations and obligations under the applicable RSA, and (d) upon the occurrence of a material adverse change.    

Subject to certain specific exceptions under the Bankruptcy Code, the Chapter 11 Cases automatically stayed most judicial or administrative actions against the Debtors as well as efforts by creditors to collect on or otherwise exercise rights or remedies with

6

RAIT Financial Trust

Notes to Consolidated Financial Statements

As of March 31, 2019

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

respect to pre-petition claims. As a result, for example, most creditor actions to obtain possession of property from the Debtors, or to create, perfect or enforce any lien against the Debtors, or to collect on or otherwise exercise rights or remedies with respect to a pre-petition claim are stayed.

On October 2, 2019, the Bankruptcy Court entered an order (the “Bidding Procedures Order”) approving the bidding procedures (the “Bidding Procedures”) by which the Debtors expect to solicit and select the highest and otherwise best offer for the sale (the “Sale”) of the Purchased Assets, establishing related dates and deadlines, approving the Debtor’s selection of the Buyer as the “stalking horse bidder,” the break-up fee and expense reimbursement contemplated by the Purchase Agreement, approving the process of any auction that might be required under the Bidding Procedures, and granting related relief.  Pursuant to the Bidding Procedures Order, the Debtors intend to sell all of their right, title and interest in and to the Purchased Assets free and clear of any pledges, liens, security interests, encumbrances, claims, charges, options, and interests thereon to the maximum extent permitted by Section 363 of the Bankruptcy Code. The deadline for the submission of bids that satisfies the requirements of the Bidding Procedures Order is November 27, 2019 at 12:00 p.m. (prevailing Eastern Time).

On September 27, 2019, the Debtors filed with the Bankruptcy Court its schedules of assets and liabilities and statements of financial affairs setting forth, among other things, the assets and liabilities of each of the Debtors, subject to the assumptions filed in connection therewith. These schedules and statements of financial affairs may be subject to further amendment or modification after filing. On October 14, 2019, the Debtors filed with the Bankruptcy Court its disclosure statement for Debtors’ Joint Chapter 11 Plan (the “Disclosure Statement”) and the Debtors’ Joint Chapter 11 Plan (the “Plan”). 

Under the priority requirements established by the Bankruptcy Code, pre-petition and post-petition liabilities to creditors must be satisfied in full before the holders of our outstanding preferred shares and common shares are entitled to receive any distribution or retain any property under a plan of reorganization. The ultimate recovery for creditors, if any, will not be determined until confirmation and implementation of a plan of reorganization. The outcome of the Chapter 11 Cases remains uncertain at this time and, as a result, we cannot accurately estimate the amounts or value of distributions that creditors may receive. The Plan contemplates that our senior notes, which are publicly traded, RAIT’s 7.125% Senior Notes due 2019 (the “7.125% Senior Notes”) and 7.625% Senior Notes due 2024 (the “7.625% Senior Notes,” and, together with the 7.125% Senior Notes, the “Senior Notes”), will be paid all outstanding principal and all accrued and unpaid interest as of (but excluding) the petition date in accordance with the Bankruptcy Code. The Plan contemplates that our junior subordinated notes will receive less than the total unpaid amounts due under each note consistent with the RSAs. The Plan contemplates that our outstanding preferred shares and common shares will be cancelled upon the effective date of the Plan and that the holders of our outstanding preferred shares and common shares will be entitled to no recovery. Article III of the Disclosure Statement sets forth a summary of the Plan, including a Plan Summary Table summarizing the classification and treatment of claims, along with projected recoveries for each class, all of which is subject to all the qualifications and disclaimers set forth in the Plan.

The filing of the Chapter 11 Cases with the Bankruptcy Court constituted an “Event of Default” under each of: (a) that certain Indenture, dated as of December 10, 2013, by and between RAIT and Wells Fargo Bank, National Association, as trustee, as subsequently modified by supplemental indentures setting forth the terms of the 7.125% Senior Notes (such indenture, the “Supplemental Indenture”) and 7.625% Senior Notes, (b) that certain Junior Subordinated Indenture, dated February 12, 2007, by and between RAIT Funding and The Bank of New York Trust Company, National Association, as Trustee, relating to the 2037 Note, and (c) that certain Junior Subordinated Indenture, dated October 25, 2010, by and between TRFT and Wells Fargo Bank, National Association, as Trustee, relating to the 2035 Note (collectively, the “Debt Instruments”). We refer to the Events of Default described in this paragraph as the “Bankruptcy Events of Default.” Each of the Debt Instruments provides that upon the occurrence of such an Event of Default, all obligations of RAIT or its applicable affiliate thereunder are accelerated and the principal and accrued interest due thereunder shall be automatically and immediately due and payable. Any efforts to enforce such payment obligations under the Debt Instruments were automatically stayed as a result of the filing of the Chapter 11 Cases with the Bankruptcy Court, and the respective creditors’ rights of enforcement in respect of the Debt Instruments are subject to the applicable provisions of the Bankruptcy Code and orders of the Bankruptcy Court. As of the date hereof, RAIT or its applicable affiliates had (i) $65,356 of principal amount of 7.125% Senior Notes outstanding, (ii) $56,324 of principal amount of 7.625% Senior Notes outstanding, (iii) $25,100 of principal amount of the 2037 Note, or the junior subordinated note, at amortized cost, outstanding and (iv) $18,671 of principal amount of the 2035 Note, or the junior subordinated note, at fair value, outstanding.

Furthermore, RAIT’s failure to pay the principal amount of 7.125% Senior Notes by their maturity date on August 30, 2019 constituted an “Event of Default” under the Supplemental Indenture.

7

RAIT Financial Trust

Notes to Consolidated Financial Statements

As of March 31, 2019

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

The Plan contemplates the appointment of a Plan Administrator (the “Plan Administrator”) to implement the Plan and to distribute any proceeds of the Plan upon confirmation of the Plan by the Bankruptcy Court. We expect that, for the duration of the of the Chapter 11 Cases, our operations will be subject to significant risks and uncertainties associated with Chapter 11 Cases. As a result of these significant risks and uncertainties, our assets, liabilities, shareholders’ equity (deficit), officers and/or trustees could be significantly different following the outcome of the Chapter 11 Cases, and the description of our operations, equity, assets and liabilities included in this report may not accurately reflect our operations, assets and liabilities following the conclusion of the Chapter 11 Cases.

Any fair values utilized or disclosed in our consolidated financial statements to determine the amounts of our assets, liabilities, shareholders’ equity or otherwise were developed for the purpose of complying with the accounting principles established for fair value measurements, as described below. The fair values of our assets, liabilities, shareholders’ equity or otherwise for enterprise value in our Chapter 11 Cases or as a component of the Plan may reflect differing assumptions and methodologies. These estimates of fair value will be subject to a number of approvals and reviews and therefore may be materially different than any fair values utilized in our consolidated financial statements.

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, 2018 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, equity 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 statement of cash flows for the three-month period ended March 31, 2018 includes the impact of correcting the reporting of certain activity that occurred in 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 $89,583 for the three-month period ended March 31, 2018. This correction had no impact to cash and cash equivalents as of March 31, 2018, nor did it impact any other consolidated financial statement amounts as of March 31, 2018 or for the three-month period ended March 31, 2018.

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) the impacts of the Chapter 11 Cases including the Events of Default as described in Note 1: The Company, and (ii) RAIT’s recurring costs of operating its business.

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RAIT Financial Trust

Notes to Consolidated Financial Statements

As of March 31, 2019

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

As described in Note 1: The Company, the filing of the Chapter 11 Cases with the Bankruptcy Court triggered the Bankruptcy Events of Default and RAIT’s failure to pay the principal amount of the 7.125% Senior Notes by their maturity date on August 30, 2019 also constituted an Event of Default. Each of the Debt Instruments provides that upon the occurrence of such an Event of Default, all obligations of RAIT and/or its applicable affiliates thereunder were accelerated and the principal and accrued interest due thereunder was automatically and immediately due and payable. Any efforts to enforce such payment obligations under the Debt Instruments are automatically stayed pursuant to Section 362 of the Bankruptcy Code, and the respective creditors’ rights of enforcement in respect of the Debt Instruments are limited. As of the date hereof, the Debt Instruments of RAIT and/or its applicable affiliates had (i) $65,356 of principal amount of 7.125% Senior Notes outstanding, (ii) $56,324 of principal amount of 7.625% Senior Notes outstanding, (iii) $25,100 of principal amount of the 2037 Note, or the junior subordinated note, at amortized cost, outstanding, and (iv) $18,671 of principal amount of the 2035 Note, or the junior subordinated note, at fair value, outstanding.

RAIT’s current sources of liquidity, including its current cash and cash equivalents balance, are not sufficient to satisfy RAIT’s obligations arising over the next twelve months. Subject to receiving a higher and otherwise better bid as a result of the Bidding Procedures, RAIT expects to sell substantially all of its assets pursuant to the Purchase Agreement under Section 363 of the Bankruptcy Code and the Bidding Procedures Order for a purchase price of $174,424, adjusted as provided in the Purchase Agreement, including the assumption of certain liabilities. RAIT’s proposed plan of reorganization under the Chapter 11 Cases provides for the ultimate wind down of RAIT’s affairs once the transactions contemplated by the Purchase Agreement and the Bidding Procedures are completed and the plan of reorganization is confirmed.

Due to the inherent risks and significant uncertainties associated with the completion of the transactions under the Purchase Agreement, the Plan, the Chapter 11 Cases, and RAIT’s recurring costs of operations, there is substantial doubt about RAIT’s ability to continue as a going concern within one year after the date that these financial statements are issued.

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 7: Variable Interest Entities for additional disclosures pertaining to VIEs.

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.

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RAIT Financial Trust

Notes to Consolidated Financial Statements

As of March 31, 2019

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

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 March 31, 2019 and December 31, 2018, we had $29,021 and $33,300, respectively, of 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 March 31, 2019 and December 31, 2018, we had $35,979 and $29,767, 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 recognize recoveries when they are received, and 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.

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RAIT Financial Trust

Notes to Consolidated Financial Statements

As of March 31, 2019

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

Loans which experience a modification to their contractual terms which result in a concession being granted to a borrower experiencing financial difficulties are considered troubled debt restructurings, or TDRs. A concession is deemed granted when, as a result of the restructuring, we do not expect to collect all amounts due, including interest accrued, at the original contractual interest rate. As appropriate, we also consider other qualitative factors in determining whether a concession is deemed granted, including the value of the underlying collateral. We do not consider restructurings that result in a delay in payment, in timing or amount, which is insignificant, to be a concession.

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, and other securities on a yield to maturity basis. Certain of our commercial mortgage loans, mezzanine loans and preferred equity interests permanently provide for the accrual of interest at specified rates which

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RAIT Financial Trust

Notes to Consolidated Financial Statements

As of March 31, 2019

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

differ from current payment terms (which may have minimum payment rates as low as zero percent). 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 the interest income is not collectible 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 March 31, 2019 and December 31, 2018 was $15,503 and $15,870, respectively.  These loans are considered to be impaired when the total amount owed exceeds the estimated value of the underlying collateral.Seven of these loans, with an unpaid principal balance of $32,968 and $33,030, respectively, were considered to be impaired as of March 31, 2019 and December 31, 2018, respectively.

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 rental income from tenant rent and other tenant-related activities at our consolidated real estate properties. For multifamily real estate properties (which we owned none of as of March 31, 2019), 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. Such reimbursements are generally recognized on a monthly basis as billed to tenants.

3) Fee and other income—We have generated and/or generate, as applicable, fee and other income through our various subsidiaries by (a) providing ongoing asset management services to investment portfolios under cancelable management agreements, and (b) prior to the sale of our retail property manager subsidiary in August 2018, providing property management services to third parties. We recognize revenue for these activities when: (i) a contract has been mutually approved and each party is committed to perform; (ii) both parties can identify the rights of each party; (iii) both parties can identify the payment terms of the contract; (iv) the contract has commercial substance; and (v) it is probable that we will collect substantially all of the consideration to which we are entitled. 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 months ended March 31, 2019 and 2018, we received $59 and $162, respectively, of earned 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 March 31,
Revenue from Contracts with customers	2019		2018
Property Management Fee income	$	—	$	766
Parking		—		202
Leasing Commission income		—		320
Other miscellaneous		70		248
Total	$	70	$	1,536

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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RAIT Financial Trust

Notes to Consolidated Financial Statements

As of March 31, 2019

(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 unsecured REIT note receivables, commercial mortgage-backed securities, or CMBS, receivables and certain financial instruments classified as 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. Generally, assets and liabilities carried at fair value and included in this category are subordinated debentures, and historically included trust preferred obligations and CDO notes payable, where observable market inputs do not exist.

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.

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RAIT Financial Trust

Notes to Consolidated Financial Statements

As of March 31, 2019

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

Fair value for certain of our Level 3 financial instruments is derived using valuation models that include discounted cash flow analyses. These internal valuation models include discounted cash flow analyses 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. 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 March 31, 2019 and December 31, 2018. The accumulated amortization for our intangible assets was $5,876 and $5,703 as of March 31, 2019 and December 31, 2018, respectively. We recorded amortization expense of $193, and $427 for the three months ended March 31, 2019 and 2018, respectively. Based on the intangible assets identified above, we expect to record amortization expense of intangible assets of $513 for 2019, $434 for 2020, $249 for 2021, $145 for 2022, $72 for 2023 and $131 thereafter. As of March 31, 2019, we have determined that no triggering events occurred that would indicate an impairment to our intangible assets.

o. Derivative Instruments

We have historically entered into interest rate derivative contracts to hedge all or a portion of the interest rate risk associated with certain of our borrowings and/or our fixed rate assets. The principal objective of these 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.

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 in hedging relationships, we determine at inception whether the hedge agreement is highly effective in offsetting the related risk by using regression analysis.  For derivatives not designated as hedges, the changes in fair value of the derivative instrument are recorded 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 March 31, 2019, we had no derivative instruments outstanding.

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RAIT Financial Trust

Notes to Consolidated Financial Statements

As of March 31, 2019

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

p. Income Taxes

RAIT and Taberna Realty Finance Trust, or TRFT, 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. Accordingly, we generally will not be subject to U.S. federal income tax to the extent of any 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. Management believes that all of the criteria to maintain RAIT’s and TRFT’s 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.  

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 the prior year, our TRS entities generated taxable revenue primarily from property management fees for services provided to RAIT properties and third-party properties.  In the current year, our TRS entities have not generated any significant taxable revenue. 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.

q. Recent Accounting Pronouncements

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 have adopted the new standard effective January 1, 2019 and have used the effective date as our date of initial application. The new standard provides a number of optional practical expedients in transition. We have elected 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 have elected the practical expedient to not separate lease and non-lease components for all of our leases. The adoption of FASB ASC Topic 842 resulted in the recognition of a lease liability of $3,008 and a ROU asset of $2,416 as of the adoption date for one of our operating leases for which we are the lessee. The standard did not have an 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 March 31, 2019

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

Not Yet Adopted Within These Financial Statements

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. During 2019, the FASB issued an amendment to this accounting standard which provides further clarification to this accounting standard. This standard and its amendment are 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 August 2018, the FASB issued an accounting standard classified under FASB ASC Topic 820, “Fair Value Measurement”. The amendments in this standard eliminate, add and modify certain disclosure requirements for fair value measurements. For example, entities will no longer have to disclose the amount of and reasons for transfers between Level 1 and Level 2 of the fair value hierarchy, but public companies will be required to disclose the range and weighted average used to develop significant unobservable inputs for Level 3 fair value measurements. The amendments in this accounting standard are effective for fiscal years beginning after December 15, 2019. Management is currently evaluating the impact that this standard will have on our consolidated financial statements.

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 March 31, 2019:

	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	$	388,913		$	(64	)	$	388,849			30		6.9	%	Apr. 2019 to Jun. 2025
Mezzanine loans		21,114			164			21,278			3		13.3	%	Jun. 2020 to Mar. 2023
Preferred equity interests		28,515			(1	)		28,514			13		6.0	%	Mar. 2023 to Jun. 2029
Total CRE (2)		438,542			99			438,641			46		7.2	%
Deferred fees and costs, net (3)		(397	)		-			(397	)
Total	$	438,145		$	99		$	438,244

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

(2) Includes $53,128 of cash flow loans, of which $7,148 are commercial mortgage loans, $21,114 are mezzanine loans and $24,866 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 $1,703 of deferred fees, net of $1,306 of deferred costs.

16

RAIT Financial Trust

Notes to Consolidated Financial Statements

As of March 31, 2019

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

The following table summarizes our investments in commercial mortgage loans, mezzanine loans and preferred equity interests as of December 31, 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	$	453,283		$	(66	)	$	453,217			35		6.9	%	Feb. 2019 to Jun. 2025
Mezzanine loans		21,114			164			21,278			3		13.3	%	Jun. 2020 to Mar. 2023
Preferred equity interests		28,577			(1	)		28,576			13		6.0	%	Mar. 2023 to Jun. 2029
Total CRE (2)		502,974			97			503,071			51		7.2	%
Deferred fees and costs, net (3)		(674	)		-			(674	)
Total	$	502,300		$	97		$	502,397

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

(2) Includes $54,621 of cash flow loans, of which $8,579 are commercial mortgage loans, $21,114 are mezzanine loans and $24,928 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 $2,558 of deferred fees, net of $1,884 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 as of March 31, 2019 and December 31, 2018:

	As of March 31, 2019
Delinquency Status	Current		30 to 59 days		60 to 89 days		90 days or more		Total		Non-accrual (1)
Commercial mortgage loans	$	351,906	$	—	$	—	$	37,007	$	388,913	$	65,952
Mezzanine loans		21,114		—		—		—		21,114		8,245
Preferred equity interests		28,515		—		—		—		28,515		7,770
Total	$	401,535	$	—	$	—	$	37,007	$	438,542	$	81,967

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

	As of December 31, 2018
Delinquency Status	Current		30 to 59 days		60 to 89 days		90 days or more		Total		Non-Accrual (1)
Commercial mortgage loans	$	414,735	$	—	$	—	$	47,440	$	453,283	$	46,793
Mezzanine loans		12,222		—		—		—		21,114		8,892
Preferred equity interests		28,577		—		—		—		28,577		37,308
Total	$	455,534	$	—	$	—	$	47,440	$	502,974	$	92,993

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

As of March 31, 2019 and December 31, 2018, all of our held for investment 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.  As of March 31, 2019, $53,128 of our loans are cash flow loans, which permanently 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 March 31, 2019, and December 31, 2018, $81,967 and $92,993, respectively, of our loans were on non-accrual status and had a weighted-average interest rate of 6.8% and 6.9%,

17

RAIT Financial Trust

Notes to Consolidated Financial Statements

As of March 31, 2019

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

respectively. Also, as of March 31, 2019 and December 31, 2018, five loans with unpaid principal balances of $25,703, and weighted average interest rate of 11.4%, were not recognizing interest based on the estimated value of the underlying collateral.

Allowance For Loan Losses And Impaired Loans

During the three months ended March 31, 2019, we recognized a benefit for loan losses of $583 primarily driven by the receipt of payments on several impaired loans, partially offset by an additional reserve taken on a previously impaired commercial mortgage loan.

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 recent operating performance of the underlying property and history of the borrower’s ability to provide financial support. We have classified our investment in loans by credit risk category as of March 31, 2019 and December 31, 2018 as follows:

	As of March 31, 2019
Credit Status	Commercial Mortgage Loans		Mezzanine Loans		Preferred Equity		Total
Satisfactory	$	257,796	$	—	$	5,063	$	262,859
Watchlist (1)		131,117		21,114		23,452		175,683
Total	$	388,913	$	21,114	$	28,515	$	438,542

(1) Includes $115,618 of loans that are considered to be impaired and $60,065 of loans that are not considered to be impaired.

	As of December 31, 2018
Credit Status	Commercial Mortgage Loans		Mezzanine Loans		Preferred Equity		Total
Satisfactory	$	314,104	$	—	$	5,063	$	319,167
Watchlist (1)		139,179		21,114		23,514		183,807
Total	$	453,283	$	21,114	$	28,577	$	502,974

(1) Includes $126,645 of loans that are considered to be impaired and $57,162 of loans that are not considered to be 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 for the three months ended March 31, 2019 and 2018:

	For the Three Months Ended March 31, 2019
	Commercial Mortgage Loans			Mezzanine Loans		Preferred Equity			Total
Beginning balance	$	11,912		$	6,496	$	3,928		$	22,336
Provision (benefit) for loan losses		(485	)		—		(98	)		(583	)
Charge-offs, net of recoveries		(1,026	)		—		—			(1,026	)
Ending balance	$	10,401		$	6,496	$	3,830		$	20,727

	For the Three Months Ended March 31, 2018
	Commercial Mortgage Loans			Mezzanine Loans			Preferred Equity		Total
Beginning balance	$	9,019		$	5,622		$	242	$	14,883
Provision (benefit) for loan losses		5,248			2,784			—		8,032
Charge-offs, net of recoveries (1)		(6,008	)		(3,175	)		—		(9,183	)
Ending balance	$	8,259		$	5,231		$	242	$	13,732

18

RAIT Financial Trust

Notes to Consolidated Financial Statements

As of March 31, 2019

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

(1) Includes $3,908 of charge-offs related to loans transferred to held for sale during the three months ended March 31, 2018.

Information on those loans considered to be impaired as of March 31, 2019 and December 31, 2018 was as follows:

	As of March 31, 2019
Impaired Loans	Commercial Mortgage Loans		Mezzanine Loans		Preferred Equity		Total
Impaired loans expecting full recovery	$	7,148	$	12,869	$	19,332	$	39,349
Impaired loans with reserves		63,904		8,245		4,120		76,269
Total Impaired Loans (1)		71,052		21,114		23,452		115,618
Allowance for loan losses	$	10,401	$	6,496	$	3,830	$	20,727

(1) As of March 31, 2019, there was no unpaid principal relating to previously identified TDRs that are on accrual status.

	As of December 31, 2018
Impaired Loans	Commercial Mortgage Loans		Mezzanine Loans		Preferred Equity		Total
Impaired loans expecting full recovery	$	8,579	$	12,869	$	19,334	$	40,782
Impaired loans with reserves		73,438		8,245		4,180		85,863
Total Impaired Loans (1)		82,017		21,114		23,514		126,645
Allowance for loan losses	$	11,912	$	6,496	$	3,928	$	22,336

(1) As of December 31, 2018, 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 $121,132 and $124,887 during the three months ended March 31, 2019 and 2018, respectively. We recorded interest income from impaired loans of $0 and $127 for the three months ended March 31, 2019 and 2018, 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 March 31, 2019, we determined that restructuring of one commercial real estate loan with an unpaid principal balance totaling $29,478 constituted a TDR as the interest payment rate was decreased through September 2019 although interest continues to accrue at the original contractual interest rate. During the three months ended March 31, 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 months ended March 31, 2019, and March 31, 2018, there were no TDRs that subsequently defaulted for restructurings that had been entered into within the previous 12 months.

In May 2019, we received $9,000 pursuant to a Settlement Agreement and Mutual Release related to a loan that was previously charged off. This will be recorded as a recovery of amounts previously charged off in the second quarter of 2019. See Note 13: Commitments and Contingencies for further information related to this Settlement Agreement and Mutual Release.

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 an 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 these loans.

During March 2018, we transferred nine additional loans to held for sale as we had the intent and ability to sell these loans. The transfer was made at the lower of cost or fair value for each respective loan. During the year ended December 31, 2018, six of these loans were sold or repaid, resulting in a net loss of $3,280. As of March 31, 2019, the three remaining loans held for sale were measured at the lower of cost or fair value, resulting in a gain of $303, an unpaid principal balance of $6,967, and a carrying amount of $5,131.

19

RAIT Financial Trust

Notes to Consolidated Financial Statements

As of March 31, 2019

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

Loan-to-Real Estate Conversions

In June 2019, we completed the conversion of a portion of a commercial mortgage loan portfolio to real estate owned property. See Note 4: Investments in Real Estate - Acquisitions for further information.

NOTE 4: INVESTMENTS IN REAL ESTATE

The table below summarizes our investments in real estate:

	Book Value
	As of March 31, 2019			As of December 31, 2018
Office real estate properties	$	48,886		$	48,760
Retail real estate properties		49,108			49,088
Parcels of land		18,744			18,744
Subtotal		116,738			116,592
Less: Accumulated depreciation and amortization		(9,742	)		(8,768	)
Investments in real estate, net	$	106,996		$	107,824

As of March 31, 2019, our investments in real estate were comprised of land of $36,905 and buildings and improvements of $79,833. As of December 31, 2018, our investments in real estate were comprised of land of $36,905 and buildings and improvements of $79,687.

As of March 31, 2019, our investments in real estate of $116,738 were financed through $40,534 of mortgage loans or other debt held by third parties and $80,562 of mortgage loans held directly by RAIT or through our RAIT I securitization. As of December 31, 2018, our investments in real estate of $116,592 were financed through $40,724 of mortgage loans or other debt held by third parties and $80,562 of mortgage loans held directly by RAIT or through our RAIT I securitization. Together, along with the other commercial real estate loans held by our RAIT I securitization, these mortgage loans serve as collateral for the CDO notes payable issued by our RAIT I securitization. All intercompany balances and interest charges are eliminated in consolidation.

The following table represents the minimum future lease payments for our office and retail properties as of March 31, 2019.

2019	$	7,072
2020		7,746
2021		5,620
2022		3,690
2023		1,980
2024 and thereafter		5,168
Total	$	31,276

Investments in real estate, held for sale:

During the first quarter of 2019, we consolidated the Collins Avenue VIE as described in Note 7: Variable Interest Entities.  As of March 31, 2019, the real estate property owned by this entity, with a carrying amount of $7,448, was considered held-for-sale.  This property was subsequently sold in May 2019. We expect to recognize a gain as a result of the sale.

Acquisitions:

As described in Note 3: Investments in Commercial Mortgage Loans, Mezzanine Loans and Preferred Equity Interests, in June 2019, we completed the conversion of a portion of a commercial mortgage loan portfolio with a carrying value of $7,448 to real estate owned property. The conversion resulted in approximately $7,448 of real estate assets being reflected on our consolidated balance sheet.

20

RAIT Financial Trust

Notes to Consolidated Financial Statements

As of March 31, 2019

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

Property Sales:

During the three months ended March 31, 2019, we disposed of one real estate owned property.  The below table summarizes the current year dispositions and also presents each property’s contribution to net income (loss) allocable to common shares, excluding the impact of any 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 March 31, 2019
Rte 18 Central Plaza	Retail	2/26/2019	$	5,100	$	-	$	(60	)
Total			$	5,100	$	-	$	(60	)

NOTE 5: INDEBTEDNESS

We maintain various forms of short-term and long-term financing arrangements.

The following tables summarizes our total recourse and non-recourse indebtedness as of March 31, 2019 and December 31, 2018, but do not reflect any potential impacts of the Chapter 11 Cases or any other “Event of Default” as discussed in Note 1: The Company or otherwise in “Defaults on Recourse Indebtedness” below.

The following table summarizes our total recourse and non-recourse indebtedness as of March 31, 2019:

Description	Unpaid Principal Balance		Unamortized Discount/Premium and Deferred Financing Costs			Carrying Amount		Weighted- Average Interest Rate			Contractual Maturity
Recourse indebtedness:
7.625% Senior Notes	$	56,324	$	(1,166	)	$	55,158		7.6	%	Apr. 2024
7.125% Senior Notes		65,356		(225	)		65,131		7.1	%	Aug. 2019
Junior subordinated notes, at fair value (1)		18,671		(13,171	)		5,500		6.8	%	Mar. 2035
Junior subordinated notes, at amortized cost		25,100		—			25,100		5.3	%	Apr. 2037
Total recourse indebtedness		165,451		(14,562	)		150,889		7.0	%
Non-recourse indebtedness:
CDO notes payable, at amortized cost (2)(3)		102,918		—			102,918		3.2	%	Nov. 2046
CMBS securitizations (4)(5)		282,393		(1,267	)		281,126		4.2	%	Jun. 2037 to Dec. 2037
Loans payable on real estate		40,534		(204	)		40,330		4.7	%	Oct. 2021 to Dec. 2021
Total non-recourse indebtedness		425,845		(1,471	)		424,374		4.0	%
Total indebtedness	$	591,296	$	(16,033	)	$	575,263		4.8	%

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

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

(3) Collateralized by $150,845 principal amount of commercial mortgage loans, mezzanine loans, other loans and preferred equity interests, $78,979 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.

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

(5) Collateralized by $355,699 principal amount of commercial mortgage loans and participation interests in commercial mortgage loans, $8,892 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.

21

RAIT Financial Trust

Notes to Consolidated Financial Statements

As of March 31, 2019

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

The following table summarizes our total recourse and non-recourse indebtedness as of December 31, 2018:

Description	Unpaid Principal Balance		Unamortized Discount/Premium and Deferred Financing Costs			Carrying Amount		Weighted- Average Interest Rate			Contractual Maturity
Recourse indebtedness:
7.625% Senior Notes	$	56,324	$	(1,224	)	$	55,100		7.6	%	Apr. 2024
7.125% Senior Notes		65,356		(359	)		64,997		7.1	%	Aug. 2019
Junior subordinated notes, at fair value (1)		18,671		(12,561	)		6,110		6.4	%	Mar. 2035
Junior subordinated notes, at amortized cost		25,100		—			25,100		5.0	%	Apr. 2037
Total recourse indebtedness		165,451		(14,144	)		151,307		6.9	%
Non-recourse indebtedness:
CDO notes payable, at amortized cost (2)(3)		116,102		—			116,102		3.1	%	Nov. 2046
CMBS securitizations (4)(5)		320,282		(2,274	)		318,008		4.0	%	Jun. 2037 to Dec. 2037
Loans payable on real estate		40,724		(225	)		40,499		4.7	%	Oct. 2021 to Dec. 2021
Total non-recourse indebtedness		477,108		(2,499	)		474,609		3.9	%
Total indebtedness	$	642,559	$	(16,643	)	$	625,916		4.6	%

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

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

(3) Collateralized by $170,124 principal amount of commercial mortgage loans, mezzanine loans, other loans and preferred equity interests, $94,191 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.

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

(5) Collateralized by $409,218 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.

Recourse indebtedness refers to indebtedness that is recourse to our general assets. 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 activity in our financing arrangements occurring as of or during the three months ended March 31, 2019 is as follows:

Recourse Indebtedness

7.625% Senior Notes.  During the three months ended March 31, 2019, there was no activity other than recurring interest. As of March 31, 2019, $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 March 31, 2019, there was no activity other than recurring interest. As of March 31, 2019, $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.

22

RAIT Financial Trust

Notes to Consolidated Financial Statements

As of March 31, 2019

(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, with all subsequent changes in fair value recorded in earnings. Starting in January 2018, in accordance with an update to FASB ASC Topic 825, we began recording the change in fair value due to instrument-specific credit risk in other comprehensive income, with all other changes in fair value recorded in earnings. As of March 31, 2019, the fair value, or carrying amount, of this indebtedness was $5,500.These notes do not contain financial covenants.

Junior subordinated notes, at amortized cost.  During the three months ended March 31, 2019, there was no activity other than recurring interest. These notes do not contain financial covenants.

Non-Recourse Indebtedness

CDO notes payable, at amortized cost. CDO notes payable at amortized cost represent notes issued by RAIT I which were used to finance the acquisition of 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. The RAIT I securitization contains interest coverage trigger tests, or IC triggers, and overcollateralization trigger tests, or OC triggers. If the IC triggers or OC triggers are not met in a given period, then the interest distributions 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 interest distributions continue until the triggers are met by curing the underlying cause of the IC trigger or OC trigger failure, which may include curing payment defaults, paying down the CDO notes payable, or other actions permitted under the relevant securitization indenture.

As of December 31, 2018, RAIT I was meeting all its OC and IC trigger tests. Starting in January 2019 through the date of the filing of this Quarterly Report on Form 10-Q, the Class F/G/H OC test for RAIT I has not been met. In October 2019, the Class F/G/H IC test for RAIT I was not met. As a result, certain interest payments that would have otherwise been directed to the Class J notes and equity issued by RAIT I, which are owned by us, are instead being redirected to pay principal on the most senior class of CDO notes payable that are outstanding.  The failure of these tests do not represent an event of default under the RAIT I securitization indenture.

CMBS securitizations As of March 31, 2019, our subsidiary, RAIT 2017-FL7 Trust, or RAIT FL7, had $224,094 of total collateral at par value, $9,000 of which is in default. As of March 31, 2019, RAIT FL7 had classes of investment grade senior notes with an aggregate principal balance outstanding of approximately $158,615 to investors.  We currently own the unrated classes of junior notes, including a class 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 March 31, 2019, our subsidiary, RAIT 2017-FL8 Trust, or RAIT FL8, had $167,940 of total collateral at par value, none of which was defaulted. As of March 31, 2019, RAIT FL8 had classes of investment grade senior notes with an aggregate principal balance outstanding of approximately $123,778 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.

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 March 31, 2019, by year, but does not reflect any potential impacts of the Chapter 11 Cases as discussed in Note 1:

23

RAIT Financial Trust

Notes to Consolidated Financial Statements

As of March 31, 2019

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

	Recourse indebtedness		Non-recourse indebtedness
2019	$	65,356	$	559
2020		-		779
2021		-		39,196
2022		-		-
2023		-		-
Thereafter		100,095		385,311
Total	$	165,451	$	425,845

Defaults on Recourse Indebtedness

The filing of the Chapter 11 Cases with the Bankruptcy Court triggered the Bankruptcy Events of Default, see Note 1: The Company for further information. Furthermore, RAIT’s failure to pay the principal amount of the 7.125% Senior Notes by their maturity date on August 30, 2019 constituted an “Event of Default” under the applicable supplemental indenture.

Prior to the filing of the Chapter 11 Cases, on August 20, 2019, RAIT received a notice of default relating to the 7.125% Senior Notes and the 7.625% Senior Notes from the indenture trustee. The notice stated that RAIT has defaulted under Section 4.02 of each of the supplemental indentures that govern those Senior Notes because RAIT failed to timely file the quarterly report for the fiscal quarter ended March 31, 2019 that RAIT is required to file with the Securities and Exchange Commission. The notice demanded RAIT remedy such default. Under the supplemental indentures, the default will not become an “Event of Default” unless RAIT failed to remedy the default within 60 days after the date on which notice was received. If such an “Event of Default” occurred, then in lieu of acceleration of the repayment obligation, RAIT may at its option elect to pay additional interest on the respective Senior Note at an annual rate equal to 0.50% of the principal amount of the respective Senior Note for up to one year after the occurrence of such “Event of Default”. Notwithstanding the foregoing, subject to certain specific exceptions under the Bankruptcy Code, the Chapter 11 Cases automatically stayed most judicial or administrative actions against the Debtors as well as efforts by creditors to collect on or otherwise exercise rights or remedies with respect to pre-petition claims.

NOTE 6: 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 and restricted cash 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.

24

RAIT Financial Trust

Notes to Consolidated Financial Statements

As of March 31, 2019

(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 March 31, 2019:

Financial Instrument	Carrying Amount		Estimated Fair Value
Assets
Total investment in mortgage loans, held for investment, net	$	417,517	$	380,819
Investment in mortgage loans, held for sale		5,131		5,131
Cash and cash equivalents		39,139		39,139
Restricted cash		65,000		65,000
Liabilities
Recourse indebtedness:
7.625% Senior Notes		55,158		41,117
7.125% Senior Notes		65,131		60,128
Junior subordinated notes, at fair value		5,500		5,500
Junior subordinated notes, at amortized cost		25,100		5,780
Non-recourse indebtedness:
CDO notes payable, at amortized cost		102,918		83,595
CMBS securitizations		281,126		282,856
Loans payable on real estate		40,330		40,698

The following table summarizes the carrying amount and the fair value of our financial instruments as of December 31, 2018:

Financial Instrument	Carrying Amount		Estimated Fair Value
Assets
Total investment in mortgage loans, held for investment, net	$	480,061	$	444,962
Investment in mortgage loans, held for sale		4,873		4,873
Cash and cash equivalents		42,453		42,453
Restricted cash		63,067		63,067
Liabilities
Recourse indebtedness:
7.625% Senior Notes		55,100		41,229
7.125% Senior Notes		64,997		58,010
Junior subordinated notes, at fair value		6,110		6,110
Junior subordinated notes, at amortized cost		25,100		6,550
Non-recourse indebtedness:
CDO notes payable, at amortized cost		116,102		94,513
CMBS securitizations		318,008		320,711
Loans payable on real estate		40,499		40,608

Fair Value Measurements

The following tables summarize information about our assets and liabilities measured at fair value on a recurring basis as of March 31, 2019, 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 March 31, 2019
Junior subordinated notes, at fair value	$	—	$	—	$	5,500	$	5,500
Total liabilities	$	—	$	—	$	5,500	$	5,500

25

RAIT Financial Trust

Notes to Consolidated Financial Statements

As of March 31, 2019

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

(1) During the three months ended March 31, 2019, 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, 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 December 31, 2018
Junior subordinated notes, at fair value	$	—	$	—	$	6,110	$	6,110
Total liabilities	$	—	$	—	$	6,110	$	6,110

(1) During the year ended December 31, 2018, 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 March 31, 2019 include a discount rate of 29% and as of December 31, 2018 include a discount rate of 27%. 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 three months ended March 31, 2019:

Liabilities	Junior Subordinated Notes, at Fair Value			Total Level 3 Liabilities
Balance, as of December 31, 2018	$	6,110		$	6,110
Change in fair value of financial instruments		(610	)		(610	)
Balance, as of March 31, 2019	$	5,500		$	5,500

26

RAIT Financial Trust

Notes to Consolidated Financial Statements

As of March 31, 2019

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

Non-Recurring Fair Value Measurements

Our 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 March 31, 2019, we measured the underlying collateral of five of our loans at a fair value of $56,310 in our consolidated balance sheet as they were impaired.

Our other non-recurring fair value measurements relate to our commercial real estate loans that are considered held for sale and are recorded at the lower of cost or fair value in our consolidated balance sheets. In evaluating our loans held for sale, we estimate the fair value of each loan and compare that fair value to our total investment in the loan. The estimate of fair value for each loan is determined using a discounted cash flow analysis. The significant inputs to these valuations are estimated future cash flows for each loan and market discount rates. The discount rates are based on underlying property performance and recent data from comparable lending markets. As of March 31, 2019, we measured three loans held for sale at a fair value of $5,131 in our consolidated balance sheet.

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 recorded at fair value in the accompanying consolidated balance sheets but for which fair value is required to be disclosed. The fair value of cash and cash equivalents and restricted cash approximates cost due to the nature of these instruments and are not included in the tables below.

	Carrying Amount as of March 31, 2019		Estimated Fair Value as of March 31, 2019		Valuation Technique	Level in Fair Value Hierarchy
Total investment in mortgage loans, held for investment, net	$	417,517	$	380,819	Discountedcash flows	Three
Investment in mortgage loans, held for sale		5,131		5,131	Discounted cash flows	Three
7.625% Senior Notes		55,158		41,117	Trading price	Two
7.125% Senior Notes		65,131		60,128	Trading price	Two
Junior subordinated notes, at amortized cost		25,100		5,780	Discounted cash flows	Three
CDO notes payable, at amortized cost		102,918		83,595	Discounted cash flows	Three
CMBS securitizations		281,126		282,856	Discounted cash flows	Three
Loans payable on real estate		40,330		40,698	Discounted cash flows	Three

	Carrying Amount as of December 31, 2018		Estimated Fair Value as of December 31, 2018		Valuation Technique	Level in Fair Value Hierarchy
Total investment in mortgage loans, held for investment, net	$	480,061	$	444,962	Discounted cash flows	Three
Investment in mortgage loans, held for sale		4,873		4,873	Discounted cash flows	Three
7.625% Senior Notes		55,100		41,229	Trading price	Two
7.125% Senior Notes		64,997		58,010	Trading price	Two
Junior subordinated notes, at amortized cost		25,100		6,550	Discounted cash flows	Three
CDO notes payable, at amortized cost		116,102		94,513	Discounted cash flows	Three
CMBS securitizations		318,008		320,711	Discounted cash flows	Three
Loans payable on real estate		40,499		40,608	Discounted cash flows	Three

27

RAIT Financial Trust

Notes to Consolidated Financial Statements

As of March 31, 2019

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

Change in Fair Value of Financial Instruments

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 March 31,
Description	2019		2018
Change in fair value of junior subordinated notes	$	30	$	(269	)
Change in fair value of derivatives		—		356
Change in fair value of financial instruments	$	30	$	87

The changes in the fair value for the junior subordinated notes for which the fair value option was elected for the three months ended March 31, 2019 and 2018 was primarily attributable to changes in base market interest rates. The changes in the fair value of derivatives for the three months ended March 31, 2018 was primarily attributable to changes in interest rates.

NOTE 7: 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 March 31, 2019 and December 31, 2018, our consolidated VIEs were: RAIT I, RAIT FL7, RAIT FL8, and the RAIT VIE Properties (Willow Grove and Cherry Hill). Also, as of March 31, 2019, we consolidated the Collins Avenue VIE (included within RAIT VIE Properties in the table below). During the first quarter of 2019, we entered into an agreement with the borrower of our Collins Avenue loan whereby the borrower agreed to cooperate with us in a deed-in-lieu of foreclosure transaction by June 30, 2019.  The terms of this agreement resulted in the determination that the entity that owns the collateral property is a VIE and that we are the primary beneficiary of the VIE.

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 March 31, 2019, we consolidated the VIE properties as we own the entities that possess and control these properties and control the significant capital and operating decisions regarding the properties. 

28

RAIT Financial Trust

Notes to Consolidated Financial Statements

As of March 31, 2019

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

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 March 31, 2019
	RAIT Securitizations			RAIT VIE Properties			Total
Assets
Investments in commercial mortgage loans, mezzanine loans and preferred equity interests	$	496,167		$	—		$	496,167
Investments in real estate		—			25,264			25,264
Cash and cash equivalents		—			273			273
Restricted cash		36,146			422			36,568
Accrued interest receivable		18,207			—			18,207
Other assets		115			3,861			3,976
Total assets	$	550,635		$	29,820		$	580,455
Liabilities and Equity
Indebtedness, net	$	568,318		$	28,353		$	596,671
Accrued interest payable		1,497			6,013			7,510
Accounts payable and accrued expenses		64			3,304			3,368
Deferred taxes, borrowers’ escrows and other liabilities		—			271			271
Total liabilities		569,879			37,941			607,820
Equity:
Shareholders’ equity:
RAIT investment and Retained earnings (deficit)		(19,244	)		(8,121	)		(27,365	)
Total shareholders’ equity		(19,244	)		(8,121	)		(27,365	)
Total liabilities and equity	$	550,635		$	29,820		$	580,455

	As of December 31, 2018
	RAIT Securitizations			RAIT VIE Properties			Total
Assets
Investments in commercial mortgage loans, mezzanine loans and preferred equity interests	$	561,101		$	—		$	561,101
Investments in real estate		—			18,020			18,020
Cash and cash equivalents		—			209			209
Restricted cash		29,658			374			30,032
Accrued interest receivable		18,849			—			18,849
Other assets		153			3,854			4,007
Total assets	$	609,761		$	22,457		$	632,218
Liabilities and Equity
Indebtedness, net	$	618,516		$	19,495		$	638,011
Accrued interest payable		1,534			5,883			7,417
Accounts payable and accrued expenses		74			3,315			3,389
Deferred taxes, borrowers’ escrows and other liabilities		2			197			199
Total liabilities		620,126			28,890			649,016
Equity:
Shareholders’ equity:
RAIT investment and Retained earnings (deficit)		(10,365	)		(6,433	)		(16,798	)
Total shareholders’ equity		(10,365	)		(6,433	)		(16,798	)
Total liabilities and equity	$	609,761		$	22,457		$	632,218

29

RAIT Financial Trust

Notes to Consolidated Financial Statements

As of March 31, 2019

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

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 $87,126 of total investments in mortgage loans and $205,996 of indebtedness as of March 31, 2019 and $93,445 of total investments in mortgage loans and $197,235 of indebtedness as of December 31, 2018. 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.

NOTE 8: 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). We subsequently repurchased a number of Series D preferred shares in transactions described below.  We purchased and cancelled the warrants and the investor SARs in October 2017 pursuant to the Investor’s exercise of put rights described below.  We used the proceeds received under the purchase agreement to fund our loan origination and investment activities, including CMBS and bridge lending.

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 Asset Holdings IV, LLC, or 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 the Investor 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 preferred units of RAIT IV and RAIT’s corresponding Series D preferred shares issued and outstanding to 2,939,190 preferred units of RAIT IV and RAIT’s corresponding Series D preferred shares issued and outstanding.

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 FL5 and FL6 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.

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.

30

RAIT Financial Trust

Notes to Consolidated Financial Statements

As of March 31, 2019

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

NOTE 9: SHAREHOLDERS’ EQUITY

Preferred Shares

Dividends:

RAIT’s Board of Trustees (the “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. As of March31, 2019, $20,250 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.

Common Shares

Dividends:

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

During the three months ended March 31, 2019, we paid $29 of dividends on restricted common share awards that vested in this 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.

Shareholders’ Equity Attributable to Common Shares:

As of March 31, 2019, total shareholders’ equity attributable to common shares was a deficit of $186,915.  

Noncontrolling Interests

RAIT Venture VIEs:

During the year ended December31, 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.

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.

31

RAIT Financial Trust

Notes to Consolidated Financial Statements

As of March 31, 2019

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

NOTE 10: EARNINGS (LOSS) PER SHARE

The following table presents a reconciliation of basic and diluted earnings (loss) per share for the three months ended March 31, 2019 and 2018:

	For the Three Months Ended March 31,
	2019			2018
Income (loss)	$	(6,201	)	$	(27,705	)
(Income) loss allocated to preferred shares		(5,063	)		(6,389	)
Net income (loss) allocable to common shares	$	(11,264	)	$	(34,094	)
Weighted-average shares outstanding—Basic (1)		1,844,037			1,837,493
Weighted-average shares outstanding—Diluted (1)		1,844,037			1,837,493
Earnings (loss) per share—Basic:
Earnings (loss) per share—Basic	$	(6.11	)	$	(18.55	)
Earnings (loss) per share—Diluted:
Earnings (loss) per share—Diluted	$	(6.11	)	$	(18.55	)

(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 months ended March 31, 2019, securities convertible into 6,015 common shares, were excluded from the earnings (loss) per share computations because their effect would have been anti-dilutive. For the three months ended March 31, 2018, securities convertible into 250,799 common shares, were excluded from the earnings (loss) per share computations because their effect would have been anti-dilutive.

NOTE 11: 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 8: Series D Preferred Shares.  Subsequent to June 27, 2018, Almanac is not considered a related party.

Ballard Spahr LLP

Justin P. Klein has served as a Trustee on our Board since June 2017 and is a partner of the law firm Ballard Spahr LLP, or Ballard Spahr.  RAIT did not have any transactions with Ballard Spahr during the three months ended March 31, 2019.  RAIT has paid Ballard Spahr LLP $32 during the three months ended March 31, 2018. The approximate dollar value of Mr. Klein’s interest in these fees was $1 for the three months ended March 31, 2018, based on Mr. Klein’s Ballard partnership interest.

Mr. Klein is a member of the RAIT board and receives board fees.  The fees are paid to Ballard Spahr.

32

RAIT Financial Trust

Notes to Consolidated Financial Statements

As of March 31, 2019

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

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.

There were no transactions with Highland in 2019 or 2018. It is noted that remaining obligations under the previously disclosed cooperation agreement between RAIT and Highland entered into on May 26, 2017 relating to a defined “standstill period” ended on May 26, 2019 and that Highland and certain of its affiliates filed a Schedule 13G/A with the SEC on February 14, 2019 disclosing that their aggregate holdings of RAIT’s common shares had reduced to 4.9% of RAIT’s outstanding common shares.

NOTE 12: SUPPLEMENTAL DISCLOSURE TO STATEMENT OF CASH FLOWS

The following are supplemental disclosures to the statements of cash flows for the three months ended March 31, 2019 and 2018:

	For the Three Months Ended March 31,
	2019			2018
Cash paid for interest	$	7,270		$	12,925
Cash paid (refunds received) for taxes		(38	)		(2	)
Non-cash increase (decrease) in indebtedness from debt extinguishments		—			(293	)

During the three months ended March 31, 2019, we consolidated the Collins Avenue VIE as described in Note 7: Variable Interest Entities. This resulted in a non-cash increase of $7,448 to investments in real estate, held for sale, and a non-cash decrease of $7,866 to investments in mortgage loans.

During the three months ended March 31, 2018, we transferred certain loans with an unpaid principal balance of $90,260 held for investment to held for sale, which were sold in March 2018.  During the three months ended March 31, 2018, we transferred nine additional loans from held for investment to held for sale with a carrying amount of $38,394. See Note 3: Investment in Commercial Mortgage Loans, Mezzanine Loans, and Preferred Equity Interests for further discussion.

During the three months ended March 31, 2018, we acquired the noncontrolling interests related to PlazAmericas Mall for $343, including transaction costs. See Note 9: Shareholders’ Equity for further discussion.

The following table summarizes our cash and cash equivalents and restricted cash balances as of March 31, 2019 and March 31, 2018:

	As of March 31, 2019		As of March 31, 2018
Cash and cash equivalents	$	39,139	$	84,483
Restricted cash		65,000		152,962
Total cash and cash equivalents and restricted cash	$	104,139	$	237,445

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RAIT Financial Trust

Notes to Consolidated Financial Statements

As of March 31, 2019

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

NOTE 13: 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, discrimination claims, negligence claims, 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.

The Chapter 11 Cases

For a description of the Chapter 11 Cases, see Note 1: The Company, which is incorporated herein by reference.

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 the following defendants, or the Defendants, CWCapital Asset Management, LLC, or CWCapital, Wells Fargo Bank N.A., or Wells Fargo, and U.S. Bank N.A., or U.S. Bank, in the Supreme Court of the State of New York, County of New York, or the Court. 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 held 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.  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.  

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 parties have since concluded discovery, and Defendants filed a motion for summary judgment on March 18, 2019.  That motion was adjourned as a result of the Settlement Agreement and Agreement to Discontinue referenced below, and the litigation is scheduled to be discontinued with prejudice by Stipulation after TRFT receives payment under the Settlement Agreement.   

On December 17, 2018, RAIT II assigned its interest in note B to TRFT in connection with TRFT’s redemption of RAIT II described in the 2018 Annual Report, see Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Securitization Summary.”  On April 8, 2019, the Court granted RAIT II’s motion to substitute TRFT as the plaintiff in this litigation.

Effective May 8, 2019, TRFT, RAIT II, CWCapital and U.S. Bank entered into a Settlement Agreement and Mutual Release, or the Settlement Agreement.  The Settlement Agreement provides (a) that CWCapital and U.S. Bank shall pay, or cause to be paid by the related securitization trust, $9,000, or the Settlement Payment, to TRFT within ten calendar days, (b) that the parties will execute and, after that Settlement Payment is received by TRFT, TRFT will file a Stipulation of Discontinuance with Prejudice, or the Stipulation, with the Court dismissing this litigation, and (c) for mutual releases between TRFT and RAIT II, on the one hand, and the Defendants, on the other hand, of claims relating to this litigation. Also, effective May 8, 2019, TRFT, RAIT II and Wells Fargo entered into an Agreement to Discontinue and Dismiss Litigation with Prejudice, or the Agreement to Discontinue.  The Agreement to Discontinue also provides (a) that TRFT, RAIT II and Wells Fargo shall sign the Stipulation, (b) that, after the Settlement Payment is received by TRFT, TRFT will file the Stipulation and (c) for mutual releases between TRFT and RAIT II, on the one hand, and Wells

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RAIT Financial Trust

Notes to Consolidated Financial Statements

As of March 31, 2019

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

Fargo, on the other hand, of claims relating to this litigation. TRFT received the payment contemplated by the Settlement Agreement in May 2019.

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 March 31, 2019, our total outstanding funding commitment was $3,190. As of April 30, 2019, we had no outstanding funding commitments.

Lease Obligation

We lease office space in Philadelphia for use in our operations. We account for this lease as an operating lease and recognize lease expense on a straight-line basis over the lease term. As of March 31, 2019, the lease had a remaining term of 13.1 years with an option to extend for an additional 5 years. As discussed in Note 2: Summary of Significant Accounting Policies, (q) Recent Accounting Pronouncements, we adopted the provisions of ASC Topic 842, “Leases” related to this lease on January 1, 2019. When establishing the value of our right-of-use asset and lease liability, we calculated the present value of future lease payments over the lease term. Since the discount rate implicit in the lease could not be determined, we used our incremental borrowing rate of 12.6%, which was based on information available as of the effective date.

As of March 31, 2019, the office lease liability and corresponding operating lease asset had carrying amounts of $2,995 and $2,399, respectively, and are included within other liabilities and other assets, respectively, in the accompanying consolidated balance sheet. For the three months ended March 31, 2019, our operating lease costs and variable lease costs associated with the office lease were $107 and $79, respectively, and are included within other general and administrative expenses in the accompanying consolidated statement of operations.

The annual minimum rent due pursuant to the office lease for each of the next five years and thereafter is estimated to be as follows as of March 31, 2019:

2019	$	322
2020		438
2021		447
2022		456
2023		465
Thereafter		4,626
Total undiscounted payments		6,754
Less imputed interest		(3,759	)
Total lease liability	$	2,995

The annual minimum rent due pursuant to the office lease for each of the next five years and thereafter is estimated to be as follows as of December 31, 2018:

2019	$	479
2020		438
2021		447
2022		456
2023		465
Thereafter		4,626
Total	$	6,911

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RAIT Financial Trust

Notes to Consolidated Financial Statements

As of March 31, 2019

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

NOTE 14: SUBSEQUENT EVENTS

We have evaluated subsequent events or transactions that have occurred after the consolidated balance sheet date of March 31, 2019, but prior to the filing of the consolidated financial statements with the SEC on this Quarterly Report on Form 10-Q. We have determined that, except as disclosed within this Note and other Notes, including, without limitation, Note 1: The Company, 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

The Securities and Exchange Commission, or SEC, encourages companies to disclose forward-looking information so that investors can better understand a company’s future prospects and make informed investment decisions. This report contains or incorporates by reference such “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, or the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act.

Words such as “anticipates,” “assumes,” “estimates,” “expects,” “projects,” “intends,” “plans,” “believes” and words and terms of similar substance used in connection with any discussion of future operating or financial results and performance identify forward-looking statements. Unless we have indicated otherwise, or the context otherwise requires, references in this report to “RAIT,” “we,” “us,” and “our” or similar terms, are to RAIT Financial Trust and its subsidiaries.

We claim the protection of the safe harbor for forward-looking statements provided in the Private Securities Litigation Reform Act of 1995 for these statements. These statements may be made directly in this report and they may also be incorporated by reference in this report to other documents filed with the SEC, and include, but are not limited to, statements about future financial and operating results and performance, statements about our strategies, plans, objectives, expectations and intentions with respect to future operations, products and services, and other statements that are not historical facts. These forward-looking statements are based upon the current beliefs and expectations of our management and are inherently subject to significant business, economic and competitive uncertainties and contingencies, many of which are difficult to predict and generally beyond our control. In addition, these forward-looking statements are subject to assumptions with respect to future business strategies and decisions that are subject to change. Actual results may differ materially from the anticipated results discussed in these forward-looking statements.

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

• the expected impact of confirmation and implementation of the Plan and consummation of a Sale on RAIT, including, without limitation, that such impact is expected to result in the sale of substantially all of RAIT’s assets, and the subsequent distribution of such assets in accordance with the Plan and subsequent winding down of RAIT so that RAIT does not continue as a going concern;

• the agreements, bankruptcy filings and transactions described in Part I, Item 1, “Financial Statements —Note 1: The Company”, including, without limitation, the Purchase Agreement, the RSAs, the Chapter 11 Cases, the Plan, the Disclosure Statement and the Bidding Procedures; and

• the ability of the Debtors to operate as a “debtor in possession” under the jurisdiction of the Bankruptcy Court.

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 RAIT or its affiliates will be able to obtain approval with respect to motions in the Chapter 11 Cases and the Bankruptcy Court’s rulings in the Chapter 11 Cases and the outcome of the Chapter 11 Cases in general, including, without limitation, confirmation of the Plan and approval of utilizing cash to fund certain operations;

• whether the agreements, bankruptcy filings and transactions described in Part I, Item 1, “Financial Statements —Note 1: The Company” will be modified or otherwise changed due to actions by the Bankruptcy Court, third parties, the Debtors or otherwise;

• risks associated with third-party motions in the Chapter 11 Cases, which may interfere with RAIT and its affiliates’ ability to develop and consummate the sale of the Purchased Assets;

• whether the closing conditions for the Purchase Agreement, any bid resulting from the Bidding Procedures, the RSAs, the Plan and other agreements and transactions described in Part I, Item 1, “Financial Statements —Note 1: The Company” will be satisfied or waived and the related transactions completed as provided therein;

• the Plan as proposed contemplates that, after confirmation of the Plan, RAIT will wind down its affairs and cease to be a going concern;

• the potential impact of the Bidding Procedures on the Chapter 11 Cases;

• the potential adverse effects of the Chapter 11 Cases on the Debtors’ liquidity, results of operations and business prospects;

• increased legal, advisor and other costs related to the Chapter 11 Cases and other litigation and the inherent risks involved in a bankruptcy process;

• the effect of the Chapter 11 Cases on the trading price and value of RAIT securities;

• whether RAIT will be able to retain key members of its management team;

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• the actions taken by any Plan Administrator appointed to implement the Plan after any confirmation;

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

• changes in the expected yield of RAIT’s investments;

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

• risks, disruption, costs and uncertainty caused by or related to the any legal proceedings initiated by third parties against RAIT, its affiliates, trustees, officers and/or advisors; and

• other factors described in the 2018 Annual Report, this Quarterly Report on Form 10-Q and RAIT’s other filings with the SEC.

The risk factors discussed and identified in Item 1A of the 2018 Annual Report, elsewhere in this Quarterly Report on Form 10-Q and in other of our public filings with the SEC, 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.

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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.

We incorporate the disclosure in Part I, Item 1, “Financial Statements —Note 1: The Company” by reference herein.  RAIT expects that the Sellers will sell substantially all of its assets in the Sale (which may be to the Buyer pursuant to the Purchase Agreement) and the Plan Administrator will distribute RAIT’s assets in accordance with the Plan and proceed with winding down RAIT’s business so that RAIT does not continue as a going concern. As part of this winding down, RAIT and TRFT may choose to terminate their respective REIT status.

Developments related to our financial performance that occurred during the three months ended March 31, 2019 included the following:

• For the three months ended March 31, 2019, RAIT monetized certain loans and real estate assets in the aggregate amount of $6.5 million.  These monetizations include sales of real estate assets and repayments of loans.  After selling costs and repayment of obligations secured by those assets of $4.3 million, RAIT received net proceeds of $2.2 million.

• RAIT’s cash and cash equivalents balance, as of March 31, 2019, was $39.1 million.

• RAIT’s compensation & general and administrative expenses were $5.7 million for the three months ended March 31, 2019 as compared to $9.3 million for the three months ended March 31, 2018.  The three months ended March 31, 2019 include additional legal and consulting expenses related to the resumed strategic and financial alternatives review.  The three months ended March 31, 2018 also included significant legal and consulting expenses in connection with the previous strategic alternatives process.

During the three months ended March 31, 2019, we generated GAAP net income (loss) allocable to common shares of $(11.3) million, or $(6.11) per common share-diluted, as compared to $(34.1) million, or $(18.55) per common share-diluted, during the three months ended March 31, 2018.  

Chapter 11 Bankruptcy Matters

We incorporate the disclosure in Part I, Item 1, “Financial Statements —Note 1: The Company” by reference herein. The Plan, the Disclosure Statement and the Bidding Procedures Order are attached to this report as Exhibit 2.1, Exhibit 2.2 and Exhibit 2.3, respectively and are incorporated by reference herein. Court filings and other information related to the Chapter 11 Cases are available at a website administered by the Debtors’ noticing and claims agent, Epiq Corporate Restructuring, LLC, at https://dm.epiq11.com/rait, or www.deb.uscourts,gov, the official Bankruptcy Court website.  Information on such websites is not incorporated by reference herein.

The Plan, as currently proposed, provides for the ultimate wind down of RAIT’s affairs, if the Plan, as currently proposed, is confirmed by the Bankruptcy Court and thereafter implemented by the Plan Administrator. RAIT is expected to sell substantially all of its assets in the Sale (which may be to the Buyer pursuant to the Purchase Agreement) and the Plan Administrator will then distribute RAIT’s assets in accordance with the Plan and proceed with winding down RAIT’s business so that RAIT does not continue as a going concern. Subject to the conditions and qualifiers and the disclosure set forth in the Plan and the Disclosure Statement, RAIT expects the Plan as currently proposed to result in the following:

• full payment of administrative, secured and priority claims;

• full payment of Senior Notes claims;

• full payment of general unsecured claims;

• partial payments on the 2037 Note and the 2035 Note claims in accordance with their respective RSAs; and

• no payment on preferred share or common share claims and the cancellation thereof.

The Plan is based upon the proceeds that are expected to be generated under the Purchase Agreement and is consistent with the RSAs entered into with the RSA Counterparties. If the transactions contemplated by the Purchase Agreement are not consummated pursuant to its terms or other alternative transactions are not successfully implemented, the proposed plan of reorganization may be materially and adversely affected. If the Debtors receive a higher and otherwise better bid pursuant to the Bidding Procedures approved in the Bidding Procedures Order, the Debtors would expect to accept that bid instead. If a higher and better bid were accepted as an alternative to a sale under the Purchase Agreement, that would trigger obligations to pay break-up fees and reimburse expenses as provided in the Bidding Procedures Order. RAIT approached many third parties soliciting possible strategic transactions with RAIT in the course of the 2018 Strategic Steps and the most recent process which culminated with the Purchase Agreement, and

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continues to solicit bids as part of the Bidding Procedures; however, RAIT cannot provide any assurances that a higher and otherwise better bid will be received.  

Going Concern Considerations

Please see Part I, Item 1, “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, Item 1, “Financial Statements —Note 13: Commitments and Contingencies” for a description of litigation and certain other possible events that could have a significant impact on our future operating results. As further described therein, in May 2019, we received to a $9.0 million settlement related to an ongoing litigation matter. This settlement will be recorded as a recovery of amounts previously charged off during the second quarter of 2019.

Trends That May Affect our Business

The following trends may affect our business:

Impact of Chapter 11 Cases. See “Chapter 11 Bankruptcy Matters” above for a description of our expectations as to the impact on RAIT of the Chapter 11 Cases.  

Impact of Transactions Contemplated by Purchase Agreement and the Bidding Procedures. We expect that the transactions contemplated by the Purchase Agreement, or any alternative developed as a result of the Bidding Procedures, will result in the sale of substantially all of our assets.

In addition, investors should read Management’s Discussion and Analysis of Financial Condition and Results of Operations in our 2018 Annual Report for discussion of the following items:

• Impact of the evolution of our business strategy.

• Trends relating to capital markets.

• Trends relating to investments in loans.

• Trends relating to investments in real estate.

• Interest rate environment.

• Prepayment rates.

• Increasing credit risk in our investment portfolio.

CRE Lending

RAIT’s CRE lending platform previously focused on the origination of first lien loans. We historically also 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 the payment of distributions are 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.  

Prior to our suspension of originating new loans in February 2018, our financing strategy involved the use of multiple sources of short-term financing to originate assets including warehouse facilities, repurchase agreements and bank conduit facilities.  Our ultimate goal was to finance these investments on a long-term, non-recourse, match-funded basis or to sell these assets into CMBS securitizations.  Match funding enabled us to match the interest rates and maturities of our assets with the interest rates and maturities of our financing, thereby reducing interest rate risk and funding risks in financing our portfolio on a long-term basis.

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During the three months ended March 31, 2019, we received CRE loan repayments of $60.0 million.

The tables below describe certain characteristics of our held-for-investment commercial mortgage loans, mezzanine loans, and preferred equity interests as of March 31, 2019 (dollars in thousands):

	Carrying Value		Weighted- Average Coupon	Range of Maturities	Number of Loans
Commercial Real Estate (CRE) Loans
Commercial mortgage loans	$	388,849	6.9%	Apr. 2019 to Jun. 2025		30
Mezzanine loans		21,278	13.3%	Jun. 2020 to Mar. 2023		3
Preferred equity interests		28,514	6.0%	Mar. 2023 to Jun. 2029		13
Total investments in loans	$	438,641	7.2%			46

Certain of our commercial mortgage loans, mezzanine loans and preferred equity interests permanently 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 cash flow from the property underlying the loan after the payment of property operating expenses and, if applicable, any senior debt service.  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 March 31, 2019, we held investments we characterized as cash flow loans, with a recorded investment (including accrued interest) of $70.3 million comprised of preferred equity interests totaling $34.3 million, bridge loans totaling $8.0 million and mezzanine loans totaling $28.0 million.  

As of March 31, 2019, our nonaccrual loans total $82.0 million, which is comparable to the $93.0 million of nonaccrual loans as of December 31, 2018.  As of March 31, 2019, we had a loan loss reserve of $20.7 million, representing 25.3% of our nonaccrual loans and 4.7% of our total CRE loan portfolio.  During the three months ended March 31, 2019, we recognized a benefit for loan losses of $0.6 million, which was primarily driven by payments received on impaired loans during the period.

We 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.

The charts below describe the property types and the geographic breakdown of our commercial mortgage loans, mezzanine loans, other loans, and preferred equity interests as of March 31, 2019:

    

(1) Based on carrying amount.

REO Portfolio

As of March 31, 2019, our real estate portfolio had an aggregate gross cost (carrying value) of $116.7 million ($107.0 million), comprised of $48.9 million ($40.1 million) of office properties, $49.1 million ($48.2 million) of retail properties and $18.7 million ($18.7 million) of land.

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We historically 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.

The table below describes certain characteristics of our REO Portfolio as of March 31, 2019 (dollars in thousands).    

	Investments in Real Estate (1)		Average Physical Occupancy	Units/ Square Feet/ Acres		Number of Properties
Office real estate properties	$	48,886	84.1%		349,999		3
Retail real estate properties		49,108	58.0%		506,737		3
Parcels of land		18,744	N/A		9.2		4
Total	$	116,738	—				10

(1) Based on properties owned as of March 31, 2019.

The charts below describe the property types and the geographic breakdown of our investments in real estate as of March 31, 2019:

  

(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. 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. Historically, the stated maturity of the debt issued by a securitization we have sponsored and consolidated has been between 15 and 19 years for our FL securitizations and approximately 40 years for RAIT I. 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 March 31, 2019, we had sponsored three 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 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 five 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, and RAIT 2015-FL4 Trust, or RAIT FL4, in 2017, and RAIT Preferred Funding II, Ltd., or RAIT II, in December 2018. During the year ended December 31, 2018, we deconsolidated RAIT 2015-FL5 Trust or RAIT FL5 and RAIT 2016-FL6 Trust or RAIT FL6, as previously reported in the 2018 Annual Report. We previously exercised our rights and unwound a legacy securitization we had sponsored, RAIT Preferred Funding II, Ltd., or RAIT II, in December 2018. We

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

Securitization Performance. RAIT I contains interest coverage triggers, or IC triggers, and over collateralization triggers, or OC triggers. 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 cause of the IC trigger or OC trigger failure, which may include curing payment defaults, paying down the CDO notes payable, or other actions permitted under the relevant securitization indenture. Since January 2019, the Class F/G/H OC test for RAIT I has not been met. As a result, certain interest payments that would have otherwise been distributed to the Class J notes and equity, which are owned by us, are instead being redirected to pay principal on the most senior class of CDO notes payable that are outstanding. In October 2019, the Class F/G/H IC test was not met. This failure resulted in no incremental impact to the interest payment waterfall.  The failure of these tests do not represent an event of default under the RAIT I securitization indenture.  All other applicable IC triggers and OC triggers continue to be met for RAIT I. The FL securitizations do not have IC triggers or OC triggers.

Repayment of the loans collateralizing RAIT I outside their contractual maturities is expected to be slower than 2018 levels for the foreseeable future.  

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

In March 2018, 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.

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

Our Legacy Securitization

• RAIT I—RAIT I has $157.1 million of total collateral at par value, of which $36.2 million is defaulted. The current Class F/G/H OC test is failing at 100.2% with an OC trigger of 116.2%. The current Class C/D/E OC test is passing at 128.9% with an OC trigger of 123.0%. The current Class A/B OC test is passing at 519.7% with an OC trigger of 136.1%. The current Class F/G/H IC test is failing at 98.2% with an OC trigger of 120.0%. The current Class C/D/E IC test is passing at 141.0% with an OC trigger of 140.0%. The current Class A/B IC test is passing at 607.4% with an OC trigger of 160.0%. Except with respect to the OC and IC test failures set forth herein, all of the notes issued by this securitization are performing in accordance with their terms. We currently own $38.9 million of the securities that were originally rated investment grade and $165.0 million of the non-investment grade securities issued by this securitization. Except for any interest being re-directed to more senior classes of notes as a result of the Class F/G/H OC and IC test failures referenced above, 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. We pledged $24.0 million of the securities we own issued by RAIT I as collateral for the junior subordinated note, at fair value, we issued.

Our Floating Rate CMBS Securitizations

• RAIT FL7—RAIT FL7 has $123.6 million of total collateral at par value, none 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 $58.1 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 $110.8 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 $66.6 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.

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

($ in millions)	RAIT I		FL 7		FL 8
Total Collateral Outstanding (Par)	$	157.1	$	123.6	$	110.8
Total Bonds Outstanding (Par)	$	175.0	$	123.6	$	110.8
Bonds Held by 3rd Parties Outstanding (Par)	$	99.8	$	58.1	$	66.6
RAIT Investment Grade Bond Ownership (Par) (1) (2)	$	39.0	$	-	$	-
RAIT Below Investment Grade Bond Ownership (Par) (1) (3)	$	36.5	$	65.5	$	44.2
RAIT Equity Interest Ownership (Par)	$	165.0	$	-	$	-

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

(2) RAIT ownership of RAIT I investment grade bonds is as follows: $1.2 million of Class B, $2.2 million of Class C, $2.5 million of Class D, $9.0 million of Class E, $0.5 million of Class F, $12.5 million of Class G, and $11.0 million of Class H.

(3) RAIT ownership of RAIT I below investment grade bonds is as follows: $36.5 million of Class J.

Impact of the Chapter 11 Cases on our Securitizations.  None of issuers of RAIT I, RAIT FL7 or RAIT FL8 are Debtors subject to the Chapter 11 Cases and the assets collateralizing each of these securitizations are expected to continue to be available to fund payments on the notes and equity issued by these securitizations in accordance with their respective terms.  The Purchase Agreement currently contemplates that RAIT’s retained interests in these securitizations would be directly or indirectly transferred to the Buyer and that the Buyer would acquire RAIT Partnership which serves as the collateral manager, servicer and special servicer for RAIT I and as the servicer and special servicer for RAIT FL7 and RAIT FL8. As a result, once the Transactions are completed, RAIT will not consolidate or have any interests in these securitizations.

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Results of Operations

Three Months Ended March 31, 2019 Compared to the Three Months Ended March 31, 2018

The following table sets forth information regarding our consolidated results of operations for the three months ended March 31, 2019 and 2018.

	For the Three Months Ended March 31,
	2019			2018			$ Variance			% Variance
Revenue:
Investment interest income	$	6,921		$	18,865		$	(11,944	)		-63	%
Investment interest expense		(4,163	)		(10,549	)		6,386			-61	%
Net interest margin		2,758			8,316			(5,558	)		-67	%
Property income		3,307			8,816			(5,509	)		-62	%
Fee and other income		88			1,209			(1,121	)		-93	%
Total revenue		6,153			18,341			(12,188	)		-66	%
Expenses:
Interest expense		3,996			6,771			(2,775	)		-41	%
Real estate operating expense		2,003			5,790			(3,787	)		-65	%
Property management expenses		-			1,931			(1,931	)		-100	%
General and administrative expenses:
Compensation expense		2,229			2,925			(696	)		-24	%
General and administrative expense		3,451			6,338			(2,887	)		-46	%
Total general and administrative expenses		5,680			9,263			(3,583	)		-39	%
Acquisition and integration expenses		-			133			(133	)		-100	%
Provision (benefit) for loan losses		(583	)		8,032			(8,615	)		-107	%
Depreciation and amortization expense		1,384			3,443			(2,059	)		-60	%
Total expenses		12,480			35,363			(22,883	)		-65	%
Operating (Loss) Income		(6,327	)		(17,022	)		10,695			-63	%
Interest and other income (expense), net		104			349			(245	)		-70	%
Gains (losses) on assets		303			(937	)		1,240			-132	%
Gains (losses) on extinguishments of debt		(285	)		(991	)		706			-71	%
Asset impairment		(26	)		(9,191	)		9,165			-100	%
Change in fair value of financial instruments		30			87			(57	)		-66	%
Income (loss) before taxes		(6,201	)		(27,705	)		21,504			-78	%
Income tax benefit (provision)		-			-			-		N/M
Net income (loss)		(6,201	)		(27,705	)		21,504			-78	%
(Income) loss allocated to preferred shares		(5,063	)		(6,389	)		1,326			-21	%
Net income (loss) allocable to common shares	$	(11,264	)	$	(34,094	)	$	22,830			-67	%

Revenue

Net interest margin. Net interest margin decreased $5.6 million, or 67%, to $2.8 million for the three months ended March 31, 2019 from $8.3 million for the three months ended March 31, 2018. The decrease was mainly caused by the deconsolidation of $266.5 million of loans due to the sale of our interests in RAIT FL5 and RAIT FL6 on June 27, 2018 and $356.6 million of loan repayments and sales since March 31, 2018, partially offset by related repayments of indebtedness.

Property income. Property income decreased $5.5 million to $3.3 million for the three months ended March 31, 2019 from $8.8 million for the three months ended March 31, 2018. The decrease is primarily attributable to a decrease in property income related to the sale or divestiture of 7 properties since March 31, 2018.

Fee and other income. Fee and other income decreased $1.1 million to $0.1 million for the three months ended March 31, 2019 from $1.2 million for the three months ended March 31, 2018. The decrease is primarily attributable to no property management fees being earned during the three months ended March 31, 2019 as we sold our retail property management subsidiary in August 2018.

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Expenses

Interest expense. Interest expense decreased $2.8 million, or 41%, to $4.0 million for the three months ended March 31, 2019 from $6.8 million for the three months ended March 31, 2018. The decrease is primarily attributable to $117.9 million of recourse debt reductions since March 31, 2018 and $21.4 million of repayments of indebtedness related to property dispositions since March 31, 2018.

Real estate operating expense. Real estate operating expense decreased $3.8 million, or 65%, to $2.0 million for the three months ended March 31, 2019 from $5.8 million for the three months ended March 31, 2018. The decrease is primarily attributable to a decrease in real estate operating expense related to the sale or divestiture of 7 properties since March 31, 2018.

Property management expense. Property management expense decreased $1.9 million, or 100% to $0.0 million for the three months ended March 31, 2019 from $1.9 million for the three months ended March 31, 2018.  The decrease is attributable to no property management expenses being incurred during the three months ended March 31, 2019 as we sold our retail property management subsidiary in August 2018.

Compensation expense. Compensation expense decreased $0.7 million to $2.2 million for the three months ended March 31, 2019 from $2.9 million for the three months ended March 31, 2018.  The primary driver of the decrease was a decrease in the number of employees.

General and administrative expense. General and administrative expense decreased $2.9 million, or 46%, to $3.5 million for the three months ended March 31, 2019 from $6.3 million for the three months ended March 31, 2018. This is primarily due to a decrease in professional fees as compared to the same period in 2018 that were incurred as part of our initial strategic alternatives process. Additionally, general and administrative expenses decreased due to a reduction in the size of RAIT.

Provision (benefit) for loan losses. During the three months ended March 31, 2019, we recognized a benefit for loan losses of $0.6 million primarily driven by the receipt of payments on several impaired loans.

Depreciation and amortization expense. Depreciation and amortization expensedecreased$2.1 million, or 60%, to $1.4 million for the three months ended March 31, 2019 from $3.4 million for the three months ended March 31, 2018. The decrease is primarily attributable to a decrease in depreciation and amortization expense related to the sale or divestiture of 7 properties since March 31, 2018.

Other income (expense)

Gains (losses) on assets. During the three months ended March 31, 2019, we recognized a $0.3 million gain on assets due to an increase in fair value on our held for sale loans.

Gains (losses) on extinguishment of debt. During the three months ended March 31, 2019, we recognized a loss on extinguishment of debt of $0.3 million, primarily due to the write-off of the deferred financing costs associated with indebtedness that was repaid.

Change in fair value of financial instruments. During the three months ended March 31, 2019, the change in fair value of financial instruments increased our net income by $0.03 million. The fair value adjustments we recorded were as follows (dollars in thousands):

Description	For the Three Months Ended March 31, 2019		For the Three Months Ended March 31, 2018
Change in fair value of junior subordinated notes	$	30	$	(269	)
Change in fair value of derivatives		—		356
Change in fair value of financial instruments	$	30	$	87

The changes in the fair value for the junior subordinated notes for which the fair value option was elected for the three months ended March 31, 2019 and 2018 was primarily attributable to changes in interest rates. The changes in the fair value of derivatives for the three months ended March 31, 2019 and 2018 was primarily attributable to changes in interest rates.

Liquidity and Capital Resources

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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 pay claims in accordance with orders of the Bankruptcy Court and the terms of the Plan, once confirmed;

• to pay any post-petition liabilities of the Debtors;

• to pay our expenses and any other liabilities, 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.

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

• the use of proceeds received from the sale of substantially all our assets under the Purchase Agreement or any alternative bid accepted under the Bidding Procedures, including our cash and cash equivalents; and

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

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, Item 1, “Financial Statements —Note 2: Summary of Significant Accounting Policies—Going Concern Considerations”, there is substantial doubt about our ability to continue to operate as a going concern.

In evaluating RAIT’s potential cash requirements over the next 12 months, management considered the impacts of the Chapter 11 Cases, including the Events of Default described in Part I, Item 1, “Financial Statements —Note 1: The Company”, and RAIT’s recurring costs of operations. As described in Part I, Item 1, “Financial Statements —Note 1: The Company”, the filing of the Chapter 11 Cases with the Bankruptcy Court triggered the Bankruptcy Events of Default and, each of the Debt Instruments provides that upon the occurrence of such an Event of Default, all obligations of RAIT and/or its applicable affiliates thereunder were accelerated and the principal and accrued interest due thereunder was automatically and immediately due and payable and any efforts to enforce such payment obligations under the Debt Instruments are automatically stayed and the respective creditors’ rights of enforcement in respect of the Debt Instruments are limited.  As of the date hereof, RAIT and/or its applicable affiliates had (i) $65.4 million principal amount of 7.125% Senior Notes outstanding, (ii) $56.3 million principal amount of 7.625% Senior Notes outstanding, (iii) $25.1 million principal amount of the 2037 Note outstanding, and (iv) $18.7 million principal amount of the 2035 Note outstanding. Furthermore, RAIT’s failure to pay the principal amount of 7.125% Senior Notes by their maturity date on August 30, 2019 constituted an Event of Default under the Supplemental Indenture.

RAIT’s current sources of liquidity, including its current cash and cash equivalents balance, are not sufficient to satisfy RAIT’s obligations arising over the next twelve months. RAIT expects to sell substantially all of its assets pursuant to the Purchase Agreement under Section 363 of the Bankruptcy Code and the Bidding Procedures Order for a purchase price of $174.4 million, adjusted as contemplated by the Purchase Agreement, including the assumption of certain liabilities. RAIT’s proposed Plan provides for the ultimate wind down of RAIT’s affairs once the transactions contemplated by the Purchase Agreement and the Bidding Procedures are completed and the Plan is confirmed by the Bankruptcy Court.

Due to the inherent risks and significant uncertainties associated with the completion of the transactions under the Purchase Agreement, the Plan, the Chapter 11 Cases, and RAIT’s recurring costs of operations over the next twelve months, there is substantial doubt about RAIT’s ability to continue as a going concern within one year after the date that these financial statements are issued.

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Cash Flows

As of March 31, 2019 and 2018, we maintained cash and cash equivalents of approximately $39.1 million and $84.5 million, respectively, and restricted cash of approximately $65.0 million and $153.0 million, respectively. Our cash and cash equivalents and restricted cash were generated from the following activities (dollars in thousands):

	For the Three Months Ended March 31,
	2019			2018
Cash flow from operating activities	$	(5,699	)	$	(2,314	)
Cash flow from investing activities		55,611			166,047
Cash flow from financing activities		(51,293	)		(137,582	)
Net change in cash and cash equivalents		(1,381	)		26,151
Cash and cash equivalents at beginning of period		105,520			211,294
Cash and cash equivalents at end of period	$	104,139		$	237,445

Cash flow from operating activities for the three months ended March 31, 2019, as compared to the same period in 2018, decreased $3.4 million primarily due to lower earnings as a result of lower loan volumes and the timing of payments for various accounts payable, accrued expenses and other liabilities.

The cash inflow for investing activities for the three months ended March 31, 2019 was substantially due to loan repayments of $60.0 million.  The cash inflow for investing activities for the three months ended March 31, 2018 was substantially due to loan repayments of $136.7 million and loan sales of $89.6 million outpacing new investments in loans of $50.5 million.

The cash outflow from our financing activities during the three months ended March 31, 2019 was primarily due to repayments of indebtedness of $51.2 million.  The cash outflow from our financing activities during the three months ended March 31, 2018 was primarily due to repayments of indebtedness of $121.2 million. 

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 conduit loans, and changes in assets and liabilities. During the three months ended March 31, 2019, we paid distributions of $0.03 million upon the vesting of restricted common share awards granted to our employees, representing the aggregate amount of dividends paid on such shares while these awards were unvested, and generated cash flows from operating activities, before acquisition expenses, origination and sale of loans, and changes in assets and liabilities of $(4.7) million. The excess distributions were funded through cash flow from previously available cash.

Capitalization

A discussion of our capitalization is incorporated by reference to Note 5: Indebtedness and Note 9: Shareholders’ Equity of Notes to Consolidated Financial Statements for information regarding our capitalization.

Due to our expectation that RAIT will wind down its business as described above after the confirmation and implementation of the Plan, the current trading levels of our publicly traded securities and other factors, we do not expect to generate liquidity from future offerings of our securities. In addition, we do not currently meet the eligibility requirements to use our shelf registration statement on Form S-3 to offer securities on our own behalf for cash.

Off-Balance Sheet Arrangements and Commitments

There have been no material changes in off-balance sheet arrangements or commitments during the three months ended March 31, 2019 from the disclosures included in our 2018 Annual Report.

Critical Accounting Estimates and Policies

Our 2018 Annual Report contains a discussion of our critical accounting policies. On January 1, 2019 we adopted a new accounting pronouncement and revised our accounting policies accordingly. 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

We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information required under this item.

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Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) that are designed to ensure that information required to be disclosed in our Exchange Act reports is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer, or CEO, and our Chief Financial Officer, or CFO, 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.  Also, projections of any evaluation of effectiveness of future periods are subject to the risk that controls may become inadequate because of changes in conditions or that the degree of compliance with the policies and procedures may deteriorate.  

Under the supervision of our CEO and CFO 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 CEO and CFO concluded that our disclosure controls and procedures were 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, 2018 related to an ineffective continuous risk assessment process and monitoring activities to reflect changes in our business operations, our CEO and CFO concluded that our disclosure controls and procedures were not effective at March 31, 2019.  

Management is in the process of remediating the material weakness. Management is continuing its risk assessment and monitoring activities and testing of its enhanced controls to ensure timely identification of changes in business operations such that necessary changes in financial reporting processes and related internal controls continue to be implemented.  

Notwithstanding the material weakness discussed above, 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 March 31, 2019, 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, disputes arising out of our loan portfolio, discrimination claims, negligence claims, 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.

The Chapter 11 Cases

For a description of the Chapter 11 Cases, see Part I, Item 1, “Financial Statements —Note 1: The Company”, which is incorporated herein by reference.

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 the following defendants, or the Defendants, CWCapital Asset Management, LLC, or CWCapital, Wells Fargo Bank N.A., or Wells Fargo, and U.S. Bank N.A., or U.S. Bank, in the Supreme Court of the State of New York, County of New York, or the Court. This action concerns a loan, or the mortgage loan, to a non-party borrower, or the borrower, made in 2007.  RAIT II purchased $18.5 million of the mortgage loan for which it held 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 their 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 parties have since concluded discovery, and Defendants filed a motion for summary judgment on March 18, 2019.  That motion was adjourned as a result of the Settlement Agreement and Agreement to Discontinue referenced below, and the litigation is scheduled to be discontinued with prejudice by Stipulation after TRFT receives payment under the Settlement Agreement.   

On December 17, 2018, RAIT II assigned its interest in note B to TRFT in connection with TRFT’s redemption of RAIT II described in the 2018 Annual Report, see Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Securitization Summary.”  On April 8, 2019, the Court granted RAIT II’s motion to substitute TRFT as the plaintiff in this litigation.

Effective May 8, 2019, TRFT, RAIT II, CWCapital and U.S. Bank entered into a Settlement Agreement and Mutual Release, or the Settlement Agreement.  The Settlement Agreement provides (a) that CWCapital and U.S. Bank shall pay, or cause to be paid by the related securitization trust, $9.0 million, or the Settlement Payment, to TRFT within ten calendar days, (b) that the parties will execute and, after that Settlement Payment is received by TRFT, TRFT will file a Stipulation of Discontinuance with Prejudice, or the Stipulation, with the Court dismissing this litigation, and (c) for mutual releases between TRFT and RAIT II, on the one hand, and the Defendants, on the other hand, of claims relating to this litigation. Also, effective May 8, 2019, TRFT, RAIT II and Wells Fargo entered into an Agreement to Discontinue and Dismiss Litigation with Prejudice, or the Agreement to Discontinue.  The Agreement to Discontinue also provides (a) that TRFT, RAIT II and Wells Fargo shall sign the Stipulation, (b) that, after the Settlement Payment is received by TRFT, TRFT will file the Stipulation and (c) for mutual releases between TRFT and RAIT II, on the one hand, and Wells Fargo, on the other hand, of claims relating to this litigation. TRFT received the payment contemplated by the Settlement Agreement in May 2019.

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Item 1A. Risk Factors

There have not been any material changes from the risk factors previously disclosed in Item 1A—“Risk Factors” in our 2018 Annual Report except as set forth below or as stated under Part I, Item 2, “Management’s Discussion and Analysis of Financial Condition and Results of Operations-Forward-Looking Statements” above.

The Debtors are subject to the risks and uncertainties associated with Chapter 11 cases.

For the duration of the Chapter 11 Cases, the Debtors’ ability to operate their business as debtors in possession are subject to the risk and uncertainties associated with bankruptcy. These risks include the following:

• The Debtors’ ability to develop, negotiate, confirm and consummate the Plan, or alternative restructuring;

• The Debtors’ ability to obtain Bankruptcy Court approval with respect to motions filed in the Chapter 11 Cases from time to time;

• The Debtors’ ability to complete the transactions contemplated by the Purchase Agreement and the Bidding Procedures Order;

• The Debtors’ ability to maintain relationships with third parties;

• The Debtors’ ability to execute and fund their operations;

• The Debtors’ ability to retain management and other employees;

• The ability of third parties to seek and obtain Bankruptcy Court approval to terminate contracts and other agreements with the Debtors; and

• The actions and decisions of the Debtors’ creditors and other third parties who have interests in the Chapter 11 Cases that may be inconsistent with the Debtors’ plans.

These risks and uncertainties could affect the Debtors’ business and operations in various ways.  For example, negative events associated with the Chapter 11 Cases could adversely affect the Debtors’ relationships with third parties, which in turn could adversely affect the Debtors’ operations and financial condition. Furthermore, the Debtors need the prior approval of the Bankruptcy Court for transactions outside the ordinary course of business, which may limit the Debtors’ ability to respond timely to certain events or take advantage of certain opportunities.  Because of the risks and uncertainties associated with the Chapter 11 Cases, the Debtors cannot accurately predict or quantify the ultimate impact of the events that will occur during the Chapter 11 Cases that may be inconsistent with the Debtors’ plans.

Operating under the jurisdiction of the Bankruptcy Court for a long period of time would likely increase related expenses and thereby reduce amounts payable to the Debtors’ stakeholders under the Plan.

The Debtors have incurred and expect to continue to incur substantial additional expenses related to the Chapter 11 Cases, including the expenses of their own financial and legal advisors and those of the unsecured creditors committee appointed in the Chapter 11 Cases.  A long period of operations under Bankruptcy Court protection would likely increase the amount paid by the Debtors for these expenses and thereby reduce amounts ultimately payable to the Debtors’ stakeholders under the Plan.

Operating under the jurisdiction of the Bankruptcy Court for a long period of time may harm the Debtors’business.

The Debtors’ future results are dependent upon the successful confirmation and implementation of a plan of reorganization. A long period of operations under Bankruptcy Court protection could have a material adverse effect on the Debtors’ business, financial condition, results of operations and liquidity. So long as the Chapter 11 Cases continue, the Debtors’ senior management will be required to spend a significant amount of time and effort dealing with the reorganization instead of focusing exclusively on the Debtors’ business operations. A prolonged period of operating under Bankruptcy Court protection also may make it more difficult to retain management and other key personnel necessary to the Debtors’ continued operation in the ordinary course. Furthermore, the Debtors cannot predict the ultimate amount of all settlement terms for the liabilities that will be subject to a plan of reorganization.

The Debtors’long-term liquidity requirements and the adequacy of their capital resources are difficult to predict at this time.

The Debtors face uncertainty regarding the adequacy of their liquidity and capital resources and have extremely limited, if any, access to additional financing. In addition to the cash requirements necessary to fund ongoing operations, the Debtors have incurred significant professional fees and other costs in connection with their evaluation of strategic alternatives and preparation for the Chapter 11 Cases and expect that the Debtors will continue to incur significant professional fees and costs throughout the Chapter 11 Cases. The Debtors cannot assure you that cash on hand and cash flow from operations will be sufficient to continue to fund their operations and allow the Debtors to satisfy their obligations related to the Chapter 11 Cases.

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The Debtors may experience increased levels of employee attrition as a result of the Chapter 11 Cases.

As a result of the Chapter 11 Cases, the Debtors may experience increased levels of employee attrition, and employees likely will face considerable distraction and uncertainty. A loss of key personnel or material erosion of employee morale could adversely affect the Debtors’ operations. The loss of services of members of the Debtors’ senior management team could impair their ability to continue to operate in the ordinary course, which would be likely to have a material adverse effect on the Debtors’ business, financial condition and results of operations.

The pursuit of the Chapter 11 Cases has consumed and will continue to consume a substantial portion of the time and attention of the Debtors’ management, which may have an adverse effect on the Debtors’ business and results of operations, and the Debtors may face increased levels of employee attrition.

While the Chapter 11 Cases continue, the Debtors’ management will be required to spend a significant amount of time and effort focusing on the cases. This diversion of attention may materially adversely affect the conduct of the Debtors’ business, and, as a result, the Debtors’ financial condition and results of operations, particularly if the Chapter 11 Cases are protracted.

In certain instances, a Chapter 11 case may be converted to a case under Chapter 7 of the Bankruptcy Code.

There can be no assurance as to whether the Debtors will successfully reorganize and wind down under the Chapter 11 Cases or, if the Debtors do successfully reorganize and wind down, as to when that would be contemplated.

 If the Bankruptcy Court finds that it would be in the interest of creditors and/or the Debtors, the Bankruptcy Court may convert the Chapter 11 Cases to cases under Chapter 7 of the Bankruptcy Code. In such event, a Chapter 7 trustee would be appointed or elected to liquidate the Debtors’ assets for distribution in accordance with the priorities established by the Bankruptcy Code.

Upon the closing of the transactions contemplated by the Purchase Agreement and the Bidding Procedures, the Debtors will have sold substantially all of their operating assets.

Upon the closing of the transactions contemplated by the Purchase Agreement and the Bidding Procedures, the Debtors will have sold substantially all of their operating assets. Accordingly, the Debtors’ only sources of liquidity will be cash on hand.

The Plan currently contemplates no payments on account of the outstanding common shares and preferred shares of RAIT Financial Trust and Taberna Realty Finance Trust and the cancellation of all such shares.  As a result, holders of such common and preferred shares are likely to suffer a total loss of their investment.

As contemplated by the bankruptcy risks described in the 2018 Annual Report, the Plan as currently contemplated sets forth the level of expected recovery for the claims of each of the Debtors’ stakeholders. The Plan provides that no payment will be made on account of the outstanding common shares and outstanding preferred shares of RAIT Financial Trust and Taberna Realty Finance Trust and that these shares will be cancelled upon confirmation of the Plan. We cannot provide any assurance that a higher and otherwise better bid will result from the Bidding Procedures and that, even if such a bid did result, whether it would be sufficient to result in any payment on account of such outstanding common shares and/or such outstanding preferred shares.

If the Sale pursuant to the Bidding Procedures does not occur (including the Transactions contemplated by the Purchase Agreement), RAIT expects that the proceeds from any liquidation of RAIT would result in significantly lower distributions to RAIT’s stakeholders.

RAIT estimated the likely proceeds and the timing of their receipt if RAIT engaged in an orderly liquidation of its assets and winding down of its affairs if the Transactions contemplated by the Purchase Agreement and the Bidding Procedures did not occur. Based on that analysis, RAIT expects that the proceeds from any such liquidation of RAIT would result in significantly lower distributions to RAIT’s stakeholders and such distributions would be made over a much longer period of time. As a result, in the event the Sale pursuant to the Bidding Procedures did not occur (including the Transactions contemplated by the Purchase Agreement) for any reason, the likelihood of losses on any securities issued by RAIT would increase.

The Implementation of the Plan is subject to factors set forth in the Plan.

Article V “Certain Factors to be Considered Regarding the Plan” of the Plan, included as Exhibit 2.1 to this Quarterly Report on Form 10-Q, is incorporated herein by reference.

52

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 ended March 31, 2019 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
01/01/2019 to 01/31/2019		-		-		-		-
02/01/2019 to 02/28/2019		911		1.89		911		-
03/01/2019 to 03/31/2019		-		-		-		-
Total		911	$	1.89		911		-

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

Item 3. Defaults Upon Senior Securities

(a) As described in Part I, Item 1, “Financial Statements—“Note 5—Indebtedness”, on August 20, 2019, RAIT received a notice of default relating to the 7.125% Senior Notes and the 7.625% Senior Notes from the indenture trustee. The notice stated that RAIT has defaulted under Section 4.02 of each of the supplemental indentures that govern those Senior Notes because RAIT failed to timely file the quarterly report for the fiscal quarter ended March 31, 2019 that RAIT is required to file with the Securities and Exchange Commission. The notice demanded RAIT remedy such default. Under the supplemental indentures, the default will not become an “Event of Default” unless RAIT failed to remedy the default within 60 days after the date on which notice was received. If such an “Event of Default” occurred, then in lieu of acceleration of the repayment obligation, RAIT may at its option elect to pay additional interest on the respective Senior Note at an annual rate equal to 0.50% of the principal amount of the respective Senior Note for up to one year after the occurrence of such “Event of Default”.  Notwithstanding the foregoing, subject to certain specific exceptions under the Bankruptcy Code, the Chapter 11 Cases automatically stayed most judicial or administrative actions against the Debtors as well as efforts by creditors to collect on or otherwise exercise rights or remedies with respect to pre-petition claims.

As described in Part I, Item 1, “Financial Statements —Note 1: The Company”, the filing of the Chapter 11 Cases with the Bankruptcy Court triggered the Bankruptcy Events of Default and all obligations of RAIT and/or its applicable affiliates thereunder were accelerated and the principal and accrued interest due thereunder was automatically and immediately due and payable and any efforts to enforce such payment obligations under the Debt Instruments are automatically stayed and the respective creditors’ rights of enforcement in respect of the Debt Instruments are limited.  As of the date hereof, RAIT and/or its applicable affiliates had (i) $65.4 million principal amount of 7.125% Senior Notes outstanding (and $1.2 million of accrued interest payable thereon through, but excluding, the Bankruptcy Cases petition filing date in accordance with the Bankruptcy Code), (ii) $56.3 million principal amount of 7.625% Senior Notes outstanding (and $0.6 million of accrued interest payable thereon through, but excluding, the Bankruptcy Cases petition filing date in accordance with the Bankruptcy Code), (iii) $25.1 million principal amount of the 2037 Note outstanding (and $0.1 million of accrued interest payable thereon through, but excluding, the Bankruptcy Cases petition filing date in accordance with the Bankruptcy Code), and (iv) $18.7 million principal amount of the 2035 Note outstanding (and $0.2 million of accrued interest payable thereon through, but excluding, the Bankruptcy Cases petition filing date in accordance with the Bankruptcy Code). Furthermore, as described in Part I, Item 1, “Financial Statements—Note 1: The Company”, RAIT’s failure to pay the principal amount of 7.125% Notes by their maturity date on August 30, 2019 constituted an “Event of Default” under the Supplemental Indenture.

(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, which gives the holders of those shares the right to seek to have two representatives elected to the Board. The table below details the arrearage of our preferred stock dividends, as of March 31, 2019.

($ in millions)	Series A		Series B		Series C
Dividends in arrears	$	11	$	5	$	4

53

Item 6. Exhibits

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

54

EXHIBIT INDEX

Exhibit Number	Description of Documents
2.1	Debtors’ Joint Chapter 11 Plan (the “Chapter 11 Plan”) filed October 14, 2019 in the cases consolidated as In re: RAIT Funding, LLC, a Delaware limited liability company, et. al.  in the United States Bankruptcy Court for the District of Delaware (the “Bankruptcy Court”).  Filed herewith.
2.2	Disclosure Statement for the Chapter 11 Plan (the “Disclosure Statement”) filed October 14, 2019 in the Bankruptcy Court.  Filed herewith.
2.3	Order of the Bankruptcy Court filed October 2, 2019 (i) establishing the bidding procedures, including approval of a break-up fee and expense reimbursement and (ii) granting related relief. Filed herewith.
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).
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).

55

Exhibit Number	Description of Documents
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, formerly known as ARS VI Investor I, LLC (“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 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. (“RAIT Partnership”), Taberna Realty Finance Trust, (“TRFT”) and RAIT Asset Holdings IV, LLC (“RAIT IV”). 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, TRFT, and RAIT IV. 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, TRFT and RAIT IV. 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, RAIT IV 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).
4.5.16	Termination Agreement dated as of June 27, 2018 among RAIT, RAIT Partnership, TRFT, RAIT IV 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).

56

Exhibit Number	Description of Documents
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).
4.7	Indenture, dated as of June 23,  2017 among RAIT 2017-FL7 Trust, as issuer, RAIT Partnership, as advancing agent, and Wells Fargo Bank, National Association, as trustee, paying agent, calculation agent, transfer agent, custodian, backup advancing agent and note registrar. Incorporated by reference to RAIT’s Form 10-K for the fiscal year ended December 31, 2018 (File No. 1-14760).
4.8	Indenture, dated as of November 29, 2017 among RAIT 2017-FL8 Trust, as issuer, RAIT Partnership, as advancing agent, and Wells Fargo Bank, National Association, as trustee, paying agent, calculation agent, transfer agent, custodian, backup advancing agent and note registrar.  Incorporated by reference to RAIT’s Form 10-K for the fiscal year ended December 31, 2018 (File No. 1-14760).
	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.
10.1.1	Equity and Asset Purchase Agreement (the “Purchase Agreement”) dated August 30, 2019 among RAIT, RAIT General, Inc., RAIT Limited, Inc., Taberna Realty Finance Trust (“TRFT”), as sellers (together, the “Sellers”), with CF RFP Holdings LLC, as buyer (“Buyer”).  Filed herewith.
10.1.2	Amendment No. 1 to the Purchase Agreement dated October 4, 2019 among the Sellers and the Buyer.  Filed herewith.
10.2.1	Restructuring and Plan Support Agreement dated August 29, 2019 among RAIT, TRFT, as borrower, and TP Management LLC, in its capacity as delegate collateral manager, relating to that certain Junior Subordinated Note due 2035 issued by TRFT.  Filed herewith.
10.2.2	Restructuring and Plan Support Agreement dated August 31, 2019 among RAIT, as guarantor, RAIT Funding, LLC (“RAIT Funding”), as borrower, and Kodiak CDO I., Ltd., as holder of certain preferred securities, relating to that certain Junior Subordinated Note due 2037 issued by RAIT Funding.  Filed herewith.
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 March 31, 2019 is formatted in XBRL interactive data files: (i) Consolidated Statements of Operations for the three months ended March 31, 2019 and 2018; (ii) Consolidated Balance Sheets as of March 31, 2019 and December 31, 2018; (iii) Consolidated Statements of Comprehensive Income (Loss) for the three months ended March 31, 2019 and 2018; (iv) Consolidated Statement of Changes in Equity for the three months ended March 31, 2019 and 2018; (v) Consolidated Statements of Cash Flows for the three months ended March 31, 2019 and 2018; and (vi) Notes to Unaudited Consolidated Financial Statements, filed herewith.

57

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 7, 2019	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 7, 2019	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)

58

EX-10.1.1

Exhibit 10.1.1

EQUITY AND ASSET PURCHASE AGREEMENT

by and among

RAIT FINANCIAL TRUST,

RAIT General, Inc.,

RAIT Limited, Inc.,

Taberna Realty Finance Trust,

as Sellers

and

CF RFP Holdings LLC

as Buyer

Dated as of August 30, 2019

TABLE OF CONTENTS

Page

ARTICLE I DEFINITIONS2

Section 1.1 Specific Definitions2

Section 1.2 Other Terms16

Section 1.3 Other Definitional Provisions16

ARTICLE II THE PURCHASE AND SALE16

Section 2.1 Purchase and Sale of Assets16

Section 2.2 Assumed Liabilities17

Section 2.3 Escrowed Funds18

Section 2.4 Consideration18

Section 2.5 Allocation of Purchase Price19

Section 2.6 Purchase Price Calculations19

Section 2.7 Closing20

Section 2.8 Deliveries at Closing20

Section 2.9 Distribution of Equity Interests in RAIT Excluded Subsidiaries and Excluded Assets22

ARTICLE III REPRESENTATIONS AND WARRANTIES OF SELLERS22

Section 3.1 [Reserved]22

Section 3.2 Organization; Capitalization; Subsidiaries; Authority and Enforceability22

Section 3.3 Financial Statements; SEC Documents; Internal Controls25

Section 3.4 Absence of Certain Changes26

Section 3.5 Material Contracts28

Section 3.6 Litigation30

Section 3.7 Compliance with Laws and Court Orders31

Section 3.8 Properties31

Section 3.9 Intellectual Property33

Section 3.10 Licenses and Permits34

Section 3.11 Finders’ Fees34

Section 3.12 Labor and Employment Matters34

Section 3.13 Employee Benefit Plans36

Section 3.14 Environmental Matters37

Section 3.15 Affiliated Transactions38

i

Section 3.16 Insurance39

Section 3.17 Information Technology39

Section 3.18 Sensitive Payments40

Section 3.19 Securitizations40

Section 3.20 Tax Related Representations and Warranties41

Section 3.21 Special Purpose Entities45

Section 3.22 No Conflict45

Section 3.23 Churchill45

Section 3.24 Disclosure46

Section 3.25 RMC Matters46

Section 3.26 M&I Credit Facility and UCC46

Section 3.27 No Other Representations and Warranties46

ARTICLE IV REPRESENTATIONS AND WARRANTIES OF BUYER47

Section 4.1 [Reserved]47

Section 4.2 Organization and Good Standing47

Section 4.3 Authority and Enforceability47

Section 4.4 No Contravention47

Section 4.5 Litigation47

Section 4.6 Finders’ Fee47

Section 4.7 Availability of Funds47

Section 4.8 No Collusion48

Section 4.9 Investment Purpose48

Section 4.10 Condition of the Business48

Section 4.11 Affiliation with Debtors48

ARTICLE V CERTAIN COVENANTS AND AGREEMENTS OF SELLERS AND BUYER49

Section 5.1 Agreements of the RAIT Entities49

Section 5.2 Taxes52

Section 5.3 Structure; Transfer Election55

Section 5.4 Notification of Certain Matters56

Section 5.5 Supplement to Schedules56

Section 5.6 Good Faith Cooperation; Further Assurances56

Section 5.7 Employees; Benefit Plans57

Section 5.8 Information Regarding Assigned Contracts58

Section 5.9 Regulatory Approval58

ii

Section 5.10 Churchill Assets59

Section 5.11 Redemption of FL7 and FL8 Securitizations59

Section 5.12 Intercompany Contracts59

Section 5.13 No Shop60

Section 5.14 Tax Engagement60

Section 5.15 Tax Returns60

Section 5.16 Reasonable Efforts60

Section 5.17 REIT Status61

ARTICLE VI CONDITIONS TO CLOSING61

Section 6.1 Conditions to Obligations of the Parties61

Section 6.2 Conditions to Obligation of Buyer62

Section 6.3 Conditions to Obligation of Sellers63

ARTICLE VII TERMINATION64

Section 7.1 Buyer Termination Events64

Section 7.2 Seller Termination Events65

Section 7.3 Mutual Termination67

Section 7.4 Notice of Termination67

Section 7.5 Termination Payments67

Section 7.6 Abandonment68

ARTICLE VIII MISCELLANEOUS69

Section 8.1 Non-Survival of Representations and Warranties; Certain Covenants69

Section 8.2 Amendment and Waiver69

Section 8.3 Expenses69

Section 8.4 Limitation on Liability69

Section 8.5 Specific Performance70

Section 8.6 Assignment70

Section 8.7 Entire Agreement70

Section 8.8 Fulfillment of Obligations70

Section 8.9 Parties in Interest: No Third Party Beneficiaries70

Section 8.10 Schedules70

Section 8.11 Counterparts71

Section 8.12 Headings71

Section 8.13 Notices71

Section 8.14 No Strict Construction72

iii

Section 8.15 GOVERNING LAW; SUBMISSION TO JURISDICTION; SELECTION OF FORUM; WAIVER OF JURY TRIAL72

Section 8.16 Severability73

Section 8.17 Exculpatory Provision73

iv

This EQUITY AND ASSET PURCHASE AGREEMENT (together with all exhibits, schedules, annexes, appendices and attachments hereto, as amended, supplemented, amended and restated or otherwise modified from time to time in accordance with the terms hereof, this “Agreement”), dated as of August 30, 2019, is entered into by and between: (a) RAIT Financial Trust, a Maryland real estate investment trust (“RAIT Parent”), RAIT General, Inc., a Maryland corporation (“RAIT General”), RAIT Limited, Inc., a Maryland corporation (“RAIT Limited”), and Taberna Realty Finance Trust, a Maryland real estate investment trust (“Taberna Realty” and, together with RAIT Parent, RAIT General and RAIT Limited, collectively, “Sellers” and each, a “Seller”); and (b) CF RFP Holdings LLC , a Delaware limited liability company (“Buyer”). Sellers and Buyer are referred to herein collectively as the “Parties” and individually as a “Party”. All capitalized terms used herein but not otherwise defined shall have the meanings set forth in Article I hereof.

WITNESSETH:

WHEREAS, RAIT Parent and its Subsidiaries (collectively, the “RAIT Entities”) are presently engaged in the business of managing and servicing a portfolio of commercial real estate loans and real estate properties;

WHEREAS, each of RAIT Parent and certain Subsidiaries of RAIT Parent, including RAIT General, RAIT Limited, Taberna Realty, RAIT Funding, LLC, a Delaware limited liability company, RAIT JV TRS, LLC, a Delaware limited liability company, and RAIT JV TRS Sub, LLC, a Delaware limited liability company, and such other direct or indirect Subsidiaries of RAIT Parent, if any, as may be mutually agreed by RAIT Parent and Buyer (such Subsidiaries each a “Debtor Subsidiary”, and collectively the “Debtor Subsidiaries”, and together with RAIT Parent, each, individually a “Debtor” and, collectively, the “Debtors”) will commence voluntary bankruptcy cases for the Debtors (to be jointly administered) (the “Chapter 11 Cases”) under chapter 11 of the Bankruptcy Code in the United States Bankruptcy Court for the District of Delaware (the “Bankruptcy Court”) within three (3) Business Days after the date hereof;

WHEREAS, upon the terms and subject to the conditions set forth herein, and pursuant to section 363 of the Bankruptcy Code, Buyer wishes to acquire and purchase, directly or indirectly (including through one or more Affiliates of Buyer) from Sellers, the Equity Interests in the Acquired RAIT Entities (each as defined below) and the other Purchased Assets (as defined below), and Sellers desire to sell, assign, transfer and convey and deliver such Equity Interests and the other Purchased Assets to Buyer, which acquisition shall occur through (i) the purchase, as of Closing, of 100% of the Equity Interests in RAIT Partnership and (ii) if Buyer so elects pursuant to the Transfer Election (as defined below), the purchase from RAIT Parent, as of Closing, of 100% of the Equity Interests in one or more of the Acquired RAIT Entities that are currently indirect Subsidiaries of RAIT Parent (the “Transaction”);

WHEREAS, Sellers and Buyer have determined that it is advisable and in their respective best interests to consummate, subject to entry of the Sale Order by the Bankruptcy Court, the transactions contemplated by this Agreement, upon the terms and subject to the conditions provided for herein;

NOW, THEREFORE, in consideration of the promises, mutual covenants and agreements set forth herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, each of the Parties, intending to be legally bound, agrees as follows:

ARTICLE I

DEFINITIONS

Section 1.1Specific Definitions.  As used in this Agreement, the following terms shall have the meanings set forth or referenced below:

“Acquired Assets” has the meaning set forth in Section 2.1(a)(iii) hereof.

“Acquired Business” means, collectively, (i) the business conducted by the Acquired RAIT Entities and (ii) the business conducted by the other applicable RAIT Entities with respect to the Purchased Assets and the Assumed Liabilities.

“Acquired Equity Interests” has the meaning set forth in Section 3.2(g) hereof.

“Acquired RAIT Entities” means each RAIT Entity listed on Schedule 3.2(g)-1 hereof under the heading “Acquired RAIT Entity”.

“Actions or Proceedings” has the meaning set forth in Section 3.6(a) hereof.

“Affiliate” means, with respect to any Person, any other Person directly or indirectly controlling, controlled by or under common control with such Person; provided, however, that notwithstanding the foregoing, an Affiliate shall not include any “portfolio company” or “portfolio investment” (as such terms are customarily used among institutional investors) of any Person. For the purpose of this definition, the term “control” (including, with correlative meanings, the terms “controlling”, “controlled by” and “under common control with”), as used with respect to any Person, means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such Person, whether through the ownership of voting securities, by contract or otherwise.

“Agreement” has the meaning set forth in the preamble of this Agreement.

“Allocation Schedule” has the meaning set forth in Section 2.5 hereof.

“Alternative Transaction” means any reorganization, merger, consolidation, tender offer, exchange offer, business combination, joint venture, partnership, sale of a material portion of assets or equity, financing (debt or equity), liquidation, recapitalization or restructuring of one or more of the Debtors (including, for the avoidance of doubt, a transaction premised on a sale of a material portion of assets or equity under section 363 of the Bankruptcy Code or a plan of reorganization), whether in a single transaction or a series of transactions, other than (a) the Transaction or (b) any plan of reorganization that seeks to distribute the proceeds of the Transaction following the consummation thereof.

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“Asset-Backed Security” has the meaning assigned to such term in Section 3(a)(79) of the Securities Exchange Act of 1934, as amended.

“Assigned Contracts” has the meaning set forth in Section 2.1(a)(iv) hereof.

“Assignment and Assumption Agreement” has the meaning set forth in Section 2.8(a)(iii) hereof.

“Assumed Liabilities” has the meaning set forth in Section 2.2 hereof.

“Back-Up Bidder” has the meaning set forth in the Bidding Procedures.

“Bankruptcy Code” means the Bankruptcy Reform Act of 1978, as codified in title 11 of the United States Code, 11 U.S.C. §§ 101-1532, as in effect on the Petition Date, together with all amendments and modifications thereto that are subsequently made applicable to the Chapter 11 Cases.

“Bankruptcy Court” has the meaning set forth in the recitals to this Agreement.

“Bankruptcy Milestones” means each of the milestones set forth in Exhibit A hereto, each of which may be extended upon mutual written agreement of RAIT Parent and Buyer.

“Base Purchase Price” means $129,250,000.

“Bidding Procedure Documents” means the Bidding Procedures, the Bidding Procedures Motion, the Bidding Procedures Order, this Agreement and any other document necessary for the implementation of the marketing and sale process contemplated by the Bidding Procedures, each of which shall contain terms and conditions consistent with this Agreement and otherwise be reasonably acceptable to RAIT Parent and Buyer, and, as applicable, shall be filed with the Bankruptcy Court.

“Bidding Procedures” means the bidding procedures with respect to the sale of the Purchased Assets and such other assets of the Debtors described therein (including all schedules, annexes, exhibits, appendices and supplements thereto), in the form attached as Exhibit B, or otherwise in form and substance reasonably acceptable to RAIT Parent and Buyer.

“Bidding Procedures Motion” means the Debtors’ motion (including all schedules, annexes, exhibits, appendices and supplements thereto), in form and substance reasonably acceptable to RAIT Parent and Buyer, to be filed by the Debtors with the Bankruptcy Court within five (5) Business Days after the Petition Date, seeking entry of the Bidding Procedures Order.

“Bidding Procedures Order” means an order of the Bankruptcy Court (including all schedules, annexes, exhibits, appendices and supplements thereto), substantially in the form attached as an exhibit hereto or otherwise in form and substance reasonably acceptable to RAIT Parent and Buyer (provided, however, that any references to Buyer or an Affiliate of Buyer in the Bidding Procedures Order shall be in form and substance acceptable to Buyer), (i) approving, among other things, the Bidding Procedures, and appointing Buyer as the stalking horse bidder for the Purchased Assets, (ii) authorizing Sellers’ entry into this Agreement, (iii) approving and

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authorizing the payment of the Breakup Fee and Expense Reimbursement to Buyer in accordance with the terms of this Agreement and (iv) granting other related relief.

“Board” has the meaning set forth in Section 7.2(c) hereof.

“Breakup Fee” means an amount equal to $5,233,000.

“Business Day” means any day other than a day which is a Saturday, Sunday or legal holiday on which banks in New York, New York or Wilmington, Delaware are authorized or obligated by Law to close.

“Buyer” has the meaning set forth in the preamble of this Agreement.

“Buyer Advisors” means (i) Stroock & Stroock & Lavan LLP; (ii) Jaffe Raitt Heuer & Weiss, P.C.; (iii) Young Conaway Stargatt & Taylor, LLP, each as co-counsel to Buyer; (iv) Ernst & Young LLP; and (v) such other consultants, advisors and professionals as reasonably required by Buyer.

“Buyer Indemnified Party” has the meaning set forth in Section 5.2(f)(i) hereof.

“Buyer Termination Event” has the meaning set forth in Section 7.1 hereof.

“CDO I Issuer” means, collectively, RAIT CRE CDO I, Ltd., a Cayman Islands company, and RAIT CRE CDO I, LLC, a Delaware limited liability company.

“CDO I Securitization” has the meaning set forth in the definition of Securitization Agreements.

“Chapter 11 Cases” has the meaning set forth in the recitals to this Agreement.

“Chosen Court” has the meaning set forth in Section 8.15(a) hereof.

“Churchill” means Churchill Casualty Ltd., a Cayman Islands exempted company incorporated with limited liability.

“Churchill Assets” has the meaning set forth in Section 5.10 hereof.

“Churchill Shareholder Agreement” means that certain Shareholder Agreement, dated July 26, 2016, between Churchill and each shareholder or prospective shareholder party thereto.

“Claim Response” has the meaning set forth in Section 5.2(f)(ii) hereof.

“Claims Notice” has the meaning set forth in Section 5.2(f)(ii) hereof.

“Closing” has the meaning set forth in Section 2.7 hereof.

“Closing Date” has the meaning set forth in Section 2.7 hereof.

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“Closing Date Cash Amount” means (a) the aggregate amount of actual cash and cash equivalents (excluding Restricted Cash) of the RAIT Entities on hand as of the Closing Dateplus (b) the aggregate amount of all checks, drafts and other bank deposits received by any RAIT Entity but not yet credited to bank accounts of such RAIT Entity as of the Closing Date (excluding Restricted Cash).

“Closing Statement” has the meaning set forth in Section 2.6(b) hereof.

“Closing Taxable Year” has the meaning set forth in Section 3.20 hereof.

“COBRA” has the meaning set forth in Section 3.13(c) hereof.

“Code” means the Internal Revenue Code of 1986, as amended.

“Continuing Employee” has the meaning set forth in Section 5.7(a) hereof.

“Copyrights” has the meaning set forth in the definition of “Intellectual Property”.

“Contract” means any single mortgage, bond, note, loan, letter of credit, indenture, unexpired lease, franchise, license, contract, agreement, obligation, trust, instrument, or other binding undertaking, commitment, agreement, plan or other executory commitment (including all amendments and supplements to any of the foregoing), whether written or oral.

“Cure Amount” shall mean, with respect to any Assigned Contracts that are executory contracts or unexpired leases, the amount required to cure any defaults required to be cured as a condition of assumption of such Assigned Contract pursuant to Section 365(b)(1) of the Bankruptcy Code.

“Debtor Subsidiary” and “Debtor Subsidiaries” have the meanings set forth in the recitals to this Agreement.

“Debtors” has the meaning set forth in the recitals to this Agreement.

“Definitive Documents” means this Agreement and the Bidding Procedure Documents and any other document necessary for the implementation and consummation of the Transaction, each of which shall contain terms and conditions consistent with this Agreement and shall otherwise be in form and substance reasonably acceptable to RAIT Parent and Buyer.

“Deposit” has the meaning set forth in Section 2.3(a) hereof.

“Deposit Escrow Agreement” means that certain Escrow Agreement, dated as of the date hereof, by and among Buyer, RAIT Parent and the Escrow Agent.

“Employee Plan” has the meaning set forth in Section 3.13(a) hereof.

“Environmental Claims” means any complaint, summons, citation, written notice, written directive, order, claim, litigation, investigation, notice of violation, judicial or administrative proceeding, judgment, letter or other written communication from any Governmental Authority

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having jurisdiction over the environment, or any third party alleging in writing non-compliance with Environmental Laws or Releases of Hazardous Materials in violation of Environmental Laws (a) from any assets, properties or businesses of the Acquired Business or any predecessor in interest of any Acquired RAIT Entity or (b) onto any facilities which received Hazardous Materials generated by the Acquired Business.

“Environmental Laws” means any applicable foreign, international, federal, state, local or municipal laws, statutes, regulations, treaties, rules or ordinances imposing liability or establishing standards of conduct for protection of the environment, including the applicable provisions of Comprehensive Environmental Response, Compensation and Liability Act (“CERCLA”), 42 U.S.C. 9601 et seq., as amended; the Resource Conservation and Recovery Act (“RCRA”), 42 U.S.C. 6901 et seq., as amended; the Clean Air Act (“CAA”), 42 U.S.C. 7401 et seq., as amended; the Clean Water Act (“CWA”), 33 U.S.C. 1251 et seq., as amended; the Occupational Safety and Health Act (“OSHA”), 29 U.S.C. 655 et seq. (but only to the extent it regulates occupational exposure to Hazardous Materials).

“Environmental Liabilities” means any monetary obligations, losses, liabilities (including strict liability), damages, punitive damages, consequential damages, treble damages, costs and expenses (including all reasonable out-of-pocket fees, disbursements and expenses of counsel, out-of-pocket expert and consulting fees and out-of-pocket costs for environmental site assessments, remedial investigation and feasibility studies), fines, penalties, sanctions and interest incurred which (a) arise from any Environmental Laws, (b) relate to any violations of Environmental Laws, or (c) relate to Remedial Actions, Releases or threatened Releases from or onto (i) any property presently or formerly owned or operated by the Acquired Business or any Acquired RAIT Entity or for which an Acquired RAIT Entity acts or acted as collateral manager (but only during the period in which the Acquired RAIT Entity acted as collateral manager), (ii) assets of the Acquired RAIT Entities or the Acquired Business or (iii) any facility which received Hazardous Materials generated by the Acquired Business.

“Environmental Permits” means all permits, licenses, franchises, certificates, approvals and other similar authorizations of Governmental Authorities required by Environmental Laws to conduct the Acquired Business as currently conducted.

“Equity Interests” means, with respect to any RAIT Entity, (i) any capital stock, membership interests, limited liability company interests, partnership interests, trust certificate interests or any other equity, ownership, beneficial or profits interests of such RAIT Entity, and (ii) any options, warrants, securities, stock appreciation rights, phantom units, incentives, commitments, calls, redemption rights, repurchase rights or other agreements, arrangements or rights of any kind that are convertible into, exercisable or exchangeable for, or otherwise permit any Person to acquire, any capital stock, membership interests, limited liability company interests, partnership interests, trust certificate interests or any other equity, ownership, beneficial or profits interests of such RAIT Entity.

“ERISA” means the Employee Retirement Income Security Act of 1974, as amended.

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“ERISA Affiliate” of any entity means any other entity which, together with such entity, would be treated as a single employer under Section 414 of the Code or any other equivalent or applicable Laws, if any, in any jurisdictions in which the RAIT Entities reside.

“Escrow Agent” means U.S. Bank, National Association.

“Estimated Purchase Price” has the meaning set forth in Section 2.6(a) hereof.

“Event” has the meaning set forth in Section 6.2(c) hereof.

“Excluded Assets” has the meaning set forth in Section 2.1(b) hereof.

“Excluded Cash Receipts Amount” means the portion of the Interim Cash Receipts Amount that, as of the close of business on the Business Day prior to the Closing Date, either  has been received (or, pursuant to clause (b) of the definition of Interim Cash Receipts Amount, will be received) by the RAIT Entities after the close of business on August 26, 2019 and that constitutes (a) regularly scheduled interest or preferred returns with respect to loans or other indebtedness or preferred stock held by the RAIT Entities or (b) rent, common area maintenance and other regularly recurring income generated from Owned Real Property or Leased Real Property (in each case for (a) and (b), including the collection of any receivables related thereto).

“Excluded RAIT Entities” has the meaning set forth in Section 2.1(b).

“Expense Provision” means that expense provision set forth in the Transaction Term Sheet, which provides that from the date of execution of the Transaction Term Sheet until the earlier of (x) the expiration or termination of such Transaction Term Sheet and (y) the execution and delivery of this Agreement, RAIT shall reimburse Fortress Credit Advisors LLC’s and Buyer’s reasonable and documented third party costs and expenses incurred in connection with the Transaction to professional advisors retained by Fortress Credit Advisors LLC and Buyer, including without limitation fees and expenses of Stroock & Stroock & Lavan LLP and any local counsel or financial advisor that may be retained by Fortress Credit Advisors LLC or Buyer, up to a maximum of $500,000 (or such greater amount as RAIT and Fortress Credit Advisors LLC may agree in writing (including via email) from time to time).

“Expense Reimbursement” means all reasonable and documented third party expenses incurred by Buyer in connection with the Transaction up to an aggregate amount of $1,744,000 less the total amount of the Transaction Expenses otherwise paid by any of the RAIT Entities (including any amounts paid pursuant to the Expense Provision).

“Fiduciary Out” has the meaning set forth in Section 7.2 hereof.

“Final Order” means an order or judgment of the Bankruptcy Court (or any other court of competent jurisdiction) entered by the clerk of the Bankruptcy Court (or such other court) on the docket in the Chapter 11 Cases (or the docket of such other court), which has not been modified, amended, reversed, vacated or stayed and as to which (a) the time to appeal, petition for certiorari, or move for a new trial, stay, reargument or rehearing has expired and as to which no appeal, petition for certiorari or motion for new trial, stay, reargument or rehearing shall then be pending or (b) if an appeal, writ of certiorari, new trial, stay, reargument or rehearing thereof has been

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sought, such order or judgment of the Bankruptcy Court (or other court of competent jurisdiction) shall have been affirmed by the highest court to which such order was appealed, or certiorari shall have been denied, or a new trial, stay, reargument or rehearing shall have been denied or resulted in no modification of such order, and the time to take any further appeal, petition for certiorari or move for a new trial, stay, reargument or rehearing shall have expired, as a result of which such order shall have become final in accordance with Rule 8002 of the Bankruptcy Rules; provided, that the possibility that a motion under Rule 60 of the Federal Rules of Civil Procedure, or any analogous rule under the Bankruptcy Rules, may be filed relating to such order, shall not cause an order not to be a Final Order.

“Financial Statements” has the meaning set forth in Section 3.3(a) hereof.

“First Day Motions” means any (a) “first day” motions and pleadings to be filed by the Debtors with the Bankruptcy Court on the Petition Date in connection with the Chapter 11 Cases and (b) the Bidding Procedures Motion.

“FL7 Indenture” and “FL7 Securitization” have the respective meanings set forth in the definition of “Securitization Agreements”.

“FL8 Indenture” and “FL8 Securitization” have the respective meanings set forth in the definition of “Securitization Agreements”.

“Fundamental Representations” means Sellers’ representations and warranties in Section 3.2(a), Section 3.2(b), Section 3.2(c) (but only with respect to the first sentence thereof), Section 3.2(g) and Section 3.2(i) (Organization, Capitalization, Subsidiaries, Authority and Enforceability), Section 3.11 (Finders’ Fees), and Section 3.20(b) (REIT Status), Section 3.20(c) (REIT Status), Section 3.20(v) (Opinion Representations) and Section 3.20(w) (Advice).

“GAAP” means generally accepted accounting principles in the United States as set forth in the opinions and pronouncements of the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board or in such other statements by such other entity as have been recognized by the four largest U.S. accounting firms, which are in effect from time to time.

“Governmental Authority” means any United States, or other international, national, federal, state, municipal or local governmental, regulatory or administrative authority, agency or commission, licensing body or any judicial (including any state or federal court) or arbitral body or other entity exercising executive, legislative, judicial, regulatory, licensing, gaming or administrative powers or functions of government.

“Hazardous Materials” means, without regard to amount and/or concentration (a) any element, compound, or chemical that is defined, listed or otherwise classified as a contaminant, pollutant, toxic pollutant, toxic or hazardous substances, extremely hazardous substance or chemical, hazardous waste, medical waste, biohazards or infectious waste, or special waste under Environmental Laws; (b) petroleum, petroleum-based or petroleum-derived products; (c) polychlorinated biphenyls; (d) any substance exhibiting a hazardous waste characteristic, as defined by applicable Environmental Laws, including, but not limited to, corrosivity, ignitibility,

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toxicity, or reactivity as well as any radioactive or explosive materials; and (e) asbestos-containing materials.

“HSR Act” shall mean the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended.

“Indemnifying Party” has the meaning set forth in Section 5.2(f)(i) hereof.

“Information Systems” has the meaning set forth in Section 3.17(a) hereof.

“Insurance Policies” has the meaning set forth in Section 3.16 hereof.

“Intellectual Property” shall mean all foreign and domestic (a) trademarks, service marks, brand names, certification marks, collective marks, d/b/a’s, Internet domain names, logos, symbols, trade dress, assumed names, fictitious names, trade names, and other indicia of origin, all applications and registrations for all of the foregoing, and all goodwill associated therewith and symbolized thereby, including, without limitation, all extensions, modifications and renewals of same (collectively, “Trademarks”), (b) inventions, discoveries and ideas, whether patentable or not, and all patents, registrations, and applications therefor, including, without limitation, divisions, continuations, continuations-in-part and renewal applications, and including, without limitation, renewals, extensions and reissues (collectively, “Patents”), (c) confidential and proprietary information, trade secrets and know-how, including, without limitation, processes, schematics, databases, formulae, drawings, prototypes, models, designs and customer lists (collectively, “Trade Secrets”), (d) published and unpublished works of authorship, whether copyrightable or not, copyrights therein and thereto, and registrations and applications therefor, and all renewals, extensions, restorations and reversions thereof (collectively, “Copyrights”), and (e) all other intellectual property or proprietary rights and claims or causes of action arising out of or related to any infringement, misappropriation or other violation of any of the foregoing, including, without limitation, rights to recover for past, present and future violations thereof.

“Intellectual Property Contracts” has the meaning set forth in Section 3.5(a)(xiv) hereof.

“Interim Balance Sheet” means the unaudited consolidated balance sheet of the RAIT Consolidated Group as of the Interim Balance Sheet Date, attached hereto as part of Schedule 3.3(a).

“Interim Balance Sheet Date” means July 31, 2019.

“Interim Cash Receipts Amount” means the sum of (a) the aggregate amount of cash and cash equivalents (excluding Restricted Cash) collected or received by the RAIT Entities during the period following the close of business on August 26, 2019 and before the close of business on the Business Day prior to the Closing Date (to the extent not included in cash and cash equivalents as of such date ), plus (b) the aggregate amount of all checks, drafts and other bank deposits received by any RAIT Entity during such period but not yet credited to bank accounts of such RAIT Entity as of the Closing Date (excluding Restricted Cash).  For purposes of this Agreement and the calculation of the Purchase Price, it is agreed that the amount of actual cash and cash equivalents (excluding Restricted Cash) on hand of the RAIT Entities as of the close of business on August 26, 2019 was $45,174,273.

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“IRS” means the United States Internal Revenue Service.

“Knowledge” means, whether or not capitalized, with respect to any fact, circumstance, event or other matter in question, the knowledge of such fact, circumstance, event or other matter of, as to Sellers, the actual knowledge after reasonable inquiry of John Reyle and Alfred Dilmore, and as to Buyer, the actual knowledge after reasonable inquiry of any of the executive officers of Buyer.

“Law” means, in any applicable jurisdiction, any applicable law (including common law), statute, ordinance, rule, treaty, regulation, code, ruling, judgment, injunction, order, decree, assessment, writ or other legal requirement or restriction, in any such case, of any court, arbitrator or applicable Governmental Authority.

“Leased Real Property” has the meaning set forth in Section 3.8(c) hereof.

“Liability Claim” has the meaning set forth in Section 5.2(f)(ii) hereof.

“Liens” means liens, claims, encumbrances, interests, set-off rights, options, rights of first refusal, mortgages, charges, pledges, indentures, security interests and deeds of trust. For the purposes of this Agreement, a Person shall be deemed to own subject to a Lien any property or asset which it has acquired or holds subject to the interest of a vendor or lessor under any conditional sale agreement or capital lease relating to such property or asset.

“Losses” means any and all losses, liabilities, claims, damages, penalties, fines, judgments, awards, settlements, Taxes, costs, fees, expenses (including reasonable attorneys’ fees) and disbursements.

“M&I” has the meaning set forth in Section 3.26 hereof.

“M&I Credit Agreement” has the meaning set forth in Section 3.26 hereof.

“M&I Credit Facility” has the meaning set forth in Section 3.26 hereof.

“M&I Note” has the meaning set forth in Section 3.26 hereof.

“M&I UCC” has the meaning set forth in Section 3.26 hereof.

“Material Adverse Effect” means a material adverse effect on either (i) the business, operations, properties, financial condition or liabilities of the RAIT Entities, taken as a whole, or (ii) the ability of the RAIT Entities, taken as a whole, to perform their obligations under, or to consummate the transactions contemplated by this Agreement and the other Definitive Documents, including the Transaction, other than the effect of (A) any change in the United States or foreign economies or securities or financial markets in general; (B) any change that generally affects the industry in which the RAIT Entities operate; (C) any change arising in connection with earthquakes, hurricanes, other natural disasters, hostilities, acts of war, sabotage or terrorism or military actions or any escalation or material worsening of any such hostilities, acts of war, sabotage or terrorism or military actions; (D) any changes in applicable Laws or accounting rules (including GAAP) or judicial interpretations; (E) any change resulting from the filing of the

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Chapter 11 Cases or from any action approved by the Bankruptcy Court so long as such action is not in breach of any Definitive Document; (F) any change resulting from the public announcement of the Transaction, compliance with terms of the Definitive Documents (excluding any obligation of the RAIT Entities to conduct its business and operations in the Ordinary Course of Business) or the consummation of the transactions contemplated hereby, including the Transaction; or (G) actions or omissions of Buyer or its Affiliates that are not required or permitted by this Agreement, but only, in the case of each of clauses (A), (B), (C) and (D), if such effect or change does not have a materially disproportionate effect on the RAIT Entities, taken as a whole, relative to other participants in the industry in which the RAIT Entities operate.

“Order” means any order, injunction, judgment, decree, ruling, writ, assessment or arbitration award of any Governmental Authority.

“Ordinary Course of Business” means, with respect to any RAIT Entity, the ordinary course of such RAIT Entity’s business consistent with past practices since September 30, 2018 (taking into account that since such date the RAIT Entities have ceased originating loans).

“Organizational Documents” has the meaning set forth in Section 3.2(c) hereof.

“Outside Date” has the meaning set forth in Section 7.1(d) hereof.

“Owned Real Property” has the meaning set forth in Section 3.8(b) hereof.

“Partial Escrow Release Amount” means Two Million Dollars ($2,000,000), less the aggregate amount of Losses set forth in all Claims Notices delivered to Indemnifying Party on or prior to the Partial Escrow Release Date that have been released to Buyer prior to the Partial Escrow Release Date or are pending on the Partial Escrow Release Date; provided, however, that if, on the Partial Escrow Release Date, the Tax Indemnity Amount is less than Two Million Dollars ($2,000,000), the Partial Escrow Release Amount, if any, shall be an amount equal to the Tax Indemnity Amount, less the aggregate amount of Losses set forth in all Claims Notices delivered to Indemnifying Party on or prior to the Partial Escrow Release Date that are pending on the Partial Escrow Release Date.

“Partial Escrow Release Date” means the earlier of (i) three (3) Business Days after the date on which both of the FL7 Securitization and the FL8 Securitization have been redeemed and (ii) 180 days after the Closing Date.

“Party” and “Parties” have the meaning set forth in the preamble of this Agreement.

“Patents” has the meaning set forth in the definition of “Intellectual Property”.

“Permits” has the meaning set forth in Section 3.10 hereof.

“Permitted Encumbrances” has the meaning set forth in Section 3.8(a)(viii) hereof.

“Person” means any individual, corporation, partnership (general or limited), limited liability company, firm, joint venture, association, joint-stock company, trust, estate, unincorporated organization or Governmental Authority.

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“Petition Date” means the date of the commencement of the Chapter 11 Cases in the Bankruptcy Court.

“Pre-Closing Statement” has the meaning set forth in Section 2.6(a) hereof.

“Purchase Agreement Effective Date” means the date on which this Agreement becomes effective and binding on each Party in accordance with its terms.

“Purchase Price” has the meaning set forth in Section 2.4 hereof.

“Purchased Assets” has the meaning set forth in Section 2.1(a) hereof.

“QRS Tax Opinion” has the meaning set forth in Section 2.8(a)(viii) hereof.

“RAIT Consolidated Group” has the meaning set forth in Section 3.3(a) hereof.

“RAIT Employees” has the meaning set forth in Section 3.12(a) hereof.

“RAIT Entities” has the meaning set forth in the recitals to this Agreement.

“RAIT Excluded Subsidiaries” means all of the direct or indirect Subsidiaries of RAIT Parent that are set forth on Schedule 1.1 hereto.

“RAIT General” has the meaning set forth in the preamble of this Agreement.

“RAIT Limited” has the meaning set forth in the preamble of this Agreement.

“RAIT Parent” has the meaning set forth in the preamble of this Agreement.

“RAIT Partnership” means RAIT Partnership, L.P. a Delaware limited partnership.

“Real Property Leases” has the meaning set forth in Section 3.8(c) hereof.

“REIT” means a real estate investment trust within the meaning of Sections 856 through 859 of the Code.

“REIT Testing Information” has the meaning set forth in Section 3.20(d) hereof.

“Release” means any spilling, leaking, pumping, emitting, emptying, discharging, injecting, escaping, leaching, migrating, dumping or disposing of Hazardous Materials into the environment in violation of Environmental Laws (including abandonment or discarding of barrels, containers or other closed receptacles containing Hazardous Materials).

“Remedial Action” means, to the extent required by Environmental Laws or a Governmental Authority, all actions taken to (i) cleanup, remove, remediate, contain, treat, monitor, assess, evaluate or in any other way address Hazardous Materials in the environment at concentrations exceeding those allowed by Environmental Laws; (ii) prevent or minimize a Release of Hazardous Materials so they do not migrate or endanger public health or welfare or the indoor or outdoor environment; (iii) perform pre-remedial studies and investigations and post-

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remedial operation and maintenance activities or (iv) any other actions authorized by 42 U.S.C. 9601 but excluding routine costs and expenses.

“Representatives” means any employee, agents, investment bankers, attorneys, accountants, consultants, advisers, and other representatives retained by any RAIT Entity or any of their Affiliates.

“Response Period” has the meaning set forth in Section 5.2(f)(ii) hereof.

“Restricted Cash” means cash and cash equivalents as would be reflected as restricted cash on a balance sheet prepared in accordance with GAAP.

“Retained Cash Amount” has the meaning set forth in Section 2.6(c) hereof.

“River Chase Loan” has the meaning set forth in Section 3.26 hereof.

“RMC Lien” means the Mechanic’s Lien recorded in the official records of the Recorder of San Francisco County, California in favor of Restoration Management Company with respect to property located at 659 Merchant Street, San Francisco, California, which property is owned by Brixton CP Chinatown, LLC,

“RMC Matter” means Restoration Management Company, v. Lee, et al., San Francisco County Superior Court Case No. CGC-170-563187.

“Sale Order” means an order of the Bankruptcy Court (including all schedules, annexes, exhibits, appendices and supplements thereto), in form and substance satisfactory to RAIT Parent and Buyer (provided, however, that any changes to the proposed form of order approved by RAIT Parent and Buyer and filed with the Bankruptcy Court that are required by the Bankruptcy Court shall be reasonably acceptable to RAIT Parent and Buyer), to be entered by the Bankruptcy Court pursuant to sections 105, 363 and 365 of the Bankruptcy Code providing for, among other things, (i) the approval of this Agreement and the transactions contemplated hereby, (ii) approval of the sale of the Purchased Assets that are owned by the Debtors to Buyer free and clear, pursuant to section 363(f) of the Bankruptcy Code, of all claims and encumbrances or other interests, (iii) findings that Buyer is a good faith purchaser entitled to the protections of section 363(m) of the Bankruptcy Code and (iv) the Cure Amounts (if any) with respect to the Assigned Contracts.

“SEC” means the United States Securities and Exchange Commission.

“SEC Documents” has the meaning set forth in Section 3.3(c) hereof.

“Schedule Supplement” has the meaning set forth in Section 5.5 hereof.

“Schedules” means the schedules delivered by RAIT Parent concurrently with the execution and delivery of this Agreement.

“Securitization Agreements” means, collectively, all material agreements, documents, instruments and certificates (and any amendments of or supplements to the foregoing) executed and delivered by a RAIT Entity (including but not limited to a Securitization Trust) in connection

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with the securities issued by (i) RAIT 2017-FL7 Trust under that certain Indenture, dated June 23, 2017 (the “FL7 Indenture”), by and among RAIT 2017-FL7 Trust, Wells Fargo Bank, National Association (“Wells Fargo”), and RAIT Partnership (the “FL7 Securitization”), (ii) RAIT 2017-FL8 under that certain Indenture, dated November 29, 2017 (the “FL8 Indenture”), by and among RAIT 2017-FL8 Trust, Wells Fargo and RAIT Partnership (the “FL8 Securitization”) and (iii) RAIT CRE CDO I, LTD, under that certain Indenture, dated November 7, 2006, by and among RAIT CRE CDO I, LTD, RAIT CRE CDO I, LLC, Wells Fargo and RAIT Partnership (“CDO I Securitization”).

“Securitization Disclosure Documents” has the meaning set forth in Section 3.19(b) hereof.

“Securitization Transaction” means each individually, and collectively, the FL7 Securitization, the FL8 Securitization and the CDO I Securitization.

“Securitization Trust” means a special purpose trust, limited liability company or other entity established for the purpose of issuing Asset-Backed Securities in a Securitization Transaction.

“Seller” and “Sellers” have the meaning set forth in the preamble of this Agreement.

“Seller Termination Event” has the meaning set forth in Section 7.2 hereof.

“Sensitive Payments” has the meaning set forth in Section 3.18 hereof.

“Straddle Period” means any tax period beginning before or on and ending after the Closing Date.

“Subsidiary” means, with respect to any Person, any corporation, partnership, joint venture, association, limited liability company, joint-stock company, trust or estate, or unincorporated organization of which (or in which) on the date of determination at least 50% of: (a) the issued and outstanding shares of capital stock having ordinary voting power to elect a majority of the board of directors of such corporation (irrespective of whether at the time shares of capital stock of any other class or classes of such corporation shall or might have voting power upon the occurrence of any contingency); (b) the interest in the capital or profits of such partnership, joint venture or limited liability company; or (c) the beneficial interest in such trust or estate, in the case of each of clauses (a), (b) and (c), is, at such time, directly or indirectly owned or controlled by such Person, by such Person and one or more of its other Subsidiaries or by one or more of such Person’s other Subsidiaries. For the sake of clarity, with respect to a RAIT Entity, a Subsidiary of such RAIT Entity shall not include entities in which such RAIT Entity has an investment consisting solely of non-convertible preferred shares or similar interests.

“Suit” has the meaning set forth in Section 3.9(c) hereof.

“Taberna Realty” has the meaning set forth in the preamble of this Agreement.

“Tax” or “Taxes” means any and all federal, state, county, local, foreign and other taxes, assessments, charges, duties, fees, levies or other similar charges, including income, gross income, gross receipts, profits, capital stock, franchise, withholding, payroll, social security, workers’

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compensation, unemployment, disability, property, ad valorem, stamp, excise, customs and parafiscal charges, severance, occupation, service, sales, use, excise, transfer, import, export, value added, alternative minimum, estimated and all other taxes of whatever nature imposed by any government or any political subdivision, agency, commission or authority thereof, and any interest, penalties, additions to tax or additional amounts in respect of the foregoing, as well as, in respect of any Taxes imposed by jurisdictions outside of the United States, any contribution in respect thereof under any group relief or other tax integration agreement.

“Tax Asset” has the meaning set forth in Section 5.2(b) hereof.

“Tax Indemnity Amount” means an amount equal to Four Million Dollars ($4,000,000), as such amount may be reduced from time to time in accordance with this Agreement and the Tax Indemnity Escrow Agreement.  Any reference to the Tax Indemnity Amount used in this Agreement shall mean and be a reference to the dollar amount of funds in the Tax Indemnity Escrow Account as of such time.

“Tax Indemnity Escrow Account” has the meaning set forth in Section 2.3(b) hereof.

“Tax Indemnity Escrow Agreement” means an Escrow Agreement, to be entered into as of the Closing Date, by and among Buyer, RAIT Parent and the Escrow Agent, with respect to the deposit and release of the Tax Indemnity Amount, reflecting the provisions of Sections 2.3(b) and 5.2 of this Agreement and otherwise in form and substance reasonably satisfactory to Buyer, RAIT Parent and the Escrow Agent.

“Tax Representations” has the meaning set forth in Section 3.20 hereof.

“Tax Returns” means all returns, reports, forms, estimates, information returns and statements (including any related or supporting information and any amendments thereto) filed or required to be filed with any taxing authority in connection with the determination, assessment, collection or administration of any Taxes.

“Termination Period” has the meaning set forth in Section 7.2 hereof.

“Third Party Claim” has the meaning set forth in Section 5.2(f)(iii) hereof.

“Trade Secrets” has the meaning set forth in the definition of “Intellectual Property”.

“Trademarks” has the meaning set forth in the definition of “Intellectual Property”.

“Transaction” has the meaning set forth in the recitals to this Agreement.

“Transaction Expenses” means all reasonable and documented costs and expenses of each of the Buyer Advisors, in each case in connection with the negotiation, formulation, preparation, execution, delivery, implementation, consummation and/or enforcement of this Agreement or any of the other Definitive Documents, and/or the transactions contemplated hereby or thereby, and/or any amendments, waivers, consents, supplements or other modifications to any of the foregoing up to the aggregate amount of $500,000 less any amount paid by RAIT Parent pursuant to the Expense Provision.

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“Transaction Term Sheet” means that certain term sheet, dated as of March 6, 2019, by and among RAIT Parent and Fortress Credit Advisors LLC.

“Transfer Election” has the meaning set forth in Section 5.3 hereof.

“Transfer Election Notice” has the meaning set forth in Section 5.3 hereof.

“Transfer Taxes” has the meaning set forth in Section 5.2(e) hereof.

“Treasury Regulations” means the income tax regulations, including temporary regulations, promulgated under the Code, as may be amended from time to time.

“WARN Act” has the meaning set forth in Section 3.12(g) hereof.

“Winning Bid” has the meaning set forth in the Bidding Procedures.

“Winning Bidder” has the meaning set forth in the Bidding Procedures.

Section 1.2Other Terms.  Other terms may be defined elsewhere in the text of this Agreement and, unless otherwise indicated, shall have such meaning indicated throughout this Agreement.

Section 1.3Other Definitional Provisions.

(a)The words “hereof,” “herein,” and “hereunder” and words of similar import, when used in this Agreement, shall refer to this Agreement as a whole and not to any particular provision of this Agreement.

(b)The words and phrases “including,” and “including, but not limited to,” when used in this Agreement shall mean “including, without limitation.”

(c)The terms defined in the singular shall have a comparable meaning when used in the plural, and vice versa.

(d)The terms “dollars” and “$” shall mean United States Dollars.

(e)All non-defined terms that are financial terms defined under GAAP shall have their meaning under GAAP on the date hereof, and to the extent that such financial terms relate to the generally accepted accounting principles of another jurisdiction, they shall have their meaning under such generally accepted accounting principles on the date hereof.

ARTICLE II

THE PURCHASE AND SALE

Section 2.1Purchase and Sale of Assets.

(a)Upon the terms and subject to the conditions contained in this Agreement and the Sale Order, at the Closing, Buyer shall purchase, acquire and accept, or cause one or more

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of its Affiliates to purchase, acquire and accept, from Sellers, and Sellers shall sell, transfer, assign, convey and deliver to Buyer, and/or (if so directed by Buyer) one or more of Buyer’s Affiliates, the assets identified below in this Section 2.1(a) (all said assets to be sold, transferred, assigned, conveyed and delivered by Sellers to Buyer being hereinafter collectively referred to as the “Purchased Assets”):

(i)All cash and cash equivalents of the RAIT Entities, including Restricted Cash, other than (A) any cash and cash equivalents included in the Retained Cash Amount, and (B) any Restricted Cash held by the Excluded RAIT Entities;

(ii)The Equity Interests in the Acquired RAIT Entities and all rights, title and interests in and to the Acquired Equity Interests;

(iii)All rights, title and interests in and to the assets set forth on Schedule 2.1(a)(iii) (the “Acquired Assets”); and

(iv)The assigned contracts set forth on Schedule 2.1(a)(iv) (the “Assigned Contracts”);

provided that, subject to Section 5.3 hereof, to the extent Buyer exercises the Transfer Election, Buyer (and/or its Affiliates) shall acquire from RAIT Parent (and/or from the applicable Subsidiaries of RAIT Parent) some or all of the Acquired Equity Interests, as specified by Buyer in the Transfer Election Notice, and RAIT Parent shall cause the applicable RAIT Entities to issue, sell, transfer, assign, convey and deliver to Buyer (and/or to one or more of Buyer’s Affiliates, as so directed by Buyer) such Acquired Equity Interests.

(b)For the avoidance of doubt, the Equity Interests in RAIT Parent, the Equity Interests in any RAIT Entities that are not Acquired RAIT Entities (“Excluded RAIT Entities”) and any and all assets of the Excluded RAIT Entities other than the Purchased Assets (collectively, the “Excluded Assets”) shall not be part of the sale and purchase contemplated hereunder and shall remain the property of the applicable RAIT Entity. The Excluded Assets shall include, but not be limited to, (i) corporate seals, organization documents, minute books and stock books of the RAIT Entities that are not Acquired RAIT Entities; (ii) Tax Returns; (iii) all employee-related or employee benefit-related files or records, other than personnel files of Continuing Employees; (iv) any other books and records that any RAIT Entity is prohibited from disclosing or transferring to Buyer under applicable Law and is required to retain under applicable Law; (v) the RAIT Excluded Subsidiaries; (vi) the Churchill Assets; (vii) cash and cash equivalents that are included in the Retained Cash Amount; and (viii) the other assets set forth on Schedule 2.1(b).

Section 2.2Assumed Liabilities. Upon the terms and subject to the conditions contained in this Agreement, in consideration of the sale, assignment, conveyance, transfer and delivery of the Purchased Assets to Buyer, Buyer shall assume and undertake to pay, perform and discharge, in accordance with the terms thereof, all of the claims, obligations and liabilities of the RAIT Entities in respect of or relating to (i) liabilities under the Assigned Contracts arising after the Closing Date and which relate solely to events, facts, circumstances or periods of time occurring after the Closing Date (except for liabilities arising out of any breach or default of the Assigned Contracts occurring prior to the Closing Date or arising out of any event occurring prior to the

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Closing Date which with the passage of time or after giving notice, or both, would constitute or give rise to such a breach or default), and all Cure Amounts owed under or relating to any Assigned Contracts, which Cure Amounts shall be paid by Buyer at Closing directly to the applicable counterparty under such Assigned Contracts (provided in the event any such counterparty agrees prior to the Closing Date to accept payment of a lesser amount in satisfaction of such Cure Amount, Buyer shall only be required to pay such lesser amount, and the balance shall be paid to RAIT Parent); and (ii) the liabilities described on Schedule 2.2(a), if any (collectively, the “Assumed Liabilities”) (it being understood and agreed that Buyer shall not assume and shall not be responsible to pay, perform or discharge any liabilities or obligations of the RAIT Entities other than the Assumed Liabilities).

Section 2.3Escrowed Funds.

(a)Concurrently with the execution of this Agreement, Buyer, RAIT Parent (on behalf of Sellers) and the Escrow Agent shall execute and deliver the Deposit Escrow Agreement and within two (2) Business Days thereof Buyer shall deposit with the Escrow Agent an amount equal to $8,721,000 as an earnest money deposit (including all interest and other earnings accrued thereon, if any, the “Deposit”). Except as otherwise expressly set forth herein and in the Deposit Escrow Agreement, the Deposit shall be applied against the Purchase Price on the Closing Date. The Deposit shall be held in escrow and disbursed by the Escrow Agent pursuant to the terms of the Deposit Escrow Agreement.  Under no circumstances shall any portion of the Deposit be deemed property of the Debtors’ Chapter 11 estate under Section 541 of the Bankruptcy Code unless and until the Deposit is delivered or required to be delivered to Sellers in accordance with the terms of this Agreement and the Deposit Escrow Agreement.

(b)At Closing, Buyer, RAIT Parent (on behalf of Sellers) and the Escrow Agent shall execute and deliver the Tax Indemnity Escrow Agreement and Buyer shall deposit with the Escrow Agent the Tax Indemnity Amount, which shall be placed by the Escrow Agent in a separate non-interest bearing account (the “Tax Indemnity Escrow Account”). The Partial Escrow Release Amount, if any, shall be released from the Tax Indemnity Escrow Account to a designee of RAIT Parent on the Partial Escrow Release Date pursuant to the terms of the Tax Indemnity Escrow Agreement and the balance of the Tax Indemnity Amount shall continue to be held in the Tax Indemnity Escrow Account and shall be disbursed by the Escrow Agent to a designee of RAIT Parent or Buyer, as applicable, pursuant to the terms of the Tax Indemnity Escrow Agreement. Subject to any pending claims set forth in Claims Notices existing at such time, the Tax Indemnity Amount shall be released to a designee of RAIT Parent on the date that is twenty (24) four months after the Closing Date.

Section 2.4Consideration.  The consideration for the Purchased Assets shall be (i) an aggregate amount equal to: (a) the Base Purchase Price, plus (b) the Closing Date Cash Amount, minus (c) the Interim Cash Receipts Amount, plus (d) the Excluded Cash Receipts Amount, minus (e) the Retained Cash Amount, minus (f) the amount of any Cure Amounts payable by Buyer pursuant to Section 2.2 (the amount so calculated, the “Purchase Price”), plus (ii) the assumption by Buyer of the Assumed Liabilities, if any. Subject to the terms and conditions of this Agreement, in consideration for the Acquired Equity Interests and other Purchased Assets, at the Closing, Buyer shall (i) pay the Purchase Price (inclusive of the Deposit, which the Escrow Agent shall release at the Closing to RAIT Parent pursuant to the terms of the Deposit Escrow Agreement and

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joint written instructions delivered by RAIT Parent and Buyer to the Escrow Agent), less the amount of the Tax Indemnity Amount to be deposited with the Escrow Agent as provided in Section 2.3(b), to RAIT Parent and/or such other Seller as may be applicable (as specified by RAIT Parent), by wire transfer in immediately available funds to one or more accounts designated by RAIT Parent at least two (2) Business Days before the Closing Date and (ii) assume the Assumed Liabilities, if any.

Section 2.5Allocation of Purchase Price. Within sixty (60) days after the Closing Date, Buyer, in its good faith reasonable discretion, shall prepare a schedule allocating the Purchase Price (the “Allocation Schedule”) and shall deliver the Allocation Schedule to RAIT Parent or a designee of RAIT Parent (on behalf of Sellers). The Allocation Schedule shall be prepared in accordance with Section 1060 of the Code and the rules and regulations thereunder, and any corresponding requirements of any state, local, or foreign laws. RAIT Parent and Buyer agree to file their respective IRS Forms 8594 and all federal, state and local Tax Returns in accordance with the Allocation Schedule.  The Allocation Schedule shall not be used for any purpose in the Chapter 11 Cases and shall not be deemed an admission or acknowledgement by Sellers and is without prejudice to Sellers’ rights to apply a different allocation in the Chapter 11 Cases.

Section 2.6Purchase Price Calculations.

(a)No later than three (3) Business Days prior to the anticipated Closing Date, RAIT Parent shall deliver to Buyer a statement (the “Pre-Closing Statement”), along with reasonably detailed information and supporting documentation, setting forth RAIT Parent’s good faith estimate of (i) the Closing Date Cash Amount, (ii) the Interim Cash Receipts Amount, (iii) the Excluded Cash Receipts Amount, (iv) the Retained Cash Amount, (v) the Cure Amounts payable by Buyer, and (vi) the amount of the Purchase Price (the “Estimated Purchase Price”). Such Pre-Closing Statement shall be certified by a financial officer of RAIT Parent on behalf of RAIT Parent to be true and complete. Following the delivery of the Pre-Closing Statement until the delivery of the Closing Statement, RAIT Parent shall (A) permit Buyer to have reasonable access during normal business hours to the finance personnel and accountants of RAIT Parent and the other RAIT Entities and the books and records of the RAIT Entities that are relevant to the calculation of the Estimated Purchase Price and each component thereof as set forth in the Pre-Closing Statement and (B) consider in good faith any of Buyer’s comments, and use commercially reasonable efforts to respond to Buyer’s questions, relating to the calculation of the Estimated Purchase Price and each component thereof as set forth in the Pre-Closing Statement and Buyer’s proposed changes to the Estimated Purchase Price and each component thereof as set forth in the Pre-Closing Statement.  RAIT Parent and Buyer shall agree in good faith as to the Estimated Purchase Price and RAIT Parent shall update the Pre-Closing Statement to reflect any agreed changes thereto.

(b)One (1) day prior to the anticipated Closing Date, RAIT Parent shall deliver to Buyer a final statement (the “Closing Statement”), along with reasonably detailed information and supporting documentation, setting forth (i) the calculated Closing Date Cash Amount, (ii) the calculated Interim Cash Receipts Amount, (iii) the calculated Excluded Cash Receipts Amount, (iv) the Retained Cash Amount, (v) the calculated Cure Amounts payable by Buyer, and (vi) the calculated amount of the Purchase Price.  Such Closing Statement shall be certified by a financial officer of RAIT Parent on behalf of RAIT Parent to be true and complete. Following the delivery

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of the Closing Statement until the Closing, RAIT Parent shall (A) permit Buyer to have reasonable access during normal business hours to the finance personnel and accountants of RAIT Parent and the other RAIT Entities and the books and records of the RAIT Entities that are relevant to the calculation of the Purchase Price and each component thereof as set forth in the Closing Statement and (B) consider in good faith any of Buyer’s comments, and use commercially reasonable efforts to respond to Buyer’s questions, relating to the calculation of the Purchase Price and each component thereof as set forth in the Closing Statement and Buyer’s proposed changes to the Purchase Price and each component thereof as set forth in the Closing Statement.RAIT Parent and Buyer shall agree in good faith as to the Purchase Price and RAIT Parent shall update the Closing Statement prior to the Closing to reflect any agreed changes thereto.

(c)RAIT Parent shall have the option to elect, by notice to Buyer at least one (1) Business Day prior to the Closing Date, to retain a portion or all of the cash and cash equivalents on hand at the Excluded RAIT Entities as of the Closing Date (the amount so retained by RAIT Parent, the “Retained Cash Amount”). In the event RAIT Parent makes the foregoing election, the Purchase Price shall be reduced by an amount equal to the Retained Cash Amount in accordance with Section 2.4 and Section 2.6.

Section 2.7Closing.  Upon the terms and subject to the conditions hereof, the closing of the transactions contemplated hereby (the “Closing”) shall take place at the offices of Buyer’s counsel, Stroock & Stroock & Lavan LLP, 180 Maiden Lane, New York, NY 10038 at 10:00 a.m., local time, on the seventh (7th) Business Day following the satisfaction or waiver of the conditions precedent specified in Article VI (other than those conditions that by their nature are to be fulfilled only at the Closing) or at such other time and place as the parties hereto may mutually agree (such date, the “Closing Date”).

Section 2.8Deliveries at Closing.

(a)At the Closing, Sellers shall deliver, or cause to be delivered, to Buyer the following:

(i)(A) evidence of ownership of the Equity Interests in RAIT Partnership, duly endorsed to, or registered in the name of, or accompanied by executed agreements or instruments effective to transfer such Equity Interests to, Buyer or its designee and (B) with respect to each other Acquired RAIT Entity, evidence of ownership of the Equity Interests in such other Acquired RAIT Entity by RAIT Partnership or by another Acquired RAIT Entity;

(ii)the Closing Statement, duly certified by an officer as contemplated in Section 2.6(b) hereof;

(iii)an assignment and assumption agreement, including a bill of sale, in form and substance reasonably acceptable to Buyer and Sellers (the “Assignment and Assumption Agreement”), duly executed by the applicable Seller(s), effectuating the assignment to Buyer of the Purchased Assets;

(iv)the Tax Indemnity Escrow Agreement, duly executed by RAIT Parent;

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(v)the officer’s certificates contemplated by Sections 6.2(a) and (c)hereof;

(vi)all consents, waivers and approvals that are required to be obtained by the RAIT Entities for the consummation of the transactions contemplated by this Agreement, including all consents, waivers and approvals with respect to the matters set forth on Schedule 3.22;

(vii)a certified copy of the Sale Order;

(viii)an opinion of Ledgewood PC, tax counsel to the RAIT Entities, with respect to the CDO I Issuer, duly executed and dated as of the Closing Date, substantially to the effect provided in Exhibit C (the “QRS Tax Opinion”), and any certificates executed in connection therewith;

(ix)a certification of each Seller’s non-foreign status pursuant to Code Section 1445;

(x)a Federal tax entity classification schedule reflecting, as of the Closing Date, the Federal tax entity classification of each Acquired RAIT Entity;

(xi)UCC-3 financing statements or such other termination and release documentation reasonably satisfactory to Buyer evidencing the termination of the UCC-1 financing statements listed on Schedule 2.8(a)(xi);

(xii)written resignations of each of the directors and managers of the Acquired RAIT Entities listed in a written request from Buyer delivered to RAIT Parent not less than five (5) days prior to Closing, which resignations shall be effective as of the Closing Date;

(xiii)all Definitive Documents required to be delivered by Sellers;

(xiv)physical possession of all of the Purchased Assets capable of passing by delivery with the intent that title in such Purchased Assets shall pass by and upon delivery;

(xv)such documentation as may be necessary to change the authorized signatories on any bank accounts of the Acquired RAIT Entities so as to appoint persons designed by Buyer as such authorized signatories;

(xvi)the termination agreement contemplated by Section 5.12 hereof; and

(xvii)such other duly executed documents, instruments and certificates as may be necessary to be delivered by the RAIT Entities pursuant to this Agreement or the other Definitive Documents or as may be reasonably requested by Buyer.

(b)At the Closing, Buyer shall deliver, or cause to be delivered, to RAIT Parent (on behalf of Sellers), the following:

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(i)the Tax Indemnity Escrow Agreement, duly executed by Buyer;

(ii)the Assignment and Assumption Agreement, duly executed by Buyer;

(iii)the Purchase Price, minus (A) the Deposit and (B) the Tax Indemnity Amount;

(iv)the officer’s certificates contemplated by Section 6.3(a) hereof;

(v)the termination agreement contemplated by Section 5.12 hereof;

(vi)all other Definitive Documents required to be delivered by Buyer; and

(vii)such other duly executed documents, instruments and certificates as may be necessary to be delivered by Buyer pursuant to this Agreement or the other Definitive Documents or as may be reasonably requested by Sellers.

(c)At the Closing (i), Buyer shall deliver, or cause to be delivered, to the Escrow Agent the Tax Indemnity Amount and (ii) Buyer and RAIT Parent shall deliver joint written instructions to the Escrow Agent instructing the Escrow Agent to release and disburse the Deposit to RAIT Parent.

Section 2.9Distribution of Equity Interests in RAIT Excluded Subsidiaries and Excluded Assets.  Prior to the Closing Date, RAIT Parent and the other RAIT Entities (including the Acquired RAIT Entities) shall take such actions as may be necessary or appropriate, as reasonably agreed by RAIT Parent and Buyer, to cause any Equity Interests in any RAIT Excluded Subsidiaries and other Excluded Assets that were not previously divested by the Acquired RAIT Entities and are held by any of the Acquired RAIT Entities to be distributed or otherwise transferred to RAIT Parent.

ARTICLE III

REPRESENTATIONS AND WARRANTIES OF SELLERS

Except as set forth in the Schedules, each Seller hereby jointly and severally represents and warrants to Buyer as follows:

Section 3.1[Reserved]

Section 3.2Organization; Capitalization; Subsidiaries; Authority and Enforceability.

(a)Each Seller has all requisite power and authority necessary to enable it to own, lease or otherwise hold the Purchased Assets that are owned, leased or otherwise held by such Seller. Subject to the applicable provisions of the Bankruptcy Code and subject to the entry of the Sale Order by the Bankruptcy Court, such Seller has the authority and ability to sell, transfer and assign such Purchased Assets to Buyer as contemplated by this Agreement.

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(b)Each Seller and each Acquired RAIT Entity is a corporation, limited liability company, trust or partnership, as applicable, duly organized, validly existing and, to the extent such concept is recognized, in good standing under the laws of the jurisdiction of incorporation, organization or formation of such Seller or Acquired RAIT Entity, as set forth on Schedule 3.2(b).

(c)The certificates of incorporation, certificates of formation, certificates of trust, bylaws, operating agreements and limited liability company agreements (or other equivalent organizational documents) (“Organizational Documents”) for each Acquired RAIT Entity have been provided to Buyer and such Organizational Documents are true, correct and complete in all material respects. The board minutes since January 1, 2017 for each Acquired RAIT Entity that has a board of directors or similar governing body, which entities are set forth on Part A of Schedule 3.2(c), have been provided or made available to Buyer and are true, correct and complete in all material respects. Each Seller and each Acquired RAIT Entity is duly authorized, qualified or licensed to do business as a foreign corporation, limited liability company or partnership, as applicable, in each jurisdiction set forth on Part B Schedule 3.2(c) and any other jurisdiction where such Seller or Acquired RAIT Entity owns or leases real property, maintains an office, has employees or conducts any portion of its business, except where the failure to be so authorized, qualified or licensed would not, individually or in the aggregate, reasonably be expected to materially and adversely affect the Acquired RAIT Entities or the Acquired Business.

(d)To the Knowledge of Sellers, Schedule 3.2(d) sets forth a summary as of August 26, 2019, which has been prepared in good faith by RAIT Parent, of where the material assets and liabilities (excluding accounts payable and accrued expenses) of the RAIT Entities (excluding cash, cash equivalents, prepaid expenses, accrued interest receivable and other similar assets) other than RAIT Parent are situated within the corporate structure.

(e)Schedule 3.2(e) sets forth a true, correct and complete listing of the officers, directors, managers and/or trustees, as applicable, of each Acquired RAIT Entity as of the date of hereof.

(f)The corporate structure and organization of the RAIT Entities, as set forth on Schedule 3.2(f), is true, correct and complete as of the date hereof, reflects the changes to the corporate structure and organization of the RAIT Entities contemplated by the transactions described in Section 3.2(h), and will remain in effect as of the opening of business on the Closing Date, except for changes consented to by Buyer (such consent not to be unreasonably withheld, conditioned or delayed).

(g)The authorized Equity Interests and the issued and outstanding Equity Interests of each Acquired RAIT Entity are as set forth on Schedule 3.2(g)-1 hereto (collectively, the “Acquired Equity Interests”). Except as set forth on Schedule 3.2(g)-2 and except for Liens that will be released or discharged at or prior to the Closing, the Sale Order or other order of the Bankruptcy Court or otherwise, all of the outstanding Acquired Equity Interests are owned beneficially and of record by RAIT Parent or one of its subsidiaries as set forth on Schedule 3.2(g)-1, free and clear of any Lien and free of any other limitation or restriction on the right to vote, sell or otherwise dispose of such Acquired Equity Interest, and nothing in the Sale Order (other than the sale of the Acquired RAIT Entities to Buyer pursuant to this Agreement) will reduce, dilute,

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restrict or otherwise affect in any way RAIT Parent’s direct or indirect ownership of or interest in any Acquired RAIT Entity, subject to the Transfer Election. All outstanding Acquired Equity Interests have been duly authorized and validly issued and are fully paid and nonassessable. Except for the Acquired Equity Interests, there are no outstanding (i) Equity Interests or other instruments convertible into or exchangeable for any Equity Interests in an Acquired RAIT Entity or (ii) options, warrants, conversion rights, stock appreciation rights or other similar rights (including pre-emptive rights) to acquire from any Acquired RAIT Entity, or other obligation of any Acquired RAIT Entity to issue, any Equity Interests convertible into or exchangeable for any interest in any Acquired RAIT Entity. There are no outstanding obligations of any Acquired RAIT Entity to repurchase, redeem or otherwise acquire any outstanding Equity Interests in an Acquired RAIT Entity or to issue any Equity Interests. Except as set forth on Schedule 3.2(g)-2, no Acquired RAIT Entity has any outstanding bonds, debentures, notes or other obligations the holders of which have the right to vote (or are convertible into or exercisable for securities having the right to vote) for the election of directors, managers and/or trustees of such Acquired RAIT Entity or to vote together with the equity holders of such Acquired RAIT Entity on any matter. The sale and/or direct or indirect transfer of the Acquired Equity Interests to Buyer hereunder is not subject to any rights of first refusal or other rights in favor of anyPerson.

(h)RAIT Excluded Subsidiaries. Prior to the date hereof, RAIT Parent caused the Equity Interests evidencing ownership in the RAIT Excluded Subsidiaries to be distributed or otherwise transferred to RAIT Asset Holdings, LLC, the interests of which will be assigned 1% to RAIT General, Inc. and 99% to RAIT Limited, Inc. As of the date hereof, none of the RAIT Excluded Subsidiaries are direct or indirect Subsidiaries of RAIT Partnership and RAIT Partnership (i) does not own or hold any right, title, or interest in any Equity Interests of the RAIT Excluded Subsidiaries and (ii) does not have any liability or obligation with respect to the RAIT Excluded Subsidiaries.

(i)Subject to the applicable provisions of the Bankruptcy Code and subject to the entry of the Sale Order by the Bankruptcy Court, each Seller has the requisite trust, corporate, limited liability company or other entity (as applicable) power and authority to enter into this Agreement, the Deposit Escrow Agreement (in the case of RAIT Parent), the Tax Indemnity Escrow Agreement (in the case of RAIT Parent) and each of the other Definitive Documents to which it is a party, and to perform its obligations hereunder and thereunder, and the execution and delivery of this Agreement, the Escrow Agreement (in the case of RAIT Parent) and the other Definitive Documents to which it is a party, and the consummation of the transactions contemplated herein and therein and the performance of such Seller’s obligations hereunder and thereunder have been duly authorized by all requisite trust, corporate, limited liability company or other entity (as applicable) action on the part of such Seller. This Agreement has been duly executed and delivered by each Seller and constitutes the legal, valid and binding obligation of each Seller, enforceable against such Seller in accordance with its terms, subject to the applicable provisions of the Bankruptcy Code and to the entry of the Sale Order by the Bankruptcy Court, and except as otherwise limited by, moratorium, bankruptcy, insolvency, reorganization, liquidation or other similar Laws relating to or affecting creditors’ rights generally and the general principles of equity (regardless of whether enforcement is considered in a proceeding in equity or law).

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(j)Assuming the accuracy of Buyer’s representations set forth in this Agreement, the sale of the Equity Interests of RAIT Partnership to Buyer shall be exempt from registration under the Securities Act of 1933 and all state securities laws.

Section 3.3Financial Statements; SEC Documents; Internal Controls.

(a)Attached hereto as Schedule 3.3(a) are complete and correct copies of (i) the audited consolidated balance sheets of RAIT Parent and its consolidated Subsidiaries (the “RAIT Consolidated Group”) as of December 31, 2017 and 2018 and the related audited consolidated statements of operations and cash flows for each of the years ended December 31, 2017 and 2018, together with appropriate notes to such financial statements, accompanied by the report thereon by Sellers’ independent accountants, and (ii) the unaudited consolidated balance sheet of the RAIT Consolidated Group as of the Interim Balance Sheet Date and the related unaudited consolidated statements of operations for the seven months then ended (collectively, the “Financial Statements”). Except as set forth on Schedule 3.3(a) or on the notes to the Financial Statements, the Financial Statements fairly present in all material respects, in conformity with GAAP applied on a consistent basis (subject, in the case of the interim financial statements, to normal year-end adjustments and the absence of notes) the consolidated financial position of the RAIT Consolidated Group as of the dates thereof and their consolidated results of operations for the periods presented.

(b)No Acquired RAIT Entity has any material liabilities (including absolute, accrued or contingent liabilities), whether or not required by GAAP to be reflected on a balance sheet or the notes thereto, except for (i) liabilities which arose in the Ordinary Course of Business after the Interim Balance Sheet Date, (ii) liabilities which are reflected or reserved against on the Interim Balance Sheet, (iii) liabilities set forth on Schedule 3.3(b) and (iv) liabilities related to Contracts entered into in the Ordinary Course of Business that are not required under GAAP to be reflected on a balance sheet prepared in accordance with GAAP.

(c)Except as set forth on Schedule 3.3(c), as of their respective filing dates (or if amended, as of the date of such amendment), none of the forms, reports and other documents required to be filed with or furnished to the SEC under the Securities Act or the Exchange Act since January 1, 2018 (collectively with any amendments thereto, the “SEC Documents”) contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading (except to the extent that information in any such SEC Document has been amended or superseded by a later SEC Document filed prior to the date hereof).

(d)RAIT Parent and its Subsidiaries have established and maintain internal control over financial reporting (as such term is defined in paragraph (f) of Rule 13a-15 under the Exchange Act). RAIT Parent’s management has completed an assessment of the effectiveness of such internal control over financial reporting in compliance with the requirements of Section 404 of the Sarbanes-Oxley Act of 2002 as of December 31, 2018, and such assessment concluded that RAIT Parent had a material weakness in the design or operation of its internal controls over financial reporting. Such material weakness was disclosed to RAIT Parent’s auditors and the audit committee of RAIT Parent’s Board in connection with its most recent evaluation of internal

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controls over financial reporting prior to the date hereof. RAIT Parent has provided to Buyer true, complete and correct copies of any written disclosures, informationor reports relating to such material weakness prepared by or on behalf of RAIT Parent that were furnished to RAIT Parent’s auditors or the audit committee of the Board of Trustees of RAIT Parent from January 1, 2019 through the date hereof, and will promptly provide to Buyer true, complete and correct copies of any such disclosures, information or reports that are made after the date hereof.

Section 3.4Absence of Certain Changes.  Since the Interim Balance Sheet Date, RAIT Parent has conducted, and has caused each other RAIT Entity to conduct, their respective businesses only in the Ordinary Course of Business in all material respects (except with respect to the RAIT Excluded Subsidiaries), and, since the Interim Balance Sheet Date there has not been (except with respect to the RAIT Excluded Subsidiaries), any event, occurrence, development or state of circumstances or facts which has had or which is reasonably expected to have, individually or in the aggregate, a Material Adverse Effect. Without limiting the generality of the foregoing, since the Interim Balance Sheet Date, other than as contemplated or required by this Agreement;

(i)no RAIT Entity has sold, leased, transferred, granted a participation or security interest in, mortgaged, pledged, assigned, or otherwise encumbered or subjected to a Lien any of its material assets, tangible or intangible, with respect to the Acquired Business, other than in the Ordinary Course of Business;

(ii)no Person (including any RAIT Entity) has accelerated, terminated, modified or canceled any Contract (or series of related Contracts) with respect to the Acquired Business involving annual payments of more than $250,000 individually or $1,000,000 in the aggregate to which any RAIT Entity is a party or by which any of them is bound, other than in the Ordinary Course of Business;

(iii)no RAIT Entity has settled, agreed to settle, or initiated, commenced or effected any settlement, compromise or other resolution of any pending or threatened claims or actions against any of the Acquired RAIT Entities or with respect to the Purchased Assets that are not fully covered by insurance (subject to reasonable deductibles) and would require any Acquired RAIT Entity to pay an amount in excess of $200,000 for any individual claim or action, except as may be expressly approved in writing by Buyer (not to be unreasonably conditioned, withheld, or delayed);

(iv)the Acquired RAIT Entities have not made any capital expenditures other than as set forth on Schedule 3.4(a)(iv);

(v)no Acquired RAIT Entity has made (A) any capital investment in, or any acquisition of the securities or assets of any other Person (or series of related capital investments and acquisitions) other than in an Acquired RAIT Entity, involving more than $250,000 individually or $1,000,000 in the aggregate or (B) other than in the Ordinary Course of Business, any loan to any other Person in excess of $250,000 individually or $1,000,000 in the aggregate;

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(vi)no Acquired RAIT Entity has issued any note, bond, or other debt security or created, incurred, assumed or guaranteed any indebtedness for borrowed money or capitalized lease obligation;

(vii)no RAIT Entity has granted any license or sublicense of any rights under or with respect to any Intellectual Property with respect to the Acquired Business;

(viii)except as set forth on Schedule 3.4(viii), there has been no change in the Organizational Documents of Sellers or any Acquired RAIT Entity;

(ix)no Acquired RAIT Entity has issued, sold, or otherwise disposed of any of its Equity Interests, or granted any options, warrants, or other rights to purchase or obtain (including upon conversion, exchange, or exercise) any of its Equity Interests;

(x)no Acquired RAIT Entity has declared, set aside, or paid any dividend or made any distribution with respect to its Equity Interests (whether in cash or in kind) or redeemed, purchased, or otherwise acquired any of its Equity Interests or effected any reclassification, recapitalization, stock split or combination, exchange or readjustment of its Equity Interests, except (A) by a direct or indirect wholly-owned Subsidiary of RAIT Parent or by RAIT Parent, to the extent necessary to maintain compliance by RAIT Parent and certain of its Subsidiaries with the Tax Laws applicable to REITs; or (B) pursuant to and in accordance with the distributions and transfers contemplated by Section 3.2(h);

(xi)with respect to the Acquired Business, no RAIT Entity has experienced any material damage, destruction or loss (whether or not covered by insurance) to its property that has not been repaired;

(xii)there has been no change in the accounting methods, principles or practices of any Acquired RAIT Entity, except as required by GAAP or applicable Law;

(xiii)No Acquired RAIT Entity has adopted, modified or terminated any Employee Plan, other than as required by applicable Law;

(xiv)No Acquired RAIT Entity has engaged in any of the transactions described in Section 3.18 hereof;

(xv)No RAIT Entity has entered into, amended, modified, cancelled or waived in any material respect, any of its rights or obligations under any material Contract with respect to the assets of the Acquired Business, other than in the Ordinary Course of Business;

(xvi)No Acquired RAIT Entity has entered into (i) any Contract that would be considered a “material contract” under the rules of the SEC which has not been disclosed in a filing with the SEC or (ii) any other Contract with an annual value in excess of $250,000; and

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(xvii)No claim or defense has been asserted that would reasonably be expected to give rise to any right of set-off or recoupment against any material assets of the Acquired Business.

Section 3.5Material Contracts.

(a)Except as disclosed on Schedule 3.5(a), no RAIT Entity is a party to or bound by any of the following (other than, in the case of those RAIT Entities that are not Acquired RAIT Entities, any of the following that do not relate to or affect the Acquired RAIT Entities, the Acquired Assets or the Acquired Business):

(i)any lease (whether of real or personal property) by an Acquired RAIT Entity as lessee or guarantor (A) providing for or guaranteeing annual rentals of $100,000 or more or (B) which, in combination with other such leases, provides for or guarantees annual rentals of $250,000 or more in the aggregate, in either case, except for any such leases that are terminable without penalty, charge or additional fees by a RAIT Entity on not more than thirty (30) days written notice;

(ii)any Contract for the purchase of materials, supplies, goods, services, equipment or other assets (A) providing for annual payments by any RAIT Entity (or group of RAIT Entities) of $100,000 or more or (B) which, in combination with other such Contracts, provides for the purchase of materials, supplies, goods, services, equipment or other assets of $250,000 or more in the aggregate, in either case, except for any such Contracts that are terminable without penalty, charge or additional fees by a RAIT Entity on not more than thirty (30) days written notice;

(iii)any sales, distribution or other similar Contract (A) providing for the sale by any RAIT Entity of materials, supplies, goods, services, equipment or other assets that provides for annual payments to RAIT Entities of $100,000 or more or (B) which, in combination with other such Contracts, provides for the sale by any RAIT Entity of materials, supplies, goods, services, equipment or other assets of $250,000 or more in the aggregate, in either case, except for any such Contracts that are terminable without penalty, charge or additional fees by a RAIT Entity on not more than thirty (30) days written notice;

(iv)any partnership, joint venture or other similar arrangement reduced to a written Contract;

(v)any Contract relating to the acquisition, or disposition of any material assets or business (whether by merger, sale of stock, sale of assets or otherwise) other than in the Ordinary Course of Business;

(vi)any Contract relating to indebtedness for borrowed money or the deferred purchase price of property (in either case, whether incurred, assumed, guaranteed or secured by any asset) pursuant to which such RAIT Entity is an obligor, except (A) any such Contract with an aggregate outstanding principal amount not exceeding $100,000 and which may be prepaid on not more than 90 days’ notice without the payment of any penalty, charge or additional fees or (B) any agreement set forth on Schedule 3.5(a)(vi) that is or will be released in the Chapter 11 Cases on or prior to the Closing Date;

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(vii)any option, license, franchise or similar material Contract (A) providing for a payment or receipt in excess of $100,000 or (B) which, in combination with other such Contracts, provides for payments or receipts in excess of $250,000 in the aggregate, in either case, except for any such Contracts that are terminable without penalty, charge or additional fees by a RAIT Entity on not more than thirty (30) days written notice;

(viii)any agency, dealer, sales representative, marketing or other similar Contract (A) providing for a payment or receipt in excess of $100,000 or (B) which, in combination with other such Contracts, provides for payments or receipts in excess of $250,000 in the aggregate, in either case, except for any such Contracts that are terminable without penalty, charge or additional fees by a RAIT Entity on not more than thirty (30) days written notice;

(ix)any other Contract or other instrument (A) involving annual payments by the applicable RAIT Entity(ies) in excess of $100,000 not disclosed in clauses (i) through (viii) above or (B) which, in combination with other Contracts or instruments that are not disclosed in clauses (i) through (viii) above, involve annual payments by the applicable RAIT Entity(ies) in excess of $250,000 in the aggregate, in either case, except for any such Contracts that are terminable without penalty, charge or additional fees by a RAIT Entity on not more than thirty (30) days written notice;

(x)any Contract containing covenants limiting the freedom of any Acquired RAIT Entity to (A) engage in any line of business or with any Person or in any geographical area or which would so limit the freedom of any Acquired RAIT Entity after the Closing Date or (B) hire or solicit for employment any Person or that would so limit the freedom of any Acquired RAIT Entity after the Closing Date;

(xi)any Contract (A) that has been notified to any competition authority; or (B) for which an application has been made for any consent or clearance pursuant to any competition regulations;

(xii)any Contract with any current officer, trustee, director, employee, consultant or agent (A) in excess of $100,000 per annum or (B) which, in combination with other such Contracts, is in excess of $250,000 per annum in the aggregate, in either case, except for any such Contracts that are terminable without penalty, charge or additional fees by a RAIT Entity on not more than thirty (30) days written notice;

(xiii)other than with respect to Liens relating to indebtedness that is disclosed pursuant to clause (vi) above, any Contract or other instrument (A) creating, securing or pertaining to Liens with a value in excess of $100,000 or (B) which, in combination with such other Contracts or instruments, creates, secures or pertains to Liens with a value in excess of $250,000 in the aggregate, in either case, except for any such Contracts or instruments that are terminable without penalty, charge or additional fees by a RAIT Entity on not more than thirty (30) days written notice;

(xiv)any material Contracts pursuant to which the RAIT Entities (A) are granted rights in any Intellectual Property or (B) grant any third party rights in any

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Intellectual Property, including, without limitation, Trademark co-existence agreements, Trademark consent agreements, and any non-assertion agreements or settlement agreements related to Intellectual Property (collectively, “Intellectual Property Contracts”), other than Contracts for off-the-shelf commercially available software sold on standard terms and for annual license fees of less than $75,000;

(xv)any Contract granting first refusal, first offer or any other similar preferential rights to purchase any assets or properties of a Person with a value in excess of $100,000;

(xvi)any collective bargaining agreement;

(xvii)any Contract that would qualify as a “material contract” under the rules of the SEC, except as publicly disclosed in any filing with the SEC except for any such Contract that is not currently in effect or is terminable without penalty, charge or additional fees by a RAIT Entity on not more than thirty (30) days written notice;

(xviii)any other Contract not made in the Ordinary Course of Business that is material to the RAIT Entities considered as a whole; or

(xix)any Contract with a Person other than a RAIT Entity that owns Equity Interests in an Acquired RAIT Entity.

(b)Each Contract disclosed in any Schedule to this Agreement or otherwise required to be disclosed pursuant to this Section 3.5, solely as such Contract is currently in effect and relates to or affects the Acquired RAIT Entities, the Acquired Assets or the Acquired Business, is, subject to compliance with the provisions of Section 363 and/or Section 365 of the Bankruptcy Code where applicable, a valid and binding agreement of a RAIT Entity, and is in full force and effect, and, except as set forth on Schedule 3.5(b), no RAIT Entity or, to the Knowledge of Sellers, any other party thereto is in default or breach under the terms of any such Contract, and, to the Knowledge of Sellers, no event or circumstance has occurred that, with notice or lapse of time or both, would constitute any event of default thereunder except for any such failures to be valid and binding and in full force and effect and any such defaults or breaches which have not and would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect. True and complete copies of each such Contract have been provided or made available to Buyer.

Section 3.6Litigation.

(a)Except as set forth on Schedule 3.6(a), there is no material action, suit, proceeding or, to the Knowledge of Sellers, investigation (collectively, “Actions or Proceedings”) pending or, to the Knowledge of Sellers, threatened in writing with respect to any Seller, any Acquired RAIT Entity or the Acquired Business before any court, arbitrator or other Governmental Authority. There are no such Actions or Proceedings which if adversely determined would reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect.

(b)(i) As of the date hereof, there are no material outstanding Orders with respect to any of the Acquired RAIT Entities or the Acquired Business and (ii) there is no such

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Order that would have or would reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect.

Section 3.7Compliance with Laws and Court Orders.

(a)Except as set forth on Schedule 3.7(a), no RAIT Entity with respect to the Acquired Business is in material violation of, and to the Knowledge of Sellers, since January 1, 2018 no RAIT Entity with respect to the Acquired Business has been under investigation with respect to, or has been threatened in writing to be charged with or given written notice of any material violation of, any applicable Law or Order. No material Actions or Proceedings have been filed or commenced and served, and remain pending, against any RAIT Entity alleging any failure to so comply with any applicable Law or Order.

(b)All material reports and filings and other material information with respect to the Acquired Business filed by the RAIT Entities with or received by the RAIT Entities from any Governmental Authority, including with respect to compliance with any state, federal or foreign Laws, in each case, since January 1, 2017, have been provided or made available to Buyer.

Section 3.8Properties.

(a)The applicable Acquired RAIT Entities have good and valid fee title to, or a valid and binding leasehold interest in, or otherwise have a valid right to use (whether by Contract or otherwise) all their respective material properties and assets (whether real, personal, tangible or intangible), except for properties and assets sold or otherwise disposed of since the Interim Balance Sheet Date in the Ordinary Course of Business. Schedule 3.8(a)-1 sets forth all material sales or dispositions of properties or assets of the Acquired RAIT Entities or properties or assets used in the Acquired Business since the Interim Balance Sheet Date. The tangible assets and real property of the Acquired RAIT Entities and the Acquired Business, taken as a whole, are in good operating condition and repair subject to normal wear and tear, are suitable for the purposes for which they are presently used and, to the Knowledge of Sellers, are free from material defects (patent and latent). The operation by Buyer after the Closing of the Acquired Business and the assets of the Acquired RAIT Entities and the other Purchased Assets would not require Buyer to assume, or obtain the benefits of, any Contracts held by a RAIT Entity that is not an Acquired RAIT Entity, other than Contracts of a nature generally available from third parties on market terms.  None of the properties or assets (whether real, personal, tangible or intangible) of the Acquired RAIT Entities or the properties or assets used in the Acquired Business is subject to any Lien, except:

(i)Liens for (A) taxes not yet due and payable or (B) taxes being contested in good faith, in each case, for which adequate accruals or reserves, to the extent required by GAAP, have been established on the Interim Balance Sheet;

(ii)Liens that constitute the rights of any lessor or sublessor under any lease;

(iii)mechanics’, carriers’, workers’, materialmens’, warehousemens’ and similar liens arising or incurred in the Ordinary Course of Business for amounts not yet due and payable or being contested in good faith;

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(iv)Liens relating to debt outstanding on the Petition Date that will be discharged at Closing or such Liens that will no longer be enforceable by operation of the Bankruptcy Code, the Sale Order or order of the Bankruptcy Court, in each case, as set forth on Schedule 3.8(a)-2;

(v)easements, rights of way, zoning ordinances and other document of record affecting any real property owned by the applicable RAIT Entities;

(vi)other than with respect to real property, Liens arising under original purchase price conditional sales, contracts and equipment leases with third parties entered into in the Ordinary Course of Business, in each case to the extent set forth on Schedule 3.8(a)-3;

(vii)Liens which do not materially detract from the value of or materially interfere with any present or intended use of any such property or assets; or

(viii)Other Liens set forth on Schedule 3.8(a)-4 (clauses (i)-(viii) of this Section 3.8(a) are, collectively, the “Permitted Encumbrances”).

(b)Part A of Schedule 3.8(b) sets forth a true, correct and complete list of the parcels of real property that are owned in fee simple by each of the Acquired RAIT Entities (the “Owned Real Property”).  Each Acquired RAIT Entity has good and valid fee simple title to such Owned Real Property, free and clear of all Liens except for Liens described on Schedule 3.8(a)-2, Schedule 3.8(b) and other Permitted Encumbrances.  Except as set forth on Part B of Schedule 3.8(b), none of the Acquired RAIT Entities has leased, licensed or otherwise granted any Person the right to use or occupy all or any portion of the Owned Real Property (other than rights of parties under Permitted Encumbrances, except for Liens described in Section 3.8(a)(ii)).

(c)Part A of Schedule 3.8(c) sets forth a true, correct and complete description of all real property leased, subleased, licensed, sublicensed to or otherwise used or occupied (but not owned) by any of the Acquired RAIT Entities (collectively, the “Leased Real Property”), including the address thereof.  A true, correct and complete copy of each lease, license or occupancy agreement, and any amendments thereto, with respect to the Leased Real Property (collectively, the “Real Property Leases”) has been delivered or made available to Buyer.  Except as set forth on Part B of Schedule 3.8(c), all of the Leased Real Property is used or occupied by the Acquired RAIT Entities pursuant to a Real Property Lease.  Assuming the applicable Real Property Lease is valid, binding and enforceable with respect to the other parties thereto, each Real Property Lease is valid, binding and enforceable with respect to the Acquired RAIT Entity party thereto in accordance with its terms and is in full force and effect.  There are no existing material defaults by any of the Acquired RAIT Entities or, to the Knowledge of Sellers, the lessor under any of the Real Property Leases, no RAIT Entity has received any written or, to the Knowledge of Sellers, oral notice of default under any Real Property Lease and, to the Knowledge of Sellers, no event has occurred that (with notice or lapse of time, or both) would reasonably be expected to constitute a material breach or material default under any of the Real Property Leases by any Person or give any Person the right to terminate, accelerate or modify any Real Property Lease.  Except as set forth on Part B of Schedule 3.8(b), no Acquired RAIT Entity has leased or sublet as lessor or sublessor, and no Person (other than the Acquired RAIT Entities) is in

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possession of, any of the Owned Real Property or Leased Real Property.  The Leased Real Property has been maintained in all material respects in accordance with the obligations of the applicable Acquired RAIT Entity under each applicable Real Property Lease.

(d)RAIT Parent has provided or made available to Buyer full and complete copies of the rent roll summaries through July 31, 2019 for the real properties owned or master leased by the RAIT Entities with respect to the Acquired Business.

Section 3.9Intellectual Property.

(a)Each Acquired RAIT Entity has ownership or valid and legally enforceable rights to use all Intellectual Property necessary for the conduct of the Acquired Business as currently conducted, except for such Intellectual Property the absence of which would not be material to their respective businesses, as applicable. Schedule 3.9(a) identifies the Trademarks, Copyrights and Patents for which the RAIT Entities have filed an application or for which a registration has been issued in the name of any Acquired RAIT Entity with respect to the Acquired Business. The applicable RAIT Entities have paid all necessary registration, maintenance and renewal fees and filed all necessary documents and certificates with the appropriate Governmental Authority in the respective jurisdictions for the purpose of maintaining the material Intellectual Property identified in Schedule 3.9(a).

(b)To the Knowledge of Sellers, all material Intellectual Property of, or relating to, the Acquired Business, owned by the RAIT Entities is valid, subsisting and enforceable. No RAIT Entity has received any written notice to the effect that any use by the RAIT Entities of any material Intellectual Property relating to the Acquired Business or that the conduct of the business of the Acquired Business as currently conducted, conflicts with or allegedly conflicts with or infringes the rights of any Person. To the Knowledge of Sellers, the conduct of the businesses of the RAIT Entities with respect to the Acquired Business as currently conducted does not conflict with the rights of any Person with respect to Intellectual Property.

(c)No suit, action, reissue, reexamination, interference, arbitration, mediation, opposition, cancellation or other proceeding (collectively, “Suit”) is pending or, to the Knowledge of Sellers, has been threatened in writing or asserted concerning any Intellectual Property owned or licensed or purported to be owned or licensed by a RAIT Entity with respect to the Acquired RAIT Entities or the Acquired Business, including any Suit asserting that such Intellectual Property has been infringed or violated or any Suit asserting that such Intellectual Property is invalid, unenforceable, not owned or not owned exclusively by a RAIT Entity.

(d)No Suit is pending or, to the Knowledge of Sellers, has been, in the prior three (3) years, been threatened in writing or asserted claiming that the RAIT Entities have violated any Intellectual Property rights with respect to the Acquired RAIT Entities or the Acquired Business.

(e)To the Knowledge of Sellers, no RAIT Entity has engaged in any conduct, or omitted to perform any necessary act, the result of which would be reasonably expected to invalidate or adversely affect the enforceability of any Intellectual Property that is material to the conduct of the Acquired Business as currently conducted by the RAIT Entities. No RAIT Entity

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or, to the Knowledge of Sellers, any other Person, is in default (or with or without the giving of notice, the lapse of time, or both, would be in default) in any material respect under any Intellectual Property Contract which is binding upon any RAIT Entity. To the Knowledge of Sellers, no material Intellectual Property owned or purported to be owned by a RAIT Entity and used or held for use in the Acquired Business as currently conducted by the RAIT Entities is subject to any outstanding claim, audit, demand, Order, stipulation or agreement restricting the use thereof in the business as currently conducted by the RAIT Entities or restricting the licensing thereof by the RAIT Entities to any Person, except for any claim, audit, demand, Order, stipulation or agreement which would not be material to the Acquired Business as currently conducted.

(f)The RAIT Entities have taken commercially reasonable measures to protect the secrecy and confidentiality of any Trade Secrets material to the Acquired Business.

(g)To the Knowledge of Sellers, there is no infringement of or unlawful use by any RAIT Entity of any of the Intellectual Property owned or licensed by any Person and used or held for use in the Acquired Business as currently conducted by the RAIT Entities, the result of which would be material to the business of the RAIT Entities as currently conducted.

Section 3.10Licenses and Permits.  Each RAIT Entity owns, holds or possesses all material licenses, franchises, permits, certificates, approvals or other similar authorizations (excluding permits, certificates and similar authorizations related to the use or occupancy of the Owned Real Property and/or the Leased Real Property (such as elevator certificates, occupancy permits, and HVAC certificates)), necessary to own or use the assets of the Acquired Business or necessary to entitle such RAIT Entity, as the case may be, to own, lease or possess and operate and use its assets and to carry on and conduct its business as related to the Acquired Business substantially as currently conducted (the “Permits”). Schedule 3.10 correctly sets forth a list of each such Permit, complete and correct copies of which have been made available to Buyer. Except as set forth on Schedule 3.10, (a) the Permits are valid and in full force and effect, (b) no RAIT Entity in any material respect is in default under or has been in default within the last three (3) years under, and, to the Knowledge of Sellers, no condition exists that with notice or lapse of time or both would constitute a material default under, the Permits, (c) no cancellation or termination of any Permit is pending or, to the Knowledge of Sellers, threatened and (d) none of the Permits will be terminated or impaired or become terminable, in whole or in part, as a result of the transactions contemplated by this Agreement or any of the other Definitive Documents.

Section 3.11Finders’ Fees.  Except for UBS Securities, LLC, whose fees will be paid by RAIT Parent, there is no investment banker, broker, finder or other intermediary which has been retained by or is authorized to act on behalf of any RAIT Entity who might be entitled to any fee or commission in connection with the transactions contemplated by this Agreement.

Section 3.12Labor and Employment Matters.

(a)No RAIT Entity, other than RAIT Parent, has, or has had during the last twelve (12) months, any employees and no Acquired RAIT Entity has had any employees during the last three (3) years. Schedule 3.12(a) sets forth a true, correct and complete list of all of the employees of RAIT Parent who, as of the date hereof, perform services for the Acquired RAIT Entities (the “RAIT Employees”).

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(b)No RAIT Entity (i) is a party to any labor or collective bargaining agreement or other contract or understanding with a labor organization; or (ii) is a party to any labor or collective bargaining agreement with respect to its employees. No employees of any RAIT Entity are represented by any labor organization in connection with such employment. No labor organization or group of employees of any RAIT Entity has made a pending demand in writing for recognition or certification to RAIT Parent or, to the Knowledge of Sellers, any RAIT Entity. There are no representation or certification proceedings or petitions seeking a representation proceeding presently pending or, to the Knowledge of Sellers, threatened, to be brought or filed with the National Labor Relations Board or other labor relations tribunal involving any RAIT Entity.

(c)There are no strikes, lockouts, work stoppages or slowdowns pending or, to the Knowledge of Sellers, threatened in writing against or involving the Acquired Business.

(d)Except as set forth on Schedule 3.12(d), there are no unfair labor practice charges, arbitrations, grievances or complaints pending or, to the Knowledge of Sellers, threatened in writing against or involving any RAIT Entity with respect to the Acquired Business relating to the employment or termination of employment of any individual by any RAIT Entity except those which would not reasonably be expected to result in material liability to the Acquired Business.

(e)Except as set forth on Schedule 3.12(e), there are no complaints, charges, administrative proceedings, claims or any other Action or Proceedings against any RAIT Entity with respect to the Acquired Business pending or, to the Knowledge of Sellers, threatened in writing to be brought or filed with any Governmental Authority against any RAIT Entity with respect to the Acquired Business (i) relating to any employment-related matter, employment practices, terms and conditions of employment and wages and hours, or (ii) in connection with the employment or engagement of any current or former employee or independent contractor of any Person providing services to any Acquired RAIT Entity, including, without limitation, any claim relating to unfair labor practices, employment discrimination, harassment, retaliation, equal pay, misclassification of any independent contractor, or any other employment-related matter arising under applicable Laws except those which would not reasonably be expected to result in material liability to the Acquired Business.

(f)Except as set forth on Schedule 3.12(f), no RAIT Entity has, or would reasonably be expected to have, any material liability with respect to the Acquired Business with respect to any failure to comply with any Law relating to employment, including, without limitation, all Laws relating to wages and hours (including all Laws relating to calculation and payment of overtime compensation, deductions from wages, and withholding, classification of employees), collective bargaining, work council agreements, discrimination, harassment, and retaliation (including, but not limited to, based upon age, sex, marital status, race, national origin, sexual orientation, disability or veteran status), leave rights, including, without limitation, family, medical, disability and/or pregnancy leave rights, I-9 and other employment verification, immigration and work authorization laws, misclassification of workers, civil rights, safety and health, workers’ compensation, consultation and the provision of information and the collection and payment of withholding and/or Social Security Taxes and similar Taxes, except to the extent non-compliance would not reasonably be expected to result in material liability to the Acquired Business.

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(g)Within the past two years, no RAIT Entity has implemented a “plant closing” or “mass layoff” as defined in the federal Worker Adjustment and Retraining Notification Act or similar state or local Laws (collectively, the “WARN Act”) affecting the Acquired Business without satisfying all obligations of the WARN Act.

(h)Except as set forth on Schedule 3.12(h), the employment of each employee of RAIT Parent is at-will, and RAIT Parent has the right to terminate such employees’ employment, and such employees have the right to resign their employment, at any time, without reason or cause (except as otherwise prohibited by statutory or common law). Schedule 3.12(h) lists all written employment and consulting agreements with individuals who provide services to any RAIT Entity who have annual compensation in excess of $150,000, and to which RAIT Parent (or any RAIT Entity) is a party. Complete and correct copies of the agreements or arrangements listed on Schedule 3.12(h) have been provided to Buyer.

(i)RAIT Parent’s employment of its employees during the prior three (3) years has not conflicted with, breached, violated or caused a default under any Contract, including, without limitation, any non-competition or non-solicitation agreements, to which any Acquired RAIT Entity is a party, in all cases in any material respect.

Section 3.13Employee Benefit Plans.

(a)No Acquired RAIT Entity contributes to, maintains, sponsors, or has or could reasonably be expected to have any liability with respect to any Employee Plan. An “Employee Plan”, as used in this Agreement means, collectively, each “employee benefit plan,” as defined in Section 3(3) of ERISA, each employment, severance or similar contract, plan, agreement, program, arrangement or policy and each other plan, agreement, policy, program or arrangement (whether written or oral) providing for compensation, employee benefits, bonuses, profit-sharing, stock option, equity appreciation, restricted stock, phantom stock, stock bonus or other equity-related rights or other forms of incentive or deferred compensation, vacation, holiday or paid time off benefits, insurance (including any self-insured arrangements), health, hospitalization, dental or medical benefits, moving or relocation benefits, gross-up, employee assistance program, disability or sick leave benefits, workers’ compensation, salary continuation, tuition assistance or reimbursement, change-in-control, material fringe benefits, supplemental unemployment benefits, severance benefits and post-employment or retirement benefits (including compensation, pension (including both defined benefit and defined contribution plans, whether qualified or unqualified), health, medical or life insurance benefits) and funding vehicle therefor, which is maintained, administered or contributed to by RAIT Parent or any ERISA Affiliate of RAIT Parent (or was maintained, administered or contributed to any predecessor of any such entity) and covers any employee, former employee, director, independent contractor or like person of RAIT Parent or any dependent or beneficiary thereof, or with respect to which such Persons, RAIT Parent or any Acquired RAIT Entity has, has had or could reasonably be expected to have any liability.

(b)Neither RAIT Parent nor any Acquired RAIT Entity, nor any predecessor that operated the business of RAIT Parent or any Acquired RAIT Entity, nor any ERISA Affiliate of any RAIT Parent or Acquired RAIT Entity, has at any time participated in, made contributions to, or has, has had or may reasonably be expected to have any other liabilities (contingent or

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otherwise) with respect to, an “employee benefit plan” (as defined in Section 3(3) of ERISA) which is or was (i) a “multiemployer plan” (as defined in Section 3(37) or 4001(a)(3) of ERISA), (ii) a “multiple employer plan” (within the meaning of Code Section 413(c)), (iii) a “multiple employer welfare arrangement” (within the meaning of Section 3(40) of ERISA), (iv) subject to Section 302 or Title IV of ERISA or Section 412 of the Code, or (v) any similar plan or arrangement under applicable Law of a jurisdiction other than the United States.

(c)No Employee Plan provides medical, health, life insurance or other welfare-type benefits to retirees or former employees, owners or consultants or individuals who terminate (or have terminated) employment with RAIT Parent or any ERISA Affiliate of RAIT Parent, or the spouses or dependents of any of the foregoing (except for continued medical benefit coverage for former employees, their spouses and other dependents as required to be provided under Section 4980B of the Code or Part 6 of Subtitle B of Title I of ERISA or applicable similar state law (“COBRA”)).

(d)There currently is not an Employee Plan that is subject to the Laws of a jurisdiction other than the United States.

Section 3.14Environmental Matters.

(a)Except as would not reasonably be likely to result in Environmental Liabilities that have a Material Adverse Effect, to the Knowledge of Sellers, the operations of the RAIT Entities with respect to the Purchased Assets or Acquired Business are in compliance with Environmental Laws, which compliance includes obtaining, maintaining and complying with all Environmental Permits that are required under Environmental Laws to operate the Purchased Assets or the assets and businesses of the Acquired Business, including compliance with any applicable institutional controls or engineering controls to maintain compliance with an approved remediation plan or environmental due care plan;

(b)To the Knowledge of Sellers, there has been no Release at any of the assets or properties owned or operated by the Acquired RAIT Entities, or to the Knowledge of Sellers, at any disposal or treatment facility that received Hazardous Materials generated by the Acquired RAIT Entities, which has resulted or would be reasonably likely to result in Environmental Liabilities that have a Material Adverse Effect;

(c)To the Knowledge of Sellers, no Environmental Claims have been asserted against any facilities that may have received Hazardous Materials generated by the RAIT Entities or any predecessor in interest with respect to the Purchased Assets or the Acquired Business, which has resulted in or would be reasonably likely to result in Environmental Liabilities that have a Material Adverse Effect;

(d)No Environmental Claims have been asserted or, to the Knowledge of Sellers, threatened in writing against any RAIT Entities with respect to the Purchased Assets or the Acquired Business, or to the Knowledge of Sellers, any predecessor in interest, with respect to the Purchased Assets or the Acquired Business, which would be reasonably likely to result in Environmental Liabilities that have a Material Adverse Effect;

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(e)No material assets of the Acquired RAIT Entities or the Acquired Business are encumbered by or subject to any Liens under Environmental Law;

(f)To the Knowledge of Sellers, there are no Environmental Liabilities associated with the assets of the Acquired RAIT Entities or the Acquired Business, whether accrued, contingent, absolute, determinable or otherwise, that would be reasonably likely to result in a Material Adverse Effect and, to the Knowledge of RAIT Parent, there are no current facts, conditions, situations or set of circumstances that would reasonably be expected to result in such Environmental Liabilities, which are reasonably likely to have a Material Adverse Effect; and

(g)To the Knowledge of Sellers, all material environmental investigation, study, audit, test, review or other analysis referencing a potential Environmental Liability associated with the assets of the Acquired RAIT Entities or the Acquired Business, conducted by or otherwise in the possession of any of the RAIT Entities, has been made available to Buyer prior to the date hereof.

Section 3.15Affiliated Transactions.  (a) Schedule 3.15 sets forth

(i)each transaction between any Acquired RAIT Entity, on the one hand, and any Affiliate of any RAIT Entity (excluding any RAIT Entity) or any current officer, trustee or director of any RAIT Entity or any of their Affiliates or any member of his or her immediate family, on the other hand, since December 31, 2018 (other than employment arrangements and agreements with trustees or directors entered into in the Ordinary Course of Business and set forth on Schedule 3.15(a));

(ii)all indebtedness of the Acquired RAIT Entities to Affiliates of any RAIT Entity (that is not an Acquired RAIT Entity) and (other than customary advances) to officers, trustees or directors of any RAIT Entity or any of their Affiliates or member of their immediate families;

(iii)all indebtedness of Affiliates of any RAIT Entity (that is not a RAIT Entity) or of officers, trustees or directors of any RAIT Entity or any of their Affiliates or member of their immediate families to all Acquired RAIT Entities; and

(iv)all Contracts and other arrangements between any Acquired RAIT Entity, on the one hand, and any Affiliate of any RAIT Entity (excluding any RAIT Entity), or (other than employment Contracts and agreements with trustees or directors entered into in the Ordinary Course of Business) any current officer, trustee or director of any RAIT Entity or any of their Affiliates or any member of his or her immediate family, on the other hand;

except in each case in items (i) through (iv) of this Section 3.15(a) for transactions, indebtedness, contracts or arrangements that, individually or in the aggregate, with all related indebtedness, contracts or arrangements, involve less than $50,000.

(b)To the Knowledge of Sellers, no Affiliate of any Acquired RAIT Entity (other than an Acquired RAIT Entity) or any of their respective employees or officers has any material direct or indirect ownership interest in any firm or corporation with which any Acquired

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RAIT Entity has, or the RAIT Entities with respect to the Acquired Business have, a business relationship, or any firm or corporation that competes with any Acquired RAIT Entity.

(c)Except as set forth on Schedule 3.15(c), there is no outstanding indebtedness of any Acquired RAIT Entity owed to any other RAIT Entity that is not an Acquired RAIT Entity or Affiliates of any other RAIT Entity that is not an Acquired RAIT Entity.

Section 3.16Insurance.  Schedule 3.16 hereto lists the insurance policies and binders in force since January 1, 2018 that require or required an annual, per year or one-time premium of at least $250,000, other than real estate title policies, (including the name of the carrier, the policy number, the term and the amount of the coverage provided thereunder) maintained by or providing coverage for Acquired RAIT Entities or the Acquired Business which policies (except for the absence of errors and omissions insurance) provide various general liability and other insurance for various claims arising from or related to the current and historical business of the RAIT Entities and their predecessors in accordance with customary industry practice. All of such policies and binders (the “Insurance Policies”) are in full force and effect and no RAIT Entity is in material default of any provision thereof and, to the Knowledge of Sellers, has not failed to give any notice or present any claim under any such Insurance Policy in a due and timely fashion. Except for claims set forth on Schedule 3.16, there are no outstanding unpaid claims under any such Insurance Policy. No RAIT Entity has received a written notice of cancellation, termination or non-renewal of any such Insurance Policy other than in the Ordinary Course of Business. To the Knowledge of Sellers there are no material inaccuracies in any application for such Insurance Policies, any failure to pay premiums when due or any similar state of facts that would reasonably form the basis for termination of any such Insurance Policy. Schedule 3.16 hereto also describes any self-insurance arrangements affecting any RAIT Entity.

Section 3.17Information Technology.

(a)Except as set forth on Schedule 3.17(a), the Acquired RAIT Entities own or possess licenses or other legal rights to use, sell or license all applications and software, hardware systems and networking and communication assets used or necessary for use in connection with the Acquired Business, except to the extent that the failure to own or possess, or license such Information Systems would not be material to the operation of the Acquired Business (the “Information Systems”).

(b)In the prior three (3) years, no material claims, or to the Knowledge of Sellers, threat of material claims, have been asserted in writing by any third party against any RAIT Entity related to the use of any Information Systems or challenging or questioning the validity or effectiveness of any Information Systems license or lease agreement.

(c)RAIT Parent has adopted reasonable privacy policies for employees consistent with industry practices and in all material respects has complied with all applicable Laws and all internal and publicly posted policies, notices, and statements concerning the collection, use, processing, storage, transfer, and security of personal information in the conduct of the Acquired Business. In the past thirty-six (36) months, no RAIT Entity has (i) to the Knowledge of Sellers, experienced any actual, alleged, or suspected material data breach or other material security incident involving personal information in its possession or control or (ii) been

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subject to or received any written notice of any audit, complaint, or Action or Proceeding by any Governmental Authority or other Person concerning any RAIT Entity’s collection, use, processing, storage, transfer, or protection of personal information or actual, alleged, or suspected violation of any applicable Law concerning privacy, data security, or data breach notification, in each case in connection with the conduct of the Acquired Business. To the Knowledge of Sellers, there are no facts or circumstances that could reasonably be expected to give rise to any such Actionor Proceeding described in clause (ii) of the preceding sentence.  The execution, delivery, or performance of this Agreement and the other Definitive Documents and the consummation of the transactions contemplated hereby and thereby, will not violate the privacy policies of any RAIT Entity or the Acquired Business as they currently exist or as they existed at any time during which any personal information was collected or obtained by or on behalf of any RAIT Entity or the Acquired Business. Immediately upon the Closing, Buyer will have the right to use such personal information on identical terms and conditions as enjoyed by the RAIT Entities immediately prior to the consummation of the Transaction.

Section 3.18Sensitive Payments.  To the Knowledge of Sellers, no officer or employee of any RAIT Entity has made any Sensitive Payments in contravention of any applicable Laws of any jurisdiction. As used herein, “Sensitive Payments” means: (i) bribes or kickbacks paid to any person, firm or company including government officials or employees; or (ii) payments or commitments (whether made in the form of commissions, payments or fees for goods received or otherwise) made with the understanding or under circumstances that would indicate that all or part of the payment is to be paid by the recipient to central or local government officials or as an illegal commercial bribe, influence, payment or kickback.

Section 3.19Securitizations.

(a)Part A of Schedule 3.19(a) sets forth a list, and RAIT Parent has delivered or made available to Buyer true and correct copies, of each Securitization Agreement, other than any Securitization Agreements described on Part B of Schedule 3.19(a).

(b)Since June 23, 2017, no RAIT Entity has received written notice that any private placement memorandum or other offering document, or any amendments or supplements to any of the foregoing, utilized in connection with the offering of Asset-Backed Securities in any Securitization Transaction (collectively, the “Securitization Disclosure Documents”), contained, as of the date of such Securitization Disclosure Document or as of the applicable closing date of the related Securitization Transaction, any untrue statement of any material fact or omitted to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances in which they were made, not misleading.  True and correct copies of the Securitization Disclosure Documents with respect to the FL7 Securitization and the FL8 Securitization have been provided to Buyer.  To the Knowledge of Sellers, true and correct copies of the Securitization Disclosure Documents with respect to the CDO I Securitization have been provided to Buyer.

(c)To the Knowledge of Sellers, neither any RAIT Entity nor any trustee, master servicer, servicer or other party with respect to any Securitization Transaction, has taken or failed to take any action which would reasonably be expected to adversely affect the intended tax characterization or tax treatment for federal, state or local income tax purposes of any

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Securitization Trust or any Asset-Backed Securities issued in any such Securitization Transaction. All federal and material state and local income tax and information returns and reports required to be filed by the Securitization Trust, master servicer, servicer or trustee relating to any such Securitization Transaction, and all tax elections required to be made in connection therewith, have been properly filed or made.

(d)No RAIT Entity has received a request or demand from the trustee of any Securitization Trust or any investor or other Person with respect to (i) the repurchase or replacement of any asset held by any such Securitization Trust or (ii) indemnification under the applicable Securitization Agreement.

(e)To the Knowledge of Sellers, all certificates and reports that have been provided to the respective trustee as required by the Securitization Agreements were, when provided, true and correct in all material respects as of the date provided.

(f)To the Knowledge of Sellers (i) each party to a Securitization Agreement has complied in all material respects with its obligations thereunder and (ii) no default, or event that with notice, the passage of time or both, could become a default, on the part of RAIT Parent or any Acquired RAIT Entity has occurred and is continuing under any such Securitization Agreement.

(g)Each Securitization Trust included in the Acquired Business has filed in a timely manner all reports required to be filed with the Securities and Exchange Commission and each such report, at the time filed, was true and correct in all material respects.

(h)With respect to each Asset-Backed Security issued on or after December 24, 2016, the RAIT Entities are in full compliance with the credit risk retention rules set forth in Regulation RR, 17 C.F.R. §246.1, et seq.

Section 3.20Tax Related Representations and Warranties. With respect to the following representations and warranties (collectively, the “Tax Representations”), the taxable year of the Acquired RAIT Entities during which Closing occurs shall be deemed to end on the Closing Date (“Closing Taxable Year”) and, except where specified otherwise all Tax Representations are made without regard to any action taken by or inaction of RAIT Parent, Buyer or any of their Affiliates after the Closing Date.

(a)(A) All federal, state, local and non-U.S. income and other material Tax Returns required to be filed by or on behalf of the Acquired RAIT Entities and with respect to the Acquired Business have been timely filed with the appropriate taxing authorities in all jurisdictions in which such Tax Returns are required to be filed (after giving effect to any valid extensions of time in which to make such filings), (B) all such Tax Returns were accurate and complete in all material respects, were prepared in substantial compliance with all applicable laws and regulations, and were properly executed by an authorized person, (C) (I) all material Taxes due and payable by RAIT Parent or any of its Subsidiaries (whether or not shown on any Tax Return) have been fully and timely paid, subject to contested Taxes under clause (II) of this subsection (a), and (II) adequate reserves or accruals for Taxes of RAIT Parent and each of its Subsidiaries have been provided in accordance with such Person’s standard accounting practices with respect to any

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period for which Taxes are not yet due and payable or Taxes that are being contested in good faith, and (D) neither RAIT Parent nor any of its Subsidiaries have executed or filed with the IRS or any other taxing authority any agreement, waiver or other document or arrangement extending or having the effect of extending the period for assessment or collection of Taxes (including, but not limited to, any applicable statute of limitation), (E) since the Interim Balance Sheet Date, none of the RAIT Entities has incurred any liability for Taxes arising from extraordinary gains or losses, as that term is used in GAAP, outside of the Ordinary Course of Business and (F)Sellers have delivered copies of all material correspondence between the RAIT Entities and their auditors and tax preparers that relate to the tax year ended December 31, 2018.

(b)RAIT Parent has, for all periods commencing with its taxable year ending December 31, 1998, (1) been organized and operated in conformity with the requirements for qualification and taxation as a REIT, (2) made an election to be treated as a REIT, which has not been terminated or revoked by the IRS, and filed all Tax Returns consistently with such election, (3) distributed its REIT taxable income in accordance with the distribution requirements set forth in Section 857(a) of the Code (for the avoidance of doubt, for purposes of this clause (3), such taxable year for the year of Closing to be the Closing Taxable Year), and (4) has not taken any action that would reasonably be expected to result in a successful challenge (or has not failed to take any action that would reasonably be expected to prevent a successful challenge) by the IRS or any other taxing authority as to the status of the RAIT Parent.

(c)The current and proposed assets and method of operation for the RAIT Parent will enable RAIT Parent to continue to meet the requirements for qualification and taxation as a REIT at all times before the Closing Date, independent of (and without having to comply with) any (1) procedure for payment of a deficiency or post-closing dividend or (2) any “savings” or “cure” provisions in the Code.

(d)RAIT Parent has delivered or otherwise made available to Buyer (i) the RAIT Parent’s computation of its compliance with the income tests set forth in Sections 856(c)(2) and (3) of the Code and the asset tests set forth in Section 856(c)(4) of the Code (with such computations being accurate in all material respects), (ii) evidence of the RAIT Entities’ compliance with the ownership, management and operations tests of Sections 856(a)(1)-(6) of the Code, as applicable, and (iii) all information and documents requested by Buyer to analyze the REIT status and qualification of the assets of the FL7 Securitization, the FL8 Securitization, and the CDO I Securitization (collectively, the “REIT Testing Information”), in each case, for each quarter of each taxable year commencing with the taxable year ended December 31, 2013, which REIT Testing Information fairly and accurately reflects in all material respects the financial position of the RAIT Entities, as of the respective dates thereof.

(e)RAIT Parent has not, for all periods commencing with its taxable year ending December 31, 2014, incurred any liability for excise taxes under Sections 857(b), 860(c) or 4981 of the Code, including without limitation any excise tax arising from a prohibited transaction described in Section 857(b)(6) of the Code, foreclosure property as described in Section 857(b)(4) of the Code, or any tax arising from “redetermined rents, redetermined deductions, excess interest, and redetermined TRS service income” described in Section 857(b)(7) of the Code (other than Taxes which have been paid prior to the date hereof).

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(f)The assets of CDO I Issuer qualify as “real estate assets” within the meaning of Code Section 856(c)(5)(B). For each loan that is included in the Purchased Assets and is secured by a mortgage on both real property and personal property, the fair market value of such personal property does not exceed 15% of the fair market value of all property securing such loan.  For each mezzanine loan that is included in the Purchased Assets and is secured by an interest in a borrower entity, the fair market value of personal property held by the borrower entity does not exceed 15% of the fair market value of all assets of the borrower entity.

(g)No challenge to RAIT Parent’s status as a REIT has been threatened in writing or, to the Knowledge of Sellers, is otherwise pending.

(h)The Federal entity classification schedule delivered by RAIT Parent at the  Closing will reflect, as of the Closing Date, the Federal entity classification of each Acquired RAIT Entity under the Code and applicable Treasury Regulations (including a listing of each disregarded entity, partnership, corporation, qualified REIT subsidiary, taxable REIT subsidiary, controlled foreign corporation, and “passive foreign investment company”).

(i)[Reserved].

(j)Neither RAIT Parent nor any Acquired RAIT Entity is subject to any federal, state, local, or non-U.S. tax audit.  Neither RAIT Parent nor any Acquired RAIT Entity has received any written notice from any taxing authority (including jurisdictions in which Acquired RAIT Entities have not filed Tax Returns) that it intends to conduct an audit relating to any Taxes or make any assessment for Taxes, whether in connection with the Closing or otherwise. Neither RAIT Parent nor any Acquired RAIT Entity is a party to any litigation or administrative proceeding relating to Taxes other than appeals of real estate taxes in the Ordinary Course of Business.  Neither RAIT Parent nor any Acquired RAIT Entity is subject to a claim by a taxing authority in a jurisdiction where the RAIT Parent or Acquired RAIT Entity does not file Tax Returns or pay Taxes that the RAIT Parent or Acquired RAIT Entity, as applicable, is required to file Tax Returns or pay Taxes in that jurisdiction.

(k)To the Knowledge of Sellers, each Acquired RAIT Entity has complied in all material respects with all applicable Laws relating to the payment and withholding of Taxes and has, within the time and manner prescribed by Law, withheld and paid over to the proper taxing authorities all amounts required to be so withheld and paid over under applicable Laws, and has complied in all material respects with all information reporting and backup withholding requirements, including maintenance of required records with respect thereto, in connection with amounts paid or owing to any employee, creditor, independent contractor, stockholding or other third party except where non-compliance would not be material to the business of the RAIT Entities as a whole.

(l)No Acquired RAIT Entity is a party to any tax sharing or similar agreement or arrangement pursuant to which it will have any obligation to make any payments after the Closing, other than commercial agreements entered into in the Ordinary Course of Business and the principal purpose of which is not related to Taxes.  All amounts payable with respect to (or by reference to) Taxes pursuant to any such commercial agreement have been timely paid in accordance with the terms of such agreement.

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(m)No RAIT Entity (1) has requested a private letter ruling from the IRS or comparable rulings from other taxing authorities, (2) has granted a power of attorney with respect to any Taxes that is currently in force, or (3) is the subject of a “closing agreement” within the meaning of Section 7121 of the Code (or any comparable agreement under applicable state, local or foreign law), that would have an effect on an Acquired RAIT Entity.

(n)To the Knowledge of Sellers, there are no Liens for Taxes (other than Taxes not yet due and payable or Taxes that are being contested in good faith) upon any of the assets of the Acquired RAIT Entities or the Acquired Business.

(o)No Acquired RAIT Entity (1) has been a member of an affiliated, unitary, combined or consolidated group (other than a group the common parent of which was RAIT Parent or a Subsidiary of RAIT Parent), or (2) has any liability for the Taxes of another Person under Treasury Regulations Section 1.1502-6 (or any similar provision of state, local or foreign law), as a transferee, successor, by contract, by operation of law or otherwise.

(p)No Acquired RAIT Entity has engaged in any listed transaction or reportable (as defined under the Treasury Regulations promulgated under Section 6011 of the Code).

(q)No RAIT Entity has distributed stock of another Person, or to the Knowledge of Sellers, had its stock distributed by another Person, in a transaction purported or intended to be governed in whole or in part by Section 355 or Section 361 of the Code.

(r)No RAIT Entity (except for TRS entities), directly or indirectly, held any property as a dealer for U.S. Federal income tax purposes, or (ii) otherwise has engaged, directly or indirectly, at any time in any “prohibited transactions” within the meaning of Section 857(b)(6) of the Code.

(s)No Acquired RAIT Entity holds, directly or indirectly, any asset, and the Acquired Business does not consist of any assets, the disposition of which would subject an Acquired RAIT Entity to Tax pursuant to Section 337(d) or Section 1374 of the Code (or rules similar to such Sections of the Code), including pursuant to IRS Notice 88-19 or Treasury Regulations Sections 1.337(d)-5, 1.337(d)-6, or 1.337(d)-7.  No Acquired RAIT Entity has made an election to defer recognition of income from the discharge of indebtedness under Section 108(i) of the Code.

(t)No RAIT Entity has earnings and profits attributable to any “non-REIT year” (within the meaning Section 857 of the Code) of a RAIT Entity or any other corporation.

(u)No Acquired RAIT Entity will be required to include any item of income in, or exclude any item of deduction from, taxable income for any post-Closing tax period (or portion of a Straddle Period beginning on the day immediately following the Closing Date) as a result of any (1) change in method of accounting requested or occurring prior to the Closing Date, (2) agreement relating to Taxes entered into with any taxing authority (including a “closing agreement” as described in Section 7121 of the Code (or any corresponding or similar provision of state, local or foreign income law)), (3) installment sale or open transaction disposition made on or prior to the Closing, (4) deferred intercompany gain or excess loss account described in

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Treasury Regulations under Section 1502 of the Code (or any corresponding or similar provision of state, local or foreign law), or (5) prepaid amount received on or prior to the Closing Date.

(v)The representations made or to be made by RAIT Parent’s officers or directors set forth in the representation letter to be executed in connection with the QRS Tax Opinion are, or will be when made, true, correct and complete.

(w)RAIT Parent has received advice from Ledgewood, P.C., pursuant to Section 2.4(o) of the FL7 Indenture and Section 2.10(e) of the FL8 Indenture, that Buyer’s indirect acquisition of the Retained Securities (as defined in the FL7 Indenture and the FL8 Indenture, respectively) shall not cause RAIT 2017-FL7 Trust or RAIT 2017-FL8 Trust, as the case may be, to be treated as an association taxable as a corporation, a “taxable mortgage pool” or a “publicly traded partnership” for U.S. federal income tax purposes that, in each case, is subject to U.S. federal, state or local income tax on a net income basis, and such advice has been shared with RAIT 2017-FL7 Trust or RAIT 2017-FL8 Trust, respectively.

(x)The property questionnaires and related emails described in Schedule 3.20(x) have been provided to Buyer by the RAIT Entities in the electronic data room established by RAIT Parent and such property questionnaires and related emails and are correct and complete in all material respects.

Section 3.21Special Purpose Entities. To the Knowledge of Sellers each Acquired RAIT Entity that is intended to be a bankruptcy remote special purpose entity has been operated in accordance with its respective organizational documents to the extent required to maintain its status as a bankruptcy remote special purpose entity and has represented itself to be, a single purpose, bankruptcy remote entity and to the Knowledge of Sellers, there are no facts or circumstances that exists that would cause the Bankruptcy Court to disregard the separate existence of any such RAIT Entity so as to order the substantive consolidation of the assets and liabilities of such RAIT Entity with those of any other RAIT Entity.

Section 3.22No Conflict. Except as set forth on Schedule 3.22, neither the execution by Sellers of this Agreement or the other Definitive Documents, nor (subject to issuance of the Sale Order) the performance by Sellers of their respective obligations hereunder or thereunder, will (a) violate or conflict with the Organizational Documents of Sellers or any of the Acquired RAIT Entities or any applicable Law or Order to which any Seller or Acquired RAIT Entity is subject or bound, (b) violate, conflict with or result in a material breach or termination of, or otherwise give any Person additional material rights or compensation under, or the right to terminate or accelerate, or constitute (with notice or lapse of time, or both) a default under the terms of any Contract, (c) result in the creation or imposition of any Lien (other than Liens created by Buyer or any of its Affiliates) with respect to the Purchased Assets or any of the assets or properties of any of the Acquired RAIT Entities, or (d) require any material registration or filing with or consent of any Governmental Authority (other than (A) filings necessary to obtain the consents, waivers and/or approvals described on Schedule 3.22 and (B) filings that may be required under federal securities laws).

Section 3.23Churchill.  None of RAIT Partnership or any other Acquired RAIT Entity has any financial Shareholder Obligations (as defined in the Churchill Shareholder Agreement),

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liabilities or other obligations arising under or in connection with the Churchill Shareholder Agreement.  Since September 1, 2018, none of RAIT Partnership or any other Acquired RAIT Entity has been an active policyholder or member of or participant in Churchill or in any Insurance Program (as defined in the Churchill Shareholder Agreement) or any other insurance or reinsurance programs operated, maintained, developed or implemented by Churchill or any of its Affiliates.  Since September 1, 2018, none of RAIT Partnership or any other Acquired RAIT Entity has made any payments or contributions to Churchill or any of its Affiliates.  Schedule 3.23 sets forth the equity interests issued by Churchill that are owned beneficially and of record by any RAIT Entity.

Section 3.24Disclosure.  The documents required to be disclosed in the Schedules (a) have been provided to Buyer by the RAIT Entities in the electronic data room established by RAIT Parent and (b) represent genuine and complete copies of the documents they purport to be, including any material amendments to such documents, as such documents exist in the records of the RAIT Entities.

Section 3.25RMC Matters.  There is a valid title insurance policy that shall survive the consummation of the Transaction in full force and effect and the insurer under such title insurance policy has acknowledged coverage for Losses  with respect to the RMC Matter and RMC Lien and has agreed to defend the applicable Acquired RAIT Entities.

Section 3.26M&I Credit Facility and UCC.  That certain First Amended and Restated Revolving Credit and Security Agreement dated February 27, 2006, but effective as of December 9, 2005, by and between RAIT Partnership and M&I Marshall & Ilsley Bank (“M&I”) (the “M&I Credit Agreement”) and that certain Third Amended and Restated Promissory Note dated April 30, 2010, by RAIT Partnership  in favor of M&I (the “M&I Note”, and together with the M&I Credit Agreement, the “M&I Credit Facility”), which were secured, in part, by a pledge of RAIT Partnership’s interest in a loan to River Chase Florida Limited Liability Company (the “River Chase Loan”) evidenced by an Amended and Restated Loan and Security Agreement dated May 26, 2006, as set forth in that certain UCC-1 Financing Statement in favor of M&I with respect to RAIT Partnership filed on September 18, 2006 with the Delaware Department of State, Filing Number 6320210 (as amended or continued, the “M&I UCC”), have been repaid and satisfied in full and the M&I Credit Facility has been terminated. No RAIT Entity has any remaining obligations or liabilities under or relating to the M&I Credit Facility or the M&I UCC. The River Chase Loan that previously secured the M&I Credit Facility and the M&I UCC is no longer outstanding.

Section 3.27No Other Representations and Warranties. Except for the representations and warranties expressly contained in this Article III (including the related portions of the Schedules), Sellers have not made (and no other RAIT Entity has made) and are not making any other express or implied representation or warranty, either written or oral, on behalf of themselves or any of the RAIT Entities, including any representation or warranty as to any information regarding any of the RAIT Entities furnished or made available to Buyer and its Affiliates or as to the future revenue, profitability or success of the RAIT Entities, or any representation or warranty arising from statute or otherwise in Law.  Notwithstanding anything to the contrary contained in this Section 3.27, nothing in this Section 3.27 or otherwise shall prevent Buyer or any of its Affiliates from asserting any claim for actual fraud.

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ARTICLE IVREPRESENTATIONS AND WARRANTIES OF BUYER

Buyer hereby represents and warrants to Sellers as follows:

Section 4.1[Reserved]

Section 4.2Organization and Good Standing. Buyer is a limited liability company formed, validly existing and in good standing under the laws of its jurisdiction of formation, and has full limited liability company power and authority to own, lease and operate its properties and carry on its business as it is now being conducted.

Section 4.3Authority and Enforceability. Buyer has the requisite limited liability company power and authority to enter into this Agreement and the Escrow Agreement and to perform its obligations hereunder, and the execution and delivery of this Agreement and the consummation of the transactions contemplated herein and the performance of Buyer’s obligations hereunder have been duly authorized by all requisite limited liability company action on the part of Buyer. This Agreement has been duly executed and delivered by Buyer and constitutes the legal, valid and binding obligation of Buyer, enforceable against Buyer in accordance with its terms except as limited by moratorium, bankruptcy, insolvency, reorganization, liquidation or other similar Laws relating to or affecting creditors’ rights generally and the general principles of equity (regardless of whether enforcement is considered in a proceeding in equity or law).

Section 4.4No Contravention. Neither the execution and delivery of this Agreement nor the consummation of the transactions contemplated herein will (i) violate or conflict with any provisions of Buyer’s certificate of formation or limited liability company agreement, (ii) violate, or result in a breach of, or constitute a material default under, or conflict with, or accelerate the performance required by, any of the terms of any material Contract to which Buyer is a party or by which it is bound, or (iii) violate or conflict with any Order of any Governmental Authority, or any Law applicable to Buyer, with respect to clauses (ii) and (iii), solely to the extent such violation, breach, default, conflict or acceleration would materially and adversely affect Buyer’s ability to consummate the transactions contemplated by this Agreement.

Section 4.5Litigation.  No Action or Proceeding is pending or, to the Knowledge of Buyer, threatened, against Buyer or any Affiliate of Buyer which seeks to delay or prevent the consummation of, or which would materially adversely affect Buyer’s or its Affiliates’ ability to consummate the transactions contemplated by this Agreement.

Section 4.6Finders’ Fee. There is no investment banker, broker, finder or other intermediary which has been retained by or is authorized to act on behalf of Buyer who might be entitled to any fee or commission in connection with the transactions contemplated by this Agreement.

Section 4.7Availability of Funds.  At the Closing, Buyer will have sufficient cash on hand or other immediately available funds to enable it to pay the Purchase Price and such other amounts required to be provided by Buyer at Closing.

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Section 4.8No Collusion. Buyer has not, and is not, engaged in any collusion with any other bidder, or potential bidder, in connection with the bidding and sale process of the Acquired Business.

Section 4.9Investment Purpose.

(a)With respect to the Acquired Equity Interests in RAIT Partnership and any other Acquired Equity Interests pursuant to the Transfer Election, Buyer is acquiring such Acquired Equity Interests solely for its own account for investment purposes and not with a view toward, or for the offer or sale in connection with any distribution thereof, or with the present intention of distributing or selling such Acquired Equity Interests. Buyer acknowledges that such Acquired Equity Interests may not be transferred or sold except pursuant to the registration provisions of the Securities Act of 1933, as amended, or pursuant to an applicable exemption therefrom and subject to state securities laws and regulations, as applicable. Buyer has such knowledge and experience in financial and business matters that it is capable of evaluating the merits and risks of its participation in the transaction contemplated hereby. Buyer confirms that RAIT Parent has provided, or made available, to Buyer the opportunity to ask questions of the officers and management employees of the RAIT Entities, as well as access to the documents, information and records of the RAIT Entities and to acquire additional information about the business and financial condition of the RAIT Entities, and Buyer confirms that it has made an independent investigation, analysis and evaluation of the RAIT Entities and their respective properties, assets, business, financial condition, documents, information and records.

(b)Buyer is a Qualified Institutional Buyer, a Qualified Investment Vehicle and a Qualified Purchaser (each as defined in the Indenture referred to in the next sentence).  Buyer makes each of the representations and warranties set out in Exhibit B-2 (Rule 144A Transfer Certificate) to the Indenture, dated November 7, 2006, among RAIT CRE CDO I, Ltd. and RAIT CRE CDO I, LLC, as Co-Issuers, Wells Fargo Bank, National Association  and RAIT Partnership, L.P., as Advancing Agent.

Section 4.10Condition of the Business.  Notwithstanding anything contained in this Agreement to the contrary, Buyer acknowledges and agrees that neither RAIT Parent nor any other RAIT Entity is making any representations or warranties whatsoever, express or implied, beyond those expressly given by RAIT Parent in Article III hereof (as modified by the Schedules hereto).  Buyer has made its own independent inquiry and investigation into, and, based thereon, has formed an independent judgment concerning, the business of the RAIT Entities, the Acquired Business, each of the RAIT Entities and the Transaction and, in making its determination to proceed with the Transaction, Buyer has relied only on the representations and warranties set forth in in Article III hereof (as modified by the Schedules hereto) and the results of its own independent investigation and independent judgment. Buyer acknowledges and agrees that, except for the representations and warranties contained in Article III hereof, the assets of the Acquired Business are being transferred on a “where-is” and, as to condition, “as is” basis.

Section 4.11Affiliation with Debtors.  Buyer has provided to Sellers, in writing, a true and correct list of all of the connections or relationships (business or otherwise), or agreements or understandings between, Buyer and any members of its investor group, if applicable, or any equity holders in the case of a Buyer which is an entity specially formed for the purpose of effectuating

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the Transaction, on the one hand, and the Debtors, RAIT Partnership or any of their Affiliates and/or any officers, directors, trustees or equity security holders of the Debtors, RAIT Partnership or any of their Affiliates, on the other hand.

ARTICLE V

CERTAIN COVENANTS AND AGREEMENTS OF SELLERS AND BUYER

Section 5.1Agreements of the RAIT Entities.

(a)Certain Affirmative Covenants. Upon the terms and subject to the conditions set forth in this Agreement, Sellers agree that, until Closing, unless otherwise consented to in advance in writing by Buyer, Sellers shall, and shall cause the other RAIT Entities (as applicable), to:

(i)commence the Chapter 11 Cases in the Bankruptcy Court within three (3) Business Days of the date of this Agreement;

(ii)comply with the milestone set forth in clause (a) of the Bankruptcy Milestones and use commercially reasonable efforts to comply with all of the other Bankruptcy Milestones;

(iii)use commercially reasonable efforts (A) to provide draft copies of all material pleadings and other documents (including, without limitation, the First Day Motions) that the Debtors intend to file with the Bankruptcy Court to the Buyer Advisors no later than two (2) full Business Days prior to the date the Debtors intend to file any such documents, other than the Sale Order and the other Definitive Documents (and any amendments thereto), which shall be deemed to be material for the purposes of this provision and shall be provided within a longer reasonable time, and (B) to consult in advance in good faith with the Buyer Advisors regarding the form, substance and timing of any such proposed filings with the Bankruptcy Court;

(iv)timely file a formal objection to any motion filed with the Bankruptcy Court or any other proceeding commenced by any party seeking (A) entry of an order (x) directing the appointment of an examiner or a trustee, (y) converting the Chapter 11 Cases to cases under chapter 7 of the Bankruptcy Code or (z) dismissing the Chapter 11 Cases; (B) confirmation or approval of an Alternative Transaction; or (C) other relief that would be inconsistent with this Agreement or the other Definitive Documents;

(v)exercise commercially reasonable efforts to obtain as promptly as practicable any and all licensing or other approvals (including, without limitation, any necessary third-party consents) necessary to the implementation or consummation of the Transaction and such third-party consents as are required by this Agreement;

(vi)(A) conduct, and cause their respective Subsidiaries to conduct, their businesses and operations only in the Ordinary Course of Business in a manner that is in compliance with Law in all material respects; (B) maintain their material physical assets, properties and facilities, in the aggregate, in the working order, condition and repair as of

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the date of this Agreement, ordinary wear and tear excepted; (C) maintain their respective books and records on a basis consistent with prior practice in all material respects; (D) use commercially reasonable efforts to maintain all insurance policies, or suitable replacements therefor, in full force and effect; and (E) use commercially reasonable efforts to preserve intact their business organizations and relationships with third parties (including creditors, lessors, licensors, suppliers, distributors and customers) and employees,except to the extent that any failure to do so isdirectly attributable to the filing of the Chapter 11 Cases;

(vii)maintain their good standing and legal existence under the Laws of the respective states in which Sellers and the other RAIT Entities are incorporated, organized or formed, except to the extent that any failure to maintain such good standing arises solely as a result of the filing of the Chapter 11 Cases;

(viii)if any Seller or other RAIT Entity receives an unsolicited proposal or expression of interest with respect to an Alternative Transaction, promptly notify the Buyer Advisors of the receipt thereof, with such notice to include the material terms thereof; and

(ix)provide or make available to Buyer full and complete copies of the rent roll summaries through the most recent month end prior to the Closing Date for the real properties owned or master leased by the RAIT Entities with respect to the Acquired Business.

(b)Negative Covenants. Upon the terms and subject to the conditions set forth in this Agreement (including Section 5.13), Sellers agree that, until Closing, unless otherwise (x) expressly permitted or required by this Agreement or (y) consented to in advance in writing by Buyer (not to be unreasonably conditioned, withheld or delayed), Sellers shall not, and shall not cause or permit any of the other RAIT Entities (as applicable) to:

(i)(A) directly or indirectly, take any action that would reasonably be expected to prevent, interfere with, delay or impede the Transaction or the consummation of the transactions contemplated by this Agreement in any way; or (B) otherwise take any action that is not consistent with this Agreement;

(ii)(A) amend or modify this Agreement or any other Definitive Document, in whole or in part, in a manner that is not consistent with this Agreement or not otherwise reasonably acceptable to Buyer; (B) publicly announce its intention not to pursue this Agreement or the Transaction; or (C) file or agree to file with the Bankruptcy Court any Definitive Document (including any modification or amendment thereof) that, in whole or in part, is not consistent with this Agreement or is not otherwise reasonably acceptable to Buyer;

(iii)[reserved];

(iv)adopt, amend or propose to amend any of the respective Organizational Documents of an Acquired RAIT Entity in any material respect, except as required by Law, or as specifically contemplated by this Agreement or in furtherance of the Transaction (and as approved by Buyer);

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(v)transfer, issue, sell, pledge, dispose of or encumber, or grant any options, warrants, conversion privileges or rights of any kind to purchase or otherwise acquire, any of the Acquired Equity Interests or any other shares of capital stock, membership interests, limited liability company interests, partnership interests, trust certificate interests or other equity interests;

(vi)adjust, split, subdivide, combine, reclassify or recapitalize any outstanding shares of capital stock, membership interests, limited liability company interests, partnership interests, trust certificate interests or any other equity interests, or issue, propose or authorize the issuance of any other equity securities (including options, profits interests, warrants or any similar security exercisable for, or convertible into, such other security) of an Acquired RAIT Entity, except as specifically contemplated by this Agreement;

(vii)declare, set aside, make or pay any dividend or make any other distribution (whether in cash, equity interests, property or otherwise) with respect to any shares of capital stock, membership interests, limited liability company interests, partnership interests, trust certificate interests or any other equity interests of a RAIT Entity, except by a wholly-owned Subsidiary to another wholly-owned Subsidiary or to RAIT Parent or as necessary to maintain REIT compliance;

(viii)redeem, purchase or otherwise acquire or offer to acquire, directly or indirectly, any outstanding shares of capital stock, membership interests, limited liability company interests, partnership interests, trust certificate interests or any other equity interests of an Acquired RAIT Entity, other than a wholly-owned Subsidiary;

(ix)acquire (A) any corporation, partnership, limited liability company, joint venture or other business organization or division (by merger, exchange, consolidation, acquisition of any portion of the stock of, or other ownership interests in, or a substantial portion of the assets of, any such Person or otherwise); (B) an ownership interest in real property (by whatever means in law, equity or otherwise); or (C) any other assets, other than (in the case of this clause (C)) in the Ordinary Course of Business;

(x)sell, lease, license, mortgage, pledge, grant or incur any encumbrance on, or otherwise encumber or dispose of, any properties or assets of any RAIT Entity, other than (A) leases in the Ordinary Course of Business of less than $250,000 aggregate annual amount per lease and (B) sales or disposals of assets in the Ordinary Course of Business of less than $2,500,000 in the aggregate;

(xi)except as set forth on Schedule 5(b)(xi), incur or create any indebtedness or debt, or guarantee any indebtedness of any Person (other than a RAIT Entity) or enter into any “keep well” or other agreement to maintain any financial condition of another person (other than a Subsidiary of a RAIT Entity) or enter into any arrangement having the economic effect of any of the foregoing, in each case, outside of the Ordinary Course of Business;

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(xii)incur, cause to exist, or enter into any commitment or agreement with respect to any debtor-in-possession financing, cash collateral usage, exit financing and/or other financing arrangements;

(xiii)except insofar as may have been required by a change in GAAP or applicable Law, change materially its financial or tax accounting methods or revalue any of its material assets;

(xiv)(A) enter into, adopt or amend any existing employment agreements or any management compensation or incentive plans by any of the Acquired RAIT Entities, or increase in any manner the compensation or benefits (including severance) of any director, officer or management level employee of any of the Acquired RAIT Entities or (B) enter into or amend any such benefit or compensation plans except in the Ordinary Course of Business;

(xv)settle, agree to settle, or initiate, commence or effect any settlement, compromise or other resolution of any pending, threatened or future claims or actions against any of the Acquired RAIT Entities, that would require any Acquired RAIT Entity to pay an amount in excess of $200,000 for any individual claim or action, except as may be expressly approved in writing by Buyer;

(xvi)amend, supplement or otherwise modify any Contract listed in the Schedules or other material Contract, except for amendments, supplements or modifications that (A) are made in the Ordinary Course of Business in connection with the Transaction and (B) do not change (other than as a consequence of such amendment) the substantive obligations of the parties thereto;

(xvii)enter into any new agreement, contract or other arrangement, amend, supplement or otherwise modify any existing agreement, contract or other arrangement, effect any transaction, or commit to enter into or otherwise effect any of the foregoing, with any Affiliate of the Acquired RAIT Entities, or that provides (directly or indirectly) any benefit (economic or otherwise) to, any Affiliate of the Acquired RAIT Entities (or, in any such case, any employee, officer, director, manager, shareholder, member or partner of the Acquired RAIT Entities or any Affiliate of the Acquired RAIT Entities, or any such individual’s parents, spouse or descendants, or any trust or entity which is for the benefit of such individual and/or such individual’s relatives); or

(xviii)pay, or agree to pay, any indebtedness, liabilities or other obligations (including any accounts payable or trade payable) that existed prior to the Petition Date or that arose from any matter, event, occurrence, action, omission or circumstance that occurred prior to the Petition Date, unless the Bankruptcy Court authorizes the Debtors to pay such indebtedness, liabilities or other obligations (including any accounts payable or trade payable) pursuant to the relief granted in connection with the First Day Motions or otherwise with the consent of Buyer (such consent not to be unreasonably withheld).

Section 5.2Taxes.

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(a)All Tax Returns required to be filed on or after the Closing Date with respect to any RAIT Entity with respect to any taxable period that ends on or before the Closing Date, (i) shall be prepared, or caused to be prepared, and filed, or caused to be filed, by Sellers, (ii) shall be accurate and complete in all material respects as of the time of filing, and (iii) Sellers shall be responsible for and shall pay in a timely manner all Taxes shown to be due on such Tax Return. All Tax Returns required to be filed on or after the Closing Date with respect to any Acquired RAIT Entity with respect to any taxable period that includes the Closing Date and ends after the Closing Date shall be prepared, or caused to be prepared, and filed, or caused to be filed, by Buyer, provided, however, that Sellers shall be responsible for and shall pay in a timely manner all Taxes in excess of $50,000 shown to be due on such Tax Return that are attributable to periods prior to the Closing Date. RAIT Parent shall provide, or cause to be provided, to Buyer Tax Returns for the prior three years for each Acquired RAIT Entity.

(b)Except as set forth on Schedule 5.2(b), from and after the date hereof, without the prior written consent of either Buyer or RAIT Parent, as applicable (which consent will not be unreasonably withheld, delayed or conditioned), Buyer, Buyer’s Affiliates, RAIT Parent and any other RAIT Entity (or any Affiliate of any RAIT Entity) shall not, to the extent it may affect or relate to any of the Acquired RAIT Entities or the Purchased Assets, make or change any Tax election, change any annual Tax accounting period, adopt or change any method of Tax accounting, file any amended Tax Return, enter into any closing agreement, settle any Tax claim or assessment, surrender any right to claim a Tax refund, consent to any extension or waiver of the limitation period applicable to any Tax claim or assessment or take or omit to take any other action, including with respect to the Purchased Assets related to CDO I, if any such action or omission could have the effect of materially increasing the Tax liability or materially reducing any Tax Asset of any Acquired RAIT Entity, Buyer or an Affiliate of Buyer or result in a Tax for which RAIT Parent may have an indemnification obligation pursuant to Section 5.2(f), provided, however, that nothing in this Section 5.2(b) shall restrict Buyer or Buyer’s Affiliates from taking any action after the Closing Date that affects the Acquired RAIT Entities or Purchased Assets solely for periods beginning on or after the Closing Date.  For purposes of this Agreement, “Tax Asset” shall mean any net operating loss, net capital loss, Tax credit or any other Tax attribute which could reduce Taxes (including, without limitation, deductions and credits related to alternative minimum Taxes).

(c)Buyer and the Debtors shall take all commercially reasonable actions necessary to qualify for exemption from, or reduction of, any stamp or similar taxes pursuant to Section 1146(c) of the Bankruptcy Code.

(d)RAIT Parent and Buyer shall, upon written request, use commercially reasonable efforts to obtain any certificate or other document from any Governmental Authority or any other Person as may be necessary to mitigate, reduce or eliminate any Tax that could be imposed with respect to the transactions contemplated by this Agreement.

(e)RAIT Parent and Buyer shall cooperate in the preparation, execution and filing of all tax returns, questionnaires, applications or other documents regarding any real property transfer or gains, sales, use, value added, stock transfer, stamp or similar Taxes, and any transfer, recording, registration and other similar fees that become payable in connection with the

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transactions contemplated by this Agreement (“Transfer Taxes”). From and after the Closing, Buyer shall pay or cause to be paid all Transfer Taxes.

(f)

(i)From and after the Closing until the date that is twenty four (24) months after the Closing Date, RAIT Parent or its successor or designee (as applicable, the “Indemnifying Party”) shall, up to the Tax Indemnity Amount, indemnify, defend and hold Buyer and its successors and permitted assigns and all of their respective members, shareholders, partners, officers, directors, managers, trustees, employees, agents and Affiliates (each, a “Buyer Indemnified Party”) harmless from any and all Losses arising from any federal, state and local income taxes, penalties and interest actually incurred or suffered by the Acquired RAIT Entities or Buyer, or for which any of the Acquired RAIT Entities or Buyer may otherwise be liable, based upon, arising out of or as a result of any breach, inaccuracy or failure to be true of any representation or warranty of Sellers set forth in Section 3.20 and any failure by Sellers to perform any covenant or agreement set forth in Section 5.2 of this Agreement. For the sake of clarity, Buyer shall be entitled to be indemnified for such federal, state and local income taxes, interest and penalties pursuant to this Section 5.2(f) solely from, and in an amount up to, the available Tax Indemnity Amount.  Any payment made pursuant to this Section 5.2(f) shall be treated for Tax purposes as an adjustment to the Purchase Price.

(ii)As soon as is reasonably practicable after any Buyer Indemnified Party becomes aware of any event or condition that could reasonably be expected to result in a Loss for which such Buyer Indemnified Party is entitled to indemnification under Section 5.2(f)(i) (a “Liability Claim”), such Buyer Indemnified Party will give written notice of such Liability Claim (a “Claims Notice”) to the Indemnifying Party. A Claims Notice must describe the Liability Claim and must indicate the amount (estimated if necessary and to the extent feasible) of the Loss that has been or that is reasonably expected to be suffered by such Buyer Indemnified Party.  No delay in or failure to give a Claims Notice by the applicable Buyer Indemnified Party under this Section 5.2(f)(ii) will adversely affect any of the other rights or remedies that such Buyer Indemnified Party has under this Agreement or alter or relieve the Indemnifying Party of its obligation to indemnify such Buyer Indemnified Party except to the extent that such delay or failure has prejudiced the Indemnifying Party.  The Indemnifying Party will respond to the applicable Buyer Indemnified Party (a “Claim Response”) within forty five (45) days after the date that the Claims Notice is sent by such Buyer Indemnified Party to the Indemnifying Party (the “Response Period”).  Any Claim Response must specify whether or not the Indemnifying Party disputes the Liability Claim described in the Claims Notice.  If the Indemnifying Party fails to give a Claim Response within the Response Period, then the Indemnifying Party will be deemed not to dispute the Liability Claim described in the related Claims Notice.  If the Indemnifying Party elects not to dispute a Liability Claim described in a Claims Notice by failing to give a timely Claim Response or by notifying the applicable Buyer Indemnified Party in writing that such Indemnifying Party does not dispute such Liability Claim in its entirety, then the amount of Losses alleged in such Claims Notice will be conclusively deemed to be an obligation of the Indemnifying Parties and subject to recovery from the Tax Indemnity Escrow Account.  If the Indemnifying

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Party timely delivers a Claim Response within the Response Period indicating that it disputes one or more of the matters identified in the Claims Notice, then the Indemnifying Party and the applicable Buyer Indemnified Party will promptly meet and use their reasonable efforts to settle the dispute.  If the Indemnifying Party and the applicable Buyer Indemnified Party are unable to settle such dispute within forty five (45) days after the conclusion of the Response Period, then either the Indemnifying Party or the Buyer Indemnified Party may resort to any legally available remedies of enforcement.

(iii)The Indemnifying Party shall have the right to defend and to direct the defense against any Liability Claim brought by a third Person (a “Third Party Claim”) relating to any indemnification sought by the applicable Buyer Indemnified Party under Section 5.2(f)(i) (including to conduct any actions or settlement negotiations) with counsel selected by the Indemnifying Party and reasonably acceptable to the applicable Buyer Indemnified Party.  If the Indemnifying Party does not exercise its right to defend and direct the defense as set forth in the immediately preceding sentence, then the applicable Buyer Indemnified Party shall have the right to defend and to direct the defense of such Third Party Claim. The Indemnifying Party, if it has assumed the defense of any Third Party Claim as provided in this Agreement, may not, without the prior written consent of the applicable Buyer Indemnified Party, consent to a settlement of, or the entry of any judgment arising from, any such Third Party Claim that (1) does not include as an unconditional term thereof the giving by the claimant or the plaintiff in such Third Party Claim to the applicable Buyer Indemnified Party a complete release from all liability in respect of such Third Party Claim, (2) grants any injunctive or equitable relief or (3) is reasonably expected to have a material adverse effect on the applicable Buyer Indemnified Party.

Section 5.3Structure; Transfer Election. On or before five (5) Business Days prior to the first date set for the hearing before the Bankruptcy Court to consider the entry of the Sale Order, Buyer shall identify in writing (the “Transfer Election Notice”) in reasonable detail any proposed transactions that will, at Buyer’s cost and expense and subject to RAIT Parent’s reasonable consent (which consent shall not be unreasonably withheld) and the approval of the Bankruptcy Court, be effected as of immediately prior to the Closing to purchase the Acquired Equity Interests, which structure may consist of the direct purchase by Buyer or its Affiliates,  pursuant to a substantially contemporaneous separate transaction, of certain Acquired Equity Interests (such structure, the “Transfer Election”).  The Transfer Election Notice shall include any other proposed transaction that will be effected as of immediately prior to the Closing, including (A) the merger of any or all of the Subsidiaries of RAIT Parent into one or more of its other Subsidiaries or the dissolution of any Subsidiaries, (B) the transfer of assets between or among the RAIT Entities, or (C) any other transaction, reincorporation or conversion exclusively involving the RAIT Entities in furtherance of the Transaction; provided, however, that the RAIT Entities shall not be required to take any action or to effect any such transaction to the extent that it requires the approval of the Bankruptcy Court, unless such approval is obtained pursuant to the Sale Order or otherwise, and is otherwise not in violation of Law.  In connection with any of the transactions proposed by Buyer under this Section 5.3, Buyer and RAIT Parent shall each consult with each other and consider in good faith any comments regarding the Transfer Election Notice and the Transfer Election. Any such transaction approved in accordance with this Section 5.3 shall be

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effective as of the Closing pursuant to the Sale Order without any further action by the stockholders or directors of any of the RAIT Entities.

Section 5.4Notification of Certain Matters.  Sellers shall give prompt notice to Buyer of (i) any representation made by one or more Sellers in this Agreement that Sellers discover was untrue or inaccurate in any material respect when made, (ii) the occurrence or nonoccurrence of any event the occurrence or nonoccurrence of which would cause any of the representations or warranties made by one or more Sellers in this Agreement to be untrue or inaccurate in any material respect at or as of, or at any time prior to, the Closing, (iii) any failure by any one or more Sellers to comply with or satisfy any covenant, condition or agreement in all material respects to be complied with or satisfied by such Seller(s) hereunder or (iv) any lawsuits, claims, proceedings or investigations that after the date hereof are threatened in writing or commenced (x) against the Acquired Business, the Acquired RAIT Entities or the Purchased Assets, (y) against any RAIT Entity with respect to the Acquired Business, the Acquired RAIT Entities, the Purchased Assets or the transactions contemplated by this Agreement, or (z) against any officer, trustee, director, employee, consultant, agent or shareholder of the RAIT Entities with respect to the affairs of any of the RAIT Entities relating to the Acquired Business or with respect to the Acquired RAIT Entities, the Purchased Assets or the transactions contemplated by this Agreement; provided, however, that the delivery of any notice pursuant to this Section 5.4 shall not cure such breach or non-compliance or limit or otherwise affect the remedies available hereunder to the party receiving such notice.

Section 5.5Supplement to Schedules.  From time to time prior to the Closing Date, Sellers shall have the right (but not the obligation) to supplement or amend the Schedules hereto with respect to any matter hereafter arising or of which it becomes aware after the date hereof if notice of such matter has been delivered to Buyer pursuant to Section 5.4 hereof (each a “Schedule Supplement”). Any disclosure in any such Schedule Supplement shall not be deemed to have cured any inaccuracy in or breach of any representation or warranty contained in this Agreement.

Section 5.6Good Faith Cooperation; Further Assurances.

(a)From and after the date hereof, until the earlier of the termination of this Agreement pursuant to Article VII and the Closing, the Parties shall cooperate with each other in good faith and shall coordinate their activities (to the extent practicable and subject to the terms hereof) in respect of (a) all matters concerning the implementation of the Transaction and (b) the pursuit and support of the Transaction (including consummation of this Agreement). Subject to any applicable confidentiality restrictions, Sellers shall, at Buyer’s expense, provide (i) reasonable access to Sellers’ books and records (including, without limitation, copies of Tax Returns of Sellers and their Subsidiaries for the prior three years), facilities, management and advisors and (ii) timely and reasonably detailed response to all reasonable diligence requests of Buyer or any Buyer Advisor. Furthermore, subject to the terms hereof, each of the Parties shall take such action as may be reasonably necessary to carry out the purposes and intent of this Agreement and the Transaction, including making and filing any required governmental or regulatory filings and executing, acknowledging and delivering all such further conveyances, notices, assumptions, releases and such other instruments.  From and after the date hereof, unless this Agreement is terminated pursuant to Article VII, Sellers shall use commercially reasonable efforts to provide Buyer all cooperation reasonably requested by Buyer in connection with Buyer obtaining a buyer side

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representation and warranty insurance policy. Notwithstanding the foregoing, nothing in this Section 5.6 shall (i) prohibit or limit RAIT Parent’s Fiduciary Out or Sellers’ shop rights under Section 5.13 hereof, or (ii) be construed to (A) prevent or restrictBuyer from appearing as a party-in-interest in any matter to be adjudicated in the Chapter 11 Cases so long as such appearance and the positions advocated in connection therewith are not materially inconsistent with this Agreement and are not for the purpose of hindering or delaying implementation of the Transaction and other matters contemplated by this Agreement, or (B) prohibit or restrict any Person that serves as collateral manager, servicer, trustee, agent or in a similar capacity, with respect to any assets or obligations of the RAIT Entities, from taking any actions (including, without limitation, actions in or in connection with the Chapter 11 Cases otherwise prohibited or restricted by this Section 5.6) with respect to such assets or obligations; provided, however, that if any such Person described in this clause (B)is an Affiliate of Buyer and its actions are primarily responsible for the circumstances giving rise to the termination of this Agreement by Buyer pursuant to Section 7.1(b) orSection 7.1(h), then Buyer shall not be entitled to the Breakup Fee or Expense Reimbursement.

(b)Each Seller shall (i) promptly deliver to Buyer any mail or other communication received by such Seller after the Closing Date and relating to the Acquired Business, the Acquired RAIT Entities, the other Purchased Assets or the Assumed Liabilities, if any, (ii) promptly transfer in immediately available funds to Buyer any cash, electronic credits or deposits received by such Seller to the extent that such cash, electronic credits or deposits are Purchased Assets and (iii) promptly forward to Buyer any checks or other instruments of payment that it receives to the extent that such checks or other instruments are Purchased Assets. Buyer shall (i) promptly deliver to Sellers any mail or other communication received by it after the Closing Date and relating in any material respect to the RAIT Excluded Subsidiaries or other Excluded Assets, (ii) promptly wire transfer in immediately available funds to Sellers, any cash, electronic credits or deposits received by Buyer but solely to the extent that such cash, electronic credits or deposits are Excluded Assets and (iii) promptly forward to Sellers any checks or other instruments of payment that it receives but solely to the extent that such checks or other instruments are Excluded Assets.

Section 5.7Employees; Benefit Plans.

(a)Buyer may, or may cause an Affiliate of Buyer to, make offers of at-will employment, effective on or after the Closing Date, to such employees of RAIT Parent as it may determine in its sole discretion, on terms and conditions determined by Buyer in its sole discretion.  Any such employee of RAIT Parent who accepts such offer and commences employment with Buyer or an Affiliate of Buyer is a “Continuing Employee”.  Nothing herein shall (i) require Buyer to employ any employee of RAIT Parent or to offer employment to any Continuing Employee or (ii) limit Buyer’s ability and discretion to change or amend the total cash compensation or employee benefits for which any Continuing Employee may be eligible.

(b)To the extent a group health plan is sponsored by RAIT Parent or an entity in the same controlled group as RAIT Parent under Treasury Regulation Section 54.4980B-2 Q&A2(a)(2), RAIT Parent shall be solely responsible for providing continuation coverage under COBRA to any individual who is an “M&A qualified beneficiary” as defined in Treasury Regulation Section 54.4980B-9, subject to each such individual’s payment of premiums thereunder.

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(c)The provisions of this Section 5.7are solely for the benefit of the parties to this Agreement and no current or former employee or any other individual associated therewith shall be regarded for any purposes as a third-party beneficiary to this Agreement.  Nothing in this Section 5.7, express or implied, shall be construed or interpreted to amend any Employee Plan or other employee benefit plan or to confer upon any individual, including any employee or former employee, any right, benefit or remedy of any nature whatsoever under or by reason of this Agreement.

(d)RAIT Parent shall be at all times responsible for any obligation or other liability with respect to the employees of RAIT Parent, including for events that occur up to and including the Closing Date, including all liabilities under the WARN Act (if any).  Buyer shall be responsible for any obligation or other liability with respect to any Continuing Employee, if any, for events that occur following the Closing Date, including all liabilities under the WARN Act.

Section 5.8Information Regarding Assigned Contracts. Buyer shall provide to RAIT Parent and the Bankruptcy Court, in a timely fashion, any and all information required by the Bankruptcy Code and the Bankruptcy Court to evidence Buyer’s capability of satisfying the conditions contained in Sections 365(b)(1)(C) and 365(f)(2)(B) of the Bankruptcy Code with respect to the Assigned Contracts.

Section 5.9Regulatory Approval.

(a)Each Party shall, as promptly as possible, use its commercially reasonable best efforts to obtain, or cause to be obtained, all consents, authorizations, orders and approvals from all Governmental Authorities that may be or become necessary for its execution and delivery of this Agreement and the performance of its obligations pursuant to this Agreement. Each Party shall cooperate fully in a commercially reasonable manner with the other Party and its Affiliates in promptly seeking to obtain all such consents, authorizations, orders and approvals. The Parties shall not willfully take any action that will have the effect of delaying, impairing or impeding the receipt of any required consents, authorizations, orders and approvals. If required by the HSR Act and if the appropriate filing pursuant to the HSR Act has not been filed prior to the date hereof, each Party shall make an appropriate filing pursuant to the HSR Act with respect to the transactions contemplated by this Agreement within ten (10) Business Days after the date hereof and supply as promptly as practicable to the appropriate Governmental Authority any additional information and documentary material that may be requested pursuant to the HSR Act.

(b)All analyses, appearances, meetings, discussions, presentations, memoranda, briefs, filings, arguments, and proposals made by or on behalf of either Party before any Governmental Authority or the staff or regulators of any Governmental Authority, in connection with the transactions contemplated hereunder (but, for the avoidance of doubt, not including any interactions between RAIT Parent with Governmental Authorities in the Ordinary Course of Business, any disclosure which is not permitted by Law or any disclosure containing confidential information) shall be disclosed to the other Party in advance of any filing, submission or attendance, it being the intent that the Parties will consult and cooperate with one another, and, to the extent commercially reasonable, consider in good faith the views of one another, in connection with any such analyses, appearances, meetings, discussions, presentations, memoranda, briefs, filings, arguments and proposals. Each Party shall give notice to the other Party

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with respect to any meeting, discussion, appearance or contact with any Governmental Authority or the staff or regulators of any Governmental Authority with respect to the transactions contemplated hereunder, with such notice being sufficient to provide the other Party with the opportunity to attend and participate in such meeting, discussion, appearance or contact.

(c)Notwithstanding the foregoing, nothing in this Section 5.9 shall require, or be construed to require, Buyer or any of its Affiliates to agree to (i) sell, hold, divest, discontinue or limit, before or after the Closing Date, any assets, businesses or interests of Buyer or any of its Affiliates; (ii) any conditions relating to, or changes or restrictions in, the operations of any such assets, businesses or interests; or (iii) any material modification or waiver of the terms and conditions of this Agreement.

Section 5.10Churchill Assets.  All amounts, profits, proceeds, payments, or returned or released collateral paid or caused to be paid by Churchill and actually received by RAIT Partnership, Buyer or any of its Affiliates as a result of or in connection with the ownership of, membership in, or being, directly or indirectly, a policyholder of Churchill by RAIT Partnership or any Affiliate thereof (collectively, the “Churchill Assets”) after the Closing Date shall be received and held in trust for the sole and exclusive benefit of RAIT Parentand shall be segregated from other funds and property of RAIT Partnership, Buyer and its Affiliates and held in a separate account. Any such received Churchill Assets shall be promptly transferred and delivered to a designee of RAIT Parent in the same form as so received, net of any expenses or Losses that are incurred by Buyer or its Affiliates in connection with the Churchill Assets or as a result of any breach by Sellers of any of the representations set forth in Section 3.5, along with all endorsements or other documents necessary or desirable for such transfer and delivery; provided, however, that Buyer’s ability to offset for Losses in respect of breaches of the representations and warranties in Section 3.5 shall be Buyer’s sole recourse after the Closing in respect of such Losses. Further, RAIT Parent, at its sole cost and expense, shall have the right, in consultation with Buyer and prior to the Closing, to take any necessary or desirable actions to transfer, liquidate or otherwise terminate RAIT Partnership’s ownership of, membership in, or its status as a policyholder of Churchill, which actions may include entering into one or more agreements related to the runoff of policies insured or reinsured by Churchill or the return or the transfer of RAIT Partnership’s ownership interest in Churchill and any amounts related thereto to a designee of RAIT Parent or an Affiliate of RAIT Parent.  Prior to the Closing and, to the extent applicable, following the Closing, Sellers shall use reasonable efforts to deliver to Buyer evidence of ownership of the equity interests in Churchill that are owned by RAIT Partnership.  For the avoidance of doubt, Buyer and Seller agree that (a) RAIT Parent shall at all times be treated as the beneficial owner of the Churchill Assets for federal income tax purposes, (b) Buyer or Buyer’s Affiliate shall hold the Churchill Assets solely in the capacity as agents for RAIT Parent, and (c) Buyer and Seller shall file their respective federal, state and local Tax Returns in a manner consistent with this Section 5.10.

Section 5.11Redemption of FL7 and FL8 Securitizations. After the Closing, Buyer shall, or shall cause one or more of its Affiliates to, use commercially reasonable efforts to,  redeem the FL7 Securitization and the FL8 Securitization within 180 days of the Closing Date.

Section 5.12Intercompany Contracts.  Each Contract between a RAIT Entity (other than the Acquired RAIT Entities), on the one hand, and any of the Acquired RAIT Entities, on the other

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hand, in existence as of immediately prior to the Closing shall, unless otherwise agreed by RAIT Parent and Buyer, terminate on the Closing Date pursuant to the terms of a termination agreement to be entered into on the Closing Date by and between the parties to such Contract.

Section 5.13No Shop. From the date of this Agreement through and including the earliest of (a) the date on which the Bankruptcy Court enters the Bidding Procedures Order, (b) the date on which the Bankruptcy Court denies the Bidding Procedures Motion, or (c) ten (10) days after the hearing on the Bidding Procedures Motion, if the Bankruptcy Court has not entered the Bidding Procedures Order by such date, the RAIT Entities shall not directly or indirectly, through any entity, seek, solicit, initiate, propose, support, assist, engage in any discussions or negotiations in connection with, encourage or induce, enter into any agreement or publicly announce expression of support by or on behalf of the RAIT Entities or their officers, directors, managers, representatives or advisors, or participate in the formulation, preparation, filing or prosecution of, any Alternative Transaction. Any contrary provision hereof notwithstanding (including Section 5.1(b) and Section 5.6), from and after the earliest of the dates referred to in clauses (a), (b) and (c) of the preceding sentence, the RAIT Entities may, subject to the Bidding Procedures (if the Bidding Procedures Order has been entered), actively solicit qualified bids and take such other actions as the RAIT Entities deem reasonable or necessary to achieve a Winning Bid.

Section 5.14Tax Engagement.  RAIT Parent shall use reasonable efforts to enter into a tax compliance engagement letter with KPMG LLP, or another firm reasonably acceptable to Buyer, prior to Closing, to prepare federal Tax Returns for the tax periods beginning on or after January 1, 2019 and on or before December 31, 2020, if any.  If such engagement letter has not been obtained prior to the Closing, RAIT Parent or its designee shall use commercially reasonable efforts to finalize such engagement after the Closing.

Section 5.15Tax Returns.  All federal and material state income Tax Returns required to be filed prior to the Closing Date by or on behalf of RAIT Parent for tax periods ending on or before the Closing Date shall be timely filed (after giving effect to any valid extensions of time in which to make such filings), and all such income Tax Returns shall reflect RAIT Parent’s status as a REIT.  All such income Tax Returns shall reflect positions consistent with RAIT Parent’s treatment as a REIT and shall be consistent with the Securitization Transactions not being treated as associations taxable as corporations, “taxable mortgage pools” or “publicly traded partnerships” for U.S. federal income tax purposes that, in each case, are subject to U.S. federal, state or local income tax on a net income basis.

Section 5.16Reasonable Efforts.  

(a)Buyer acknowledges that in connection with the purchase of the Acquired RAIT Entities and other Purchased Assets, Buyer is not acquiring all of the assets that may be needed for Buyer to operate the Acquired Business.  Sellers agree to use reasonable efforts prior to Closing to assist Buyer and its Affiliates with the transition of the Acquired RAIT Entities and Purchased Assets to Buyer’s ownership.

(b)Prior to the Closing, the Parties will engage in good faith discussions regarding an arrangement, which would be in effect from and after the Closing Date, pursuant to

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which Sellers would use reasonable efforts in light of available resources to provide certain transition services to Buyer on a temporary basis on terms and conditions to be agreed by the Parties.

(c)Following the Closing, each of the Parties shall execute, acknowledge and deliver all such further conveyances, notices, assumptions, releases and acquaintances and such other instruments and cooperate and take such further actions, as may be reasonably necessary or appropriate to transfer to, and vest in, Buyer (including by means of data transfer), ownership and use of all of the Purchased Assets, including all assets that are owned or held by the Acquired RAIT Entities as of the Closing Date (including any asset management files, books and records and other files and data that are currently stored on the “Servicing System” and the “Internal O Drive” (as such terms are used on Schedule 3.17(a))).  In connection with the foregoing, prior to the Closing Date RAIT Parent shall use commercially reasonable efforts to obtain and file with the Delaware Secretary of State a termination statement with respect to the M&I UCC.

Section 5.17REIT Status.  From the Closing Date through the end of the tax year in which the Closing occurs, RAIT Parent (a) shall be organized and operated in conformity with the requirements for qualification and taxation as a REIT, (b) shall not make any payment, distribution or other disposition of cash proceeds of the Transaction to the extent such payment, distribution or other disposition would reduce the cash and cash equivalents held by RAIT Parent below the minimum amount required for RAIT Parent to continue to satisfy the necessary asset test to qualify as a REIT, and (c) shall not take any other actions that would have an adverse effect on its ability to continue to meet the requirements for qualification and taxation as a REIT, independent of any “savings” or “cure” provisions in the Code.

ARTICLE VI

CONDITIONS TO CLOSING

Section 6.1Conditions to Obligations of the Parties.  The obligations of each party to consummate the Closing are subject to the satisfaction of the following conditions:

(a)this Agreement shall not have been terminated in accordance with its terms;

(b)the Bankruptcy Court shall have entered the Bidding Procedures Order and the Sale Order, and the Bidding Procedures Order and Sale Order shall each have become a Final Order;

(c)[Reserved];

(d)all other Governmental Authority, regulatory and other material third-party approvals, notifications, filings, waivers, authorizations and consents, including, without limitation, any necessary approvals, notifications, filings, waivers, authorizations and consents under the HSR Act, necessary or required for the consummation of the Transaction or the acquisition by Buyer of the Acquired RAIT Entities and other Purchased Assets shall have been obtained, not be subject to unfulfilled conditions and be in full force and effect, and all applicable waiting periods shall have expired without any action being taken or threatened in writing by any

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Governmental Authority that would restrain, prevent or otherwise impose materially adverse conditions on the transactions contemplated by this Agreement, including the Transaction; and

(e)there shall not be in effect any order by a Governmental Authority or other governmental litigations or investigations (or written communications threatening the same) challenging the validity or restraining, enjoining or otherwise prohibiting the consummation of the transactions contemplated by this Agreement, including the Transaction, or enjoining, restraining or prohibiting this Agreement or any other Definitive Document or the consummation of any of the transactions contemplated hereby or thereby, including the Transaction.

Section 6.2Conditions to Obligation of Buyer. The obligation of Buyer to consummate the Closing is subject to the satisfaction (or waiver by Buyer in its sole discretion) of the following further conditions:

(a)

(i)each Seller shall have performed in all material respects all of its obligations hereunder required to be performed by it on or prior to the Closing Date;

(ii)the Fundamental Representations of Sellers in this Agreement shall be true and correct in all respects at and as of the Closing Date as if made at and as of the Closing Date (other than those Fundamental Representations that address matters only as of a specified date, which shall have been true and correct in all respects as of that specified date);

(iii)the representations and warranties of Sellers in this Agreement and in any certificate delivered by Seller at the Closing pursuant hereto (other than the Fundamental Representations) shall be true and correct in all respects (without giving any effect to any limitation or qualification as to “materiality” or “Material Adverse Effect” set forth therein) at and as of the Closing Date as if made at and as of the Closing Date (other than those representations and warranties that address matters only as of a specified date, which shall have been true and correct in all respects as of that specified date), except in each case where such failure of such representations and warranties to be true and correct as of the Closing Date (or such specified date, as applicable) would not have a Material Adverse Effect; and

(iv)Buyer shall have received a certificate signed by the chief executive officer and the chief financial officer of RAIT Parent to the effect set forth in the preceding clauses (i), (ii) and (iii).

(b)Buyer shall have received all documents it may have reasonably requested at least three (3) Business Days prior to Closing relating to the existence of Sellers and/or the Acquired RAIT Entities and the authority of Sellers to execute, deliver and perform their respective obligations under this Agreement (such as Organizational Documents, bankruptcy related documents, secretarial certificates and the like), all in form and substance reasonably satisfactory to Buyer.

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(c)From the date hereof, there shall not have been any event, change, effect, occurrence, development, circumstance, condition, result, state of fact or change of fact (each, an “Event”) that, individually or together with all other Events, has had or would result in a Material Adverse Effect with respect to the Acquired Business, the Acquired RAIT Entities or the other Purchased Assets and Buyer shall have received a certificate signed by the chief executive officer and the chief financial officer of RAIT Parent to the foregoing effect.

(d)All accrued and unpaid Transaction Expenses incurred up to (and including) the Purchase Agreement Effective Date shall have been paid in full in cash in accordance with, and subject to the terms of, the Expense Provision.

(e)[Reserved.]

(f)Buyer shall have received evidence, reasonably satisfactory to Buyer, that all federal and material state income Tax Returns required to be filed prior to the Closing Date by or on behalf of RAIT Parent for tax periods ending on or before the Closing Date have been timely filed (after giving effect to any valid extensions of time in which to make such filings), all such federal and material state income Tax Return reflect RAIT Parent status as a REIT (if applicable), and KPMG LLP shall have filed such income Tax Returns for the year ended December 31, 2018.

(g)[Reserved.]

(h)No Debtor shall have rejected, or filed a motion seeking to reject, pursuant to Section 365 of the Bankruptcy Code, any Assigned Contract.

(i)Buyer shall have received the other documents required to be delivered by Sellers pursuant to Section 2.8(a) hereof.

Section 6.3Conditions to Obligation of Sellers.  The respective obligations of Sellers to consummate the Closing are subject to the satisfaction (or waiver by Sellers in their sole discretion) of the following further conditions:

(a)

(i)Buyer shall have performed in all material respects all of its obligations hereunder required to be performed by it on or prior to the Closing Date, and

(ii)the representations and warranties of Buyer in this Agreement and in any certificate delivered by Buyer at the Closing pursuant hereto shall be true and correct in all respects (without giving any effect to any limitation or qualification as to “materiality” or “Material Adverse Effect” set forth therein) at and as of the Closing Date as if made at and as of the Closing Date (other than those representations and warranties that address matters only as of a specified date, which shall have been true and correct in all respects as of that specified date), except in each case where such failure of such representations and warranties to be true and correct as of the Closing Date (or such specified date, as applicable) would not have a material adverse effect on the consummation of the Transaction.

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(iii)Sellers shall have received a certificate signed by an officer or other authorized person of Buyer to the foregoing effect.

(b)Sellers shall have received all documents they may have reasonably requested at least three (3) Business Days prior to Closing relating to the authority of Buyer and/or one of its Affiliates, as applicable, to execute, deliver and perform its obligations under this Agreement (such as Organizational Documents, bankruptcy related documents, secretarial certificates and the like), all in form and substance reasonably satisfactory to Sellers; and

(c)Sellers shall have received the documents required to be delivered by Buyer pursuant to Section 2.8(b) hereof.

ARTICLE VII

TERMINATION

Section 7.1Buyer Termination Events. Buyer may elect to terminate this Agreement, upon written notice to RAIT Parent (on behalf of Sellers), delivered in accordance with Section 8.13 hereof, at any time after the occurrence of, and during the continuation of, any of the following events (each, a “Buyer Termination Event”), unless waived in writing by Buyer:

(a)the Bankruptcy Court grants relief terminating, annulling, or modifying the automatic stay (as set forth in section 362 of the Bankruptcy Code) with regard to any assets of the Debtors having an aggregate fair market value in excess of $150,000;

(b)the breach in any material respect of any of (i) the covenants, undertakings, or obligations of Sellers set forth in this Agreement, or (ii) the representations and warranties of Sellers set forth in this Agreement that would cause a condition set forth in Section 6.2 not to be satisfied; provided, however, to the extent such breach described in clause (i) or (ii) above is curable, such breach shall not become a Buyer Termination Event unless such breach remains uncured for a period of fifteen (15) Business Days following written notice to Sellers, so long as Sellers are diligently attempting to cure such breach;

(c)the occurrence of an Event that, individually or together with other Events, has had or is reasonably expected to have, a Material Adverse Effect;

(d)the Closing has not occurred on or before the date that is 180 days after the Petition Date (the “Outside Date”); provided, however, that Buyer shall not be entitled to terminate this Agreement pursuant to this clause (d) if Buyer’s breach of this Agreement has prevented the consummation of the Closing by the Outside Date; provided, further, that, if the Sale Order has been entered by the Bankruptcy Court on or before the Outside Date and has not been appealed but the Closing shall not have occurred on or before the Outside Date solely because (x) the Sale Order has not become a Final Order or (y) the waiting period, if any, under applicable antitrust Laws shall have not expired or early termination shall not have been granted, and if all other conditions to the respective obligations of Buyer and Sellers to close have been fulfilled or are capable of being fulfilled by the Outside Date, then the Outside Date shall be automatically extended by thirty (30) days;

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(e)there is in effect a Final Order of a Governmental Authority restraining, enjoining or otherwise prohibiting the consummation of the Closing;

(f)the Bankruptcy Court enters an order (A) directing the appointment of a trustee; (B) converting the Chapter 11 Cases to cases under chapter 7 of the Bankruptcy Code and such conversion does not expressly contemplate the Transaction; or (C) dismissing, voluntarily or involuntarily, the Chapter 11 Cases and such dismissal does not expressly contemplate the Transaction;

(g)the Bankruptcy Court denies the Bidding Procedures Motion or declines to enter, or fails to enter, within ten (10) days after the hearing on the Bidding Procedures Motion, the Bidding Procedures Order or a similar order (in form and substance reasonably acceptable to RAIT Parent and Buyer) that provides Buyer with substantially the same bid protections as proposed in the Bidding Procedures Motion;

(h)the Bankruptcy Court enters any Order or grants relief that is materially inconsistent with the Bidding Procedures Order, the Sale Order, the Transaction or the transactions contemplated by this Agreement;

(i)the Auction has occurred and Buyer is not selected as the Winning Bidder or, if (A) Buyer is obligated under the Bidding Procedures, or (B) Buyer has agreed to serve as the Back-Up Bidder, the Back-Up Bidder;

(j)the Debtors file a motion with the Bankruptcy Court seeking approval of, or the Bankruptcy Court enters an order approving, an Alternative Transaction; or

(k)the Debtors fail to satisfy or comply with the milestone set forth in clause (a) of the Bankruptcy Milestones, and such failure remains uncured at the time notice of termination based on such failure is given by Buyer.

Section 7.2Seller Termination Events. RAIT Parent may elect on behalf of Sellers (subject to RAIT Parent’s obligation, if any, to pay the Breakup Fee and/or Expense Reimbursement in accordance with Section 7.5 hereof) to terminate this Agreement upon written notice to Buyer, delivered in accordance with Section 8.13 hereof, at any time after the occurrence of, and during the continuation of, any of the following events (each, a “Seller Termination Event”), unless waived in writing by RAIT Parent on behalf of Sellers:

(a)[reserved];

(b)the breach in any material respect of any of (i) the covenants, undertakings, or obligations of Buyer set forth in this Agreement, or (ii) the representations and warranties of Buyer set forth in this Agreement that would cause a condition set forth in Section 6.3 not to be satisfied; provided, however, to the extent such breach described in clause (i) or (ii) above is curable, such breach shall not become a Seller Termination Event unless such breach remains uncured for a period of fifteen (15) Business Days following written notice to Buyer, so long as Buyer is diligently attempting to cure such breach;

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(c)prior to the commencement of the Chapter 11 Cases, RAIT Parent’s board of trustees (the “Board”) reasonably determines in good faith, after consultation with outside counsel and other professional advisors, that continued pursuit of the Transaction would be inconsistent with the exercise of the Board’s fiduciary duties under applicable Law;

(d)at any time following commencement of the Chapter 11 Cases, the Debtors (by the Board), or if a trustee for the Debtors has been appointed, such trustee, reasonably determines in good faith, after consultation with outside counsel and other professional advisors, that continued pursuit of the Transaction would be inconsistent with the exercise of Debtors’ fiduciary duties as debtors and debtors-in-possession in the Chapter 11 Cases;

(e)the Closing has not occurred on or before the Outside Date; provided, however, that RAIT Parent shall not be entitled to terminate this Agreement pursuant to this clause (e) if a Seller’s breach of this Agreement has prevented the consummation of the Closing by the Outside Date; provided, further, that, if the Sale Order has been entered by the Bankruptcy Court on or before the Outside Date and has not been appealed but the Closing shall not have occurred on or before the Outside Date solely because (x) the Sale Order has not become a Final Order or (y) the waiting period, if any, under applicable antitrust Laws shall have not expired or early termination shall not have been granted and if all other conditions to the respective obligations of Buyer and Sellers to close have been fulfilled or are capable of being fulfilled by the Outside Date, then the Outside Date shall be automatically extended by thirty (30) days;

(f)there is in effect a Final Order of a Governmental Authority restraining, enjoining or otherwise prohibiting the consummation of the Closing;

(g)Buyer fails to deliver the Deposit to the Escrow Agent within two (2) Business Days of the execution of this Agreement;

(h)except at the request of the Debtors, the Bankruptcy Court enters an order (A) directing the appointment of a trustee; (B) converting the Chapter 11 Cases to cases under chapter 7 of the Bankruptcy Code and such conversion does not expressly contemplate the Transaction; or (C) dismissing, voluntarily or involuntarily, the Chapter 11 Cases and such dismissal does not expressly contemplate the Transaction; or

(i)the Bankruptcy Court enters an order approving an Alternative Transaction;

provided, that, in the event RAIT Parent desires to terminate this Agreement pursuant to Section 7.2(c) or Section 7.2(d) above (such Seller Termination Events, the “Fiduciary Out”), RAIT Parent shall provide at least five (5) Business Days’ advance written notice to Buyer and the Buyer Advisors prior to the date RAIT Parent elects to terminate this Agreement pursuant to the Fiduciary Out (provided, however, to the extent that providing at least five (5) Business Days’ advance notice is not practicable under the circumstances, RAIT Parent shall provide as much advance notice as reasonably possible under the circumstances, but in no event less than (1) in the case of a notice delivered to Buyer and its advisors at the auction contemplated by the Bidding Procedures, such minimum notice period (if any) as is required by the Bidding Procedures, (2) in the case of a notice delivered to Buyer and its advisors at a hearing before the Bankruptcy Court, two (2) hours or as otherwise directed by the Bankruptcy Court or (3) otherwise, one (1) full Business Day (such

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applicable advance notice period, the “Termination Period”)) advising Buyer and the Buyer Advisors that RAIT Parent intends to terminate this Agreement pursuant to the Fiduciary Out and specifying, in reasonable detail, the reasons therefor (including, to the extent applicable, the terms, conditions and provisions of any Alternative Transaction that RAIT Parent may pursue), and during the Termination Period, RAIT Parent shall, and shall cause itstrustees, directors, managers, Representatives and advisors to, (x) negotiate with Buyer in good faith (to the extent Buyer wishes to negotiate) to enable Buyer to determine whether to propose revisions to the terms of this Agreement such that it would obviate the need for RAIT Parent to exercise its right to terminate this Agreement pursuant to the Fiduciary Out, (y) provide Buyer with all non-privileged information and materials reasonably requested by Buyer relating to the decision by RAIT Parent to exercise the Fiduciary Out, and (z) consider in good faith any proposal by Buyer to amend the terms and conditions of this Agreement and the Transaction in a manner that would obviate the need for RAIT Parent to exercise the Fiduciary Out.

Section 7.3Mutual Termination. This Agreement may be terminated at any time by mutual written agreement among Buyer and RAIT Parent (on behalf of Sellers).

Section 7.4Notice of Termination.  In the event of any termination pursuant to this Article VII (other than a termination pursuant to Section 7.3 hereof), written notice thereof, delivered in accordance with Section 8.13, setting forth the reasons therefor and the provision of Section 7.1 or 7.2 hereof pursuant to which this Agreement is being terminated shall promptly be given to the other parties, and the transactions contemplated by this Agreement shall be terminated, without further action by any party.

Section 7.5Termination Payments.

(a)If, prior to the consummation of the Transaction, RAIT Parent, on behalf of Sellers, terminates this Agreement pursuant to the Fiduciary Out or this Agreement is terminated pursuant to Section 7.1(b), Section 7.1(h), Section 7.1(i) or Section 7.1(j), then, subject to the entry of the Bidding Procedures Order, Sellers shall be obligated to pay to Buyer the Breakup Fee, payable in full upon the consummation of an Alternative Transaction (or the first in a series of transactions that would constitute an Alternative Transaction). In addition to the foregoing, subject to the entry of the Bidding Procedures Order, upon any termination of this Agreement, other than a termination pursuant to Section 7.2(b) hereof, Sellers shall pay to Buyer the Expense Reimbursement within five (5) Business Days after such termination. Except as otherwise set forth herein, in the event Sellers consummate an Alternative Transaction, Sellers’ liability to Buyer shall be limited to payment of the Breakup Fee and Expense Reimbursement. Notwithstanding the foregoing, Sellers will not be required to pay the Breakup Fee or Expense Reimbursement (i) if this Agreement is not terminated and the transactions contemplated by this Agreement are consummated in accordance with their terms or (ii) under the circumstances set forth in the proviso to the last sentence of Section 5.6(a).

(b)The terms set forth in this Section 7.5 shall survive termination of this Agreement and shall remain in full force and effect regardless of whether the transactions contemplated by this Agreement are consummated. Sellers hereby acknowledge and agree that Buyer has expended, and will continue to expend, considerable time, effort and expense in connection with the Transaction and this Agreement, and the negotiation thereof, and that this

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Agreement provides substantial value to, is beneficial to, and is necessary to preserve the Debtors and the Debtors’ estates, and Buyer has made a substantial contribution to the Debtors, Sellers and the Transaction. The Parties acknowledge that the agreements contained in this Section 7.5 are an integral part of the transactions contemplated by this Agreement, are actually necessary to preserve the value of the Debtors’ estates and constitute liquidated damages and not a penalty, and that, without these agreements, Buyer would not have entered into this Agreement and the other Definitive Documents. The obligations set forth in this Section 7.5 are in addition to, and do not limit, Sellers’ other obligations under this Agreement.

(c)Subject to the approval of the Bankruptcy Court in the Bidding Procedures Order, the obligations of RAIT Parent to pay the Breakup Fee and/or the Expense Reimbursement as provided herein shall be entitled to treatment as allowed superpriority administrative expense claims in the Chapter 11 Cases pursuant to sections 503(b)(1) and 507(a)(2) of the Bankruptcy Code, senior to all other general administrative expense claims and superpriority administrative expense claims granted such status pursuant to sections 503(b)(1) and 507(a)(2).

(d)If this Agreement is terminated by RAIT Parent (on behalf of Sellers) pursuant to Section 7.2(b), the Deposit shall be disbursed by the Escrow Agent to RAIT Parent pursuant to the terms of the Deposit Escrow Agreement.

(e)If this Agreement is terminated, other than under the circumstances described in Section 7.5(d), the Deposit shall be disbursed by the Escrow Agent to Buyer pursuant to the terms of the Escrow Agreement.

(f)In the event that this Agreement is terminated pursuant to Section 7.1, Section 7.2 or, Section 7.3, then RAIT Parent and Buyer shall deliver to the Escrow Agent, promptly following any such termination, a joint written instructions to the Escrow Agent to disburse the Deposit to RAIT Parent (on behalf of Sellers) or Buyer, as applicable, pursuant to the terms of this Section 7.5 and the Escrow Agreement.

(g)The terms set forth in this Section 7.5 shall survive termination of this Agreement and shall remain in full force and effect regardless of whether the transactions contemplated by this Agreement are consummated.

Section 7.6Abandonment.

(a)If this Agreement is terminated as permitted by this Article VII, this Agreement will forthwith become null and void, and there will be no liability or obligation on the part of any party hereto (or their respective trustees, directors, officers, employees, agent, consultant, advisors, other representatives, or Affiliates); provided, however, that (i) the provisions of this Article VII will continue to apply following any termination, and (ii) nothing contained in this Agreement will relieve any party from any liability arising from such party’s fraud, to the extent such fraud arose prior to the termination of this Agreement. Notwithstanding anything herein to the contrary, other than in connection with fraud on the part of any Seller, (A) if an Alternative Transaction is consummated, the Breakup Fee, the Expense Reimbursement and the disbursement of the Deposit to Buyer, if payable, shall constitute liquidated damages, and not a penalty, and shall be Buyer’s sole remedy (including against any trustees, officers, directors,

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employees or Affiliates of RAIT Parent) for any breach by RAIT Parent or otherwise in connection with this Agreement, (B) in all cases if an Alternative Transaction is not consummated, the Expense Reimbursement and the disbursement of the Deposit to Buyer, if payable, shall constitute liquidated damages, and not a penalty, and shall be Buyer’s sole remedy (including against any trustees, officers, directors, employees or Affiliates of RAIT Parent) for any breach by RAIT Parent or otherwise in connection with this Agreement and (C) if this Agreement is terminated by RAIT Parent (on behalf of Sellers) pursuant to Section 7.2(b), the disbursement of the Deposit to RAIT Parent shall constitute liquidated damages, and not a penalty, and shall be Sellers’ sole remedy (including against any trustees, officers, directors, employees or Affiliates of Buyer) for any breach by Buyer or otherwise in connection with this Agreement.

(b)The Parties acknowledge that the agreements contained in Section 7.5 and Section 7.6 are an integral part of the transactions contemplated by this Agreement, are actually necessary to preserve the value of the Debtors’ estates and that, without these agreements, Buyer would not have entered into this Agreement.

ARTICLE VIII

MISCELLANEOUS

Section 8.1Non-Survival of Representations and Warranties; Certain Covenants.  The representations and warranties and the covenants required to be performed prior to the Closing Date contained in this Agreement or in any instrument delivered pursuant to this Agreement shall terminate as of the Closing Date and shall not survive the Closing (other than (a) Section 3.20 hereof, provided, that the survival of and any liability arising from any breach of Section 3.20 shall be subject to, and limited by, Section 5.2(f) hereof,  and (b) Section 3.5; provided, that the survival of and any liability arising from any breach of Section 3.5 shall be subject to, and limited by, Section 5.10 hereof).

Section 8.2Amendment and Waiver.  Any provision of this Agreement may be amended or waived if, and only if, such amendment or waiver is in writing and signed, in the case of an amendment, by Sellers and Buyer, or in the case of a waiver, by the party against whom the waiver is to be effective. No failure or delay by any party or parties in exercising any right, power or privilege hereunder shall operate as a waiver thereof nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right, power or privilege.

Section 8.3Expenses.  Except as otherwise expressly provided in this Agreement, including this Section 8.3, whether or not the transactions contemplated by this Agreement are consummated, the parties shall bear their own respective expenses (including, but not limited to, all compensation and expenses of counsel, financial advisors, consultants, actuaries and independent accountants) incurred in connection with this Agreement and the transactions contemplated hereby.

Section 8.4Limitation on Liability. In no event shall any Party have any liability for consequential, special, incidental, indirect or lost profits, or similar liabilities. Further, in no event shall any Party have any liability for punitive damages, except to the extent payable to a third

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party. For purposes of this Section 8.4, the Breakup Fee and Expense Reimbursement shall not be considered consequential, special, incidental, indirect, or punitive damages or similar liabilities.

Section 8.5Specific Performance.  The parties recognize that if any party breaches this Agreement, monetary damages alone would not be adequate to compensate the non-breaching party or parties for their injuries. The non-breaching party or parties shall therefore be entitled, to the extent not inconsistent with legal remedies, in addition to any other remedies that may be available, to seek specific performance of the terms of this Agreement without necessity of proving the inadequacy of money damages as a remedy at law.

Section 8.6Assignment. This Agreement shall not be, directly or indirectly, assignable by operation of Law or otherwise, without the prior written consent of the Parties; provided, however, (a) Buyer may assign, delegate or transfer, in whole or in part, this Agreement and any or all of its rights and obligations hereunder to (i) any of Buyer’s financing sources as collateral, (ii) one or more Affiliates of Buyer, or (iii) following the Closing, any successor or purchaser of all or part of the business of Buyer or any of its Subsidiaries, except that no such assignment by Buyer shall relieve or otherwise release Buyer from any of its obligations or liabilities under this Agreement, and (b) Sellers may assign, delegate or transfer, in whole or in part, this Agreement and any or all of their rights and obligations hereunder to any trustee, estate or representative referenced in the following sentence.  This Agreement and all actions taken hereunder shall inure to the benefit of and shall be binding upon all of the parties hereto and upon all of their respective successors and permitted assigns, including, but not limited to, any trustee, estate or representative appointed in the Chapter 11 Cases or any successor Chapter 7 case.

Section 8.7Entire Agreement.  This Agreement (including all Schedules and Exhibits hereto) contains the entire agreement between the parties hereto with respect to the subject matter hereof and supersedes all prior agreements and understandings, oral or written, with respect to such matters.

Section 8.8Fulfillment of Obligations.  Any obligation of any party to any other party under this Agreement, which obligation is performed, satisfied or fulfilled by an Affiliate of such party, shall be deemed to have been performed, satisfied or fulfilled by such party.

Section 8.9Parties in Interest: No Third Party Beneficiaries.  This Agreement shall inure to the benefit of and be binding upon the parties hereto and their respective successors and permitted assigns. Nothing in this Agreement, express or implied, is intended to confer upon any Person other than Buyer and Sellers, or their successors or permitted assigns, any rights or remedies under or by reason of this Agreement, except that each Buyer Indemnified Party that is not a party hereto shall be a third party beneficiary of Section 5.2(f).

Section 8.10Schedules.  The inclusion of any matter in any Schedule to this Agreement shall be deemed to be an inclusion for all purposes of this Agreement, to the extent that such disclosure is sufficient to identify the section to which such disclosure is responsive, but inclusion therein shall not be deemed to constitute an admission, or otherwise imply, that any such matter is material or creates a measure for materiality for the purposes of this Agreement.

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Section 8.11Counterparts.  This Agreement and any amendments hereto may be executed in one or more counterparts, each of which shall be deemed to be an original by the parties executing such counterpart, but all of which shall be considered one and the same instrument.

Section 8.12Headings.  The section and paragraph headings and table of contents contained in this Agreement are for reference purposes only and shall not in any way affect the meaning or interpretation of this Agreement.

Section 8.13Notices. All notices, requests, demands, document deliveries and other communications hereunder shall be deemed given if in writing and delivered, if sent by e-mail, courier or by registered or certified mail (return receipt requested) to the following addresses or e-mail addresses (or at such other addresses or e-mail addresses as shall be specified by like notice):

(1)If to Sellers:
RAIT Financial Trust
Two Logan Square, 23rd Floor
Philadelphia, PA 19103
Attention:	Jamie Reyle
	CEO, President & General Counsel
	jreyle@rait.com
With a copy to:
Drinker Biddle & Reath LLP
1117 Avenue of the Americas, 41st Floor
New York, NY 10036
Attention:	Michael Pompeo
	michael.pompeo@dbr.com
	F. Douglas Raymond Douglas.Raymond@dbr.com
(2)If to Buyer:
Fortress Investment Group 1345 Avenue of the Americas
New York, NY 10105
Attention:	Michael Polidoro
	mpolidoro@fortress.com
With a copy to:
Stroock & Stroock & Lavan LLP
180 Maiden Lane
New York, NY 10038

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Attention: Jeffrey Lowenthal

Daniel Ginsberg

jlowenthal@stroock.com

dginsberg@stroock.com

Any notice given by delivery, mail or courier or email shall be effective when received.

Section 8.14No Strict Construction.  Notwithstanding the fact that this Agreement has been drafted or prepared by one of the parties, the parties confirm in that both they and their respective counsel have reviewed, negotiated and adopted this Agreement as the joint agreement and understanding of the parties, and the language used in this Agreement shall be deemed to be the language chosen by the parties hereto to express their mutual intent, and no rule of strict construction construing ambiguities against the draftsperson shall be applied against any Person.

Section 8.15GOVERNING LAW; SUBMISSION TO JURISDICTION; SELECTION OF FORUM; WAIVER OF JURY TRIAL.

(a)THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO ANY CONFLICTS OF LAW PROVISIONS THAT WOULD REQUIRE THE APPLICATION OF THE LAW OF ANY OTHER JURISDICTION. BY ITS EXECUTION AND DELIVERY OF THIS AGREEMENT, EACH OF THE PARTIES HEREBY IRREVOCABLY AND UNCONDITIONALLY AGREES THAT ANY LEGAL ACTION, SUIT, DISPUTE OR PROCEEDING ARISING UNDER, OUT OF OR IN CONNECTION WITH THIS AGREEMENT SHALL BE BROUGHT (I) FOR SO LONG AS THE DEBTORS ARE SUBJECT TO THE JURISDICTION OF THE BANKRUPTCY COURT, IN THE BANKRUPTCY COURT AND (II) IF THE CHAPTER 11 CASES HAVE NOT BEEN COMMENCED OR HAVE BEEN CLOSED OR IF THE BANKRUPTCY COURT LACKS FEDERAL SUBJECT MATTER JURISDICTION, (A) IN THE DELAWARE COURT OF CHANCERY AND ANY STATE APPELLATE COURT THEREFROM WITHIN THE STATE OF DELAWARE (UNLESS THE DELAWARE COURT OF CHANCERY SHALL DECLINE TO ACCEPT JURISDICTION OVER A PARTICULAR MATTER, IN WHICH CASE, IN ANY DELAWARE STATE COURT) OR (B) IN ANY FEDERAL COURT WITHIN THE STATE OF DELAWARE (THE “CHOSEN COURT”) AND THE PARTIES HERETO IRREVOCABLY CONSENT TO THE JURISDICTION OF SUCH COURTS AND WAIVE ANY OBJECTIONS AS TO VENUE OR INCONVENIENT FORUM. EACH PARTY HERETO IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.

(b)Service of summons and other legal process against Buyer or Sellers in any action or proceeding may be made by mailing a copy of the summons and complaint or other legal process in any action or proceeding by registered or certified mail, return receipt requested, to the addresses set forth in Section 8.13 hereof. Service upon any such party, as aforesaid, shall be deemed to be personal service on such party and shall be legal and binding upon such party for all purposes notwithstanding any failure of such party to receive same and such party irrevocably consents to such service of process outside of the Chosen Court in any such action or proceeding.

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Section 8.16Severability.  The provisions of this Agreement shall be deemed severable and the invalidity or unenforceability of any provision shall not affect the validity or enforceability of the other provisions hereof. If any provision of this Agreement, or the application thereof to any Person or entity or any circumstance, is invalid or unenforceable, (a) a suitable and equitable provision shall be substituted therefor in order to carry out, so far as may be valid and enforceable, the intent and purpose of such invalid or unenforceable provision and (b) the remainder of this Agreement and the application of such provision to other Persons, entities or circumstances shall not be affected by such invalidity or unenforceability.

Section 8.17Exculpatory Provision.  No officer, manager, trustee, director or employee of the RAIT Entities shall be liable to Buyer or any of its Affiliates, shareholders or other interest holders for any action by or omission of such officer, manager, trustee, director or employee under or in connection with this Agreement, absent the commission of fraud by such person. No officer, director or employee of Buyer or its Affiliates shall be liable to Sellers or any of their  Affiliates, shareholders or other interest holders for any action by or omission of such officer, director or employee under or in connection with this Agreement, absent the commission of fraud by such person.

[Remainder of this page intentionally left blank]

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IN WITNESS WHEREOF, this Agreement has been signed on behalf of each of the parties hereto as of the date first written above.

RAIT FINANCIAL TRUST
By:	/s/ John J. Reyle
	Name:	John J. Reyle
	Title:	Chief Executive Officer

RAIT General, Inc.,
By:	/s/ John J. Reyle
	Name:	John J. Reyle
	Title:	Chief Executive Officer

RAIT Limited, Inc.,
By:	/s/ John J. Reyle
	Name:	John J. Reyle
	Title:	Chief Executive Officer

Taberna Realty Finance Trust,
By:	/s/ John J. Reyle
	Name:	John J. Reyle
	Title:	Chief Executive Officer

[Signature Page to Equity and Asset Purchase Agreement]

CF RFP HOLDINGS LLC
By:	/s/ Constantine M. Dakolias
	Name:	Constantine M. Dakolias
	Title:	President

[Signature Page to Equity and Asset Purchase Agreement]

List of Omitted Exhibits and Schedules

The following exhibits and schedules to the Equity and Asset Purchase Agreement, dated August 30, 2019, by and among RAIT Financial Trust, RAIT General, Inc., RAIT Limited, Inc., and Taberna Realty Finance Trust, as Sellers, and CF RFP Holdings LLC, as Buyer, have not been provided herein:

Exhibits

Exhibit A – Bankruptcy Milestones

Exhibit B – Bidding Procedures

Exhibit C – QRS Tax Opinion

3.2(b) – Acquired RAIT Entities

3.2(d) – Material Assets and Liabilities

3.2(f) – Corporate Structure

3.3(a)-1 – Audited Consolidated Financial Statements

3.3(a)-2 – Unaudited Consolidated Financial Statements as of Interim Balance Sheet Date

3.4(a)(iv) – Capital Expenditures

3.6(a) – Pending Litigation

3.8(b) – Occupation of Owned Real Property

Schedules

1.1 – RAIT Excluded Subsidiaries

2.1(a)(iii) – Acquired Assets

2.1(b) – Excluded Assets

2.2(a) – Assumed Liabilities

2.8(a)(xi) – UCC-1 Financing Statements

3.2(b) – Acquired RAIT Entities

3.2(c) – Acquired RAIT Entities

3.2(d) – Material Assets and Liabilities

3.2(e) – Officers and Directors

3.2(f) – Corporate Structure and Organization

3.2(g)-2 – Liens on Acquired Equity Interests

3.3(a) – Financial Statements

3.3(b) – Material Liabilities

3.3(c) – SEC Documents

3.4 – Absence of Certain Changes

3.5(a) – Material Contracts

3.5(b) – No Defaults

3.6(a) – Litigation

3.7(a) – Compliance with Laws and Court Orders

3.8(a)-1 – Sales and Dispositions of Properties

3.8(a)-2 – Permitted Encumbrances

3.8(a)-3 – Permitted Encumbrances

3.8(a)-4 – Permitted Encumbrances

3.8(b) – Owned Real Property

3.8(c) – Leased Real Property

3.9(a) – Intellectual Property

3.10 – Liens and Permits

3.12(a) – RAIT Employees

3.12(d) – Unfair Labor Practices

3.12(e) – Employee Matters

3.12(f) – Violations of Labor Laws

3.12(h) – Employment Agreements

3.15 – Affiliated Transactions

3.15(c) – Intercompany Indebtedness

3.16 – Insurance

3.17(a) – Information Technology

3.19(a) - Securitizations

3.20(x) – Property Questionnaires and Related E-mails

3.22 – No Conflicts

3.23 – Churchill

5.1(b)(xi) – Permitted Indebtedness

5.2(b) – Permitted Tax Election

The registrant hereby undertakes to furnish supplementally a copy of such omitted exhibits and schedules to the Securities and Exchange Commission upon request.

Schedule 2.1(a)(iv)

Assigned Contracts

1. Guaranty of Non-Recourse Carve-Outs by RAIT Financial Trust to Liberty Bank, dated as of November 10, 2016.

2. Limited Guaranty by RAIT Financial Trust to Liberty Bank, dated as of November 10, 2016.

Schedule 3.2(g)-1

Authorized & Outstanding Acquired Equity Interests

Acquired RAIT Entity	Record Owner	Authorized Equity Interests	Acquired Equity Interest
RAIT Partnership, L.P.	RAIT General, Inc.	100 Partnership Units	Percent Owned: 1% (General Partnership Interest) Partnership Units: 1 Partnership Unit
	RAIT Limited, Inc.		Percent Owned: 99% (Limited Partnership Interest) Partnership Units: 99 Partnership Units
RAIT Preferred Holdings I, LLC	RAIT Partnership, L.P.		Percent Owned: 100%
RAIT CRE CDO I, Ltd.	RAIT Preferred Holdings I, LLC	250 Ordinary 165,000 Preference	Outstanding: 250 Ordinary 165,000 Preference Percent Owned: 100%
Fountainhead CDO Preferred Member, LLC	RAIT CRE CDO I, Ltd.		Percent Owned: 100%
Landera CDO Preferred Member, LLC	RAIT CRE CDO I, Ltd.		Percent Owned: 100%
Grange CDO Preferred Member, LLC	RAIT CRE CDO I, Ltd.		Percent Owned: 100%
Broadstone I Preferred, LLC	RAIT Partnership, L.P.		Percent Owned: 25%
	RAIT CRE CDO I, Ltd.		Percent Owned: 75%
RAIT Broadstone, Inc.	Broadstone I Preferred, LLC	1,000 common shares	Outstanding: 100 Percent Owned: 100%
Edgerton CDO Preferred Member, LLC	RAIT CRE CDO I, Ltd.		Percent Owned: 100%

Acquired RAIT Entity	Record Owner	Authorized Equity Interests	Acquired Equity Interest
Walnut Ridge CDO Preferred Member, LLC	RAIT CRE CDO I, Ltd.		Percent Owned: 100%
Bluemound CDO Preferred Member, LLC	RAIT CRE CDO I, Ltd.		Percent Owned: 100%
RAIT CRE CDO I, LLC	RAIT Partnership, L.P.		Percent Owned: 100%
RAIT Capital Corp.	RAIT Partnership, L.P.	1,000 common shares	Outstanding: 100 Percent Owned: 100%
RAIT Executive Mews Manager I, Inc.	RAIT Partnership, L.P.	1,000 common shares	Outstanding: 100 Percent Owned: 100%
RAIT Executive Mews Manager II, Inc.	RAIT Partnership, L.P.	1,000 common shares	Outstanding: 100 Percent Owned: 100%
RAIT Executive Mews Manager III, Inc.	RAIT Partnership, L.P.	1,000 common shares	Outstanding: 100 Percent Owned: 100%
St. Pete Beach Holdings, LLC	RAIT Partnership, L.P.		Percent Owned: 100%
Fountainhead Preferred Member, LLC	RAIT Partnership, L.P.		Percent Owned: 100%
Landera Preferred Member, LLC	RAIT Partnership, L.P.		Percent Owned: 100%
Bluemound Preferred Member, LLC	RAIT Partnership, L.P.		Percent Owned: 100%
Grange Preferred Member, LLC	RAIT Partnership, L.P.		Percent Owned: 100%
Walnut Ridge Preferred Member, LLC	RAIT Partnership, L.P.		Percent Owned: 100%
Edgerton Preferred Member, LLC	RAIT Partnership, L.P.		Percent Owned: 100%
RAIT Urban Equity Holdings, LLC	RAIT Partnership, L.P.		Percent Owned: 100%

Acquired RAIT Entity	Record Owner	Authorized Equity Interests	Acquired Equity Interest
Oakland Plaza Member, LLC	RAIT Urban Equity Holdings, LLC		Percent Owned: 100%
Oakland Plaza Owner, LLC	Oakland Plaza Member, LLC		Percent Owned: 100%
Oakland Square Member, LLC	RAIT Urban Equity Holdings, LLC		Percent Owned: 100%
Oakland Square Owner, LLC	Oakland Square Member, LLC		Percent Owned: 100%
RAIT Asset Holdings IV, LLC	RAIT Partnership, L.P.		Percent Owned: 100%
RAIT FL Asset Holdings, LLC	RAIT Asset Holdings IV, LLC		Percent Owned: 100%
RAIT 2017-FL7, LLC	RAIT Partnership, L.P.		Percent Owned: 100%
RAIT 2017-FL7 Trust	RAIT 2017-FL7, LLC		Trust Depositor
RAIT 2017-FL7 Intermediate Trust	RAIT 2017-FL7 Trust		Trust Depositor
RAIT 2017-FL7 A-2 Holdings, LLC	RAIT Partnership, L.P.		Percent Owned: 100%
RAIT 2017-FL8, LLC	RAIT Partnership, L.P.		Percent Owned: 100%
RAIT 2017-FL8 Trust	RAIT 2017-FL8, LLC		Trust Depositor
RAIT 2017-FL8 Intermediate Trust	RAIT 2017-FL8 Trust		Trust Depositor
RAIT 2017-FL8 A-2 Holdings, LLC	RAIT Partnership, L.P.		Percent Owned: 100%
RAIT Equity Holdings I, LLC	RAIT Partnership, L.P.		Percent Owned: 100%
Union Medical Campus Member, LLC	RAIT Equity Holdings I, LLC		Percent Owned: 100%
Union Medical Campus Owner, LLC	Union Medical Campus Member, LLC		Percent Owned: 100%
Raritan Center Member, LLC	RAIT Equity Holdings I, LLC		Percent Owned: 100%
Raritan Center SPE Owner, LLC	Raritan Center Member, LLC		Percent Owned: 100%
Daytona Portfolio, LLC	RAIT Equity Holdings I, LLC		Percent Owned: 100%

Acquired RAIT Entity	Record Owner	Authorized Equity Interests	Acquired Equity Interest
Beachcomber Beach Resort Florida, LLC	Daytona Portfolio, LLC		Percent Owned: 100%
REM-Willow Grove, Inc.	RAIT Equity Holdings I, LLC	1,000 common shares	Outstanding: 100 Percent Owned: 100%
REM Willow Grove, L.P.	REM-Willow Grove, Inc.		Percent Owned: 1% (representing 100% of the General Partnership Interest)
	RAIT Equity Holdings I, LLC		Percent Owned: 99% (representing 100% of the Limited Partnership Interest)
Brandywine-Willow Grove, Inc.	REM Willow Grove, L.P.	1,000 common shares	Outstanding: 100 Percent Owned: 100%
Washington SC SPE Owner, LLC	RAIT Equity Holdings I, LLC		Percent Owned: 100%
Allentown PC SPE Owner, LLC	RAIT Equity Holdings I, LLC1		Percent Owned: 100%
Finderne SPE Owner, LLC	RAIT Equity Holdings I, LLC2		Percent Owned: 100%
680 Memorial SPE Owner, LLC	RAIT Equity Holdings I, LLC3		Percent Owned: 100%
REM Cherry Hill, LLC	RAIT Partnership, L.P.		Percent Owned: 100%
Brandywine-Cherry Hill, Inc.	REM Cherry Hill, LLC	1,000 common shares	Outstanding: 100 Percent Owned: 100%

¹  Record ownership to be memorialized if necessary.

²  Record ownership to be memorialized if necessary.

³  Record ownership to be memorialized if necessary.

EX-10.1.2

Exhibit 10.1.2

AMENDMENT NO. 1
TO THE EQUITY AND ASSET PURCHASE AGREEMENT

AMENDMENT NO. 1 TO THE EQUITY AND ASSET PURCHASE AGREEMENT (this “Amendment”), dated as of October 4, 2019 (the “Amendment Effective Date”), by and among (a) RAIT Financial Trust, a Maryland real estate investment trust (“RAIT Parent”), RAIT General, Inc., a Maryland corporation (“RAIT General”), RAIT Limited, Inc., a Maryland corporation (“RAIT Limited”), and Taberna Realty Finance Trust, a Maryland real estate investment trust (“Taberna Realty” and, together with RAIT Parent, RAIT General and RAIT Limited, collectively, “Sellers” and each, a “Seller”); and (b) CF RFP Holdings LLC, a Delaware limited liability company (“Buyer”). Sellers and Buyer are referred to herein collectively as the “Parties” and individually as a “Party”.

W I T N E S S E T H:

WHEREAS, the Parties entered into an Equity and Asset Purchase Agreement, dated as of August 30, 2019 (the “Purchase Agreement”); and

WHEREAS, the Parties desire to amend the Purchase Agreement in accordance with Section 8.2 of the Purchase Agreement.

NOW, THEREFORE, in consideration of the premises and mutual covenants contained herein, the Parties hereby agree as follows:

1.Defined Terms.  Unless otherwise defined herein, terms used in this Amendment which are defined in the Purchase Agreement are used herein as defined in the Purchase Agreement.

2.Amendments.  Each of the Parties hereby agrees that, effective as of the Amendment Effective Date, the Purchase Agreement is amended as follows:

(a)Section 1.1 of the Purchase Agreement shall be amended by adding the following new defined terms in the appropriate alphabetical order:

““Additional Deposit” has the meaning set forth in Section 2.3(a) hereof.”

““Amendment No. 1 Effective Date” means October 4, 2019.”

““Specified New/Modified Lease” means any new, renewed, modified or amended lease with respect to Owned Real Property or Leased Real Property that is entered into by an Acquired RAIT Entity after the Amendment No. 1 Effective Date and prior to the Closing Date with the prior written consent of Buyer, but only if Buyer has expressly agreed in writing to treat such new, renewed, modified or amended lease as a “Specified New/Modified Lease” for purposes of this Agreement (it being understood that in connection with any request by any Seller for any proposed new, renewed, modified or amended lease to be treated as a “Specified New/Modified Lease”, such Seller shall provide to Buyer a copy of such

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proposed new, renewed, modified or amended lease (or, in the case of an amendment to an existing lease, a copy of such amendment) that is in substantially final form).”

““Specified New/Modified Lease Expenses” means payments (a) due to commercial real estate brokers in respect of broker’s fees or commissions in connection with any Specified New/Modified Lease or (b) in respect of tenant and/or landlord improvements, in each case, that an Acquired RAIT Entity has agreed to make in connection with any Specified New/Modified Lease, to the extent set forth in such Specified New/Modified Lease.”

““Specified Payments” means payments made by an Acquired RAIT Entity after the Amendment No. 1 Effective Date and prior to the Closing Date in respect of Specified New/Modified Lease Expenses, but in each case only to the extent Buyer expressly agrees in writing, either at the time Buyer agrees to treat the new, renewed, modified or amended lease to which any such payment relates as a Specified New/Modified Lease or at any time thereafter prior to the date such payment is made by the applicable Acquired RAIT Entity, to bear the cost of such payment if the Closing occurs.”

““Unapproved Liabilities” means any liabilities incurred by the Acquired RAIT Entities after the Amendment No. 1 Effective Date and prior to the Closing Date (to the extent such liabilities have not been paid, satisfied or otherwise discharged prior to the Closing Date), pursuant to any new, renewed, modified or amended leases that are entered into after the Amendment No. 1 Effective Date and that are not Specified New/Modified Leases, for payments (a) due to commercial real estate brokers in respect of broker’s fees or commissions with respect to such new, renewed, modified or amended leases or (b) in respect of tenant and/or landlord improvements with respect to such new, renewed, modified or amended leases.”

(b)Section 2.1(a)(iii) of the Purchase Agreement shall be amended by deleting the reference to “Schedule 2.1(a)(iii)” and substituting in lieu thereof “Exhibit D”.

(c)Exhibit D to this Amendment (which the Parties acknowledge is identical to Schedule 2.1(a)(iii) to the Purchase Agreement) is hereby added as new Exhibit D to the Purchase Agreement.

(d)Section 2.3(a) of the Purchase Agreement shall be amended and restated in its entirety to read as follows:

“Concurrently with the execution of this Agreement, Buyer, RAIT Parent (on behalf of Sellers) and the Escrow Agent shall execute and deliver the Deposit Escrow Agreement and within two (2) Business Days thereof Buyer shall deposit with the Escrow Agent an amount equal to $8,721,000 as an earnest money deposit (including all interest and other earnings accrued thereon, if any, the “Deposit”). In

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addition, if, after the conclusion of the Auction (as defined in the Bidding Procedures) Buyer is the Winning Bidder,or Buyer agrees to serve as the Back-Up Bidder, on the terms set forth in this Agreement, or if there is no Auction, Buyer shall deposit with the Escrow Agent an additional $8,721,000 (including all interest and other earnings accrued thereon, if any, the “Additional Deposit”) prior to the commencement of the Sale Hearing (as defined in the Bidding Procedures). Once funded, the Additional Deposit shall constitute a part of the Deposit and shall be held and applied in accordance with the terms of the Deposit Escrow Agreement (it being agreed that, if requested by the Escrow Agent or any of the Parties, the Deposit Escrow Agreement shall be amended at the time of Buyer’s deposit of the Additional Deposit to the extent reasonably necessary to provide for the Additional Deposit to become part of the Deposit and to be held and appliedin accordance with the terms set forth in the Deposit Escrow Agreement (whereupon all references in this Agreement to the Deposit Escrow Agreement shall be deemed references to the Deposit Escrow Agreement as so amended)).Except as otherwise expressly set forth herein and in the Deposit Escrow Agreement, the Deposit (including the Additional Deposit, if any) shall be applied against the Purchase Price on the Closing Date. The Deposit (including the Additional Deposit, if any) shall be held in escrow and disbursed by the Escrow Agent pursuant to the terms of the Deposit Escrow Agreement.  Under no circumstances shall any portion of the Deposit (including the Additional Deposit, if any) be deemed property of the Debtors’ Chapter 11 estate under Section 541 of the Bankruptcy Code unless and until the Deposit is delivered or required to be delivered to Sellers in accordance with the terms of this Agreement and the Deposit Escrow Agreement.

(e)Section 2.4 of the Purchase Agreement shall be amended and restated in its entirety to read as follows:

“Section 2.4  Consideration.  The consideration for the Purchased Assets shall be (i) an aggregate amount equal to: (a) the Base Purchase Price, plus (b) the Closing Date Cash Amount, minus (c) the Interim Cash Receipts Amount, plus (d) the Excluded Cash Receipts Amount, minus (e) the Retained Cash Amount, minus (f) the amount of any Cure Amounts payable by Buyer pursuant to Section 2.2, minus (g) the aggregate amount of any Unapproved Liabilities, if any, plus (h) the aggregate amount of any Specified Payments (the amount so calculated, the “Purchase Price”), plus (ii) the assumption by Buyer of the Assumed Liabilities, if any. Subject to the terms and conditions of this Agreement, in consideration for the Acquired Equity Interests and other Purchased Assets, at the Closing, Buyer shall (i) pay the Purchase Price (inclusive of the Deposit, which the Escrow Agent shall release at the Closing to RAIT Parent pursuant to the terms of the Deposit Escrow Agreement and joint written instructions delivered by RAIT Parent and Buyer to the Escrow Agent), less the amount of the Tax Indemnity Amount to be deposited with the Escrow Agent as provided in Section 2.3(b), to RAIT Parent and/or such other Seller as may be applicable (as specified by RAIT Parent), by wire transfer in immediately available funds to one or more accounts designated by RAIT Parent at

3

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least two (2) Business Days before the Closing Date and (ii) assume the Assumed Liabilities, if any.”

(f)Section 2.6(a) of the Purchase Agreement shall be amended and restated in its entirety to read as follows:

“No later than three (3) Business Days prior to the anticipated Closing Date, RAIT Parent shall deliver to Buyer a statement (the “Pre-Closing Statement”), along with reasonably detailed information and supporting documentation, setting forth RAIT Parent’s good faith estimates of (i) the Closing Date Cash Amount, (ii) the Interim Cash Receipts Amount, (iii) the Excluded Cash Receipts Amount, (iv) the Retained Cash Amount, (v) the Cure Amounts payable by Buyer, (vi) the amount of the Specified Payments, if any, (vii) the amount of the Unapproved Liabilities, if any, and (viii) the amount of the Purchase Price (the “Estimated Purchase Price”). Such Pre-Closing Statement shall be certified by a financial officer of RAIT Parent on behalf of RAIT Parent to be true and complete. Following the delivery of the Pre-Closing Statement until the delivery of the Closing Statement, RAIT Parent shall (A) permit Buyer to have reasonable access during normal business hours to the finance personnel and accountants of RAIT Parent and the other RAIT Entities and the books and records of the RAIT Entities that are relevant to the calculation of the Estimated Purchase Price and each component thereof as set forth in the Pre-Closing Statement and (B) consider in good faith any of Buyer’s comments, and use commercially reasonable efforts to respond to Buyer’s questions, relating to the calculation of the Estimated Purchase Price and each component thereof as set forth in the Pre-Closing Statement, and Buyer’s proposed changes to the Estimated Purchase Price and each component thereof as set forth in the Pre-Closing Statement.  RAIT Parent and Buyer shall agree in good faith as to the Estimated Purchase Price and RAIT Parent shall update the Pre-Closing Statement to reflect any agreed changes thereto.”

(g)Section 2.6(b) of the Purchase Agreement shall be amended and restated in its entirety to read as follows:

“One (1) day prior to the anticipated Closing Date, RAIT Parent shall deliver to Buyer a final statement (the “Closing Statement”), along with reasonably detailed information and supporting documentation, setting forth (i) the calculated Closing Date Cash Amount, (ii) the calculated Interim Cash Receipts Amount, (iii) the calculated Excluded Cash Receipts Amount, (iv) the Retained Cash Amount, (v) the calculated Cure Amounts payable by Buyer, (vi) the calculated amount of the Specified Payments, if any, (vii) the calculated amount of the Unapproved Liabilities, if any, and (viii) the calculated amount of the Purchase Price.  Such Closing Statement shall be certified by a financial officer of RAIT Parent on behalf of RAIT Parent to be true and complete. Following the delivery of the Closing Statement until the Closing, RAIT Parent shall (A) permit Buyer to have reasonable access during normal business hours to the finance personnel and accountants of RAIT Parent and the other RAIT Entities and the books and records of the RAIT

4

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Entities that are relevant to the calculation of the Purchase Price and each component thereofas set forth in the Closing Statement, and (B) consider in good faith any of Buyer’s comments, and use commercially reasonable efforts to respond to Buyer’s questions, relating to the calculation of the Purchase Price and each component thereofas set forth in the Closing Statement, and Buyer’s proposed changes to the Purchase Price and each component thereofas set forth in the Closing Statement. RAIT Parent and Buyer shall agree in good faith as to the Purchase Price and RAIT Parent shall update the Closing Statement prior to the Closing to reflect any agreed changes thereto.”

(h)Section 2.8(a)(vi) of the Purchase Agreement shall be amended by deleting the reference to “Schedule 3.22” and substituting in lieu thereof “Exhibit E”.

(i)Exhibit E to this Amendment is hereby added as new Exhibit E to the Purchase Agreement.

(j)Section 2.8(a) of the Purchase Agreement shall be further amended by deleting clause (xvii) of such Section and substituting the following:

“(xvii) copies of any executed Specified New/Modified Leases, to the extent not previously provided to Buyer; and

“(xviii) such other duly executed documents, instruments and certificates as may be necessary to be delivered by the RAIT Entities pursuant to this Agreement or the other Definitive Documents or as may be reasonably requested by Buyer.”

(k)Article VI of the Purchase Agreement shall be amended by adding the following new “Section 6.4”:

“Section 6.4Proposed New or Modified Leases.

(a) Notwithstanding anything to the contrary in this Article VI or in any other section of this Agreement, Buyer acknowledges that if Buyer does not agree to treat any proposed new, renewed, modified or amended lease with respect to Owned Real Property or Leased Real Property that is presented by a Seller to Buyer with a request for Buyer’s consent thereto (accompanied by a copy of such new, renewed, modified or amended lease (or, in the case of an amendment to an existing lease, a copy of such amendment) as set forth in the parenthetical in the definition of “Specified New/Modified Lease”), as a Specified New/Modified Lease, and the applicable Acquired RAIT Entity elects not to enter into such proposed new, renewed, modified or amended lease, then any events or consequences to the extent arising directly as a result of such Acquired RAIT Entity’s determination not to enter into such proposed new, renewed, modified or amended lease, will not be deemed to constitute a breach of, or failure to comply with, any representation, warranty, covenant or condition set forth in this Agreement.

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(b) Notwithstanding anything to the contrary in this Article VI or in any other section of this Agreement, Buyer acknowledges that if Buyer agrees to treat any proposed new, renewed, modified or amended lease with respect to Owned Real Property or Leased Real Property as a Specified New/Modified Lease but does not agree to treat as “Specified Payments”certain of the Specified New/Modified Lease Expenses coming due prior to the Closing Date with respect to such Specified New/Modified Lease, then in the event the applicable Acquired RAIT Entity thereafter fails to pay when due such portion of such Specified New/Modified Lease Expenses that does not constitute a Specified Payment with respect to such Specified New/Modified Lease, thenon-payment by the applicable Acquired RAIT Entity of such portion of such Specified New/Modified Lease Expenses that does not constitute a Specified Payment,and any events or consequences to the extent arising directly as a result of such non-payment of theportion of such Specified New/Modified Lease Expenses that does not constitute a Specified Payment, including without limitation lease defaults, loan defaults, Actions and the attachment of Liens and the like, will not be deemed to constitute a breach of, or failure to comply with, any representation, warranty, covenant or condition set forth in this Agreement.”

(l)Section 7.2(g) of the Purchase Agreement shall be amended and restated in its entirety to read as follows:

“Buyer fails to deliver to the Escrow Agent in accordance with Section 2.3(a) either (i) the portion of the Deposit required to be delivered to the Escrow Agent within two (2) Business Days of the execution of this Agreement or (ii) if, after the conclusion of the Auction, Buyer is the Winning Bidder, or Buyer agrees to serve as the Back-Up Bidder, or if there is no Auction, the Additional Deposit prior to the commencement of the Sale Hearing;”

(m)The Schedules shall be amended to remove Schedule 2.1(a)(iii) in its entirety.

3.Effectiveness.  The amendments set forth in this Amendment shall become effective as of the Amendment Effective Date, subject to execution and delivery of this Amendment by each of the Parties.

4.Miscellaneous.

(a)Except as expressly provided herein, this Amendment shall not, by implication or otherwise, alter, modify, amend or in any way affect any of the obligations, covenants or rights (including, without limitation, rights to terminate the Purchase Agreement) contained in the Purchase Agreement, all of which are ratified and confirmed in all respects by the Parties and shall continue in full force and effect.

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(b)Each reference to the Purchase Agreement hereafter made in any document, agreement, instrument, notice or communication shall mean and be a reference to the Purchase Agreement as amended and modified hereby.

(c)THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO ANY CONFLICTS OF LAW PROVISIONS THAT WOULD REQUIRE THE APPLICATION OF THE LAW OF ANY OTHER JURISDICTION.

(d)The Section captions herein are for convenience of reference only, do not constitute part of this Amendment and shall not be deemed to limit or otherwise affect any of the provisions hereof.

(e)This Amendment, together with the Purchase Agreement and the other Definitive Documents, constitutes the entire agreement among the Parties with respect to the subject matter hereof and supersedes all prior agreements and understandings among the Parties with respect to such subject matter.

(f)For the convenience of the Parties, this Amendment may be executed and delivered (by facsimile or PDF signature) in any number of counterparts, each such counterpart being deemed to be an original instrument, and all such counterparts shall together constitute the same agreement.

(g)If any term, condition or other provision of this Amendment is invalid, illegal or incapable of being enforced by any rule of Law or public policy, all other terms, conditions and provisions of this Amendment shall nevertheless remain in full force and effect so long as the economic or legal substance of the transactions contemplated hereby is not affected in a manner adverse to any Party.  Upon such determination that any term, condition or other provision is invalid, illegal or incapable of being enforced, the Parties shall negotiate in good faith to modify this Amendment so as to effect the original intent of the Parties as closely as possible in an acceptable manner to the end that the transactions contemplated hereby are fulfilled to the fullest extent possible.

(h)The words “include,” includes” and “including,” when used herein shall be deemed in each case to be followed by the words “without limitation” (regardless of whether such words or similar words actually appear).  Any reference in this Amendment to gender shall include all genders, and words imparting the singular number only shall include the plural and vice versa.  The words such as “herein,” “hereinafter,” “hereof” and “hereunder” refer to this Amendment as a whole and not merely to a subdivision in which such words appear unless the context otherwise requires.

(i)The Parties agree that they have been represented by legal counsel during the negotiation and execution of this Amendment and, therefore, waive the application of any Law, regulation, holding or rule of construction providing that ambiguities in an agreement or other document shall be construed against the party drafting such agreement or document.

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[Remainder of Page Intentionally Left Blank.]

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IN WITNESS WHEREOF, each Party has caused this Amendment No. 1to the Equity and Asset Purchase Agreement to be duly executed and delivered as of the date first above written.

RAIT FINANCIAL TRUST
By:	/s/ Jamie Reyle, Esq.
	Name:	Jamie Reyle, Esq.
	Title:	Chief Executive Officer, President & General Counsel

RAIT General, Inc.
By:	/s/ Jamie Reyle, Esq.
	Name:	Jamie Reyle, Esq.
	Title:	Chief Executive Officer, President & General Counsel

RAIT Limited, Inc.
By:	/s/ Jamie Reyle, Esq.
	Name:	Jamie Reyle, Esq.
	Title:	Chief Executive Officer, President & General Counsel

Taberna Realty Finance Trust
By:	/s/ Jamie Reyle, Esq.
	Name:	Jamie Reyle, Esq.
	Title:	Chief Executive Officer, President & General Counsel

[Signature Page to Amendment No. 1 to the Equity and Asset Purchase Agreement]

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CF RFP HOLDINGS LLC
By:	/s/ Constantine M. Dakolias
	Name:	Constantine M. Dakolias
	Title:	President

[Signature Page to Amendment No. 1 to the Equity and Asset Purchase Agreement]

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List of Omitted Exhibits

The following exhibit to the Amendment No. 1 to the Equity and Asset Purchase Agreement, dated October 4, 2019, by and among RAIT Financial Trust, RAIT General, Inc., RAIT Limited, Inc., and Taberna Realty Finance Trust, as Sellers, and CF RFP Holdings LLC, as Buyer, has not been provided herein:

Exhibit E – Required Consents, Waivers and Approvals

The registrant hereby undertakes to furnish supplementally a copy of such omitted exhibit to the Securities and Exchange Commission upon request.

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Exhibit DAcquired Assets

1. CDO I Notes F, G and H owned by any Seller.  

2. The “A” Participation Interest, as such term is defined in that certain Participation and Servicing Agreement, dated as of June 27, 2012, among RAIT Partnership, L.P., as initial holder, RAIT Partnership, L.P., as initial A Participant, and RAIT Partnership, L.P., as initial B Participant, governing the participation of that certain mortgage loan made by RAIT Partnership, L.P. to M&R Glen Oak Commons LLC, evidenced by that certain “A” Participation Certificate dated December 17, 2018, acknowledging Taberna Realty Finance Trust as 100% holder of the A Participation Interest pursuant to that certain Assignment and Assumption of “A” Participation Interest from RAIT Preferred Funding II, Ltd. to Taberna Realty Finance Trust, dated December 17, 2018.

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EX-10.2.1

Exhibit 10.2.1

Confidential

RESTRUCTURING AND PLAN SUPPORT AGREEMENT
(Fair Value Junior Subordinated Note)

This RESTRUCTURING AND PLAN SUPPORT AGREEMENT (this “Agreement”) is made and entered into as of August 29, 2019 (the “Execution Date”) by and among (i) RAIT Financial Trust (“RAIT”) and its wholly-owned subsidiary Taberna Realty Finance Trust (“Taberna” and together with RAIT collectively, the “Debtors”), (ii) TP Management LLC, in its capacity as delegate collateral manager under the Delegation Agreement (as defined below) (“Collateral Manager”). The Debtors and Collateral Manager are referred to herein each individually as a “Party,” and collectively, as the “Parties.”

RECITALS

A.WHEREAS, Taberna and Wells Fargo Bank, National Association, in its capacity as Trustee (“Trustee”), are party to that certain Junior Subordinated Indenture dated as of October 25, 2010 (the “Indenture Agreement”), pursuant to which Taberna issued that certain Junior Subordinated Note due 2035 in the principal sum of eighteen million six hundred seventy-one thousand dollars ($18,671,000) (the “Note”);

B.WHEREAS, Taberna Preferred Funding I, Ltd., an exempt company under the laws of the Cayman Islands (“TPF”), is the sole holder of the Note;

C.WHEREAS, TPF and Taberna Capital Management (“Prior Collateral Manager”) are party to that certain (i) Collateral Management Agreement, dated as of March 15, 2005, as amended or supplemented from time to time (the “Collateral Management Agreement”) and (ii) Collateral Administration Agreement, dated as of March 15, 2005, as amended or supplemented from time to time (the “Collateral Administration Agreement by and among, Prior Collateral Manager, TPF and JPMorgan Chase Bank, National Association;

D.WHEREAS, Prior Collateral Manager, RAIT, and Collateral Manager are party to that certain Delegation Agreement, dated as of December 14, 2014, as amended or supplemented from time to time (the “Delegation Agreement”);

E.WHEREAS, TPF, as the sole holder of the Note, is the legal and/or beneficial holder of a claim, as defined in section 101(5) of the Bankruptcy Code, against Taberna arising out of or relating to its interest in the Note (the “Note Claim”);

F.WHEREAS, pursuant to the Indenture Agreement, TPF, as the holder of the Note, has the authority to direct the time, method and place of conducting any proceeding for any remedy available to the Trustee or exercising any trust or power conferred on the Trustee;

G.WHEREAS, prior to the date hereof, representatives of the Debtors and the Collateral Manager have engaged in good faith negotiations with the objective of reaching an agreement regarding the restructuring of the Debtors' indebtedness and other obligations and interests (the “Restructuring”) as set forth in this Agreement, the Plan Term Sheet (as defined below), and the Plan (as defined below), which Restructuring may be accomplished through the prosecution of jointly administered chapter 11 cases (collectively, the “Chapter 11 Cases”) in the

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119429973.3

 

Confidential

United States Bankruptcy Court for the District of Delaware (the “Bankruptcy Court”) and confirmation of a chapter 11 plan of reorganization as described herein and in the Plan Term Sheet;

H.WHEREAS, the Parties acknowledge and agree that, unless the Parties agree otherwise in writing, the Restructuring will occur pursuant to a plan of reorganization under chapter 11 of the Bankruptcy Code containing, among other things, the terms and conditions set forth in the Summary of Principal Terms and Conditions of Restructuring attached hereto as Exhibit A (the “Plan Term Sheet”).  Such plan, together with all plan-related documents, agreements, supplements and instruments consistent with the Plan Term Sheet and Reasonably Acceptable to the Collateral Manager and the Debtors, shall be referred to herein as the “Plan”.  For purposes of this Agreement, “Reasonably Acceptable” shall mean acceptable to a Debtor and the Collateral Manager (as applicable) in such Debtor’s or the Collateral Manager’s reasonable discretion, provided, that, any documentation or matter consistent with a term specifically addressed in the Plan Term Sheet and this Agreement shall be deemed Reasonably Acceptable;

I.WHEREAS, each Party has reviewed or has had the opportunity to review the Plan Term Sheet and this Agreement with the assistance of professional legal advisors of its own choosing;

J.WHEREAS, the Collateral Manager, after consultation with its legal and financial advisors, has determined that any proceeds of a sale transaction in the imminent Chapter 11 Cases that may be allocated to Taberna assets by the purchaser, less the administrative expenses allocable to the Taberna bankruptcy estate by the Bankruptcy Court, likely would result in substantially less recovery to TPF on the Note Claim than the proposed treatment of the Allowed Subordinated Taberna Note Claims as provided in the Plan Term Sheet;

K.WHEREAS, the Collateral Manager desires to support and vote to accept the Plan and will direct the Trustee to support and vote to accept the Plan, and the Debtors desire to obtain the commitment of the Collateral Manager to do the same, in each case subject to the terms and conditions set forth herein; and

L.WHEREAS, in expressing such support and commitment, the Parties do not desire and do not intend in any way to derogate from or diminish the solicitation requirements of applicable bankruptcy law, or the fiduciary duties of Debtors.

NOW, THEREFORE, in consideration of the promises and the mutual covenants and agreements set forth herein, and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the Parties hereby agree as follows:

AGREEMENT

1.Means for Implementation.  The Parties believe that prompt approval and confirmation by the Bankruptcy Court in the Debtors’ chapter 11 cases (the “Chapter 11 Cases”) and consummation of the Plan will best facilitate the Restructuring and is in the best interests of the Debtors’ creditors, equity holders, and other parties in interest.  Accordingly, to implement this Agreement, the Parties jointly and severally agree, on the terms and conditions set forth herein, that the Debtors shall use their commercially reasonable efforts to:

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119429973.3

 

Confidential

a.support and consummate, and take any and all reasonable and necessary actions in furtherance of the Restructuring, including satisfying the timeframe set forth in Paragraph 6(f)-(j);

b.obtain Bankruptcy Court approval of the sale of substantially all of the assets of the Debtors or the reorganized equity of RAIT pursuant to section 363 of the Bankruptcy Code (the “Sale”);

c.obtain Bankruptcy Court approval of the disclosure statement accompanying the Plan in a form and in substance consistent with this Agreement and Reasonably Acceptable to the Collateral Manager and the Debtors (the “Disclosure Statement”);

d.solicit the requisite acceptances of the Plan in accordance with section 1125 of the Bankruptcy Code and any applicable orders of the Bankruptcy Court;

e.move the Bankruptcy Court to confirm the Plan as expeditiously as practicable under the Bankruptcy Code, the Federal Rules of Bankruptcy Procedure and the Bankruptcy Court's local rules;

f.not withdraw the Plan, or file any exhibit, amendment, modification or supplement to the Plan that contains any material term(s) that are inconsistent with the Plan Term Sheet and are not Reasonably Acceptable to the Collateral Manager;

g.not pursue, propose or support, or encourage the pursuit, proposal or support of, any chapter 11 plan for any Debtor that is inconsistent with the Plan or this Agreement; and

h.take all actions reasonably necessary and appropriate to consummate the Plan at the earliest practicable date;

provided, however, that the Plan and the Disclosure Statement shall be consistent with this Agreement, and the Debtors’ obligations hereunder shall in all respects be subject to the exercise by each of the Debtors of its respective fiduciary duty as a debtor and debtor in possession in the Chapter 11 Cases.

2.Representations as to Authority of the Collateral Manager.  The Collateral Manager hereby represents and warrants as of the date hereof:

a.that it has the right, on behalf of TPF, as sole holder of the Note, to instruct the Trustee to vote, compromise, and dispose of, consistent with the provisions contained in the Plan, the Note Claim.

3.Agreement to Support the Plan.  For so long as this Agreement remains in effect, and subject to the Debtors fulfilling their obligations as provided herein, the Collateral Manager agrees to use its commercially reasonable efforts to (a) support approval of the Sale; (b) support approval of the Disclosure Statement and confirmation of the Plan; (c) not directly or indirectly pursue, propose, support, solicit or encourage the pursuit, proposal, solicitation or support of, any chapter 11 plan or other restructuring or reorganization (including, without

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Confidential

limitation, any sale, proposal or offer of dissolution, winding up or merger) for, or the liquidation of, any of the Debtors (directly or indirectly) that is inconsistent with the Plan or this Agreement; (d) not, nor encourage any other person or entity to, object, oppose, delay, impede, appeal or take any other negative action, directly or indirectly, to interfere with, the approval of the Disclosure Statement and the acceptance, implementation, confirmation and consummation of the Plan; (e) not commence any proceeding or prosecute any objection to oppose or object to the Plan or to the Disclosure Statement; and (f) subject to the prior approval of the Disclosure Statement by the Bankruptcy Court and receipt of such approved Disclosure Statement by the Collateral Manager and Trustee, direct Trustee to vote the Note Claim (and not revoke or withdraw its vote) in favor of the Plan and (ii) to direct Trustee to vote theNote Claim (and not revoke or withdraw its vote) in favor of the Plan; provided that, in each case, (x) the Plan and Disclosure Statement meet all the requirements and conditions relating thereto as set forth in this Agreement; (y) the Disclosure Statement that is approved by the Bankruptcy Court does not contain information that differs materially from that which was known by the Collateral Manager as of the date hereof; and (z) the Plan does not impose terms not contained in this Agreement (including the Plan Term Sheet) that adversely affect the interests of TPF.  Notwithstanding the foregoing, nothing in this Agreement shall be construed to prohibit the Collateral Manager from appearing as a party in interest in any matter to be adjudicated in the Chapter 11 Cases so long as such appearance and the positions advocated in connection therewith are not materially inconsistent with this Agreement and are not for the purpose of hindering or delaying (and are not reasonably likely to hinder or delay) implementation of the transactions and other matters contemplated by this Agreement.  Notwithstanding anything herein to the contrary, if theCollateral Manager is appointed to and serves on an official committee in the Chapter 11 Cases, the terms of this Agreement shall not be construed to limit the Collateral Manager’s exercise of its fiduciary duties in its role as a member of such committee, and any exercise of such fiduciary duties shall not be deemed to constitute a breach of the terms of this Agreement; provided, however, that serving as a member of such committee shall not relieve the Collateral Manager in its individual capacity of any obligations to instruct Trustee to vote in favor of the Plan; provided, further, that nothing in this Agreement shall be construed as requiring theCollateral Manager to serve on any official committee in the Chapter 11 Cases.

4.Acknowledgement.  The entry by the Parties into this Restructuring and Plan Support Agreement is not and shall not be deemed to be a solicitation of votes for the acceptance of a chapter 11 plan for the purposes of sections 1125 and 1126 of the Bankruptcy Code.  The Debtors will not solicit acceptances of the Plan from Trustee or the Collateral Manager until they have been provided with copies of a Disclosure Statement approved by the Bankruptcy Court.

5.Limitations on Transfer.  The Collateral Manager agrees, for so long as this Agreement is in effect (such period, the “Restricted Period”), that TPF will not (a) sell, transfer, assign, pledge (except bona fide pledges to its lenders (if any) or any Federal Reserve bank or branch), grant a participation interest in or otherwise dispose, directly or indirectly, of TPF’s right, title or interest (including any voting rights) in respect of the Note or the Indenture Agreement, including the Note Claim (to the extent held by it on the date hereof), in whole or in part, or any interest therein, or (b) grant any proxies, deposit any of TPF’s interest in the Note Claim (to the

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extent held by it on the date hereof) into a voting trust, or enter into a voting agreement with respect to any of the Note Claim.  

6.Termination Events.  The occurrence of any of the following events shall constitute a “Termination Event”:

a.Execution and delivery of a written agreement among the Debtors and the Collateral Manager terminating this Agreement;

b.the entry or issuance by any court of competent jurisdiction or other competent governmental or regulatory authority of an order making illegal or otherwise restricting, preventing or prohibiting the consummation of the Restructuring;

c.the withdrawal of the Plan by the Debtors, or the public announcement by any Debtor of its intention not to support the Plan, or the support by any Debtor for the filing of any plan of reorganization or liquidation and/or disclosure statement that is not consistent with this Agreement, or the public announcement by any Debtor of its support for any such inconsistent plan and/or disclosure statement, or any action or conduct by any Debtor suggesting an intention not to proceed with the Plan or to proceed with any alternative plan or form of transaction inconsistent with this Agreement;

d.the entry of any order in the Chapter 11 Cases terminating either of the Debtors’ exclusive right to file a chapter 11 plan pursuant to section 1121 of the Bankruptcy Code;

e.the amendment, modification of, or the filing of a pleading by either of the Debtors that seeks to amend or modify the Plan, the Disclosure Statement or any documents related to the Plan, notices, exhibits or appendices, which amendment, modification or filing is materially inconsistent with the Plan or this Agreement and is not Reasonably Acceptable to Collateral Manager;

f.the failure of the Debtors to commence the Chapter 11 Cases on or before September 15, 2019 (the “Petition Date”);

g.the failure of the Debtors to file the Plan and the Disclosure Statement within 30 days of the Petition Date;

h.the failure of the Debtors to obtain an order from the Bankruptcy Court approving the Disclosure Statement pursuant to section 1125 of the Bankruptcy Code, consistent with the Plan and this Agreement and Reasonably Acceptable to the Debtors, and the Collateral Manager, within 90 days of the Petition Date;

i.the failure of the Debtors to commence the solicitation of acceptances of the Plan within 10 business days of entry of the Order approving the Disclosure Statement pursuant to section 1125 of the Bankruptcy Code;

j.the failure of the Debtors to obtain an order from the Bankruptcy Court confirming the Plan (the “Confirmation Order”) within 240 days of the Petition Date;

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k.the entry of an order denying approval of the Disclosure Statement or denying confirmation of the Plan where the revisions that would be necessary to the Disclosure Statement or the Plan in order to resolve the objections to these could not be done without breaching or contradicting this Agreement or in a manner Reasonably Acceptable to the Debtors and the Collateral Manager;

l.the dismissal of any of the Chapter 11 Cases or the conversion of any of the Chapter 11 Cases to a case under chapter 7 of the Bankruptcy Code, or the appointment of an interim or permanent trustee in either of the Chapter 11 Cases, or the appointment of a responsible officer or an examiner with powers beyond the duty to investigate and report (as set forth in sections 1106(a)(3) and (4) of the Bankruptcy Code) in either of the Chapter 11 Cases, or the filing by any of the Debtors of a motion, or any other actions by any of the Debtors, in support of any of the foregoing;

m.the entry by any court (including the Bankruptcy Court) of a final, non-appealable order holding this Agreement to be unenforceable;

n.the occurrence of any change, effect, event, development, circumstance or state of facts which as determined by the Collateral Manager, in its reasonable discretion, (i) would materially impair either Debtor’s ability to perform its obligations under this Agreement or the Plan, as applicable, (ii) would prevent or materially delay the consummation of the transactions contemplated by this Agreement beyond the time period set forth herein, or (iii) would make the Plan not feasible to consummate in all material respects (any such change, effect, event, development, or state of facts, a “Material Adverse Change”);  providedthat the mere act of commencing the Chapter 11 Cases contemplated by this Agreement shall not constitute a Material Adverse Change;

o.the occurrence of any breach of any representation or obligation under this Agreement by any of the Parties (to the extent not otherwise waived in accordance with the terms hereof); or

p. the Debtors shall enter into a Restructuring and Plan Support Agreement between RAIT Financial Trust and Kodiak CDO I, Ltd., on terms that are materially inconsistent with the terms of this Agreement.

The foregoing Termination Events are intended solely for the benefit of the Debtors and the Collateral Manager; provided that neither the Debtors nor the Collateral Manager may seek to terminate this Agreement based upon a material breach or a failure of a condition (if any) in this Agreement arising out of its own actions or omissions.

7.Termination of this Agreement.  Upon the occurrence of any Termination Event specified in Paragraph 6(f)‑(k), this Agreement shall terminate, without any requirement to provide notice of such termination unless such Termination Event is waived or the Agreement is modified, amended or supplemented in accordance with paragraph 12 prior to the occurrence of such Termination Event.  With respect to the occurrence of any other Termination Event specified in Paragraph 6, written notice shall be required, unless such Termination Event is waived or the Agreement is modified, amended or supplemented in accordance with paragraph 12.  For

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avoidance of doubt, the automatic stay pursuant to section 362 of the Bankruptcy Code shall be deemed waived for purposes of providing notice hereunder.

8.Effect of Termination.  Upon termination of this Agreement, all obligations hereunder shall terminate and shall be of no further force and effect; provided, however, that any claim for breach of this Agreement shall survive termination and all rights and remedies with respect to such claims shall not be prejudiced in any way.  Except as set forth above in this paragraph 8, upon such termination, any obligations of the non-breaching Parties set forth in this Agreement shall be null and void ab initio and all claims, causes of action, remedies, defenses, setoffs, rights or other benefits of such non-breaching Parties shall be fully preserved without any estoppel, evidentiary or other effect of any kind or nature whatsoever.

9.Representations and Warranties.  Each of the Parties for itself represents and warrants to each other Party, severally but not jointly, that the following statements are true, correct and complete as of the date hereof:

a.Corporate Power and Authority.  It is duly organized, validly existing, and in good standing under the laws of the state of its organization, and has all requisite corporate, partnership or other power and authority to enter into this Agreement and to carry out the transactions contemplated by, and to perform its respective obligations under, this Agreement.

b.Authorization.  The execution and delivery of this Agreement and the performance of its obligations hereunder have been duly authorized by all necessary corporate, partnership or other action on its part.

c.Binding Obligation.  Subject to the provisions of sections 1125 and 1126 of the Bankruptcy Code, this Agreement constitutes its legal, valid and binding obligation, enforceable in accordance with the terms hereof.

d.No Conflicts.  The execution, delivery and performance by it (when such performance is due) of this Agreement do not and shall not violate any provision of law, rule or regulation applicable to it or any of its subsidiaries or its certificate of incorporation or bylaws or other organizational documents or those of any of its subsidiaries.

e.Government Consents.  The execution, delivery and performance by it (when such performance is due) of this Agreement do not and shall not violate any provision of law, rule or regulation applicable to it or any of its subsidiaries or its certificate of incorporation or bylaws or other organizational documents or those of any of its subsidiaries.

10.Adequate Information.  Although none of the Parties intends that this Agreement should constitute, and they each believe it does not constitute, a solicitation or acceptance of the Plan, they each acknowledge and agree, that adequate information was provided by the Debtors to the Collateral Manager in order to enable it to make an informed decision such that, were this Agreement to be construed as or deemed to constitute such a solicitation or acceptance, such solicitation was (i) in compliance with any applicable nonbankruptcy law, rule, or regulation governing the adequacy of disclosure in connection with such solicitation, or (ii) if

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there is not any such law, rule, or regulation, solicited after disclosure to such holder of “adequate information” as such term is defined in section 1125(a) of the Bankruptcy Code.

11.Public Announcements and Bankruptcy Court Filings.  The Debtors may disclose the existence of and nature of support evidenced by this Agreement in one or more public releases.  Notwithstanding anything contained herein, in connection with the filing of the Chapter 11 Cases with the Bankruptcy Court, the Debtors may attach a form of this Agreement and the Plan Term Sheet as an exhibit to any pleading filed in the Chapter 11 Cases.

12.Amendment or Waiver.  Except as otherwise specifically provided herein, this Agreement may not be modified, waived, amended or supplemented unless such modification, waiver, amendment or supplement is in writing and has been signed by each of the Parties.  No waiver of any of the provisions of this Agreement shall be deemed or constitute a waiver of any other provision of this Agreement, whether or not similar, nor shall any waiver be deemed a continuing waiver.

13.Notices.  Any notice required or desired to be served, given or delivered under this Agreement shall be in writing, and shall be deemed to have been validly served, given or delivered if provided by personal delivery, or upon receipt of fax or email delivery, as follows:

a.if to any of the Debtors: Drinker Biddle & Reath LLP, c/o Michael P. Pompeo, 1177 Avenue of the Americas, 41st Floor, New York, New York 10036 fax: (212) 248-3141, email: michael.pompeo@dbr.com; and

b.if to the Collateral Manager: Hunton Andrews Kurth, c/o Tyler P. Brown, 951 East Byrd Street, Richmond, Virginia  23219; email: tpbrown@huntonAK.com.

14.Governing Law; Jurisdiction.  THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF DELAWARE, WITHOUT REGARD TO ANY CONFLICTS OF LAW PROVISION WHICH WOULD REQUIRE THE APPLICATION OF THE LAW OF ANY OTHER JURISDICTION.  By its execution and delivery of this Agreement, each of the Parties hereto hereby irrevocably and unconditionally agrees for itself that any legal action, suit or proceeding against it with respect to any matter under or arising out of or in connection with this Agreement or for recognition or enforcement of any judgment rendered in any such action, suit or proceeding, may be brought in the United States District Court for the District of Delaware.  By execution and delivery of this Agreement, each of the Parties hereto irrevocably accepts and submits itself to the nonexclusive jurisdiction of such court, generally and unconditionally, with respect to any such action, suit or proceeding, and waives any objection it may have to venue or the convenience of the forum.  Notwithstanding the foregoing consent to Delaware jurisdiction, each of the Parties hereto hereby agrees that, upon commencement of the Chapter 11 Cases, the Bankruptcy Court shall have exclusive jurisdiction of all matters arising out of or in connection with this Agreement.

15.Headings.  The headings of the sections, paragraphs and subsections of this Agreement are inserted for convenience only and shall not affect the interpretation hereof.

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16.Interpretation.  This Agreement is the product of negotiations of the Parties, and in the enforcement or interpretation hereof is to be interpreted in a neutral manner, and any presumption with regard to interpretation for or against any Party by reason of that Party having drafted or caused to be drafted this Agreement, or any portion hereof, shall not be effective in regard to the interpretation hereof.

17.Successors and Assigns.  This Agreement is intended to bind and inure to the benefit of the Parties and their respective successors, assigns, heirs, executors, administrators and representatives.

18.No Third-Party Beneficiaries.  Unless expressly stated herein, this Agreement shall be solely for the benefit of the Parties hereto and no other person or entity shall be a third-party beneficiary hereof.

19.No Waiver of Participation and Reservation of Rights.  Except as expressly provided in this Agreement and in any amendment among the Parties, nothing herein is intended to, or does, in any manner waive, limit, impair or restrict the ability of each of the Parties to protect and preserve its rights, remedies and interests, including without limitation, its claims against any of the other Parties (or their respective affiliates or subsidiaries) or its full participation in the Chapter 11 Cases.  If the transactions contemplated by this Agreement or in the Plan Term Sheet and the Plan are not consummated, or if this Agreement is terminated for any reason, the Parties fully reserve any and all of their rights.  Pursuant to Federal Rule of Evidence 408 and any other applicable rules of evidence, this Agreement and all negotiations relating hereto shall not be admissible into evidence in any proceeding other than a proceeding to enforce its terms.

20.No Admissions.  This Agreement shall in no event be construed as or be deemed to be evidence of an admission or concession on the part of any Party of any claim or fault or liability or damages whatsoever.  Each of the Parties denies any and all wrongdoing or liability of any kind and does not concede any infirmity in the claims or defenses which it has asserted or could assert.  No Party shall have, by reason of this Agreement, a fiduciary relationship in respect of any other Party or any party in interest in the Chapter 11 Cases, or any of the Debtors, and nothing in this Agreement, expressed or implied, is intended to or shall be so construed as to impose upon any Party any obligations in respect of this Agreement except as expressly set forth herein.

21.Specific Performance.  It is understood and agreed by the Parties that money damages would be an insufficient remedy for any breach of this Agreement by any Party and each non-breaching Party shall be entitled to specific performance and injunctive or other equitable relief as a remedy of any such breach, including, without limitation, an order of the Bankruptcy Court or other court of competent jurisdiction requiring any Party to comply promptly with any of its obligations hereunder.

22.Reservation of Rights.  If the Restructuring is not consummated as provided herein, if a Termination Event occurs, or if this Agreement is otherwise terminated for any reason, the Collateral Manager fully reserves any and all of TPF’s rights, remedies and interests under the Indenture Agreement, the Note, applicable law and in equity.

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23.No Consideration.  It is hereby acknowledged by each of the Parties that no consideration shall be due or paid to the Parties for their agreement to support or not interfere with the Plan and the Restructuring in accordance with the terms and conditions of this Agreement, other than the obligations of the other Parties under this Agreement, the Plan Term Sheet, and the Plan.  

24.Counterparts.  This Agreement may be executed in two or more counterparts, each of which shall be deemed an original and all of which shall constitute one and the same Agreement.  Delivery of an executed signature page of this Agreement by facsimile or electronic mail transmission shall be effective as delivery of a manually executed signature page of this Agreement.

25.Representation by Counsel.  Each Party acknowledges that it has been represented by counsel in connection with this Agreement and the transactions contemplated herein.  Accordingly, any rule of law or any legal decision that would provide any Party with a defense to the enforcement of the terms of this Agreement against such Party based upon lack of legal counsel shall have no application and is expressly waived.

26.Entire Agreement.  This Agreement and the exhibits hereto, including, without limitation, the Plan Term Sheet, constitute the entire agreement between the Parties and supersedes all prior and contemporaneous agreements, representations, warranties and understandings of the Parties, whether oral, written or implied, as to the subject matter hereof.

27.Several Not Joint.  The agreements, representations and obligations of the Parties under this Agreement are, in all respects, several and not joint.  Any breach of this Agreement by any Party shall not result in liability for any other non-breaching Party.

28.Cooperation.The Debtors shall, except (a) in an emergency where it is not reasonably practicable or (b) upon consent of counsel to the Collateral Manager, provide to counsel for the Collateral Manager copies of all motions or applications and other documents Debtors intend to file with the Bankruptcy Court no later than three (3) business days prior to the date when the Debtors intend to file any such document and shall consult in good faith with counsel to the Collateral Manager regarding the form and substance of any such proposed filing with the Bankruptcy Court.

29.Further Assurances.  Subject to the terms of this Agreement, the Parties agree to execute and deliver such other instruments and perform such other acts in addition to the matters herein specified, as may be reasonably appropriate or necessary, from time to time, to effectuate the Plan.

[Signature pages follow]

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IN WITNESS WHEREOF, the undersigned have each caused this Agreement to be duly executed and delivered by their respective, duly authorized officers as of the date first above written.

RAIT FINANCIAL TRUST

By:  /s/ John J. Reyle

Name:  John J. Reyle

Title:    Chief Executive Officer

TABERNA REALTY FINANCE TRUST

By:  /s/ John J. Reyle

Name:   John J. Reyle

Title:    Chief Executive Officer

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[SIGNATURE PAGE FOR COLLATERAL MANAGER]

TP MANAGEMENT LLC

By: /s/ Constantine M. Dakolias

Name:  Constantine M. Dakolias

Title:    President

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List of Omitted Exhibits

The following exhibit to Restructuring and Plan Support Agreement (Fair Value Junior Subordinated Note), dated August 29, 2019, by and among RAIT Financial Trust, Taberna Realty Finance Trust and TP Management LLC has not been provided herein:

Exhibit A – Plan Term Sheet

The registrant hereby undertakes to furnish supplementally a copy of such omitted exhibit to the Securities and Exchange Commission upon request.

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Exhibit 10.2.2

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RESTRUCTURING AND PLAN SUPPORT AGREEMENT
(Amortized Cost Junior Subordinated Note)

This RESTRUCTURING AND PLAN SUPPORT AGREEMENT (this “Agreement”) is made and entered into as of August 31, 2019 (the “Execution Date”) by and among (i) RAIT Financial Trust (“RAIT”) and its indirect wholly-owned subsidiary RAIT Funding, LLC f/k/a Taberna Funding LLC (“Funding” and together with RAIT collectively, the “Debtors”), and (ii) Kodiak CDO I, Ltd., as holder of Preferred Securities (as defined below) (the “Preferred Owner”).  The Debtors and the Preferred Owner are referred to herein each individually as a “Party,” and collectively, as the “Parties.”

RECITALS

A.WHEREAS, Funding and The Bank of New York Trust Company, National Association, in its capacity as Trustee (“Indenture Trustee”), are party to that certain Junior Subordinated Indenture dated as of February 12, 2007 (the “Note Indenture”), pursuant to which Funding issued that certain Junior Subordinated Note due 2037 in the principal sum of twenty-five million one hundred thousand dollars ($25,100,000) (the “Note”) to The Bank of New York Trust Company, National Association, in its capacity as Property Trustee under the Trust Agreement (as defined below) (“Property Trustee”).  The Note is guaranteed by RAIT on a subordinated basis pursuant to that certain Parent Guarantee Agreement dated as of February 12, 2007 (the “Parent Guarantee Agreement”), between RAIT and The Bank of New York Trust Company, National Association, in its capacity as Guarantee Trustee (“Guarantee Trustee”);

B.WHEREAS, Funding and Property Trustee, together with The Bank of New York (Delaware), in its capacity as Delaware Trustee, and certain individuals, are parties to that certain Amended and Restated Trust Agreement dated February 12, 2007 (the “Trust Agreement”), which provided for the issuance and sale of certain undivided preferred beneficial interests (the “Preferred Securities”) by Taberna Funding Capital Trust I, a Delaware statutory trust (the “Trust”), the proceeds of which sale were used to acquire the Note;

C.WHEREAS, Preferred Owner is the owner of all of the Preferred Securities issued by the Trust, and EJF CDO Manager LLC, is the designated collateral manager for Preferred Owner (in such capacity, the “Collateral Manager”);

D.WHEREAS, Property Trustee is the legal and beneficial holder for the legal or beneficial owner of a claim, as defined in section 101(5) of the Bankruptcy Code (a “Claim”), against Funding arising out of or relating to its interests in the Note (the “Note Claim”);

E.WHEREAS, Guarantee Trustee is the legal and beneficial holder for the legal or beneficial owner of a Claim against RAIT arising out of or relating to its interests in the Parent Guarantee Agreement (the “Guarantee Claim”);

F.WHEREAS, pursuant to the Trust Agreement, Preferred Owner, who is the holder of a Majority in Liquidation Amount (as defined in the Trust Agreement) of the Preferred Securities, has the right to direct the time, method, and place of conducting any proceeding for any remedy available to the Property Trustee or exercising any trust or power conferred upon the Property Trustee in respect of the Trust Agreement.

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G.WHEREAS, pursuant to the Parent Guarantee Agreement, the Guarantee Trustee has the right to enforce the Parent Guarantee Agreement on behalf of the Preferred Owner, and Preferred Owner, who is the holder of a Majority in Liquidation Amount (as defined in the Trust Agreement) of the Preferred Securities, has the right to direct the time, method and place of conducting any proceeding for any remedy available to the Guarantee Trustee or exercising any trust or power conferred upon the Guarantee Trustee under the Parent Guarantee Agreement;

H.WHEREAS, the Collateral Manager and the Preferred Owner are parties to (i) that certain Indenture, dated as of September 19, 2006, among Preferred Owner, as issuer, Kodiak CDO Inc., as co-issuer, and The Bank of New York Mellon Trust Company, National Association (as successor to JPMorgan Chase Bank, National Association) as trustee (the “Kodiak Trustee”) (the “Kodiak Indenture”), and (ii) that certain Collateral Management Agreement, dated as of September 19, 2006, among Preferred Owner, as issuer, and the Collateral Manager, as collateral manager (the “Kodiak Collateral Management Agreement”), pursuant to which the Collateral Manager has the right, on behalf of the Preferred Owner, to instruct the Kodiak Trustee in its efforts to maximize the recovery value of any Defaulted Security (as defined the Kodiak Indenture);

I.WHEREAS, prior to the date hereof, representatives of the Debtors and the Collateral Manager have engaged in good faith negotiations with the objective of reaching an agreement regarding the restructuring of the Debtors' indebtedness and other obligations and interests (the “Restructuring”) as set forth in this Agreement, the Plan Term Sheet (as defined below), and the Plan (as defined below), which Restructuring may be accomplished through the prosecution of jointly administered chapter 11 cases (collectively, the “Chapter 11 Cases”) in the United States Bankruptcy Court for the District of Delaware (the “Bankruptcy Court”) and confirmation of a chapter 11 plan of reorganization as described herein and in the Plan Term Sheet;

J.WHEREAS, the Parties acknowledge and agree that, unless otherwise agreed in writing, the Restructuring will occur pursuant to a plan of reorganization under chapter 11 of the Bankruptcy Code containing, among other things, the terms and conditions set forth in the Summary of Principal Terms and Conditions of Restructuring attached hereto as Exhibit A (the “Plan Term Sheet”).  Such plan, together with all plan-related documents, agreements, supplements and instruments consistent with the Plan Term Sheet and Reasonably Acceptable to the Collateral Manager, shall be referred to herein as the “Plan”.  For purposes of this Agreement, “Reasonably Acceptable” shall mean acceptable to the Debtors or the Preferred Owner, as applicable, each in its reasonable discretion, provided, that, any documentation or matter consistent with a term specifically addressed in the Plan Term Sheet and this Agreement shall be deemed Reasonably Acceptable;

K.WHEREAS, each Party has reviewed or has had the opportunity to review the Plan Term Sheet and this Agreement with the assistance of professional legal advisors of its own choosing;

L.WHEREAS, the Collateral Manager, on behalf of the Preferred Owner, desires to support and vote to accept the Plan and will direct the Property Trustee and the Guarantee Trustee to support and vote to accept the Plan, and the Debtors desire to obtain the commitment of the

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Preferred Owner to do the same, in each case subject to the terms and conditions set forth herein; and

M.WHEREAS, in expressing such support and commitment, the Parties do not desire and do not intend in any way to derogate from or diminish the solicitation requirements of applicable bankruptcy law, or the fiduciary duties of Debtors.

NOW, THEREFORE, in consideration of the promises and the mutual covenants and agreements set forth herein, and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the Parties hereby agree as follows:

AGREEMENT

1.Means for Implementation.  The Parties believe that prompt approval and confirmation by the Bankruptcy Court in the Debtors’ chapter 11 cases (the “Chapter 11 Cases”) and consummation of the Plan will best facilitate the Restructuring and is in the best interests of the Debtors’ creditors, equity holders, and other parties in interest.  Accordingly, to implement this Agreement, the Parties jointly and severally agree, on the terms and conditions set forth herein, that the Debtors shall use their commercially reasonable efforts to:

a.support and consummate, and take any and all reasonable and necessary actions in furtherance of the Restructuring, including satisfying the timeframe set forth in Paragraph 6(f)-(j);

b.obtain Bankruptcy Court approval of the sale of substantially all of the assets of the Debtors or the reorganized equity of RAIT pursuant to section 363 of the Bankruptcy Code (the “Sale”);

c.obtain Bankruptcy Court approval of the disclosure statement accompanying the Plan in a form and in substance consistent with this Agreement and Reasonably Acceptable to the Preferred Owner and the Debtors (the “Disclosure Statement”);

d.solicit the requisite acceptances of the Plan in accordance with section 1125 of the Bankruptcy Code and any applicable orders of the Bankruptcy Court;

e.move the Bankruptcy Court to confirm the Plan as expeditiously as practicable under the Bankruptcy Code, the Federal Rules of Bankruptcy Procedure and the Bankruptcy Court's local rules;

f.not withdraw the Plan, or file any exhibit, amendment, modification or supplement to the Plan that contains any material term(s) that are inconsistent with the Plan Term Sheet and are not Reasonably Acceptable to the Preferred Owner;

g.not pursue, propose or support, or encourage the pursuit, proposal or support of, any chapter 11 plan for any Debtor that is inconsistent with the Plan or this Agreement; and

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h.take all actions reasonably necessary and appropriate to consummate the Plan at the earliest practicable date;

provided, however, that the Plan and the Disclosure Statement shall be consistent with this Agreement, and the Debtors’ obligations hereunder shall in all respects be subject to the exercise by each of the Debtors of its respective fiduciary duty as a debtor and debtor in possession in the Chapter 11 Cases.

2.Representations of the Preferred Owner.  The Preferred Owner hereby represents and warrants as follows, in each case as of the date hereof:

a.Property Trustee is the legal and beneficial holder for the Preferred Owner as the legal or beneficial owner of the Note Claim and the Collateral Manager has the right, pursuant to the terms of the Kodiak Indenture and the Kodiak Collateral Management Agreement to cause the Preferred Owner to enter into this Agreement and to instruct the Property Trustee to vote, compromise, and dispose of, consistent with the provisions contained in the Plan, the aggregate amount of the Note Claim;

b.Guarantee Trustee is the legal and beneficial holder for the Preferred Owner as the legal or beneficial owner of the Guarantee Claim and the Collateral Manager has the right, pursuant to the terms of the Kodiak Indenture and the Kodiak Collateral Management Agreement to cause the Preferred Owner to enter into this Agreement and to instruct the Guarantee Trustee to vote, compromise, and dispose of, consistent with the provisions contained in the Plan, the aggregate amount of the Guaranty Claim; and

c.Preferred Owner is the owner of all of the Preferred Securities issued by the Trust.

3.Agreement to Support the Plan.  For so long as this Agreement remains in effect, and subject to the Debtors fulfilling their obligations as provided herein, the Preferred Owner agrees to use its commercially reasonable best efforts to (a) support approval of the Sale; (b) support approval of the Disclosure Statement and confirmation of the Plan; (c) not directly or indirectly pursue, propose, support, solicit or encourage the pursuit, proposal, solicitation or support of, any chapter 11 plan or other restructuring or reorganization (including, without limitation, any sale, proposal or offer of dissolution, winding up or merger) for, or the liquidation of, any of the Debtors (directly or indirectly) that is inconsistent with the Plan or this Agreement; (d) not, nor encourage any other person or entity to, object, oppose, delay, impede, appeal or take any other negative action, directly or indirectly, to interfere with, the approval of the Disclosure Statement and the acceptance, implementation, confirmation and consummation of the Plan; (e) not commence any proceeding or prosecute any objection to oppose or object to the Plan or to the Disclosure Statement; and (f) subject to the prior approval of the Disclosure Statement by the Bankruptcy Court and receipt of such approved Disclosure Statement by the Preferred Owner, Collateral Manager, Property Trustee, and Guaranty Trustee, direct Property Trustee (i) to vote the Note Claim (and not revoke or withdraw its vote) in favor of the Plan and (ii) to direct Guarantee Trustee to vote the Guaranty Claim (and not revoke or withdraw its vote) in favor of the Plan;

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provided that, in each case, (x) the Plan and Disclosure Statement meet all the requirements and conditions relating thereto as set forth in this Agreement; and (y) the Disclosure Statement that is approved by the Bankruptcy Court does not contain information that differs materially from that which was known by the Preferred Owner and Collateral Manager as of the date hereof or impose terms that adversely affect the interests of the Preferred Owner.  Notwithstanding the foregoing, nothing in this Agreement shall be construed to prohibit the Collateral Manager from appearing as a party in interest on behalf of the Preferred Owner in any matter to be adjudicated in the Chapter 11 Cases so long as such appearance and the positions advocated in connection therewith are not materially inconsistent with this Agreement and are not for the purpose of hindering or delaying (and are not reasonably likely to hinder or delay) implementation of the transactions and other matters contemplated by this Agreement.  Notwithstanding anything herein to the contrary, if thePreferred Owner is appointed to and serves on an official committee in the Chapter 11 Cases, the terms of this Agreement shall not be construed to limit the Preferred Owner’s exercise of its fiduciary duties in its role as a member of such committee, and any exercise of such fiduciary duties shall not be deemed to constitute a breach of the terms of this Agreement; provided, however, that serving as a member of such committee shall not relieve the Preferred Owner in its individual capacity of any obligations to instruct Property Trustee’s and/or Guarantee Trustee’s to vote in favor of the Plan; provided, further, that nothing in this Agreement shall be construed as requiring thePreferred Owner or the Collateral Manager to serve on any official committee in the Chapter 11 Cases.

4.Acknowledgement.  The entry by the Parties into this Restructuring and Plan Support Agreement is not and shall not be deemed to be a solicitation of votes for the acceptance of a chapter 11 plan for the purposes of sections 1125 and 1126 of the Bankruptcy Code.  The Debtors will not solicit acceptances of the Plan from Property Trustee, Guaranty Trustee, or the Preferred Owner until they have been provided with copies of a Disclosure Statement approved by the Bankruptcy Court.

5.Limitations on Transfer.  The Preferred Owner agrees, for so long as this Agreement is in effect (such period, the “Restricted Period”), not to (a) sell, transfer, assign, pledge (except bona fide pledges to its lenders or any Federal Reserve bank or branch), grant a participation interest in or otherwise dispose, directly or indirectly, of Preferred Owner’s right, title or interest (including any voting rights) in respect of the Note or the Parent Guaranty Agreement, including the Note Claim or the Guaranty Claim (to the extent held by it on the date hereof), in whole or in part, or any interest therein, or (b) grant any proxies, deposit any of Preferred Owner’s interest in the Note Claim or the Guaranty Claim (to the extent held by it on the date hereof) into a voting trust, or enter into a voting agreement with respect to any of the Note Claim or the Guaranty Claim.  

6.Termination Events.  The occurrence of any of the following events shall constitute a “Termination Event”:

a.a written agreement among the Debtors and the Preferred Owner terminating this Agreement;

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b.the entry or issuance by any court of competent jurisdiction or other competent governmental or regulatory authority of an order making illegal or otherwise restricting, preventing or prohibiting the consummation of the Restructuring;

c.the withdrawal of the Plan by the Debtors, or the public announcement by any Debtor of its intention not to support the Plan, or the support by any Debtor for the filing of any plan of reorganization or liquidation and/or disclosure statement that is not consistent with the Plan, or the public announcement by any Debtor of its support for any such inconsistent plan and/or disclosure statement, or any action or conduct by any Debtor suggesting an intention not to proceed with the Plan or to proceed with any alternative plan or form of transaction;

d.the entry of any order in the Chapter 11 Cases terminating either of the Debtors’ exclusive right to file a chapter 11 plan pursuant to section 1121 of the Bankruptcy Code;

e.the amendment, modification of, or the filing of a pleading by either of the Debtors that seeks to amend or modify the Plan, the Disclosure Statement or any documents related to the Plan, notices, exhibits or appendices, which amendment, modification or filing is materially inconsistent with the Plan or this Agreement and is not Reasonably Acceptable to the Preferred Owner;

f.the failure of the Debtors to commence the Chapter 11 Cases on or before September 15, 2019 (the “Petition Date”);

g.the failure of the Debtors to file the Plan and the Disclosure Statement within 30 days of the Petition Date;

h.the failure of the Debtors to obtain an order from the Bankruptcy Court approving the Disclosure Statement pursuant to section 1125 of the Bankruptcy Code, consistent with the Plan and this Agreement and Reasonably Acceptable to the Preferred Owner within 90 days of the Petition Date;

i.the failure of the Debtors to commence the solicitation of acceptances of the Plan within 10 business days of entry of the Order approving the Disclosure Statement pursuant to section 1125 of the Bankruptcy Code;

j.the failure of the Debtors to obtain an order from the Bankruptcy Court confirming the Plan (the “Confirmation Order”) within 240 days of the Petition Date;

k.the entry of an order denying approval of the Disclosure Statement or denying confirmation of the Plan where the revisions that would be necessary to the Disclosure Statement or the Plan in order to resolve the objections to these could not be done without breaching or contradicting this Agreement or in a manner Reasonably Acceptable to the Debtors and the Preferred Owner;

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l.the dismissal any of the Chapter 11 Cases or the conversion of any of the Chapter 11 Cases to a case under chapter 7 of the Bankruptcy Code, or the appointment of an interim or permanent trustee in either of the Chapter 11 Cases, or the appointment of a responsible officer or an examiner with powers beyond the duty to investigate and report (as set forth in sections 1106(a)(3) and (4) of the Bankruptcy Code) in either of the Chapter 11 Cases, or the filing by any of the Debtors of a motion,or any other actions by any of the Debtors, in support of any of the foregoing;

m.the entry by any court (including the Bankruptcy Court) of a final, non-appealable order holding this Agreement to be unenforceable;

n.the occurrence of any change, effect, event, development, circumstance or state of facts which as determined by the Preferred Owner, in its reasonable discretion, (i) would materially impair the Debtors’ ability to perform their or its obligations under this Agreement or the Plan, as applicable, (ii) would prevent or materially delay the consummation of the transactions contemplated by this Agreement beyond the time period set forth herein, or (iii) would make the Plan not feasible to consummate in all material respects (any such change, effect, event, development, or state of facts, a “Material Adverse Change”);  providedthat the mere act of commencing the Chapter 11 Cases contemplated by this Agreement shall not constitute a Material Adverse Change; or

o.the occurrence of any breach of any representation or obligation under this Agreement by any of the Parties (to the extent not otherwise waived in accordance with the terms hereof).

The foregoing Termination Events are intended solely for the benefit of the Debtors and the Preferred Owner; provided that neither the Debtors nor the Preferred Owner may seek to terminate this Agreement based upon a material breach or a failure of a condition (if any) in this Agreement arising out of its own actions or omissions.

7.Termination of this Agreement.  Upon the occurrence of any Termination Event specified in Paragraph 6(f)‑(k), this Agreement shall terminate, without any requirement to provide notice of such termination unless such Termination Event is waived or the Agreement is modified, amended or supplemented in accordance with paragraph 12 prior to the occurrence of such Termination Event.  With respect to the occurrence of any other Termination Event specified in Paragraph 6, written notice shall be required, unless such Termination Event is waived or the Agreement is modified, amended or supplemented in accordance with paragraph 12.  For avoidance of doubt, the automatic stay pursuant to section 362 of the Bankruptcy Code shall be deemed waived for purposes of providing notice hereunder.

8.Effect of Termination.  Upon termination of this Agreement, all obligations hereunder shall terminate and shall be of no further force and effect; provided, however, that any claim for breach of this Agreement shall survive termination and all rights and remedies with respect to such claims shall not be prejudiced in any way.  Except as set forth above in this paragraph 8, upon such termination, any obligations of the non-breaching Parties set forth in this Agreement shall be null and void ab initio and all claims, causes of action, remedies, defenses,

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setoffs, rights or other benefits of such non-breaching Parties shall be fully preserved without any estoppel, evidentiary or other effect of any kind or nature whatsoever.

9.Representations and Warranties.  Each of the Parties for itself represents and warrants to each other Party, severally but not jointly, that the following statements are true, correct and complete as of the date hereof:

a.Corporate Power and Authority.  It is duly organized, validly existing, and in good standing under the laws of the state of its organization, and has all requisite corporate, partnership or other power and authority to enter into this Agreement and to carry out the transactions contemplated by, and to perform its respective obligations under, this Agreement.

b.Authorization.  The execution and delivery of this Agreement and the performance of its obligations hereunder have been duly authorized by all necessary corporate, partnership or other action on its part.

c.Binding Obligation.  Subject to the provisions of sections 1125 and 1126 of the Bankruptcy Code, this Agreement constitutes its legal, valid and binding obligation, enforceable in accordance with the terms hereof.

d.No Conflicts.  The execution, delivery and performance by it (when such performance is due) of this Agreement do not and shall not violate any provision of law, rule or regulation applicable to it or any of its subsidiaries or its certificate of incorporation or bylaws or other organizational documents or those of any of its subsidiaries.

e.Government Consents.  The execution, delivery and performance by it (when such performance is due) of this Agreement do not and shall not violate any provision of law, rule or regulation applicable to it or any of its subsidiaries or its certificate of incorporation or bylaws or other organizational documents or those of any of its subsidiaries.

10.Adequate Information.  Although none of the Parties intends that this Agreement should constitute, and they each believe it does not constitute, a solicitation or acceptance of the Plan, they each acknowledge and agree, that adequate information was provided by the Debtors to the Preferred Owner in order to enable it to make an informed decision such that, were this Agreement to be construed as or deemed to constitute such a solicitation or acceptance, such solicitation was (i) in compliance with any applicable nonbankruptcy law, rule, or regulation governing the adequacy of disclosure in connection with such solicitation, or (ii) if there is not any such law, rule, or regulation, solicited after disclosure to such holder of “adequate information” as such term is defined in section 1125(a) of the Bankruptcy Code.

11.Public Announcements and Bankruptcy Court Filings.  The Debtors may disclose the existence of and nature of support evidenced by this Agreement in one or more public releases.  Notwithstanding anything contained herein, in connection with the filing of the Chapter 11 Cases with the Bankruptcy Court, the Debtors may attach a form of this Agreement and the Plan Term Sheet as an exhibit to any pleading filed in the Chapter 11 Cases.

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12.Amendment or Waiver.  Except as otherwise specifically provided herein, this Agreement may not be modified, waived, amended or supplemented unless such modification, waiver, amendment or supplement is in writing and has been signed by each of the Parties.  No waiver of any of the provisions of this Agreement shall be deemed or constitute a waiver of any other provision of this Agreement, whether or not similar, nor shall any waiver be deemed a continuing waiver.

13.Notices.  Any notice required or desired to be served, given or delivered under this Agreement shall be in writing, and shall be deemed to have been validly served, given or delivered if provided by personal delivery, or upon receipt of fax or email delivery, as follows:

a.if to any of the Debtors: Drinker Biddle & Reath LLP, c/o Michael P. Pompeo, 1177 Avenue of the Americas, 41st Floor, New York, New York 10036 fax: (212) 248-3141, email: michael.pompeo@dbr.com; and

b.if to the Preferred Owner: Morrison & Foerster LLP, c/o Thomas H. Good, 2000 Pennsylvania Avenue, NW, Washington, DC 20006; fax: (202) 785-7539, email: tgood@mofo.com.

14.Governing Law; Jurisdiction.  THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF DELAWARE, WITHOUT REGARD TO ANY CONFLICTS OF LAW PROVISION WHICH WOULD REQUIRE THE APPLICATION OF THE LAW OF ANY OTHER JURISDICTION.  By its execution and delivery of this Agreement, each of the Parties hereto hereby irrevocably and unconditionally agrees for itself that any legal action, suit or proceeding against it with respect to any matter under or arising out of or in connection with this Agreement or for recognition or enforcement of any judgment rendered in any such action, suit or proceeding, may be brought in the United States District Court for the District of Delaware.  By execution and delivery of this Agreement, each of the Parties hereto irrevocably accepts and submits itself to the nonexclusive jurisdiction of such court, generally and unconditionally, with respect to any such action, suit or proceeding, and waives any objection it may have to venue or the convenience of the forum.  Notwithstanding the foregoing consent to Delaware jurisdiction, each of the Parties hereto hereby agrees that, upon commencement of the Chapter 11 Cases, the Bankruptcy Court shall have exclusive jurisdiction of all matters arising out of or in connection with this Agreement.

15.Headings.  The headings of the sections, paragraphs and subsections of this Agreement are inserted for convenience only and shall not affect the interpretation hereof.

16.Interpretation.  This Agreement is the product of negotiations of the Parties, and in the enforcement or interpretation hereof is to be interpreted in a neutral manner, and any presumption with regard to interpretation for or against any Party by reason of that Party having drafted or caused to be drafted this Agreement, or any portion hereof, shall not be effective in regard to the interpretation hereof.

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17.Successors and Assigns.  This Agreement is intended to bind and inure to the benefit of the Parties and their respective successors, assigns, heirs, executors, administrators and representatives.

18.No Third-Party Beneficiaries.  Unless expressly stated herein, this Agreement shall be solely for the benefit of the Parties hereto and no other person or entity shall be a third-party beneficiary hereof.

19.No Waiver of Participation and Reservation of Rights.  Except as expressly provided in this Agreement and in any amendment among the Parties, nothing herein is intended to, or does, in any manner waive, limit, impair or restrict the ability of each of the Parties to protect and preserve its rights, remedies and interests, including without limitation, its claims against any of the other Parties (or their respective affiliates or subsidiaries) or its full participation in the Chapter 11 Cases.  If the transactions contemplated by this Agreement or in the Plan Term Sheet and the Plan are not consummated, or if this Agreement is terminated for any reason, the Parties fully reserve any and all of their rights.  Pursuant to Federal Rule of Evidence 408 and any other applicable rules of evidence, this Agreement and all negotiations relating hereto shall not be admissible into evidence in any proceeding other than a proceeding to enforce its terms.

20.No Admissions.  This Agreement shall in no event be construed as or be deemed to be evidence of an admission or concession on the part of any Party of any claim or fault or liability or damages whatsoever.  Each of the Parties denies any and all wrongdoing or liability of any kind and does not concede any infirmity in the claims or defenses which it has asserted or could assert.  No Party shall have, by reason of this Agreement, a fiduciary relationship in respect of any other Party or any party in interest in the Chapter 11 Cases, or any of the Debtors, and nothing in this Agreement, expressed or implied, is intended to or shall be so construed as to impose upon any Party any obligations in respect of this Agreement except as expressly set forth herein.

21.Specific Performance.  It is understood and agreed by the Parties that money damages would be an insufficient remedy for any breach of this Agreement by any Party and each non-breaching Party shall be entitled to specific performance and injunctive or other equitable relief as a remedy of any such breach, including, without limitation, an order of the Bankruptcy Court or other court of competent jurisdiction requiring any Party to comply promptly with any of its obligations hereunder.

22.Reservation of Rights.  If the Restructuring is not consummated as provided herein, if a Termination Event occurs, or if this Agreement is otherwise terminated for any reason, the Collateral Manager fully reserves any and all of the Preferred Owner’s rights, remedies and interests under the Trust Agreement, Parent Guarantee Agreement, applicable law and in equity.

23.No Consideration.  It is hereby acknowledged by each of the Parties that no consideration shall be due or paid to the Parties for their agreement to support or not interfere with the Plan and the Restructuring in accordance with the terms and conditions of this Agreement, other than the obligations of the other Parties under this Agreement, the Plan Term Sheet, and the Plan.  

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24.Counterparts.  This Agreement may be executed in two or more counterparts, each of which shall be deemed an original and all of which shall constitute one and the same Agreement.  Delivery of an executed signature page of this Agreement by facsimile or electronic mail transmission shall be effective as delivery of a manually executed signature page of this Agreement.

25.Representation by Counsel.  Each Party acknowledges that it has been represented by counsel in connection with this Agreement and the transactions contemplated herein.  Accordingly, any rule of law or any legal decision that would provide any Party with a defense to the enforcement of the terms of this Agreement against such Party based upon lack of legal counsel shall have no application and is expressly waived.

26.Entire Agreement.  This Agreement and the exhibits hereto, including, without limitation, the Plan Term Sheet, constitute the entire agreement between the Parties and supersedes all prior and contemporaneous agreements, representations, warranties and understandings of the Parties, whether oral, written or implied, as to the subject matter hereof.

27.Several Not Joint.  The agreements, representations and obligations of the Parties under this Agreement are, in all respects, several and not joint.  Any breach of this Agreement by any Party shall not result in liability for any other non-breaching Party.

28.Cooperation.The Debtors shall, except (a) in an emergency where it is not reasonably practicable or (b) upon consent of counsel to the Collateral Manager, provide to counsel for the Collateral Manager copies of all motions or applications and other documents Debtors intend to file with the Bankruptcy Court no later than three (3) business days prior to the date when the Debtors intend to file any such document and shall consult in good faith with counsel to the Collateral Manager regarding the form and substance of any such proposed filing with the Bankruptcy Court.

29.Further Assurances.  Subject to the terms of this Agreement, the Parties agree to execute and deliver such other instruments and perform such other acts in addition to the matters herein specified, as may be reasonably appropriate or necessary, from time to time, to effectuate the Plan.

[Signature pages follow]

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IN WITNESS WHEREOF, the undersigned have each caused this Agreement to be duly executed and delivered by their respective, duly authorized officers as of the date first above written.

RAIT FINANCIAL TRUST

By:  /s/ John J. Reyle___________

Name:  John J. Reyle

Title:    Chief Executive Officer

RAIT FUNDING LLC

By: RAIT JV TRS Sub, LLC, its sole member,

    By: RAIT JV TRS, LLC, its sole member,

       By: RAIT Asset Holdings, LLC, its managing member

           By: all of its members,

    RAIT General, Inc.

    By: /s/ John J. Reyle___________

Name: John J. Reyle

               Title:  Chief Executive Officer

                and

     RAIT Limited, Inc.

      By: /s/ John J. Reyle___________

Name: John J. Reyle

                  Title:  Chief Executive Officer

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KODIAK CDO I, LTD.

By: EJF CDO Manager LLC, its Collateral Manager

By: EJF Investments Manager LLC, its Managing Member

By: /s/ Neal J. Wilson

Name:  Neal J. Wilson

Title:    Chief Executive Officer

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List of Omitted Exhibits

The following exhibit to Restructuring and Plan Support Agreement (Amortized Cost Junior Subordinated Note), dated August 31, 2019, by and among RAIT Financial Trust, RAIT Funding, LLC f/k/a Taberna Funding LLC and Kodiak CDO I, Ltd. has not been provided herein:

Exhibit A – Plan Term Sheet

The registrant hereby undertakes to furnish supplementally a copy of such omitted exhibit to the Securities and Exchange Commission upon request.

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EX-2.1

Exhibit 2.1

IN THE UNITED STATES BANKRUPTCY COURT
FOR THE DISTRICT OF DELAWARE

In re: RAIT FUNDING, LLC,
a Delaware limited liability company, et al.¹ Debtors. Chapter 11 Case No. 19-11915 (BLS)
(Jointly Administered)  

DEBTORS’ JOINT CHAPTER 11 PLAN

Patrick A. Jackson (Del. Bar No. 4976) Joseph N. Argentina, Jr. (Del. Bar No. 5453) DRINKER BIDDLE & REATH LLP 222 Delaware Avenue, Suite 1410 Wilmington, DE 19801 Tel:  (302) 467-4200 Fax: (302) 467-4201 Patrick.Jackson@dbr.com Joseph.Argentina@dbr.com	Michael P. Pompeo (admitted pro hac vice) Brian P. Morgan (admitted pro hac vice) DRINKER BIDDLE & REATH LLP 1177 Avenue of the Americas, 41st Floor New York, NY 10036-2714 Tel:  (212) 248-3140 Fax:  (212) 248-3141 Michael.Pompeo@dbr.com Brian.Morgan@dbr.com
Proposed Counsel to the Debtors and Debtors in Possession
Dated:  October 14, 2019

11  The Debtors in these chapter 11 cases, along with the last four digits of each Debtor’s federal tax identification number, are as follows: RAIT Funding, LLC, a Delaware limited liability company (9983); RAIT Financial Trust, a Maryland real estate investment trust (9819); RAIT General, Inc., a Maryland corporation (9987); RAIT Limited, Inc., a Maryland corporation (9773); Taberna Realty Finance Trust, a Maryland real estate investment trust (3577); RAIT JV TRS, LLC, a Delaware limited liability company (3190); and RAIT JV TRS Sub, LLC, a Delaware limited liability company (4870).  The mailing address for all Debtors is Two Logan Square, 100 N. 18th Street, 23rd Floor, Philadelphia, Pennsylvania 19103 (Attn: John J. Reyle).

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Exhibit 2.1

TABLE OF CONTENTS

Page

INTRODUCTION 1

ARTICLE I DEFINED TERMS, RULES OF INTERPRETATION, COMPUTATION OF TIME, GOVERNING LAW, AND OTHER REFERENCES 1

1.1 Defined Terms1

1.2 Rules of Interpretation11

1.3 Computation of Time11

1.4 Governing Law11

1.5 Reference to Monetary Figures12

1.6 Reference to the Debtors or the Reorganized Debtors12

1.7 Controlling Document12

1.8 Nonconsolidated Plan12

ARTICLE II ADMINISTRATIVE AND PRIORITY CLAIMS 12

2.1 Administrative Claims12

2.2 Professional Claims13

2.3 Priority Tax Claims13

2.4 Statutory Fees13

ARTICLE III CLASSIFICATION, TREATMENT, AND VOTING OF CLAIMS AND INTERESTS 14

3.1 Classification of Claims and Interests14

3.2 Treatment of Classes of Claims and Interests14

3.3 Special Provision Governing Unimpaired Claims and Interests18

3.4 Elimination of Vacant Classes18

3.5 Voting Classes; Presumed Acceptance by Non-Voting Classes18

3.6 Subordinated Claims and Interests18

ARTICLE IV PROVISIONS FOR IMPLEMENTATION OF THE PLAN 19

4.1 General Settlement of Claims19

4.2 Plan Transactions19

4.3 Cancellation of Notes, Instruments, Certificates, and Other Documents19

4.4 Exemption from Certain Taxes and Fees20

4.5 Reorganized Debtors20

4.6 Retiree Benefits22

ARTICLE V TREATMENT OF EXECUTORY CONTRACTS AND UNEXPIRED LEASES 22

5.1 Assumption of Executory Contracts and Unexpired Leases22

5.2 Cure of Defaults and Objections to Cure and Assumption22

5.3 Pre-existing Payment and Other Obligations23

5.4 Rejection Damages Claims and Objections to Rejections23

5.5 Contracts, Intercompany Contracts, and Leases Entered Into After the Petition Date24

5.6 Indemnification Obligations24

5.7 Director and Officer Liability Insurance24

5.8 Modifications, Amendments, Supplements, Restatements, or Other Agreements24

5.9 Reservation of Rights24

5.10 Non-occurrence of the Effective Date25

ARTICLE VI PROVISIONS GOVERNING DISTRIBUTIONS 25

6.1 Distributions on Account of Claims and Interests Allowed as of the Effective Date25

6.2 Special Rules for Distributions to Holders of Disputed Claims and Interests25

6.3 Delivery of Distributions25

6.4 Claims Paid or Payable by Third Parties27

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Exhibit 2.1

6.5 Setoffs27

6.6 Allocation Between Principal and Accrued Interest28

ARTICLE VII PROCEDURES FOR RESOLVING DISPUTED CLAIMS AND INTERESTS 28

7.1 Disputed Claims Process28

7.2 Prosecution of Objections to Claims and Interests28

7.3 Interest28

7.4 Disallowance of Claims and Interests28

ARTICLE VIII THE PLAN ADMINISTRATOR 29

8.1 The Plan Administrator29

8.2 Wind-Down30

8.3 Exculpation, Indemnification, Insurance and Liability Limitation30

8.4 Tax Returns31

8.5 Dissolution of the Reorganized Debtors31

ARTICLE IX EFFECT OF CONFIRMATION OF THE PLAN 31

9.1 Discharge of Claims and Termination of Interests31

9.2 Term of Injunctions or Stays31

9.3 Release of Liens32

9.4 Releases by the Debtors32

9.5 Releases by Holders of Claims and Interests33

9.6 Exculpation33

9.7 Injunction34

9.8 Protection Against Discriminatory Treatment34

9.9 Reimbursement or Contribution34

9.10 Dissolution of Creditors Committee34

ARTICLE X CONDITIONS PRECEDENT TO THE EFFECTIVE DATE 35

10.1 Conditions Precedent to the Effective Date.35

10.2 Waiver of Conditions Precedent35

10.3 Effect of Non-Occurrence of Conditions to Consummation35

ARTICLE XI MODIFICATION, REVOCATION, OR WITHDRAWAL OF THE PLAN 35

11.1 Modification of Plan35

11.2 Revocation or Withdrawal of Plan36

ARTICLE XII RETENTION OF JURISDICTION 36

ARTICLE XIII MISCELLANEOUS PROVISIONS 37

13.1 Additional Documents37

13.2 Payment of Statutory Fees37

13.3 Reservation of Rights37

13.4 Successors and Assigns38

13.5 Service of Documents38

13.6 Entire Agreement38

13.7 Plan Supplement Exhibits38

13.8 Non-Severability39

ARTICLE XIV CRAMDOWN REQUEST 39

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INTRODUCTION

RAIT Funding, LLC and its Debtor affiliates in the above-captioned chapter 11 cases jointly propose this Plan for the resolution of outstanding Claims against, and Interests in, the Debtors.  Capitalized terms used in this Plan shall have the meanings set forth in ARTICLE I below.

Although proposed jointly for administrative purposes, the Plan constitutes a separate Plan for each Debtor.  Each Debtor is a proponent of the Plan within the meaning of section 1129 of the Bankruptcy Code.  The classifications of claims and interests set forth in ARTICLE III shall be deemed to apply separately with respect to each Plan proposed by each Debtor, as applicable.  The Plan does not contemplate substantive consolidation of any of the Debtors.  Reference is made to the Disclosure Statement for a discussion of the debtors’ history, business, properties and operations, projections, risk factors, a summary and analysis of this Plan and certain related matters.

ALL HOLDERS OF CLAIMS AND INTERESTS ARE ENCOURAGED TO READ THE PLAN AND THE DISCLOSURE STATEMENT IN THEIR ENTIRETY BEFORE VOTING TO ACCEPT OR REJECT THE PLAN.

ARTICLE I

DEFINED TERMS, RULES OF INTERPRETATION,
COMPUTATION OF TIME, GOVERNING LAW, AND OTHER REFERENCES

1.1Defined Terms

1.“Administrative Claim” means a Claim for costs and expenses of administration of the Chapter 11 Cases pursuant to sections 503(b), 507(a)(2), 507(b), or 1114(e)(2) of the Bankruptcy Code, including:  (a) the actual and necessary costs and expenses incurred on or after the Petition Date until and including the Effective Date of preserving the Estates and operating the businesses of the Debtors; (b) Allowed Professional Claims; (c) all fees and charges assessed against the Estates pursuant to section 1930 of chapter 123 of title 28 of the United States Code; and (d) any other obligation designated as an Allowed Administrative Claims pursuant to a Final Order of the Bankruptcy Court.

2.“Administrative Claims Bar Date” means the deadline for Filing requests for payment of Administrative Claims, except as otherwise set forth in the Plan or a Final Order, which: (a) with respect to Administrative Claims other than Professional Claims, shall be 30 days after the Effective Date; and (b) with respect to Professional Claims, shall be 45 days after the Effective Date; provided that Filing requests for payment of Administrative Claims is not required where the Plan, Bankruptcy Code, or a Final Order does not require such Filing.

3.“Affiliate” has the meaning set forth in section 101(2) of the Bankruptcy Code.

4.“Allowed” means, as to a Claim or an Interest, that (i) such Claim or Interest was expresslyallowedunderthisPlanorotherwisebyaFinalOrder,(ii)proofofsuchClaimorInterest was properly and timely filed in accordance with all applicable orders of the Bankruptcy Court and provisions of the Plan, the Bankruptcy Code, and the Bankruptcy Rules, and the applicable time for parties in interest to bring objections to allowance of such Claim or Interest has passed (or if such an objection was brought by a party in interest, such objection has been determined by aFinalOrderinfavoroftheHolderofsuchClaimorInterest),(iii)suchClaimorInteresthasbeen listed in the applicable Debtor’s Schedules or list of equity security Holders, as applicable, as liquidated in amount and not disputed or contingent, and no contrary proof of Claim or Interest hasbeenfiledonaccountofsuchClaimorInterest,or(iv)aClaimorInterestastowhichaProof of Claim or Proof of Interest, as applicable, was filed timely and as to which no objection was filed.

5.“Assumption Schedule” means the schedule of Executory Contracts and Unexpired Leases in the Plan Supplement, as may be amended from time to time, setting forth certain Executory Contracts and Unexpired Leases for assumption, or assumption and assignment, as of the Effective Date under section 365 of the Bankruptcy Code.

6.“Avoidance Actions” means any and all avoidance, recovery, subordination, or other claims, actions, or remedies that may be brought by or on behalf of the Debtors or their Estates or other authorized parties in interest under the Bankruptcy Code or applicable non-bankruptcy law, including actions or remedies under sections 502, 510, 542, 544, 545, and 547 through and including 553 of the Bankruptcy Code.

7.“Bankruptcy Code” means Title 11 of the United States Code, 11 U.S.C. §§ 101–1532, as may be amended from time to time.

8.“Bankruptcy Court” means the United States Bankruptcy Court for the District of Delaware or such other court having jurisdiction over the Chapter 11 Cases.

9.“Bankruptcy Rules” means, collectively, the following, as applicable to the Chapter 11 Cases: (i) the Federal Rules of Bankruptcy Procedure as promulgated by the United States Supreme Court under section 2075 of title 28 of the United States Code, 28 U.S.C. § 2075, as applicable to the Chapter 11 Cases, (ii) the Local Rules of Bankruptcy Practice and Procedure of the United States Bankruptcy Court for the District of Delaware, and (iii) any applicable general orders or chambers procedures of the Bankruptcy Court, all as may be amended from time to time.

10.“Bar Date” means the dates established by the Bankruptcy Court by which Proofs of Claim must be filed.

11.“Bidding Procedures Order” means the Order (I) Establishing the Bidding Procedures, Including Approval of a Break-Up Fee and Expense Reimbursement, and (II) Granting Related Relief dated October 2, 2019 [D.I. 126].

12.“Business Day” means any day, other than a Saturday, Sunday, or a legal holiday, as defined in Bankruptcy Rule 9006(a).

13.“Cash” means the legal tender of the United States of America or the equivalent thereof, including bank deposits and checks.

14.“Causes of Action” means any and all claims, actions, causes of action, choses in action, suits, debts, damages, dues, sums of money, accounts, reckonings, bonds, bills, specialties, covenants, contracts, controversies, agreements, promises, variances, trespasses, judgments, remedies, rights of set-off, third-party claims, subrogation claims, contribution claims, reimbursement claims, indemnity claims, counterclaims, and crossclaims (including all claims and any avoidance, recovery, subordination, or other actions against Insiders and/or any other Entities under the Bankruptcy Code, including Avoidance Actions) of any of the Debtors, the debtors in possession, and/or the Estates (including those actions set forth in the Plan Supplement), whether known or unknown, liquidated or unliquidated, fixed or contingent, matured or unmatured, disputed or undisputed, that are or may be pending on the Effective Date or commenced by the Reorganized Debtors after the Effective Date against any Entity, based in law or equity, including under the Bankruptcy Code, whether direct, indirect, derivative, or otherwise and whether asserted or unasserted as of the date of entry of the Confirmation Order.

15.“Certificate” means any instrument evidencing a Claim or an Interest.

16.“Chapter 11 Cases” means the procedurally consolidated chapter 11 cases pending for the Debtors in the Bankruptcy Court.

17.“Claim” means a claim, as defined in section 101(5) of the Bankruptcy Code, against a Debtor.

18.“Claims and Solicitation Agent” means Epiq Bankruptcy Solutions, LLC, the claims and solicitation agent retained by the Debtors in the Chapter 11 Cases pursuant to order of the Bankruptcy Court.

19.“Claims Objection Bar Date” means the deadline for objecting to a Claim, which shall be on the date that is 180 days after the Effective Date, subject to extension by order of the Bankruptcy Court upon the request by the Reorganized Debtors.

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20.“Claims Register” means the official register of Claims against or Interests in the Debtors maintained by the Claims and Solicitation Agent.

21.“Class” means a category of Holders of Claims or Interests under section 1122(a) of the Bankruptcy Code.

22.“Common Interests” means the common stock of RAIT Parent (OTCPK: RASFQ).

23.“Confirmation” means the entry of the Confirmation Order on the docket of the Chapter 11 Cases.

24.“Confirmation Date” means the date on which the Bankruptcy Court enters the Confirmation Order on the docket of the Chapter 11 Cases within the meaning of Bankruptcy Rules 5003 and 9021.

25.“Confirmation Hearing” means the hearing(s) before the Bankruptcy Court under section 1128 of the Bankruptcy Code at which the Debtors seek entry of the Confirmation Order.

26.“Confirmation Order” means the order of the Bankruptcy Court confirming the Plan under section 1129 of the Bankruptcy Code.

27.“Consummation” means the occurrence of the Effective Date.

28.“Creditor” has the meaning set forth in section 101(10) of the Bankruptcy Code.

29.“Creditors Committee” means the Official Committee of Unsecured Creditors appointed by the US Trustee in the Chapter 11 Cases.

30.“Cure Claim” means a Claim (unless waived or modified by the applicable counterparty) based upon a Debtor’s defaults under an Executory Contract or Unexpired Lease assumed by such Debtor under section 365 of the Bankruptcy Code, other than a default which is not required to be cured pursuant to section 365(b)(2) of the Bankruptcy Code.

31.“Cure Notice” means a notice of a proposed amount to be paid on account of a Cure Claim in connection with an Executory Contract or Unexpired Lease to be assumed under the Plan pursuant to section 365 of the Bankruptcy Code, which notice shall include:  (a) procedures for objecting to proposed assumptions of Executory Contracts and Unexpired Leases; (b) Cure Claims to be paid in connection therewith; and (c) procedures for resolution by the Bankruptcy Court of any related disputes.

32.“Cure/Assumption Objection Deadline” means the date that is 14 days after filing of the Assumption Schedule with the Plan Supplement and service of the Cure Notice; provided that if any Executory Contract or Unexpired Lease is added to the Assumption Schedule after the filing of the initial Assumption Schedule, or an Executory Contract or Unexpired Lease proposed to be assumed by the Debtors or Reorganized Debtors is proposed to be assigned to a third party after the filing of the initial Assumption Schedule, then the Cure/Assumption Objection Deadline with respect to such Executory Contract or Unexpired Lease shall be the earlier of (a) 14 days after service of the amended Assumption Schedule with such modification and (b) the date of the scheduled Confirmation Hearing.

33.“D&O Liability Insurance Policies” means all insurance policies (including any “tail policy”) of any of the Debtors for liability of any current or former directors, managers, officers, and members.

34.“Debtors” means, collectively, each of the following (the debtors and debtors in possession in the Chapter 11 Cases): RAIT Funding, LLC; RAIT Financial Trust; RAIT General, Inc.; RAIT Limited, Inc.; Taberna Realty Finance Trust; RAIT JV TRS, LLC; and RAIT JV TRS Sub, LLC.

35.“Disclosure Statement” means the Bankruptcy Court-approved disclosure statement for the Plan as may be amended, supplemented, or modified from time to time, including all exhibits and schedules thereto.

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36.“Disputed” means, as to a Claim or an Interest, that the Claim or an Interest is not yet Allowed.

37.“Disputed Claim Reserve” means a reserve established by the Debtors prior to the Effective Date for the payment of Disputed Claims if and to the extent that they should become Allowed Claims.  If the Debtors intend to reserve less than the full amount of filed Disputed Claims, prior to the Effective Date, the Debtors shall file a motion for an order establishing the Disputed Claim Reserve.

38.“Distribution Agent” means the Debtors, the Plan Administrator (or the Senior Notes Trustee with respect to the Senior Notes), or the Entity or Entities selected by the Debtors or the Plan Administrator, to make or facilitate distributions contemplated under the Plan.

39.“Distribution Date” means, except as otherwise set forth herein, the date or dates determined by the Debtors or Reorganized Debtors, in their sole discretion, on or after the Effective Date, upon which the Distribution Agent shall make distributions to Holders of Allowed Claims and Interests entitled to receive distributions under the Plan; provided that Distribution Dates shall occur no less frequently than every 30 days after the Effective Date, as necessary.

40.“Distribution Proceeds” means all Cash of the Debtors available on the Effective Date, including any proceeds of the Sale Transaction, and any funds received after the Effective Date, after (i) the payment of all Allowed Secured Claims, Allowed Administrative Claims, Allowed Priority Claims, Allowed Senior Note Claims, Allowed General Unsecured Claims, (ii) the creation and funding of the Disputed Claims Reserve and the Wind-Down Reserve.

41.“Distribution Record Date” means the date for determining which Holders of Allowed Claims or Allowed Interests are eligible to receive distributions hereunder, which shall be (a) the Confirmation Date or (b) such other date as designated in a Final Order of the Bankruptcy Court.

42.“Effective Date” means the date that is the first Business Day after the Confirmation Date on which all conditions precedent to the occurrence of the Effective Date set forth in Section 10.1 have been satisfied or waived in accordance with Section 10.2.

43.“Employee Retention and Severance Plans” means the employee retention bonus and severance plans in effect as of the Petition Date for RAIT Parent’s employees.

44.“Entity” has the meaning set forth in section 101(15) of the Bankruptcy Code.

45.“Estate” means the bankruptcy estate of any Debtor created under sections 301 and 541 of the Bankruptcy Code upon the commencement of the Chapter 11 Cases.

46.“Exculpated Party” means each of the following in its capacity as such:  (a) the Debtors; (b) the Creditors Committee and all members thereof, (c) the Reorganized Debtors, (d) the Plan Administrator, (e) the Trustees, (f) the RSA Counterparties, and (g) with respect to each of the foregoing Entities in clauses (a) through (f), such Entity’s successors and assigns and current and former affiliates, subsidiaries, officers, directors, trustees, principals, employees, agents, financial advisors, attorneys, accountants, investment bankers, consultants, representatives, and other Professionals.

47.“Executory Contract” means a contract or lease to which one or more of the Debtors is a party that is subject to assumption or rejection under section 365 of the Bankruptcy Code.

48.“File,” “Filed,” or “Filing” means file, filed, or filing in the Chapter 11 Cases with the Bankruptcy Court or, with respect to the filing of a Proof of Claim or proof of Interest, the Claims and Solicitation Agent.

49.“Final Decree” means the decree contemplated under Bankruptcy Rule 3022.

50.“Final Order” means, as applicable, an order or judgment of the Bankruptcy Court or other court of competent jurisdiction with respect to the relevant subject matter, which has not been reversed, stayed, modified, or

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amended, and as to which the time to appeal or seek certiorari has expired and no appeal or petition for certiorari has been timely taken, or as to which any appeal that has been taken or any petition for certiorari that has been or may be filed has been resolved by the highest court to which the order or judgment could be appealed or from which certiorari could be sought or the new trial, reargument, or rehearing shall have been denied, resulted in no modification of such order, or has otherwise been dismissed with prejudice; provided that the possibility of a motion under Rule 60 of the Federal Rules of Civil Procedure, or any analogous rule under the Bankruptcy Rules or applicable non-bankruptcy law, may be filed relating to such order or judgment shall not prevent such order or judgment from being a Final Order.

51.“First-Half Sale Transaction Escrow” means an amount initially equal to $2,000,000 to be held in escrow and released to the Sellers or the Purchaser, as applicable, pursuant to the terms of the Purchase Agreement within six months after the closing of the Sale Transaction.

52.“General Unsecured Claim” means any Claim other than an Administrative Claim, a Professional Claim, a Secured Tax Claim, an Other Secured Claim, a Priority Tax Claim, an Other Priority Claim, a Senior Note Claim, a RAIT Parent Subordinated Guaranty Claim, a Subordinated Taberna Note Claim, a Subordinated RF Junior Note Claim, a Section 510(b) Claim, or an Intercompany Claim.

53.“Governmental Unit” has the meaning set forth in section 101(27) of the Bankruptcy Code.

54.“Holder” means an Entity holding a Claim or an Interest, as the context requires.

55.“Impaired” means, with respect to any Class of Claims or Interests, a Claim or an Interest that is not Unimpaired.

56.“Indentures” means (i) the Senior Notes Indentures, (ii) the Taberna Junior Subordinated Indenture, and (iii) the RF Note Indenture.

57.“Insider” has the meaning set forth in section 101(31) of the Bankruptcy Code.

58.“Intercompany Claim” means any Claim held by a Debtor or a Debtor’s Affiliate against a Debtor or a Debtor’s Affiliate.

59.“Intercompany Contract” means a contract between or among two or more Debtors or a contract between or among one or more Affiliates and one or more Debtors.

60.“IntercompanyInterest” means an Interest in one Debtor held by another Debtor or a Debtor’s Affiliate.

61.“Interest” means any equity security (as defined in section 101(16) of the Bankruptcy Code) in any Debtor.

62.“Interim Compensation Order” means the order of the Bankruptcy Court establishing procedures for interim compensation and reimbursement of expenses of professionals.

63.“Judicial Code” means title 28 of the United States Code, 28 U.S.C. §§ 1–4001, as may be amended from time to time.

64.“Lien” has the meaning set forth in section 101(37) of the Bankruptcy Code.

65.“Other Priority Claim” means any Claim other than an Administrative Claim or a Priority Tax Claim entitled to priority in right of payment under section 507(a) of the Bankruptcy Code.

66.“Other Secured Claim” means any Secured Claim other than a Secured Tax Claim or a Secured Subordinated Note Claim.

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67.“Parent Guarantee Agreement” means that certain Parent Guarantee Agreement dated as of February 12, 2007, by and between RAIT Parent, as Parent Guarantor, and the Subordinated RF Junior Note Indenture Trustee, as Guarantee Trustee.

68.“Person” has the meaning set forth in section 101(41) of the Bankruptcy Code.

69.“Petition Date” means the date on which each of the Debtors filed their petitions for relief commencing the Chapter 11 Cases.

70.“Plan” means this chapter 11 plan, as it may be altered, amended, modified, or supplemented from time to time, including the Plan Supplement and all exhibits, supplements, appendices, and schedules.

71.“Plan Administrator” means the Person designated by the Debtors prior to the Confirmation Date to carry out the Reorganized Debtors’ responsibilities under this Plan as set forth in ARTICLE VIII hereof.

72.“Plan Documents” means the RSAs, the Plan, the Disclosure Statement, the Plan Supplement, and the various agreements and other documents formalizing or implementing the Plan and the transactions contemplated thereunder.

73.“Plan Supplement” means the compilation of documents and forms of documents, schedules, and exhibits to the Plan, to be Filed by the Debtors no later than five (5) Business Days before the Plan objection deadline or such later date as may be approved by the Bankruptcy Court on notice to parties in interest, and additional documents Filed with the Bankruptcy Court before the Effective Date as amendments to the Plan Supplement. The Plan Supplement shall include the following: (a) Assumption Schedule; (b) Rejection Schedule; (c) a list of retained Causes of Action; and (d) any and all other documentation necessary to effectuate the Plan or that is contemplated by the Plan. The Debtors shall have the right to amend the documents contained in, and exhibits to, the Plan Supplement through the Effective Date in accordance with ARTICLE X hereof (including, for avoidance of doubt, to reflect the terms and conditions of the Sale Transactions).

74.“Preferred Interests” means the following series of preferred stock in RAIT Parent and Taberna, as applicable, but excluding any Intercompany Interests:  (a) 7.75% Series A cumulative redeemable preferred shares of RAIT Parent (OTCPK: RASGQ); (b) 8.375% Series B cumulative redeemable preferred shares of RAIT Parent (OTCPK: RASJQ); (c) 8.875% Series C cumulative redeemable preferred shares of RAIT Parent (OTCPK: RASLQ); and (d) 12.5% Series A cumulative non-voting preferred shares of Taberna.

75.“Priority Claims” means, collectively, Priority Tax Claims and Other Priority Claims.

76.“Priority Tax Claim” means any Claim of a Governmental Unit of the kind specified in section 507(a)(8) of the Bankruptcy Code.

77.“Pro Rata” means the proportion that an Allowed Claim or an Allowed Interest in a particular Class bears to the aggregate amount of Allowed Claims or Allowed Interests in that Class, or the proportion that Allowed Claims or Allowed Interests in a particular Class bear to the aggregate amount of Allowed Claims or Allowed Interests in a particular Class and other Classes entitled to share in the same recovery as such Allowed Claim or Interest under the Plan.

78.“Pro Rata Share” means the ratio (expressed as a percentage) of the amount of an Allowed Interest or Claim in a Class to the aggregate amount of all Allowed Interests or Claims in the same Class.

79.“Professional” means an Entity:  (a) employed in the Chapter 11 Cases pursuant to a Final Order in accordance with sections 327 and 1103 of the Bankruptcy Code and to be compensated for services rendered prior to or on the Effective Date pursuant to sections 327, 328, 329, 330, and 331 of the Bankruptcy Code or (b) for which compensation and reimbursement has been Allowed by the Bankruptcy Court pursuant to section 503(b)(4) of the Bankruptcy Code.

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80.“Professional Claim” means a Claim by a Professional seeking an award by the Bankruptcy Court of compensation for services rendered or reimbursement of expenses incurred through and including the Effective Date under sections 330, 331, 503(b)(2), 503(b)(3), 503(b)(4), or 503(b)(5) of the Bankruptcy Code.

81.“Professional Fee Escrow Account” means an interest-bearing account in an amount equal to the total Professional Fee Reserve Amount funded by the Reorganized Debtors on the Effective Date.

82.“Professional Fee Reserve Amount” means the aggregate amount of Professional Claims that the Professionals estimate they have incurred or will incur in rendering service to the Estates prior to and as of the Effective Date, which estimates Professionals shall deliver to the Debtors as set forth in Section 2.2 hereof.

83.“Proof of Claim” means a proof of Claim filed against any of the Debtors in the Chapter 11 Cases.

84.“Proof of Interest” means a proof of Interest filed with respect to any of the Debtors in the Chapter 11 Cases.

85.“Purchase Agreement” means either (i) if the Stalking Horse Purchaser is the Winning Bidder (as defined in the Bidding Procedures Order), then the Stalking Horse Purchase Agreement, or (ii) if another party is determined to be the Winning Bidder (as defined in the Bidding Procedures Order), then the definitive asset purchase agreement by and between the applicable Debtors and such Winning Bidder, as amended, modified, or supplemented from time to time.

86.“Purchaser” means either (i) CF RFP Holdings LLC, together with its successors and permitted assigns, or (ii) such other party determined to be the Winning Bidder (as such term is used in the Bidding Procedures Order), together with its successors and permitted assigns.

87. “RAIT Funding” means RAIT Funding, LLC.

88.“RAIT Funding RSA Counterparty” means Kodiak CDO I, Ltd., as Holder of certain undivided preferred beneficial interests issued and sold by Taberna Funding Capital Trust I.

89. “RAIT General” means RAIT General, Inc.

90.“RAIT JV TRS” means RAIT JV TRS, LLC.

91.“RAIT JV TRS Sub” means RAIT JV TRS Sub, LLC.

92.“RAIT Limited” means RAIT Limited, Inc.

93.“RAIT Parent” means RAIT Financial Trust.

94.“RAIT Parent Subordinated Guaranty Claim” means the Claim arising under that certain Parent Guarantee Agreement dated as of February 12, 2007, by and between RAIT Parent, as Parent Guarantor, and The Bank of New York Trust Company, National Association, as Guarantee Trustee.

95.“Reinstated” or “Reinstatement” means, with respect to Claims or Interests, that the Claim or Interest shall be rendered Unimpaired in accordance with section 1124 of the Bankruptcy Code.

96.“Rejection Schedule” means the schedule of Executory Contracts and Unexpired Leases in the Plan Supplement, as may be amended from time to time, setting forth certain Executory Contracts and Unexpired Leases for rejection as of the Effective Date under section 365 of the Bankruptcy Code.

97.“Released Party” means each of the following in its capacity as such:  (a) the Debtors; (b) the RSA Counterparties; (c) the Taberna Noteholder; (d) the Reorganized Debtors, (e) the Plan Administrator, (f) the Creditors Committee and all members thereof, (g) the Trustees and (h) with respect to each of the foregoing Entities in clauses

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(a) through (g), such Entity’s successors and assigns and current and former affiliates, subsidiaries, officers, directors, trustees, principals, employees, agents, financial advisors, attorneys, accountants, investment bankers, consultants, representatives, and other Professionals.

98.“Releasing Parties” means each of the following in its capacity as such:  (a) the Debtors and their Affiliates; (b) the Reorganized Debtors and their Affiliates; (c) the Plan Administrator; (d) each Holder of a Claim entitled to vote to accept or reject the Plan that votes to accept or reject the Plan but does not affirmatively elect to “opt out” of being a Releasing Party by checking the applicable box on the ballot; (e) each Holder of a Claim entitled to vote to accept or reject the Plan that does not vote and does not affirmatively elect to “opt out” of being a Releasing Party by timely objecting to the Plan’s third-party release provisions; and (f) each Holder of a Claim that is Unimpaired and presumed to accept the Plan that does not affirmatively elect to “opt out” of being a Releasing Party by timely objecting to the Plan’s third-party release provisions.

99.“Reorganized Debtors” or “Reorganized Debtor” means the Debtors or Debtor, as applicable, or any successor thereto, by merger, consolidation, or otherwise, on or after the Effective Date.

100.“Retained Causes of Action List” means a list of all retained Causes of Action of the Debtors, identified in the Plan Supplement.

101.“RF Note Indenture” means, collectively, (i) that certain Junior Subordinated Indenture dated as of February 12, 2007 by and between RAIT Funding and The Bank of New York Mellon Trust Company National Association, as trustee, and (ii) that certain Amended and Restated Trust Agreement by and between RAIT Funding (f/k/a Taberna Funding LLC), as Depositor, the Subordinated RF Junior Note Indenture Trustee, as Property Trustee, The Bank of New York Mellon (Delaware), as Delaware Trustee, and the Administrative Trustees Named Therein, dated as of February 12, 2007, pursuant to which the TFC Trust was established.

102.“RSA Counterparties” means, collectively, the RAIT Funding RSA Counterparty and the Taberna RSA Counterparty.

103.“RSAs” means, collectively, (i) the Restructuring and Plan Support Agreement dated as of August 31, 2019, by and among RAIT Parent, RAIT Funding, and the RAIT Funding RSA Counterparty, and (ii) the Restructuring and Plan Support Agreement dated as of August 29, 2019, by and among RAIT Parent, Taberna, and the Taberna RSA Counterparty, each as filed on the docket on September 9, 2019 [D.I. 52] and as altered, amended, modified, or supplemented from time to time.

104.“Sale Transaction” means the sale of the Debtors’ assets to the Purchaser in accordance with the Purchase Agreement.

105.“Sale Transaction Escrow” means funds that may be held in escrow under the Purchase Agreement.

106.“Schedules” means collectively, the schedules of assets and liabilities, schedules of Executory Contracts and Unexpired Leases, and statements of financial affairs Filed by the Debtors pursuant to section 521 of the Bankruptcy Code and in substantial accordance with the Official Bankruptcy Forms, as the same may have been amended, modified, or supplemented from time to time.

107.“Second-Half Sale Transaction Escrow” means an amount initially equal to $2,000,000 to be held in escrow and released to the Sellers or the Purchaser, as applicable, pursuant to the terms of the Purchase Agreement within 24 months after the closing of the Sale Transaction.

108.“Section 510(b) Claim” means any Claim subject to subordination under section 510(b) of the Bankruptcy Code.

109.“Secured Claim” means a Claim:  (a) secured by a Lien on collateral to the extent of the value of such collateral, as determined in accordance with section 506(a) of the Bankruptcy Code or (b) subject to a valid right of setoff pursuant to section 553 of the Bankruptcy Code.

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110.“SecuredSubordinated Note Claims” means Claims arising under the certain $18,670,743 junior subordinated note issued by Taberna on October 25, 2010, with a maturity date of March 30, 2035, to the extent such Claims are Secured Claims.

111.“Secured Tax Claim” means any Secured Claim that, absent its secured status, would be entitled to priority in right of payment under section 507(a)(8) of the Bankruptcy Code (determined irrespective of time limitations), including any related Secured Claim for penalties.

112.“Sellers” means, collectively, the Debtors and any Affiliate of the Debtors that is a Seller under the Purchase Agreement.

113.“Senior Note” means, collectively, (i) the certain 7.625% senior notes issued by RAIT Parent on April 14, 2014, with a maturity date of April 15, 2024, and (ii) the certain 7.125% senior notes issued by RAIT Parent on August 14, 2014, with a maturity date of August 30, 2019, pursuant to the Senior Note Indentures.

114.“Senior Note Claims” means Claims arising under the Senior Note.

115.“Senior Note Indentures” means that certain indenture, dated as of December 10, 2013, by and between RAIT Parent and the Senior Note Trustee, as amended, restated, and supplemented from time to time, including by: (i) that certain Second Supplemental Indenture, dated as of April 14, 2014, by and between RAIT Parent and the Senior Note Trustee; and (ii) that Third Supplemental Indenture, dated as of August 14, 2014, by and between RAIT Parent and the Senior Note Trustee.

116.“Senior Note Trustee” means Wells Fargo Bank, National Association, in its capacity as indenture trustee for the Senior Note, together with its successors, assigns, or any replacement indenture trustee appointed pursuant to the terms of the Senior Note Indentures.

117.“Senior Note Trustee Claims” means Claims for reasonable fees and charges incurred by Senior Notes Trustees pursuant to the Senior Note Indentures, provided that (i) the Senior Note Trustee shall reasonably estimate its fees and charges, and shall deliver such estimate to the Debtors no later than five days before the Effective Date (which estimate shall not be deemed to limit the amount of the fees and charges that are the subject of the Senior Note Trustee’s request for payment of its fees and charges) and (ii) if the Senior Note Trustee does not provide an estimate, the Debtors or the Plan Administrator may estimate the fees and charges of the Senior Note Trustee.

118.“Servicer” means an indenture trustee, agent, or other authorized representative of Holders of Claims or Interests, including Trustees.

119.“Stalking Horse Purchase Agreement” means that certain Equity and Asset Purchase Agreement dated as of August 30, 2019, by and between RAIT Parent, RAIT General, RAIT Limited, Taberna, as Sellers, and the Stalking Horse Purchaser, as Buyer, as amended, modified, or supplemented from time to time.

120. “Stalking Horse Purchaser” means CF RFP Holdings LLC, together with its successors and permitted assigns.

121. “Subordinated RF Junior Note Indenture Trustee” means The Bank of New York Mellon Trust Company, National Association, in its capacity as trustee for the Subordinated RF Junior Note pursuant to the RF Note Indenture.

122.“Subordinated RF Junior Note” means the certain $25.1 million junior note issued by RAIT Funding, with a maturity date of April 30, 2037.

123.“Subordinated RF Junior Note Claim” means Claims arising under the Subordinated RF Junior Note pursuant to the RF Note Indenture, which shall include Claims for reasonable fees and charges incurred by the Subordinated RF Junior Note Indenture Trustee pursuant to the RF Note Indenture, provided that (i) the Subordinated RF Junior Note Indenture Trustee shall reasonably estimate its fees and charges, and shall deliver such estimate to the

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Debtors no later than five days before the Effective Date (which estimate shall not be deemed to limit the amount of the fees and charges that are the subject of the Subordinated RF Junior Note Indenture Trustee’s request for payment of itsfees and charges) and (ii) if theSubordinated RF Junior Note Indenture Trustee does not provide an estimate, the Debtors or the Plan Administrator may estimate the fees and charges of theSubordinated RF Junior Note Indenture Trustee.

124.“Subordinated Taberna Note Claims” means Claims arising under that certain $18,670,743 junior subordinated note issued by Taberna on October 25, 2010, with a maturity date of March 30, 2035.

125.“Taberna” means Taberna Realty Finance Trust.

126.“Taberna Indenture Trustee” means UMB Bank, National Association, in its capacity as successor indenture trustee for the Taberna Junior Subordinated Note, together with its successors, assigns, or any replacement indenture trustee appointed pursuant to the terms of the Taberna Junior Subordinated Indenture.

127.“Taberna Junior Subordinated Indenture” means that certain indenture, dated as of October 25, 2010, by and between Taberna and the Taberna Indenture Trustee.

128.“Taberna Junior Subordinated Note” means the certain $18,670,743 junior subordinated note issued by Taberna on October 25, 2010, with a maturity date of March 30, 2035, pursuant to the Taberna Junior Subordinated Indenture.

129.“Taberna Noteholder” means Taberna Preferred Funding I, Ltd.

130.“Taberna RSA Counterparty” means TP Management LLC, in its capacity as delegate collateral manager under that certain Delegation Agreement dated as of December 14, 2014, by and between the Taberna Noteholder, Taberna Capital Management, and JPMorgan Chase Bank, National Association, as amended or supplemented from time to time.

131.“TFC Trust” means the Taberna Funding Capital Trust I established pursuant to the RF Note Indenture.

132.“Trustees” means (i) Senior Note Trustee; (ii) the Subordinated RF Junior Note Indenture Trustee, as Property Trustee under the RF Note Indenture, and as Guarantee Trustee under the Parent Guarantee Agreement; (iii) the Taberna Indenture Trustee; and (iv) The Bank of New York Mellon (Delaware), in its capacity as Delaware Trustee under the RF Note Indenture.

133.“Unclaimed Distribution” means any distribution under the Plan on account of an Allowed Claim or Interest to a Holder that has not:  (a) accepted a particular distribution or, in the case of distributions made by check, negotiated such check; (b) given notice to the Reorganized Debtors of an intent to accept a particular distribution; (c) responded to the Debtors’ or Reorganized Debtors’ requests for information necessary to facilitate a particular distribution; or (d) taken any other action necessary to facilitate such distribution.

134.“Unexpired Lease” means a lease of nonresidential real property to which one or more of the Debtors is a party that is subject to assumption or rejection under section 365 of the Bankruptcy Code.

135.“Unimpaired” means a Class of Claims or Interests that is unimpaired within the meaning of section 1124 of the Bankruptcy Code.

136.“U.S. Trustee” means the Office of the United States Trustee for the District of Delaware.

137.“Voting Deadline” means {*}, 2019 at 5:00 p.m. (prevailing Eastern Time).

138.“Wind-Down” means the wind-down and dissolution of the Debtors and their Estates following the Effective Date as set forth in Section 8.2 hereof.

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139.“Wind-Down Reserve” means a segregated account established by the Plan Administrator on the Effective Date and funded with Cash in an amount determined by the Plan Administrator, in the exercise of its reasonable discretion, to satisfy the expenses of the Reorganized Debtors and the Plan Administrator (including, for the avoidance of doubt, in consultation with the RSA Counterparties, the compensation of the Plan Administrator) as set forth in the Plan.

1.2Rules of Interpretation

For purposes of the Plan:  (1) in the appropriate context, each term, whether stated in the singular or the plural, shall include both the singular and the plural, and pronouns stated in the masculine, feminine, or neuter gender shall include the masculine, feminine, and the neuter gender; (2) unless otherwise specified, any reference herein to a contract, lease, instrument, release, indenture, or other agreement or document being in a particular form or on particular terms and conditions means that the referenced document shall be substantially in that form or substantially on those terms and conditions; (3) unless otherwise specified, any reference herein to an existing document, schedule, or exhibit, whether or not Filed, having been Filed or to be Filed shall mean that document, schedule, or exhibit as it may thereafter be amended, modified, or supplemented; (4) any reference to an Entity as a Holder of a Claim or Interest includes that Entity’s successors and assigns; (5) unless otherwise specified, all references herein to “Articles” are references to Articles hereof or hereto; (6) unless otherwise specified, all references herein to exhibits are references to exhibits in the Plan Supplement; (7) unless otherwise specified, the words “herein,” “hereof,” and “hereto” refer to the Plan in its entirety rather than to a particular portion of the Plan; (8) captions and headings to Articles are inserted for convenience of reference only and are not intended to be a part of or to affect the interpretation of the Plan; (9) unless otherwise specified herein, the rules of construction set forth in section 102 of the Bankruptcy Code shall apply; (10) any term used in capitalized form herein that is not otherwise defined but that is used in the Bankruptcy Code or the Bankruptcy Rules shall have the meaning assigned to that term in the Bankruptcy Code or the Bankruptcy Rules, as the case may be; (11) all references to docket numbers of documents Filed in the Chapter 11 Cases are references to the docket numbers under the Bankruptcy Court’s CM/ECF system; (12) all references to statutes, regulations, orders, rules of courts, and the like shall mean as amended from time to time, and as applicable to the Chapter 11 Cases, unless otherwise stated; (13) any immaterial effectuating provisions may be interpreted by the Debtors or the Reorganized Debtors in such a manner that is consistent with the overall purpose and intent of the Plan, all without further notice to, or action, order, or approval of, the Bankruptcy Court or any other Entity; and (14) except as otherwise specifically provided in the Plan to the contrary, references in the Plan to the Debtors or to the Reorganized Debtors shall mean the Debtors and the Reorganized Debtors, as applicable, to the extent the context requires.

1.3Computation of Time

Bankruptcy Rule 9006(a) applies in computing any period of time prescribed or allowed herein.

1.4Governing Law

Unless a rule of law or procedure is supplied by federal law (including the Bankruptcy Code and Bankruptcy Rules) or unless otherwise specifically stated, the laws of the State of New York, without giving effect to the principles of conflict of laws, shall govern the rights, obligations, construction, and implementation of the Plan, any agreements, documents, instruments, or contracts executed or entered into in connection with the Plan (except as otherwise set forth in those agreements, in which case the governing law of such agreement shall control); provided that corporate governance matters relating to the Debtors or the Reorganized Debtors, as applicable, shall be governed by the laws of the state of incorporation or formation of the relevant Debtor or Reorganized Debtor, as applicable.

1.5Reference to Monetary Figures

All references in the Plan to monetary figures refer to currency of the United States of America, unless otherwise expressly provided.

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1.6Reference to the Debtors or the Reorganized Debtors

Except as otherwise specifically provided in the Plan to the contrary, references in the Plan to the Debtors or to the Reorganized Debtors mean the Debtors and the Reorganized Debtors, as applicable, to the extent the context requires.

1.7Controlling Document

In the event of an inconsistency between the Plan and the Disclosure Statement, the terms of the Plan shall control in all respects. In the event of an inconsistency between the Plan and any document included in the Plan Supplement, the terms of the relevant provision in the Plan shall control (unless stated otherwise in such document or in the Confirmation Order). In the event of an inconsistency between the Confirmation Order and the Plan, the Confirmation Order shall control.

1.8Nonconsolidated Plan

Although for purposes of administrative convenience and efficiency the Plan has been filed as a joint plan for each of the Debtors and presents together Classes of Claims against, and Interests in, the Debtors, the Plan does not provide for the substantive consolidation of any of the Debtors.

ARTICLE II
ADMINISTRATIVE AND PRIORITY CLAIMS

In accordance with section 1123(a)(1) of the Bankruptcy Code, Administrative Claims, Professional Claims, and Priority Tax Claims have not been classified and thus are excluded from the Classes of Claims set forth in ARTICLE III.

2.1Administrative Claims

Unless otherwise agreed to by the Holder of an Allowed Administrative Claim and the Debtors or the Plan Administrator, as applicable, each Holder of an Allowed Administrative Claim (other than Holders of Professional Claims and Claims for fees and expenses pursuant to section 1930 of chapter 123 of title 28 of the United States Code) will receive in full and final satisfaction of its Administrative Claim an amount of Cash equal to the amount of such Allowed Administrative Claim either:  (a) on the Effective Date, or as soon as practicable thereafter; (b) if the Administrative Claim is not Allowed as of the Effective Date, no later than 30 days after the date on which an order Allowing such Administrative Claim becomes a Final Order, or as soon as reasonably practicable thereafter; or (c) if the Allowed Administrative Claim is based on liabilities incurred by the Debtors in the ordinary course of their business after the Petition Date, then in accordance with the terms and conditions of the particular transaction giving rise to such Allowed Administrative Claims without any further action by the Holders of such Allowed Administrative Claims.

2.2Professional Claims

(a)Final Fee Applications and Payment of Professional Claims

All final requests for payment of Professional Claims incurred during the period from the Petition Date through the Effective Date shall be Filed no later than 45 days after the Effective Date. All such final requests will be subject to approval by the Bankruptcy Court after notice and a hearing in accordance with the procedures established by the Bankruptcy Code, Bankruptcy Rules, and prior orders of the Bankruptcy Court, including the Interim Compensation Order, and once approved by the Bankruptcy Court, shall be promptly paid from the Professional Fee Escrow Account up to the full Allowed amount. To the extent that funds held in the Professional Fee Escrow Account are insufficient to satisfy the amount of Professional Claims owing to the Professionals, such Professionals shall have an Allowed Administrative Claim for any such deficiency, and the Plan Administrator shall pay the full unpaid amount of such Allowed Administrative Claim in Cash.

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(b)Professional Fee Escrow Account

On the Effective Date, the Plan Administrator shall establish and fund the Professional Fee Escrow Account with Cash equal to the Professional Fee Reserve Amount. The Professional Fee Escrow Account shall be maintained in trust solely for the Professionals. Such funds shall not be considered property of the Estates. The amount of Professional Claims owing to the Professionals shall be paid in Cash to such Professionals by the Plan Administrator as soon as reasonably practicable after such Professional Claims are Allowed. When all Allowed amounts owing to the Professionals have been paid in full, any amount remaining in the Professional Fee Escrow Account shall promptly be paid to the Plan Administrator without any further action or order of the Bankruptcy Court. If the Professional Fee Escrow Account is insufficient to fund the full Allowed amounts of Professional Claims, the remaining unpaid Allowed Professional Fee Claims will be paid by the Plan Administrator.

(c)Professional Fee Reserve Amount

Professionals shall reasonably estimate their unpaid Professional Claims, and shall deliver such estimate to the Debtors no later than five days before the Effective Date; provided that such estimate shall not be deemed to limit the amount of the fees and expenses that are the subject of the Professional’s final request for payment of Professional Fee Claims. If a Professional does not provide an estimate, the Debtors or the Plan Administrator may estimate the unpaid and unbilled fees and expenses of such Professional.

2.3Priority Tax Claims

Each Holder of an Allowed Priority Tax Claim shall receive, on the Effective Date or as soon as practicable thereafter, payment in Cash in an amount equal to the amount of such Allowed Priority Tax Claim.

2.4Statutory Fees

All fees due and payable pursuant to section 1930 of Title 28 of the United States Code before the Effective Date shall be paid by the Debtors. On and after the Effective Date, to the extent applicable, the Reorganized Debtors shall pay any and all such fees when due and payable, and shall File with the Bankruptcy Court quarterly reports in a form reasonably acceptable to the U.S. Trustee. Each Reorganized Debtor shall remain obligated to pay quarterly fees to the U.S. Trustee until the earliest of the applicable Debtor’s Chapter 11 Case being closed, dismissed, or converted to a case under chapter 7 of the Bankruptcy Code.

ARTICLE III
CLASSIFICATION, TREATMENT, AND VOTING OF CLAIMS AND INTERESTS

3.1Classification of Claims and Interests

Except for the Claims addressed in ARTICLE II, all Claims and Interests are classified in the Classes set forth below in accordance with section 1122 of the Bankruptcy Code.  Because this Plan constitutes a separate Plan proposed by each Debtor, each of the general Classes below shall be deemed a separate Class with respect to Claims against or Interests in each applicable Debtor for all purposes.  A Claim or Interest is classified in a particular Class only to the extent that the Claim or Interest qualifies within the description of that Class and is classified in other Classes to the extent that any portion of the Claim or Interest qualifies within the description of such other Classes.  A Claim or Interest is also classified in a particular Class for the purpose of receiving distributions pursuant to the Plan only to the extent that such Claim or Interest is an Allowed Claim or Interest in that Class and has not been paid, released, or otherwise satisfied prior to the Effective Date.

Below is a chart assigning each Class a number for purposes of identifying each separate Class.

Class	Claim or Interest	Status	Voting Rights
1	Secured Tax Claims	Unimpaired	Presumed to Accept

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Class	Claim or Interest	Status	Voting Rights
2	Other Secured Claims	Unimpaired	Presumed to Accept
3	Other Priority Claims	Unimpaired	Presumed to Accept
4	Senior Note Claims and Senior Note Trustee Claims	Unimpaired	Presumed to Accept
5	General Unsecured Claims	Unimpaired	Presumed to Accept
6	Subordinated Taberna Note Claims	Impaired	Entitled to Vote
7	Subordinated RF Junior Note Claims and RAIT Subordinated Guaranty Claims	Impaired	Entitled to Vote
8	Intercompany Claims	Unimpaired	Presumed to Accept
9	Intercompany Interests	Unimpaired / Impaired	Presumed to Accept / Deemed to Reject
10	Section 510(b) Claims	Unimpaired	Presumed to Accept
11	Preferred Interests in RAIT Parent	Impaired	Deemed to Reject
12	Preferred Interests in Taberna	Impaired	Deemed to Reject
13	Common Interests in RAIT Parent	Impaired	Deemed to Reject

3.2Treatment of Classes of Claims and Interests

Except to the extent that a Holder of an Allowed Claim or Interest, as applicable, agrees to a less favorable treatment, such Holder shall receive under the Plan the treatment described below in full and final satisfaction, settlement, release, and discharge of and in exchange for such Holder’s Allowed Claim or Interest.  Unless otherwise indicated, the Holder of an Allowed Claim or Interest, as applicable, shall receive such treatment on the Effective Date, or as soon as practicable thereafter.

(a)Class 1 — Secured Tax Claims

(1) Classification:  Class 1 consists of any Secured Tax Claims against any Debtor.

(1) Treatment:  Each Holder of an Allowed Secured Tax Claim shall receive payment in Cash in an amount equal to the amount of such Allowed Secured Tax Claim.

(2) Voting:  Class 1 is Unimpaired.  Holders of Class 1 Claims are conclusively presumed to have accepted the Plan under section 1126(f) of the Bankruptcy Code.  Holders of Class 1 Claims are not entitled to vote to accept or reject the Plan.

(b)Class 2 —Other Secured Claims

(1) Classification:  Class 2 consists of any Other Secured Claims against any Debtor.

(2) Treatment:  Each Holder of an Allowed Other Secured Claim will receive, at the Debtors’ election: (a) payment in Cash in an amount equal to the amount of such Allowed Other Secured Claim; (b) delivery of the collateral securing any such Claim and payment of any interest required under section 506(b) of the Bankruptcy Code; (c) Reinstatement of such Claim; or (d) other treatment rendering such Claim Unimpaired.

(3) Voting:  Class 2 is Unimpaired.  Holders of Class 2 Claims are conclusively presumed to have accepted the Plan under section 1126(f) of the Bankruptcy Code.  Holders of Class 2 Claims are not entitled to vote to accept or reject the Plan.

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(c)Class 3 —Other Priority Claims

(1) Classification:  Class 3 consists of any Other Priority Claims against any Debtor.

(2) Treatment:  Each Holder of an Allowed Other Priority Claim shall receive payment in Cash in an amount equal to the amount of such Allowed Other Priority Claim.

(3) Voting:  Class 3 is Unimpaired. Holders of Class 3 Claims are conclusively presumed to have accepted the Plan under section 1126(f) of the Bankruptcy Code.  Holders of Class 3 Claims are not entitled to vote to accept or reject the Plan.

(d)Class 4 — Senior Note Claims and Senior Note Trustee Claims

(1) Classification:  Class 4 consists of Senior Note Claims and Senior Note Trustee Claims against RAIT Parent.

(2) Treatment:  Each Holder of an Allowed Senior Note Claim and Senior Note Trustee Claim shall receive payment in Cash in an amount equal to the amount of such Allowed Senior Note Claim and Allowed Senior Note Trustee Claim.

(3) Voting:  Class 4 is Unimpaired. Holders of Class 4 Claims are conclusively presumed to have accepted the Plan under section 1126(f) of the Bankruptcy Code.  Holders of Class 4 Claims are not entitled to vote to accept or reject the Plan.

(e)Class 5 — General Unsecured Claims

(1) Classification:  Class 5 consists of any General Unsecured Claims against any Debtor.

(2) Treatment:  Each Holder of an Allowed General Unsecured Claim shall receive, at the Debtors’ election: (a) payment in Cash in an amount equal to the amount of such Allowed General Unsecured Claim; or (b) Reinstatement of such Claim.

(3) Voting:  Class 5 is Unimpaired.  Holders of Class 5 Claims are conclusively presumed to have accepted the Plan under section 1126(f) of the Bankruptcy Code.  Holders of Class 5 Claims are not entitled to vote to accept or reject the Plan.

(f)Class 6 Subordinated Taberna Note Claim

(1) Classification:  Class 6 consists of the Subordinated Taberna Note Claim against Taberna.

(2) Allowance:  The Subordinated Taberna Note Claim shall be Allowed in the amount of $18,670,743 (the “Allowed Taberna Note Claim Amount”).

(3) Treatment:  On or as soon as practicable after the Effective Date, the Holder of the Allowed Subordinated Taberna Note Claim shall receive payment in cash of (i) $12,250,000 from Distribution Proceeds, plus (ii) after receipt by the Holder of the Allowed Subordinated RF Junior Note Claim of an amount equal to $1,750,000 from the Second-Half Sale Transaction Escrow, an amount equal to $250,000 (or such amount as may be available) from the Second-Half Sale Transaction Escrow, plus, subject to the payment in full of the Allowed RAIT Funding Claim Amount, (a) all other Distribution Proceeds, if any, plus (b) any funds, if any, remaining in the Disputed Claim Reserve after all Disputed Claims are Allowed or otherwise resolved, plus (c) any funds remaining in the Wind-Down Reserve, provided however, that the amount paid pursuant to this subparagraph shall not exceed the Allowed Taberna Note Claim Amount.

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(4) Voting:  Class 6 is Impaired.  The Holder of the Class 6 Claim is entitled to vote to accept or reject the Plan.

(g)Class 7 — Subordinated RF Junior Note Claim and RAIT Parent Subordinated Guaranty Claim

(1) Classification:  Class 7 consists of the Subordinated RF Junior Note Claim against RAIT Funding and the RAIT Parent Subordinated Guaranty Claim against RAIT Parent.

(2) Allowance:  The Class 7 Claims shall be Allowed as a single Claim against RAIT Parent in the aggregate amount of $23,750,000 (the “Allowed RAIT Funding Claim Amount”).

(3) Treatment:  On or as soon as practicable after the Effective Date, the Holders of the Allowed Class 7 Claim shall receive up to the Allowed RAIT Funding Claim Amount from (a) the Distribution Proceeds (after the Holder of the Subordinated Taberna Note Claim receives $12,250,000 from Distribution Proceeds), plus (b) any funds remaining in the Disputed Claim Reserve after all disputed Claims are Allowed or otherwise resolved, plus (c) all proceeds otherwise payable to the Sellers under the Purchase Agreement of the First-Half Sale Transaction Escrow, plus, (d) all proceeds otherwise payable to the Sellers under the Purchase Agreement of the Second-Half Transaction Escrow up to $1,750,000 on a first-out basis, plus (e) any funds remaining in the Wind-Down Reserve.

(4) Voting:  Class 7 is Impaired.  Holders of Class 7 Claims are entitled to vote to accept or reject the Plan.

(h)Class 8 — Intercompany Claims

(1) Classification:  Class 8 consists of any Intercompany Claims against any Debtor.

(2) Treatment:  Each Allowed Intercompany Claim, unless otherwise provided for under the Plan, will be Reinstated.

(3) Voting:  Class 8 is Unimpaired.  Holders of Class 8 Claims are conclusively presumed to have accepted the Plan under section 1126(f) of the Bankruptcy Code.  Holders of Class 8 Claims are not entitled to vote to accept or reject the Plan.

(i)Class 9 — Intercompany Interests

(1) Classification:  Class 9 consists of any Intercompany Interests in RAIT General, RAIT Limited, Taberna, RAIT JV TRS, RAIT JV TRS Sub, and RAIT Funding.

(2) Treatment:  Each Allowed Intercompany Interest shall, at the Debtors’ election: (a) be Reinstated for administrative convenience; or (b) be canceled and released without any distribution on account to of such Interests.

(3) Voting:  Class 9 is either Unimpaired, and the Holders of Intercompany Interests are conclusively presumed to have accepted the Plan under section 1126(f) of the Bankruptcy Code, or Impaired, and the Holders of Intercompany Interests are deemed to have rejected the Plan under section 1126(g) of the Bankruptcy Code. Holders of Intercompany Interests are not entitled to vote to accept or reject the Plan.

(j)Class 10 — Section 510(b) Claims

(1) Classification:  Class 10 consists of any Section 510(b) Claims against any Debtor.

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(2) Allowance:  Notwithstanding anything in the Plan to the contrary, a Class 10 Claim, if existing, may only become Allowed by Final Order of the Bankruptcy Court.  The Debtors are not aware of any asserted Class 10 Claims and believe that no Class 10 Claims exists.

(3) Treatment:  Each Holder of an Allowed Section 510(b) Claim (if any) shall receive, at the Debtors’ election: (a) payment in Cash in an amount equal to the amount of such Allowed Section 510(b) Claim; (b) Reinstatement of such Claim; or (C) in accordance with section 510(b) of the Bankruptcy Code, treatment as if such Holder held a number of Allowed Preferred Interests or Common Interests, as applicable, equal in value to the amount of its Allowed Section 510(b) Claim.

(4) Voting:  Class 10 is Unimpaired.  Holders (if any) of Class 10 Claims are conclusively presumed to have accepted the Plan under section 1126(f) of the Bankruptcy Code.  Holders (if any) of Class 10 Claims are not entitled to vote to accept or reject the Plan.

(k)Class 11 — Preferred Interests in RAIT Parent

(1) Classification:  Class 11 consists of any Preferred Interests in RAIT Parent.

(2) Treatment:  Each Preferred Interest in RAIT Parent shall be canceled, released, and extinguished, and will be of no further force or effect and no Holder of Preferred Interests in RAIT Parent shall be entitled to any recovery or distribution under the Plan on account of such Interests.

(3) Voting:  Class 11 is Impaired.  Holders of Class 11 Interests are deemed to have rejected the Plan under section 1126(g) of the Bankruptcy Code.  Holders of Class 11 Interests are not entitled to vote to accept or reject the Plan.

(l)Class 12 — Preferred Interests in Taberna

(1) Classification:  Class 11 consists of any Preferred Interests in Taberna.

(2) Treatment:  Each Preferred Interest in Taberna shall be canceled, released, and extinguished, and will be of no further force or effect and no Holder of Preferred Interests in Taberna shall be entitled to any recovery or distribution under the Plan on account of such Interests.

(3) Voting:  Class 12 is Impaired.  Holders of Class 12 Interests are deemed to have rejected the Plan under section 1126(g) of the Bankruptcy Code.  Holders of Class 12 Interests are not entitled to vote to accept or reject the Plan.

(m)Class 13 — Common Interests

(1) Classification:  Class 13 consists of Common Interests in RAIT Parent.

(2) Treatment:  Each Common Interest shall be canceled, released, and extinguished, and will be of no further force or effect and no Holder of Common Interests shall be entitled to any recovery or distribution under the Plan on account of such Interests.

(3) Voting:  Class 13 is Impaired. Holders of Class 13 Interests are deemed to have rejected the Plan under section 1126(g) of the Bankruptcy Code.  Holders of Class 13 Interests are not entitled to vote to accept or reject the Plan.

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3.3Special Provision Governing Unimpaired Claims and Interests

Except as otherwise provided in the Plan, nothing under the Plan shall affect the Debtors’ or the Reorganized Debtors’ rights regarding any Unimpaired Claim or Interest, including all rights regarding legal and equitable defenses to or setoffs or recoupments against any such Unimpaired Claim or Interest.

3.4Elimination of Vacant Classes

Any Class of Claims or Interests that does not have a Holder of an Allowed Claim or Allowed Interest or a Claim or Interest temporarily Allowed by the Bankruptcy Court as of the date of the Confirmation Hearing shall be deemed eliminated from the Plan for purposes of voting to accept or reject the Plan and for purposes of determining acceptance or rejection of the Plan by such Class pursuant to section 1129(a)(8) of the Bankruptcy Code.

3.5Voting Classes; Presumed Acceptance by Non-Voting Classes

If a Class of Claims or Interests is eligible to vote and no Holder of Claims or Interests, as applicable, in such Class votes to accept or reject the Plan, the Plan shall be presumed accepted by such Class.

3.6Subordinated Claims and Interests

The allowance, classification, and treatment of all Allowed Claims and Allowed Interests and their respective distributions and treatments under the Plan take into account and conform to the relative priority and rights of the Claims and Interests in each Class in connection with any contractual, legal, and equitable subordination rights relating thereto, whether arising under general principles of equitable subordination, section 510(b) of the Bankruptcy Code, or otherwise. Pursuant to section 510 of the Bankruptcy Code, the Debtors or Reorganized Debtors, as applicable, reserve the right to re-classify any Allowed Claim or Allowed Interest in accordance with any contractual, legal, or equitable subordination relating thereto.

ARTICLE IV
PROVISIONS FOR IMPLEMENTATION OF THE PLAN

4.1General Settlement of Claims

Pursuant to section 1123 of the Bankruptcy Code and Bankruptcy Rule 9019, and in consideration for the classification, distributions, releases, and other benefits provided under the Plan, on the Effective Date, the provisions of the Plan shall constitute a good-faith compromise and settlement of all Claims, Interests, Causes of Action, and controversies released, settled, compromised, discharged, satisfied, or otherwise resolved pursuant to the Plan. The Plan shall be deemed a motion to approve the good-faith compromise and settlement of all such Claims, Interests, Causes of Action, and controversies pursuant to Bankruptcy Rule 9019, and the entry of the Confirmation Order shall constitute the Bankruptcy Court’s approval of such compromise and settlement under section 1123 of the Bankruptcy Code and Bankruptcy Rule 9019, as well as a finding by the Bankruptcy Court that such settlement and compromise is fair, equitable, reasonable, and in the best interests of the Debtors and their Estates.

4.2Plan Transactions

Before, on, and after the Effective Date, the Debtors or Plan Administrator, as applicable, shall take all actions as may be necessary or appropriate to effectuate the terms of this Plan, including: (a) the execution and delivery of any appropriate agreements or other documents of merger, consolidation, restructuring, conversion, disposition, transfer, dissolution, or liquidation containing terms that are consistent with the terms of the Plan, and that satisfy the requirements of applicable law and any other terms to which the applicable Entities may agree; (b) the execution and delivery of appropriate instruments of transfer, assignment, assumption, or delegation of any asset, property, right, liability, debt, or obligation on terms consistent with the terms of the Plan and having other terms for which the applicable parties agree; (c) the filing of appropriate certificates or articles of incorporation, reincorporation, merger, consolidation, conversion, or dissolution pursuant to applicable state law; (d) such other transactions that are required

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to effectuate the Plan; and (e) all other actions that the applicable Entities determine to be necessary or appropriate, including making filings or recordings that may be required by applicable law.

4.3Cancellation of Notes, Instruments, Certificates, and Other Documents

On the Effective Date, except to the extent otherwise provided herein, all notes, instruments, Certificates, and other documents evidencing Claims or Interests, including the Senior Note Claims, the Subordinated Taberna Note Claim, the Subordinated RF Junior Note Claim, and the RAIT Parent Subordinated Guaranty Claim, shall be cancelled, and the TFC Trust shall be terminated in accordance with the terms of the RF Note Indenture, and the obligations of the Debtors or Reorganized Debtors thereunder or in any way related thereto shall be supplanted for all purposes by the obligations set forth in this Plan, and the Trustees shall be released from all duties thereunder; provided, however, that notwithstanding Confirmation or the occurrence of the Effective Date, any agreement that governs the rights of the Holder of a Claim shall continue in effect solely for purposes of (a) allowing Holders of Claims and Interests and Holders of any interest in the TFC Trust to receive distributions under the Plan, (b) allowing and preserving the rights of the Servicer to make distributions on account of Claims and Interests as provided in Article VI, (c) preserving the Trustees’ rights to compensation and indemnification as against any money or property distributable to Holders of Senior Note Claims, Subordinated Taberna Note Claim, Subordinated RF Junior Note Claim or the RAIT Parent Subordinated Guaranty Claim, or distributions pursuant to the RF Note Indenture, including permitting the Trustees to maintain, enforce, and exercise their charging liens against such distributions, (d) preserving all rights, including rights of enforcement, of the Trustees against any person other than a Released Party, including with respect to indemnification or contribution from the Holders of (i) the Senior Note Claims pursuant and subject to the terms of the Senior Note Indentures, or (ii) the Subordinated Taberna Note Claim pursuant and subject to the terms of the Taberna Subordinated Indenture, (e) permitting the Trustees to enforce any obligation (if any) owed to the Trustees under the Plan, and (f) permitting the Trustees to appear in the Chapter 11 Cases or in any proceeding in the Bankruptcy Court or any other court; provided, further, however, that (x) the preceding proviso shall not affect the discharge of Claims or Interests pursuant to the Bankruptcy Code, the Confirmation Order, or the Plan, or result in any expense or liability to the Debtors, Reorganized Debtors, or Plan Administrator, as applicable, except as expressly provided for in the Plan and (y) except as otherwise provided in the Plan, the terms and provisions of the Plan shall modify any existing contract or agreement that would in any way be inconsistent with distributions under the Plan. The Trustees shall be discharged and shall have no further obligation or liability except as provided in the Plan and Confirmation Order, and after the performance by the Trustees and their representatives and professionals of any obligations and duties required under or related to the Plan or Confirmation Order, the Trustees shall be relieved of and released from any obligations and duties arising thereunder.

4.4Exemption from Certain Taxes and Fees

Pursuant to section 1146(a) of the Bankruptcy Code, any transfers of property under this Plan, including any issuance, transfer or exchange of any security, shall not be subject to any document recording tax, stamp tax, conveyance fee, intangibles or similar tax, mortgage tax, stamp act, real estate transfer tax, sale or use tax, mortgage recording tax, or other similar tax or governmental assessment, and upon entry of the Confirmation Order, the appropriate state or local governmental officials or agents shall forgo the collection of any such tax or governmental assessment and accept for filing and recordation any of the foregoing instruments or other documents pursuant to such transfers of property without the payment of any such tax, recordation fee, or governmental assessment.

4.5Reorganized Debtors

On and after the Effective Date, the Reorganized Debtors shall continue in existence for purposes of (a) winding down the Debtors’ business and affairs, (b) resolving Disputed Claims, (c) making distributions on account of Allowed Claims as provided hereunder, (d) establishing and funding appropriate distribution reserve accounts, (e) enforcing and prosecuting claims, interests, rights, and privileges under the Causes of Action on the Retained Causes of Action List in an efficacious manner and only to the extent the benefits of such enforcement or prosecution are reasonably believed to outweigh the costs associated therewith, (f) filing appropriate tax returns, (g) complying with their continuing obligations under the Purchase Agreement, if any, and (h) administering the Plan in an efficacious manner.

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(a)Sources of Consideration for Plan Distributions

The Reorganized Debtors will fund distributions under the Plan with Cash on hand on the Effective Date and the revenues and proceeds of all assets of the Debtors or Reorganized Debtors, including the Sale Transaction proceeds and all Causes of Action not settled, released, discharged, enjoined, or exculpated under the Plan or otherwise on or prior to the Effective Date.

(b)Vesting of Assets in Reorganized Debtors

Except as otherwise provided in the Plan, the Purchase Agreement, or any agreement, instrument, or other document incorporated herein or therein, on the Effective Date, the assets of the Debtors shall vest in the Reorganized Debtors for the purpose of liquidating the Estates, free and clear of all Liens, Claims, charges, or other encumbrances. On and after the Effective Date, except as otherwise provided for in the Plan or the Purchase Agreement, the Debtors and the Reorganized Debtors may operate their business and use, acquire, or dispose of property, and compromise or settle any Claims, Interests, or Causes of Action without supervision or approval by the Bankruptcy Court and free of any restrictions of the Bankruptcy Code or Bankruptcy Rules.

(c)The Plan Administrator

The Plan Administrator shall act for the Reorganized Debtors in the same fiduciary capacity as applicable to a board of managers, directors, and officers, subject to the provisions hereof (and all certificates of formation, membership agreements, and related documents are deemed amended by the Plan to permit and authorize the same), solely for the benefit of the Holders of Class 6 and Class 7 Claims. On the Effective Date, the authority, power, and incumbency of the persons acting as managers, directors, and officers of the Debtors shall terminate, and the Plan Administrator shall be appointed as the sole manager, sole director, and sole officer of the Reorganized Debtors, and shall succeed to the powers of the Debtors’ managers, directors, and officers. From and after the Effective Date, the Plan Administrator shall be the sole representative of, and shall act for, the Reorganized Debtors.

The foregoing shall not limit the authority of the Reorganized Debtors or the Plan Administrator, as applicable, to continue the employment any former manager or officer, including pursuant to any transition services agreement entered into on or after the Effective Date by and between the Reorganized Debtors and the Purchaser.

(d)Dissolution of the Debtors

Unless otherwise provided in this Plan or the Purchase Agreement, the Reorganized Debtors shall be dissolved as soon as practicable on or after the Effective Date. The Plan Administrator shall have the power and authority to take any action necessary to wind down and dissolve any of the Debtors, and shall: (a) file a certificate of dissolution for any of the Debtors, together with all other necessary corporate and company documents, to effect the dissolution of such Debtor under the applicable laws of its state of formation; and (b) complete and file all final or otherwise required federal, state, and local tax returns and shall pay taxes required to be paid for any of the Debtors, and pursuant to section 505(b) of the Bankruptcy Code, request an expedited determination of any unpaid tax liability of any of the Debtors or their Estates for any tax incurred during the administration of such Debtor’s Chapter 11 Case, as determined under applicable tax laws.

The filing by the Plan Administrator of any of the Reorganized Debtors’ certificate of dissolution or similar document shall be authorized and approved in all respects without further action under applicable law, regulation, order, or rule, including any action by the stockholders, members, trustees, board of directors, or board of managers of Reorganized RAIT Parent or any of its affiliates.

(e)Corporate Action

Upon the Effective Date, all actions contemplated under the Plan, regardless of whether taken before, on, or after the Effective Date, shall be deemed authorized and approved in all respects (whether to occur before, on, or after the Effective Date). All matters provided for in the Plan or deemed necessary or desirable by the Debtors before, on, or after the Effective Date involving the corporate structure of the Debtors or the Reorganized Debtors, and any

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corporate actionrequired by the Debtors or the Reorganized Debtors in connection with the Plan or corporate structure of the Debtorsor Reorganized Debtors, shall be deemed to have occurred and shall be in effect on the Effective Date, without anyrequirement of further action by the security Holders, directors, managers, or officers of the Debtors or the ReorganizedDebtors. Before the Effective Date, the appropriate officers of the Debtors, and on or after the Effective Date, the Plan Administrator on behalf of the Reorganized Debtors,as applicable, shall be authorized to issue, execute, and deliver the agreements, documents, securities, and instrumentscontemplated under the Plan (or necessary or desirable to effect the transactions contemplated under the Plan) in thename of and on behalf of the Reorganized Debtors. The authorizations and approvals contemplated by this Section 4.5(g) shall be effective notwithstanding any requirements under non-bankruptcy law.

(f)Effectuating Documents; Further Transactions

Prior to the Effective Date, the Debtors are, and on and after the Effective Date, the Reorganized Debtors and the Plan Administrator are, authorized to and may issue, execute, deliver, file, or record such contracts, securities, instruments, releases, and other agreements or documents and take such actions as may be necessary or appropriate to effectuate, implement, and further evidence the terms and conditions of the Plan, without the need for any approvals, authorizations, notice, or consents, except for those expressly required pursuant to the Plan.

(g)Preservation of Causes of Action

Unless any Cause of Action against an Entity is expressly waived, relinquished, exculpated, released, compromised, or settled in the Plan or a Final Order, in accordance with section 1123(b) of the Bankruptcy Code, all rights to commence, prosecute, or settle, as appropriate, any and all Causes of Action, whether arising before or after the Petition Date, shall vest in the Reorganized Debtors and be enforceable by the Plan Administrator pursuant to the terms of the Plan. Except for any Cause of Action against an Entity that is expressly waived, relinquished, exculpated, released, compromised, or settled in the Plan or a Final Order, in accordance with section 1123(b) of the Bankruptcy Code, the Plan Administrator may enforce all rights to commence, prosecute, or settle, as appropriate, any and all Causes of Action, whether arising before or after the Petition Date, and the Plan Administrator’s rights to commence, prosecute, or settle such Causes of Action shall be preserved notwithstanding the occurrence of the Effective Date. The Plan Administrator may, in its reasonable business judgment, pursue such Causes of Action and may retain and compensate professionals in the analysis or pursuit of such Causes of Action to the extent the Plan Administrator deems appropriate, including on a contingency fee basis. No Entity may rely on the absence of a specific reference in the Plan or the Disclosure Statement to any Cause of Action against them as any indication that the Reorganized Debtors or the Plan Administrator will not pursue any and all available Causes of Action against them. The Reorganized Debtors and the Plan Administrator expressly reserve all rights to prosecute any and all Causes of Action against any Entity, except as otherwise expressly provided in the Plan. Unless any Cause of Action against an Entity is expressly waived, relinquished, exculpated, released, compromised, or settled in the Plan or a Final Order, the Plan Administrator expressly reserves all Causes of Action for later adjudication, and, therefore, no preclusion doctrine, including the doctrines of res judicata, collateral estoppel, issue preclusion, claim preclusion, estoppel (judicial, equitable, or otherwise), or laches, shall apply to such Causes of Action upon, after, or as a consequence of the Confirmation or Consummation. The Plan Administrator reserves and shall retain the foregoing Causes of Action notwithstanding the rejection of any Executory Contract or Unexpired Lease during the Chapter 11 Cases or pursuant to the Plan. The Plan Administrator shall have the exclusive right, authority, and discretion to determine and to initiate, file, prosecute, enforce, abandon, settle, compromise, release, withdraw, or litigate to judgment any such Causes of Action, or to decline to do any of the foregoing, without the consent or approval of any third party or any further notice to, or action, order, or approval of, the Bankruptcy Court.

4.6Retiree Benefits

Pursuant to section 1129(a)(13) of the Bankruptcy Code, from and after the Effective Date, all retiree benefits (as that term is defined in section 1114 of the Bankruptcy Code), if any, shall continue to be paid in accordance with applicable law.

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ARTICLE VTREATMENT OF EXECUTORY CONTRACTS AND UNEXPIRED LEASES

5.1Assumption of Executory Contracts and Unexpired Leases

On the Effective Date, except as otherwise provided herein, each Executory Contract and Unexpired Lease not previously rejected, assumed, or assumed and assigned, including any employee benefit plans and other Executory Contracts under which employee obligations arise, shall be deemed automatically rejected pursuant to sections 365 and 1123 of the Bankruptcy Code, unless such Executory Contract or Unexpired Lease: (1) is specifically described in the Plan as to be assumed in connection with confirmation of the Plan, or is specifically scheduled to be assumed or assumed and assigned pursuant to the Plan or the Plan Supplement; (2) is subject to a pending motion to assume such Unexpired Lease or Executory Contract as of the Effective Date; (3) is to be assumed by the Debtors or assumed by the Debtors and assigned to another third party, as applicable, in connection with the Sale Transaction; (4) is a contract, instrument, release, indenture, or other agreement or document entered into in connection with the Plan; or (5) is an insurance policy, including but not limited to, any D&O Liability Insurance Policy. Entry of the Confirmation Order by the Bankruptcy Court shall constitute approval of such assumptions, assignments, and rejections, including the assumption of the Executory Contracts or Unexpired Leases as provided in the Plan Supplement, pursuant to sections 365(a) and 1123 of the Bankruptcy Code.

Notwithstanding the foregoing, on the Effective Date, Reorganized RAIT Parent shall be deemed to have assumed the Employee Retention and Severance Plans.

5.2Cure of Defaults and Objections to Cure and Assumption

The Debtors or Plan Administrator, as applicable, shall pay Cure Claims on the Effective Date or as soon as practicable thereafter.  Unless otherwise agreed upon in writing by the parties to the applicable Executory Contract or Unexpired Lease, all requests for payment of Cure Claims that differ from the amounts paid or proposed to be paid by the Debtors or Plan Administrator must be filed with the Claims and Solicitation Agent on or before 30 days after the Effective Date.  Any such request that is not timely filed shall be disallowed and forever barred, estopped, and enjoined from assertion, and shall not be enforceable against any Reorganized Debtor, without the need for any objection by the Plan Administrator or any further notice to or action, order, or approval of the Bankruptcy Court.  Any Cure shall be deemed fully satisfied, released, and discharged upon payment by the Debtors or the Plan Administrator of the Cure; provided, however, that nothing herein shall prevent the Plan Administrator from paying any Cure despite the failure of the relevant counterparty to file such request for payment of such Cure.  The Plan Administrator also may settle any Cure without any further notice to or action, order, or approval of the Bankruptcy Court.  In addition, any objection to the assumption of an Executory Contract or Unexpired Lease pursuant to the Plan must be filed with the Bankruptcy Court on or before 30 days after the Effective Date.  Any such objection will be scheduled to be heard by the Bankruptcy Court at the Debtors’ or Plan Administrator’s, as applicable, first scheduled omnibus hearing for which such objection is timely filed.  Any counterparty to an Executory Contract or Unexpired Lease that fails to timely object to the proposed assumption of any Executory Contract or Unexpired Lease will be deemed to have consented to such assumption.

If there is a dispute regarding a Cure Claim, the ability of the Reorganized Debtors or any assignee to provide “adequate assurance of future performance” within the meaning of section 365 of the Bankruptcy Code, or any other matter pertaining to assumption, then payment of the applicable Cure Claim shall occur as soon as practicable after entry of a Final Order resolving such dispute, approving such assumption (and, if applicable, assignment), or as may be agreed upon by the Debtors or Plan Administrator, as applicable, and the counterparty to the Executory Contract or Unexpired Lease.  The Debtors or Plan Administrator, as applicable, reserve the right either to reject or nullify the assumption of any Executory Contract or Unexpired Lease within 45 days after a Final Order resolving an objection to assumption or determining the Cure Claim or any request for adequate assurance of future performance required to assume such Executory Contract or Unexpired Lease, is entered.

Assumption of any Executory Contract or Unexpired Lease pursuant to the Plan or otherwise shall result in the full release and satisfaction of any Cure Claims or defaults, whether monetary or nonmonetary, including defaults of provisions restricting the change in control or ownership interest composition or other bankruptcy-related defaults,

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arising under any assumed Executory Contract or Unexpired Lease at any time prior to the effective date of assumption.  Any and all Proofs of Claim based upon Executory Contracts or Unexpired Leases that have been assumed in the Chapter 11 Cases, including pursuant to the Confirmation Order, shall be deemed satisfied as of the Effective Date without the need for any objection thereto or any further notice to or action, order, or approval of the Bankruptcy Court.

5.3Pre-existing Payment and Other Obligations

Rejection of any Executory Contract or Unexpired Lease pursuant to the Plan or otherwise shall not constitute a termination of pre-existing obligations owed to the Debtors or Reorganized Debtors, as applicable, under such contract or lease.  In particular, notwithstanding any non-bankruptcy law to the contrary, the Reorganized Debtors expressly reserve and do not waive any right to receive, or any continuing obligation of a counterparty to provide:  (a) payment to the contracting Debtors or Reorganized Debtors, as applicable, of outstanding and future amounts owing thereto under or in connection with rejected Executory Contracts or Unexpired Leases or (b) warranties or continued maintenance obligations on goods previously purchased by the contracting Debtors or Reorganized Debtors, as applicable, from counterparties to rejected Executory Contracts.

5.4Rejection Damages Claims and Objections to Rejections

Pursuant to section 502(g) of the Bankruptcy Code, counterparties to Executory Contracts or Unexpired Leases that are rejected shall have the right to assert Claims, if any, on account of the rejection of such contracts and leases.  Unless otherwise provided by a Bankruptcy Court order, any Proofs of Claim asserting Claims arising from the rejection of Executory Contracts and Unexpired Leases pursuant to the Plan must be filed with the Claims and Solicitation Agent no later than 30 days after the later of the Confirmation Date or the effective date of rejection.  Any such Proofs of Claim that are not timely filed shall be disallowed without the need for any further notice to or action, order, or approval of the Bankruptcy Court.  Such Proofs of Claim shall be forever barred, estopped, and enjoined from assertion.  Moreover, such Proofs of Claim shall not be enforceable against any Reorganized Debtor, without the need for any objection by the Plan Administrator or any further notice to or action, order, or approval of the Bankruptcy Court, and any Claim arising out of the rejection of the Executory Contract or Unexpired Lease shall be deemed fully satisfied, released, and discharged notwithstanding anything in a Proof of Claim to the contrary.  All Allowed Claims arising from the rejection of Executory Contracts and Unexpired Leases shall be classified as Class 5 - General Unsecured Claims against the applicable Debtor counterparty thereto.

5.5Contracts, Intercompany Contracts, and Leases Entered Into After the Petition Date

Contracts, Intercompany Contracts, and leases entered into after the Petition Date by any Debtor and any Executory Contracts and Unexpired Leases assumed by any Debtor may be performed by the applicable Reorganized Debtor in the ordinary course of business.

5.6Indemnification Obligations

All indemnification obligations in place as of the Effective Date (whether in the by-laws, certificates of incorporation or formation, limited liability company agreements, other organizational or formation documents, board resolutions, indemnification agreements, employment contracts, or otherwise) for the post-petition directors, officers, trustees, managers, employees, attorneys, accountants, investment bankers, and other professionals of the Debtors, as applicable, shall be assumed and remain in full force and effect after the Effective Date, and shall not be modified, reduced, discharged, impaired, or otherwise affected in any way, and shall survive Unimpaired and unaffected, irrespective of when such obligation arose.

5.7Director and Officer Liability Insurance

To the extent that the D&O Liability Insurance Policies are considered to be Executory Contracts, notwithstanding anything in the Plan to the contrary, effective as of the Effective Date, the Debtors shall be deemed to have assumed all D&O Liability Insurance Policies with respect to the Debtors’ and each of its or their, as appropriate, Affiliates’, directors, trustees, managers, officers, and employees serving on or before the Petition Date

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pursuant to section 365(a) of the Bankruptcy Code, and coveragefor defense and indemnity under any of the D&O Liability Insurance Policies shall remain available to all individualswithin the definition of “Insured” in any of the D&O Liability Insurance Policies. Entry of the Confirmation Orderwill constitute the Bankruptcy Court’s approval of the Debtors’ foregoing assumption of each of the unexpired D&OLiability Insurance Policies. Notwithstanding anything to the contrary contained herein, Confirmation of the Planshall not discharge, impair, or otherwise modify any indemnity obligations assumed by the foregoing assumption ofthe D&O Liability Insurance Policies, and each such indemnity obligation will be deemed and treated as an ExecutoryContract that has been assumed by the Debtors under the Plan as to which no Proof of Claim need be Filed.

5.8Modifications, Amendments, Supplements, Restatements, or Other Agreements

Unless otherwise provided in the Plan, each Executory Contract or Unexpired Lease that is assumed shall include all modifications, amendments, supplements, restatements, or other agreements that in any manner affect such Executory Contract or Unexpired Lease, and Executory Contracts and Unexpired Leases related thereto, if any, including easements, licenses, permits, rights, privileges, immunities, options, rights of first refusal, and any other interests, unless any of the foregoing agreements has been previously rejected or repudiated or is rejected or repudiated under the Plan.

Modifications, amendments, supplements, and restatements to prepetition Executory Contracts and Unexpired Leases that have been executed by the Debtors during the Chapter 11 Cases shall not be deemed to alter the prepetition nature of the Executory Contract or Unexpired Lease, or the validity, priority, or amount of any Claims that may arise in connection therewith.

5.9Reservation of Rights

Neither the exclusion nor inclusion of any contract or lease in the Plan Supplement, nor anything contained in the Plan, shall constitute an admission by the Debtors that any such contract or lease is in fact an Executory Contract or Unexpired Lease or that any Reorganized Debtor has any liability thereunder.  If there is a dispute regarding whether a contract or lease is or was executory or unexpired at the time of assumption or rejection, the Debtors or Reorganized Debtors, as applicable, shall have 45 days following entry of a Final Order resolving such dispute to alter their treatment of such contract or lease.

5.10Non-occurrence of the Effective Date

In the event that the Effective Date does not occur, the Bankruptcy Court shall retain jurisdiction with respect to any request to extend the deadline for assuming or rejecting any Unexpired Leases pursuant to section 365(d)(4) of the Bankruptcy Code.

ARTICLE VI

PROVISIONS GOVERNING DISTRIBUTIONS

6.1Distributions on Account of Claims and Interests Allowed as of the Effective Date

(a)Delivery of Distributions in General

Except as otherwise provided in the Plan, a Final Order, or as otherwise agreed to by the Debtors or the Reorganized Debtors, as applicable, and the Holder of the applicable Claim or Interest, on the first Distribution Date, the Distribution Agent shall make initial distributions under the Plan on account of Claims and Interests Allowed on or before the Effective Date, subject to the Reorganized Debtors’ right to object to Claims and Interests; provided, however, that (1) Allowed Administrative Claims with respect to liabilities incurred by the Debtors in the ordinary course of business during the Chapter 11 Cases or assumed by the Debtors prior to the Effective Date shall be paid or performed in the ordinary course of business in accordance with the terms and conditions of any controlling agreements, course of dealing, course of business, or industry practice, and (2) Allowed Priority Tax Claims and Allowed Secured Tax Claims shall be paid in accordance with Sections 2.3 and 3.2(a)(1), respectively.  The first

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Distribution Date for Claims Allowed on or before the Effective Date shall be as soon as reasonably practical after the Effective Date, but no later than thirty (30) days following the Effective Date.  To the extent any Allowed Priority Tax Claim or Allowed Secured Tax Claim is not due and owing on the Effective Date, such Claim shall be paid in full in Cash in accordance with the terms of any agreement between the Debtors and the Holder of such Claim or as may be due and payable under applicable non-bankruptcy law or in the ordinary course of business.  Distribution Dates shall occur no less frequently than every thirty (30) days, as necessary in the Plan Administrator’s sole discretion, after the Effective Date.  Each distribution to the Trustees on Allowed Claims in Class 4, Class 6, and Class 7 shall be subject in all respects to the right of the Trustees to assert any applicable charging liens against the respective distribution in accordance to the terms of the applicable Indentures.

6.2Special Rules for Distributions to Holders of Disputed Claims and Interests

Notwithstanding any provision otherwise in the Plan and except as otherwise agreed by the relevant parties, no partial payments and no partial distributions shall be made with respect to a Disputed Claim or Interest until all such disputes in connection with such Disputed Claim or Interest have been resolved by settlement or Final Order, provided, however that if a portion of a Claim is not Disputed, the Distribution Agent shall make a partial distribution based on such portion of such Claim that is not Disputed.

6.3Delivery of Distributions

(a)Record Date for Distributions

On the Distribution Record Date, the Claims Register shall be closed and the Distribution Agent shall be authorized and entitled to recognize only those record Holders, if any, listed on the Claims Register as of the close of business on the Distribution Record Date.  Notwithstanding the foregoing, if a Claim or Interest, other than one based on a publicly traded Certificate, is transferred fewer than 20 days before the Distribution Record Date, the Distribution Agent shall make distributions to the transferee only to the extent practical and in any event only if the relevant transfer form contains an unconditional and explicit certification and waiver of any objection to the transfer by the transferor.

(b)Distribution Process

The Distribution Agent shall make all distributions required under the Plan, except that distributions to Holders of Allowed Claims or Interests governed by a separate agreement and administered by a Servicer shall be deposited with the appropriate Servicer, at which time such distributions shall be deemed complete, and the Servicer shall deliver such distributions in accordance with the Plan and the terms of the governing agreement.  Except as otherwise provided in the Plan, and notwithstanding any authority to the contrary, distributions to Holders of Allowed Claims and Interests, including Claims and Interests that become Allowed after the Distribution Record Date, shall be made to Holders of record as of the Distribution Record Date by the Distribution Agent or a Servicer, as appropriate:  (1) to the address of such Holder as set forth in the books and records of the applicable Debtor (or if the Debtors have been notified in writing, on or before the date that is 14 days before the Effective Date, of a change of address, to the changed address); (2) in accordance with Federal Rule of Civil Procedure 4, as modified and made applicable by Bankruptcy Rule 7004, if no address exists in the Debtors books and records, no Proof of Claim has been filed and the Distribution Agent has not received a written notice of a change of address on or before the date that is 14 days before the Effective Date; or (3) to any counsel that has appeared in the Chapter 11 Cases on the Holder’s behalf.  The Debtors, the Reorganized Debtors, and the Distribution Agent, as applicable, shall not incur any liability whatsoever on account of any distributions under the Plan.

(c)Compliance Matters

In connection with the Plan, to the extent applicable, the Reorganized Debtors and the Distribution Agent shall comply with all tax withholding and reporting requirements imposed on them by any Governmental Unit, and all distributions pursuant to the Plan shall be subject to such withholding and reporting requirements.  Notwithstanding any provision in the Plan to the contrary, the Reorganized Debtors and the Distribution Agent shall be authorized to take all actions necessary or appropriate to comply with such withholding and reporting requirements, including liquidating a portion of the distribution to be made under the Plan to generate sufficient funds to pay applicable

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withholding taxes, withholding distributions pending receipt of information necessary to facilitate such distributions, or establishing any other mechanisms they believe are reasonable and appropriate.  The Reorganized Debtors reserve the right to allocate all distributions made under the Plan in compliance with all applicable wage garnishments, alimony, child support, and other spousal awards, liens, and encumbrances.

(d)Foreign Currency Exchange Rate

Except as otherwise provided in a Bankruptcy Court order, any Claim asserted in currency other than U.S. dollars shall be automatically deemed converted to the equivalent U.S. dollar value using the exchange rate for the applicable currency as published in The Wall Street Journal, National Edition, on the Petition Date, without further notice, hearing, or order of the Bankruptcy Court.

(e)Undeliverable, and Unclaimed Distributions

(1) Undeliverable Distributions.  If any distribution to a Holder of an Allowed Claim or Interest is returned to a Distribution Agent as undeliverable, no further distributions shall be made to such Holder unless and until such Distribution Agent is notified in writing of such Holder’s then-current address or other necessary information for delivery, at which time all currently due missed distributions shall be made to such Holder on the next Distribution Date.  Undeliverable distributions shall remain in the possession of the Reorganized Debtors until such time as a distribution becomes deliverable, or such distribution reverts to the Reorganized Debtors or is cancelled pursuant to Section 6.2(e)(2), and shall not be supplemented with any interest, dividends, or other accruals of any kind.

(2) Reversion.  Any distribution under the Plan that is an Unclaimed Distribution for a period of six months after distribution shall be deemed unclaimed property under section 347(b) of the Bankruptcy Code and such Unclaimed Distribution shall revest in the applicable Reorganized Debtor.  Upon such revesting, the Claim or Interest of any Holder or its successors with respect to such property shall be cancelled, discharged, and forever barred notwithstanding any applicable federal or state escheat, abandoned, or unclaimed property laws, or any provisions in any document governing the distribution that is an Unclaimed Distribution, to the contrary.

6.4Claims Paid or Payable by Third Parties

(a)Claims Paid by Third Parties

A Claim shall be reduced in full, and such Claim shall be disallowed without a Claims objection having to be filed and without any further notice to or action, order, or approval of the Bankruptcy Court, to the extent that the Holder of such Claim receives payment in full on account of such Claim from a party that is not a Debtor or Reorganized Debtor.  To the extent a Holder of a Claim receives a distribution on account of such Claim and receives payment from a party that is not a Debtor or a Reorganized Debtor on account of such Claim, such Holder shall repay, return or deliver any distribution held by or transferred to the Holder to the applicable Reorganized Debtor to the extent the Holder’s total recovery on account of such Claim from the third party and under the Plan exceeds the amount of such Claim as of the date of any such distribution under the Plan.  

(b)Claims Payable by Insurance Carriers

No distributions under the Plan shall be made on account of an Allowed Claim that is payable pursuant to one of the Debtors’ insurance policies until the Holder of such Allowed Claim has exhausted all remedies with respect to such insurance policy.  To the extent that one or more of the Debtors’ insurers agrees to satisfy in full a Claim (if and to the extent adjudicated by a court of competent jurisdiction), then immediately upon such insurers’ agreement, such Claim may be disallowed to the extent of any agreed upon satisfaction on the Claims Register by the Claims and

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Solicitation Agent without a Claims objection having to be filed and without any further notice to or action, order, or approval of the Bankruptcy Court.

(c)Applicability of Insurance Policies

Except as otherwise provided herein, distributions to Holders of Allowed Claims shall be in accordance with the provisions of an applicable insurance policy.  Nothing contained in the Plan shall constitute or be deemed a waiver of any Cause of Action that the Debtors or any Entity may hold against any other Entity, including insurers under any policies of insurance, nor shall anything contained herein constitute or be deemed a waiver by such insurers of any defenses, including coverage defenses, held by such insurers.

6.5Setoffs

Except as otherwise expressly provided for herein, each Reorganized Debtor, pursuant to the Bankruptcy Code (including section 553 of the Bankruptcy Code), applicable non-bankruptcy law, or as may be agreed to by the Holder of a Claim, may set off against any Allowed Claim and the distributions to be made pursuant to the Plan on account of such Allowed Claim (before any distribution is made on account of such Allowed Claim), any Claims, rights, and Causes of Action of any nature that such Debtor or Reorganized Debtor, as applicable, may hold against the Holder of such Allowed Claim, to the extent such Claims, rights, or Causes of Action against such Holder have not been otherwise compromised or settled on or prior to the Effective Date (whether pursuant to the Plan or otherwise); provided, however, that neither the failure to effect such a setoff nor the allowance of any Claim pursuant to the Plan shall constitute a waiver or release by such Reorganized Debtor of any such Claims, rights, and Causes of Action that such Reorganized Debtor may possess against such Holder.  In no event shall any Holder of Claims be entitled to set off any Claim against any Claim, right, or Cause of Action of the Debtor or Reorganized Debtor, as applicable, unless such Holder has filed a motion with the Bankruptcy Court requesting the authority to perform such setoff on or before the Confirmation Date, and notwithstanding any indication in any Proof of Claim or otherwise that such Holder asserts, has, or intends to preserve any right of setoff pursuant to section 553 or otherwise.  

6.6Allocation Between Principal and Accrued Interest

Except as otherwise provided in the Plan, the aggregate consideration paid to Holders with respect to their Allowed Claims shall be treated pursuant to the Plan as allocated first to the principal amount of such Allowed Claims (to the extent thereof) and, thereafter, to the interest, if any, accrued through the Petition Date.

ARTICLE VII

PROCEDURES FOR RESOLVING DISPUTED CLAIMS AND INTERESTS

7.1Disputed Claims Process

Except as otherwise provided herein, if a party files a proof of claim and the Debtors or Plan Administrator, as applicable, do not determine in their sole discretion, and without the need for notice to or action, order or approval of the Bankruptcy Court, that the Claim subject to such proof of claim is Allowed, such Claim shall be Disputed unless Allowed or disallowed by a Final Order or as otherwise set forth in this Article VII.  Except as otherwise provided herein, all proofs of claim filed after the Effective Date shall be disallowed and forever barred, estopped, and enjoined from assertion, and shall not be enforceable against any Reorganized Debtor, without the need for any objection by the Plan Administrator or any further notice to or action, order, or approval of the Bankruptcy Court.

7.2Prosecution of Objections to Claims and Interests

Except insofar as a Claim or Interest is Allowed under the Plan, the Debtors, the Reorganized Debtors or any other party in interest shall be entitled to object to the Claim or Interest.  Any objections to Claims and Interests shall be served and filed on or before the Claims Objection Bar Date.  All Claims and Interests not objected to by the end of such period shall be deemed Allowed.  For the avoidance of doubt, except as otherwise provided in the Plan, from and after the Effective Date, each Reorganized Debtor shall have and retain any and all rights and defenses such

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Debtor had immediately prior to the Effective Date with respect to any Disputed Claim or Interest, including any Causes of Action against the Holder of such Disputed Claim or Interest.

7.3Interest

Unless otherwise specifically provided for in the Plan or by order of the Bankruptcy Court, postpetition interest shall not accrue or be paid on Claims, and no Holder of a Claim shall be entitled to interest accruing on or after the Petition Date on any Claim or right.  Additionally, and without limiting the foregoing, interest shall not accrue or be paid on any Disputed Claim with respect to the period from the Effective Date to the date a final distribution is made on account of such Disputed Claim, if and when such Disputed Claim becomes an Allowed Claim.  To the extent that there are surplus Distribution Proceeds or funds remaining in the Disputed Claim Reserve or Wind-Down Reserve after payment in full of the Allowed Taberna Note Claim Amount and Allowed RAIT Funding Claim Amount, the Plan Administrator shall file a motion with the Bankruptcy Court to distribute such funds in accordance with applicable law.

7.4Disallowance of Claims and Interests

All Claims and Interests of any Entity from which property is sought by the Debtors under section 542, 543, 550, or 553 of the Bankruptcy Code or that the Debtors or the Reorganized Debtors allege is a transferee of a transfer that is avoidable under section 522(f), 522(h), 544, 545, 547, 548, 549, or 724(a) of the Bankruptcy Code shall be disallowed if:  (a) the Entity, on the one hand, and the Debtors or the Reorganized Debtors, on the other hand, agree or the Bankruptcy Court has determined by Final Order that such Entity or transferee is liable to turn over any property or monies under any of the aforementioned sections of the Bankruptcy Code and (b) such Entity or transferee has failed to turn over such property by the date set forth in such agreement or Final Order.

ARTICLE VIII

THE PLAN ADMINISTRATOR

8.1The Plan Administrator

The powers of the Plan Administrator shall include any and all powers and authority to implement the Plan and to administer and distribute the Distribution Proceeds and the proceeds, if any, from the Sale Transaction Escrow and wind down the business and affairs of the Debtors and the Reorganized Debtors, including: (1) liquidating, receiving, holding, investing, supervising, and protecting the assets of the Reorganized Debtors; (2) taking all steps to execute all instruments and documents necessary to effectuate the distributions to be made under the Plan from the Distribution Proceeds or otherwise; (3) making distributions as contemplated under the Plan; (4) establishing and maintaining bank accounts in the name of the Reorganized Debtors; (5) subject to the terms set forth herein, employing, retaining, terminating, or replacing professionals to represent it with respect to its responsibilities or otherwise effectuating the Plan to the extent necessary; (6) paying all reasonable fees, expenses, debts, charges, and liabilities of the Reorganized Debtors; (7) administering and paying taxes of the Reorganized Debtors, including filing tax returns; (8) representing the interests of the Reorganized Debtors or the Estates before any taxing authority in all matters, including any action, suit, proceeding, or audit; and (9) exercising such other powers as may be vested in it pursuant to order of the Bankruptcy Court or pursuant to the Plan, or as it reasonably deems to be necessary and proper to carry out the provisions of the Plan.

The Plan Administrator may resign at any time upon 30 days’ written notice delivered to the Bankruptcy Court; provided that such resignation shall only become effective upon the appointment of a permanent or interim successor Plan Administrator. Upon its appointment, the successor Plan Administrator, without any further act, shall become fully vested with all of the rights, powers, duties, and obligations of its predecessor and all responsibilities of the predecessor Plan Administrator relating to the Reorganized Debtors shall be terminated.

(a)Plan Administrator Rights and Powers

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The Plan Administrator shall retain and have all the rights, powers, and duties necessary to carry out its responsibilities under this Plan, and as otherwise provided in the Confirmation Order. The Plan Administrator shall be the exclusive trustee of the assets of the Reorganized Debtors for the purposes of 31 U.S.C. § 3713(b) and 26 U.S.C. § 6012(b)(3), as well as the representative of the Estates appointed pursuant to section 1123(b)(3)(B) of the Bankruptcy Code.

(b)Retention of Professionals

The Plan Administrator shall have the right to retain the services of attorneys, accountants, and other professionals that, in the discretion of the Plan Administrator, are necessary to assist the Plan Administrator in the performance of its duties. The reasonable fees and expenses of such professionals shall be paid by the Reorganized Debtors from the Wind-Down Reserve upon the monthly submission of statements to the Plan Administrator. The payment of the reasonable fees and expenses of the Plan Administrator’s retained professionals shall be made in the ordinary course of business from the Wind-Down Reserve and shall not be subject to the approval of the Bankruptcy Court.

(c)Compensation of the Plan Administrator

The Plan Administrator’s compensation, on a post-Effective Date basis, shall be as described in the Plan Supplement and paid out of the Wind-Down Reserve. Except as otherwise ordered by the Bankruptcy Court, the fees and expenses incurred by the Plan Administrator on or after the Effective Date (including taxes) and any reasonable compensation and expense reimbursement Claims (including attorney fees and expenses) made by the Plan Administrator in connection with such Plan Administrator’s duties shall be paid without any further notice to, or action, order, or approval of, the Bankruptcy Court in Cash from the Wind-Down Reserve if such amounts relate to any actions taken hereunder.

(d)Plan Administrator Expenses

All costs, expenses, and obligations incurred by the Plan Administrator in administering this Plan, the Reorganized Debtor, or in any manner connected, incidental, or related thereto, in effecting distributions from the Reorganized Debtors thereunder (including the reimbursement of reasonable expenses) shall be a charge against the assets of the Reorganized Debtors remaining from time to time in the hands of the Plan Administrator. Such costs, expenses, and obligations shall be paid from the Wind-Down Reserve.

The Debtors and the Plan Administrator, as applicable, shall not be required to give any bond or surety or other security for the performance of its duties unless otherwise ordered by the Bankruptcy Court. However, in the event that the Plan Administrator is so ordered after the Effective Date, all costs and expenses of procuring any such bond or surety shall be paid for with Cash from the Wind-Down Reserve.

8.2Wind-Down

On and after the Effective Date and except as provided in the Purchase Agreement, the Plan Administrator will be authorized to implement the Plan and any applicable orders of the Bankruptcy Court, and the Plan Administrator shall have the power and authority to take any action necessary to wind down and dissolve the Debtors’ Estates.

As soon as practicable after the Effective Date, the Plan Administrator shall: (1) cause the Debtors and the Reorganized Debtors, as applicable, to comply with, and abide by, the terms of the Purchase Agreement and any other documents contemplated thereby; (2) to the extent applicable, file a certificate of dissolution or equivalent document, together with all other necessary corporate and company documents, to effect the dissolution of the Debtors under the applicable laws of their state of incorporation or formation (as applicable); and (3) take such other actions as the Plan Administrator may determine to be necessary or desirable to carry out the purposes of the Plan. Any certificate of dissolution or equivalent document may be executed by the Plan Administrator without need for any action or approval by the shareholders or board of directors or managers of any Debtor. From and after the Effective Date, except with respect to the Reorganized Debtors as set forth herein, the Debtors (1) for all purposes shall be deemed to have

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withdrawn their business operations from any state in which the Debtors were previouslyconducting, or are registered or licensed to conduct, their business operations, and shall not be required to file anydocument, pay any sum, or take any other action in order to effectuate such withdrawal, (2) shall be deemed to havecanceled pursuant to this Plan all Interests, and (3) shall not be liable in any manner to any taxing authority forfranchise, business, license, or similar taxes accruing on or after the Effective Date. Notwithstanding the Debtors’dissolution, the Debtors shall be deemed to remain intact solely with respect to the preparation, filing, review, andresolution of applications for Professional Claims.

The filing of the final monthly report (if required for the month in which the Effective Date occurs) and all subsequent quarterly reports shall be the responsibility of the Plan Administrator.

8.3Exculpation, Indemnification, Insurance and Liability Limitation

The Plan Administrator and all professionals retained by the Plan Administrator, each in their capacities as such, shall be deemed exculpated and indemnified, except for fraud, willful misconduct, or gross negligence, in all respects by the Reorganized Debtors. The Plan Administrator may obtain, at the expense of the Reorganized Debtors and with funds from the Wind-Down Reserve, commercially reasonable liability, errors and omissions, directors and officers, or other appropriate insurance with respect to the indemnification obligations of the Reorganized Debtors. The Plan Administrator may rely upon written information previously generated by the Debtors.

Notwithstanding anything to the contrary contained herein, the Plan Administrator in its capacity as such, shall have no liability whatsoever to any party for the liabilities and/or obligations, however created, whether direct or indirect, in tort, contract, or otherwise, of the Debtors.

8.4Tax Returns

After the Effective Date, the Plan Administrator, or an accounting firm that the Plan Administrator designates and provides oversight, shall complete and file all final or otherwise required federal, state, and local tax returns for each of the Debtors and non-debtor Affiliates, as applicable, and, pursuant to section 505(b) of the Bankruptcy Code, may request an expedited determination of any unpaid tax liability of any Debtor or its Estate for any tax incurred during the administration of such Debtor’s Chapter 11 Case, as determined under applicable tax laws.

8.5Dissolution of the Reorganized Debtors

Upon a certification to be Filed with the Bankruptcy Court by the Plan Administrator of all distributions having been made and completion of all its duties under the Plan and entry of a final decree closing the last of the Chapter 11 Cases, the Reorganized Debtors shall be deemed to be dissolved without any further action by the Reorganized Debtors, including the filing of any documents with the secretary of state for the state in which the Reorganized Debtors is formed or any other jurisdiction. The Plan Administrator, however, shall have authority to take all necessary actions to dissolve the Reorganized Debtors in and withdraw the Reorganized Debtors from applicable state(s).

ARTICLE IX

EFFECT OF CONFIRMATION OF THE PLAN

9.1Discharge of Claims and Termination of Interests

To the maximum extent permitted by section 1141(d) of the Bankruptcy Code, and except as otherwise specifically provided in the Plan or in any contract, instrument, or other agreement or document created pursuant to the Plan, the distributions, rights, and treatment that are provided in the Plan shall be in complete satisfaction, discharge, and release, effective as of the Effective Date, of Claims (including any Intercompany Claims resolved or compromised after the Effective Date by the Reorganized Debtors), Interests, and Causes of Action against any Debtor of any nature whatsoever, including any interest accrued on Claims from and after the Petition Date, whether known or unknown, against, liabilities of, Liens on, obligations of, rights

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against, and Interests in, the Debtors or any of their assets or properties, regardless of whether any property shall have been distributed or retained pursuant to the Plan on account of such Claims and Interests, including demands, liabilities, and Causes of Action that arose before the Effective Date, any liability to the extent such Claims or Causes of Action accrued before the Effective Date, and all debts of the kind specified in sections 502(g), 502(h), or 502(i) of the Bankruptcy Code, in each case whether or not: (1) a Proof of Claim based upon such debt or right is filed or deemed filed pursuant to section 501 of the Bankruptcy Code; (2) a Claim based upon such debt or right is Allowed pursuant to section 502 of the Bankruptcy Code; or (3) the Holder of such a Claim or Interest has accepted the Plan. Any default or “event of default” by the Debtors or their Affiliates with respect to any Claim that existed immediately before or on account of the filing of the Chapter 11 Cases shall be deemed cured (and no longer continuing) as of the Effective Date. Unless expressly provided in the Plan, the Confirmation Order shall be a judicial determination of the discharge of all Claims and Interests subject to the Effective Date occurring.

9.2Term of Injunctions or Stays

Unless otherwise provided in the Plan or the Confirmation Order, all injunctions or stays in effect in the Chapter 11 Cases pursuant to sections 105 or 362 of the Bankruptcy Code or any order of the Bankruptcy Court, and extant on the Confirmation Date (excluding any injunctions or stays contained in the Plan or the Confirmation Order), shall remain in full force and effect until the Effective Date. All injunctions or stays contained in the Plan or the Confirmation Order shall remain in full force and effect in accordance with their terms.

9.3Release of Liens

Except as otherwise provided herein or in any contract, instrument, release, or other agreement or document created pursuant to the Plan, on the Effective Date, all mortgages, deeds of trust, Liens, pledges, or other security interests against any property of the Estates shall be fully released and discharged, and all of the right, title, and interest of any Holder of such mortgages, deeds of trust, Liens, pledges, or other security interests shall revert to the Reorganized Debtor and its successors and assigns.

9.4Releases by the Debtors

Pursuant to section 1123(b) of the Bankruptcy Code, for good and valuable consideration, on and after the Effective Date, each Released Party is deemed released and discharged by the Debtors, the Reorganized Debtors, Plan Administrator, and their Estates from any and all Causes of Action, including any derivative claims asserted on behalf of the Debtors, that the Debtors, the Reorganized Debtors, Plan Administrator, or their Estates would have been legally entitled to assert in their own right (whether individually or collectively) or on behalf of the Holder of any Claim or Interest, or that any Holder of any Claim or Interest could have asserted on behalf of the Debtors, based on or relating to, or in any manner arising from, in whole or in part:

(a) the Debtors, the Debtors’ in- or out-of-court restructuring efforts, intercompany transactions, the formulation, preparation, dissemination, negotiation, or filing of the Plan Documents;

(b) any Plan Document, contract, instrument, release, or other agreement or document (including providing any legal opinion requested by any Entity regarding any transaction, contract, instrument, document, or other agreement contemplated by the Plan or the reliance by any Released Party on the Plan or the Confirmation Order in lieu of such legal opinion) created or entered into in connection with the Disclosure Statement or the Plan;

(c) the Chapter 11 Cases, the Disclosure Statement, the Plan, the Purchase Agreement, the filing of the Chapter 11 Cases, the pursuit of Confirmation, the pursuit of Consummation, the administration and implementation of the Plan, including the distribution of property under the Plan or any other related agreement; or

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(d) the business or contractual arrangements between any Debtor and any Released Party, andany other act or omission, transaction, agreement, event, or other occurrence taking place onor before the Effective Date relating to any of the foregoing.

Notwithstanding anything to the contrary in the foregoing, the releases set forth above do not release any post-Effective Date obligations of any party or Entity under the Plan, any Plan Document, or any document, instrument, or agreement (including those set forth in the Plan Supplement) executed to implement the Plan.

Entry of the Confirmation Order shall constitute the Bankruptcy Court’s approval, pursuant to Bankruptcy Rule 9019, of the release set forth in this Section 9.4, which includes by reference each of the related provisions and definitions contained herein, and further, shall constitute the Bankruptcy Court’s finding that such release is:  (a) in exchange for the good and valuable consideration provided by the Released Parties; (b) a good faith settlement and compromise of the Claims released by this Section 9.4; (c) in the best interests of the Debtors and all Holders of Claims and Interests; (d) fair, equitable, and reasonable; (e) given and made after due notice and opportunity for hearing; and (f) a bar to any of the Debtors asserting any Claim or Cause of Action released by this Section 9.4.

9.5Releases by Holders of Claims and Interests

Pursuant to section 1123(b) of the Bankruptcy Code, for good and valuable consideration, on and after the Effective Date, each Releasing Party is deemed to have released and discharged each Debtor or Reorganized Debtor, as applicable, and each other Released Party from any and all Causes of Action, including any derivative claims asserted on behalf of the Debtors, that such Entity would have been legally entitled to assert (whether individually or collectively), based on or relating to, or in any manner arising from, in whole or in part:

(a) the Debtors, the Debtors’ in- or out-of-court restructuring efforts, intercompany transactions, the formulation, preparation, dissemination, negotiation, or filing of the Plan Documents;

(b) any Plan Document, contract, instrument, release, or other agreement or document (including providing any legal opinion requested by any Entity regarding any transaction, contract, instrument, document, or other agreement contemplated by the Plan or the reliance by any Released Party on the Plan or the Confirmation Order in lieu of such legal opinion) created or entered into in connection with the Disclosure Statement or the Plan;

(c) the Chapter 11 Cases, the Disclosure Statement, the Plan, the Purchase Agreement, the filing of the Chapter 11 Cases, the pursuit of Confirmation, the pursuit of Consummation, the administration and implementation of the Plan, including the distribution of property under the Plan or any other related agreement; or

(d) the business or contractual arrangements between any Debtor and any Released Party, and any other act or omission, transaction, agreement, event, or other occurrence taking place on or before the Effective Date relating to any of the foregoing.

Notwithstanding anything to the contrary in the foregoing, the releases set forth above do not release any post-Effective Date obligations of any party or Entity under the Plan, any Plan Document, or any document, instrument, or agreement (including those set forth in the Plan Supplement) executed to implement the Plan.

Entry of the Confirmation Order shall constitute the Bankruptcy Court’s approval, pursuant to Bankruptcy Rule 9019, of the release set forth in this Section 9.5, which includes by reference each of the related provisions and definitions contained herein, and further, shall constitute the Bankruptcy Court’s finding that such release is:  (a) in exchange for the good and valuable consideration provided by the Released Parties; (b) a good faith settlement and compromise of the Claims released by this Section 9.5; (c) in the best interests of the

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Debtors and all Holders of Claims and Interests; (d) fair, equitable, and reasonable; (e) given and made after due notice and opportunity for hearing; and (f) a bar to any of the Releasing Parties asserting any Claim or Cause of Action released by this Section 9.5 against any of the Released Parties.

9.6Exculpation

Except as otherwise specifically provided in the Plan, no Exculpated Party shall have or incur, and each Exculpated Party is hereby released and exculpated from any Cause of Action for any claim related to any act or omission in connection with, relating to, or arising out of, the Chapter 11 Cases, the Disclosure Statement, the Plan, the Sale Transaction, the Purchase Agreement, or any Plan Document, contract, instrument, release or other agreement or document (including providing any legal opinion requested by any Entity regarding any transaction, contract, instrument, document, or other agreement contemplated by the Plan or the reliance by any Exculpated Party on the Plan or the Confirmation Order in lieu of such legal opinion) created or entered into in connection with the Disclosure Statement or the Plan, the filing of the Chapter 11 Cases, the pursuit of Confirmation, the pursuit of Consummation, the administration and implementation of the Plan, including the distribution of property under the Plan or any other related agreement, except for claims related to any act or omission that is determined in a final order to have constituted actual fraud, willful misconduct, or gross negligence, but in all respects such Entities shall be entitled to reasonably rely upon the advice of counsel with respect to their duties and responsibilities pursuant to the Plan. The Exculpated Parties have, and upon closing of the Chapter 11 Cases or the Effective Date shall be deemed to have, participated in good faith and in compliance with the applicable laws with regard to the solicitation of, and distribution of, consideration pursuant to the Plan and, therefore, are not, and on account of such distributions shall not be, liable at any time for the violation of any applicable law, rule, or regulation governing the solicitation of acceptances or rejections of the Plan or such distributions made pursuant to the Plan.

9.7Injunction

Except with respect to the obligations arising under the Plan or the Confirmation Order, and except as otherwise expressly provided in the Plan or the Confirmation Order, all Entities that held, hold, or may hold claims or interests that have been released, discharged, or exculpated pursuant to the Plan, are permanently enjoined, from and after the Effective Date, from taking any of the following actions against, as applicable, the Debtors or Reorganized Debtors, or the other Released Parties: (1) commencing or continuing in any manner any action or other proceeding of any kind on account of or in connection with or with respect to any such claims or interests; (2) enforcing, attaching, collecting, or recovering by any manner or means any judgment, award, decree, or order against such Entities on account of or in connection with or with respect to any such claims or interests; (3) creating, perfecting, or enforcing any Lien or encumbrance of any kind against such Entities or the property of such Entities on account of or in connection with or with respect to any such claims or interests; (4) asserting any right of setoff, subrogation, or recoupment of any kind against any obligation due from such Entities or against the property of such Entities on account of or in connection with or with respect to any such claims or interests unless such Entity has timely asserted such setoff right in a document filed with the Bankruptcy Court explicitly preserving such setoff, and notwithstanding an indication of a claim or interest or otherwise that such Entity asserts, has, or intends to preserve any right of setoff pursuant to applicable law or otherwise; and (5) commencing or continuing in any manner any action or other proceeding of any kind on account of or in connection with or with respect to any such claims or interests released or settled pursuant to the Plan.

9.8Protection Against Discriminatory Treatment

In accordance with section 525 of the Bankruptcy Code, and consistent with paragraph 2 of Article VI of the United States Constitution, no Governmental Unit shall discriminate against any Reorganized Debtor, or any Entity with which a Reorganized Debtor has been or is associated, solely because such Reorganized Debtor was a Debtor under chapter 11, may have been insolvent before the commencement of the Chapter 11 Cases (or during the Chapter 11 Cases but before such Debtor was granted or denied a discharge), or has not paid a debt that is dischargeable in the Chapter 11 Cases.

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9.9Reimbursement or Contribution

If the Bankruptcy Court disallows a Claim for reimbursement or contribution of an Entity pursuant to section 502(e)(1)(B) of the Bankruptcy Code, then to the extent that such Claim is contingent as of the Effective Date, such Claim shall be forever disallowed notwithstanding section 502(j) of the Bankruptcy Code, unless prior to the Effective Date (a) such Claim has been adjudicated as noncontingent or (b) the relevant Holder of a Claim has filed a noncontingent Proof of Claim on account of such Claim and a Final Order has been entered determining such Claim as no longer contingent.

9.10Dissolution of Creditors Committee

On the Effective Date, the Creditors Committee shall dissolve automatically and the members thereof shall be released and discharged from all rights, duties, responsibilities, and liabilities arising from, or related to, the Chapter 11 Cases and under the Bankruptcy Code, except for the limited purpose of prosecuting requests for payment of Professional Claims for services and reimbursement of expenses incurred prior to the Effective Date by such Creditors Committee and its Professionals.

ARTICLE X

CONDITIONS PRECEDENT TO THE EFFECTIVE DATE

10.1Conditions Precedent to the Effective Date.  It shall be a condition to the Effective Date that the following conditions shall have been satisfied or waived pursuant to Section 10.2:

(a)The Plan Documents shall be in form and substance reasonably acceptable to the RSA Counterparties;

(b)the Confirmation Order shall have been entered, shall be in form and substance reasonably acceptable to the RSA Counterparties, and such order shall not have been stayed, modified, or vacated on appeal;

(c)the Sale Transaction shall have been consummated;

(d)the Debtors shall have obtained all authorizations, consents, regulatory approvals, rulings, or documents that are necessary to implement and effectuate the Plan and each of the other transactions contemplated by the Plan Documents;

(e)the Debtors shall have paid or reserved for all statutory fees due to the United States Trustee;

(f)the Debtors shall have paid or reserved for all expenses and payments due to be made on the Effective Date of the Plan; and

(g)not more than 240 days shall have passed from the Petition Date.

10.2Waiver of Conditions Precedent

The Debtors, with the written consent of the RSA Counterparties, may waive any of the conditions to the Effective Date set forth in Section 10.1 any time without any notice to any other parties in interest and without any further notice to or action, order, or approval of the Bankruptcy Court, and without any formal action other than proceeding to confirm or consummate the Plan.

10.3Effect of Non-Occurrence of Conditions to Consummation

If prior to Consummation, the Confirmation Order is vacated pursuant to a Final Order, then except as provided in any order of the Bankruptcy Court vacating the Confirmation Order, the Plan will be null and void in all respects, and nothing contained in the Plan or Disclosure Statement shall:  (a) constitute a waiver or release of any

34

Claims, Interests, or Causes of Action; (b) prejudice in any manner the rights of any Debtor or any other Entity; or (c) constitute an admission, acknowledgment, offer, or undertaking of any sort by any Debtor or any other Entity.

ARTICLE XI

MODIFICATION, REVOCATION, OR WITHDRAWAL OF THE PLAN

11.1Modification of Plan

Effective as of the date hereof:  (a) the Debtors reserve the right, with the reasonable consent of the RSA Counterparties, in accordance with the Bankruptcy Code and the Bankruptcy Rules, to amend or modify the Plan before the entry of the Confirmation Order, subject to the limitations set forth herein and, if effective, the Purchase Agreement; and (b) after the entry of the Confirmation Order (and before the Effective Date with the reasonable consent of the Creditors Committee and the RSA Counterparties), the Debtors or the Reorganized Debtors, as applicable, may, upon order of the Bankruptcy Court, amend or modify the Plan, in accordance with section 1127(b) of the Bankruptcy Code, remedy any defect or omission, or reconcile any inconsistency in the Plan in such manner as may be necessary to carry out the purpose and intent of the Plan, subject to the limitations set forth herein and, if effective, the Purchase Agreement.

11.2Revocation or Withdrawal of Plan

The Debtors reserve the right to revoke or withdraw the Plan before the Confirmation Date and to file subsequent chapter 11 plans.  If the Debtors revoke or withdraw the Plan, or if Confirmation or the Effective Date does not occur, then:  (a) the Plan will be null and void in all respects; (b) any settlement or compromise embodied in the Plan, assumption or rejection of Executory Contracts or Unexpired Leases effected by the Plan, and any document or agreement executed pursuant hereto will be null and void in all respects; and (c) nothing contained in the Plan shall (1) constitute a waiver or release of any Claims, Interests, or Causes of Action, (2) prejudice in any manner the rights of any Debtor or any other Entity, or (3) constitute an admission, acknowledgement, offer, or undertaking of any sort by any Debtor or any other Entity.

ARTICLE XII

RETENTION OF JURISDICTION

Notwithstanding the entry of the Confirmation Order and the occurrence of the Effective Date, the Bankruptcy Court shall retain jurisdiction, to the maximum extent permitted by applicable law, over all matters arising out of, or related to, the Chapter 11 Cases and the Plan pursuant to sections 105(a) and 1142 of the Bankruptcy Code, including specifically jurisdiction to:

(a)allow, disallow, determine, liquidate, classify, estimate, or establish the priority, secured or unsecured status, or amount of any Claim or Interest, including the resolution of any request for payment of any Claim or Interest and the resolution of any and all objections to the secured or unsecured status, priority, amount, or allowance of Claims or Interests;

(b)decide and resolve all matters related to the granting and denying, in whole or in part, any applications for allowance of compensation or reimbursement of expenses to Professionals authorized pursuant to the Bankruptcy Code or the Plan;

(c)resolve any matters related to Executory Contracts or Unexpired Leases, including:  (a) the assumption, assumption and assignment, or rejection of any Executory Contract or Unexpired Lease to which a Debtor is party or with respect to which a Debtor may be liable and to hear, determine, and, if necessary, liquidate, any Cure or Claims arising therefrom, including pursuant to section 365 of the Bankruptcy Code; (b) any potential contractual obligation under any Executory Contract or Unexpired Lease that is assumed; (c) the Reorganized Debtors’ amendment, modification, or supplement, after the Effective Date, pursuant to ARTICLE V, of the list of Executory

35

Contracts and Unexpired Leases to be rejected or otherwise; and (d) any dispute regarding whether a contract or lease is or was executory or expired;

(d)ensure that distributions to Holders of Allowed Claims are accomplished pursuant to the provisions of the Plan and adjudicate any and all disputes arising from or relating to distributions under the Plan;

(e)adjudicate, decide, or resolve any motions, adversary proceedings, contested or litigated matters, and any other matters, and grant or deny any applications involving a Debtor that may be pending on the Effective Date;

(f)enter and implement such orders as may be necessary or appropriate to execute, implement, or consummate the provisions of (a) contracts, instruments, releases, indentures, and other agreements or documents approved by Final Order in the Chapter 11 Cases and (b) the Plan or the Confirmation Order, including contracts, instruments, releases, indentures, and other agreements or documents created in connection with the Plan;

(g)enforce any order for the sale of property pursuant to sections 363, 1123, or 1146(a) of the Bankruptcy Code;

(h)grant any consensual request to extend the deadline for assuming or rejecting Unexpired Leases pursuant to section 365(d)(4) of the Bankruptcy Code;

(i)issue injunctions, enter and implement other orders, or take such other actions as may be necessary or appropriate to restrain interference by any Entity with Consummation or enforcement of the Plan;

(j)hear, determine, and resolve any cases, matters, controversies, suits, disputes, or Causes of Action in connection with or in any way related to the Chapter 11 Cases, including:  (a) with respect to the repayment or return of distributions and the recovery of additional amounts owed by the Holder of a Claim or Interest for amounts not timely repaid pursuant to Section 6.4(a); (b) with respect to the releases, injunctions, and other provisions contained in ARTICLE IX, including entry of such orders as may be necessary or appropriate to implement such releases, injunctions, and other provisions; (c) that may arise in connection with the Consummation, interpretation, implementation, or enforcement of the Plan or the Confirmation Order, or any Entity’s obligations incurred in connection with the Plan or the Confirmation Order, including those arising under agreements, documents, or instruments executed in connection with the Plan; or (d) related to section 1141 of the Bankruptcy Code;

(k)enter and implement such orders as are necessary or appropriate if the Confirmation Order is for any reason modified, stayed, reversed, revoked, or vacated;

(l)consider any modifications of the Plan, to cure any defect or omission, or to reconcile any inconsistency in any Bankruptcy Court order, including the Confirmation Order;

(m)hear and determine matters concerning state, local, and federal taxes in accordance with sections 346, 505, and 1146 of the Bankruptcy Code;

(n)enter an order or Final Decree concluding or closing the Chapter 11 Cases;

(o)enforce all orders previously entered by the Bankruptcy Court; and

(p)hear any other matter not inconsistent with the Bankruptcy Code.

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ARTICLE XIIIMISCELLANEOUS PROVISIONS

13.1Additional Documents

On or before the Effective Date, the Debtors may file with the Bankruptcy Court such agreements and other documents as may be necessary or appropriate to effectuate and further evidence the terms and conditions of the Plan.  The Debtors or the Reorganized Debtors, as applicable, and all Holders of Claims and Interests receiving distributions pursuant to the Plan and all other parties in interest shall, from time to time, prepare, execute, and deliver any agreements or documents and take any other actions as may be necessary or advisable to effectuate the provisions and intent of the Plan.

13.2Payment of Statutory Fees

All fees payable pursuant to 28 U.S.C. § 1930(a) shall be paid for each quarter (including any fraction thereof) until the Chapter 11 Cases are converted, dismissed, or a Final Decree is issued, whichever occurs first.

13.3Reservation of Rights

Except as expressly set forth herein, the Plan shall have no force or effect unless the Bankruptcy Court shall enter the Confirmation Order.  None of the filing of the Plan, any statement or provision contained in the Plan, or the taking of any action by any Debtor with respect to the Plan, the Disclosure Statement, or the Plan Supplement shall be or shall be deemed to be an admission or waiver of any rights of any Debtor with respect to the Holders of Claims or Interests prior to the Effective Date.

13.4Successors and Assigns

The rights, benefits, and obligations of any Entity named or referred to in the Plan shall be binding on, and shall inure to the benefit of any heir, executor, administrator, successor or assign, affiliate, officer, director, trustee, agent, representative, attorney, beneficiary, or guardian, if any, of each Entity.

13.5Service of Documents

After the Effective Date, any pleading, notice, or other document required by the Plan to be served on or delivered to the Reorganized Debtors shall be served on:

Reorganized Debtors	RAIT Financial Trust Two Logan Square, 23rd Floor Philadelphia, PA 19103 Attn:Jamie Reyle CEO, President & General Counsel jreyle@rait.com
Counsel to Reorganized Debtors	Drinker Biddle & Reath LLP 1177 Avenue of the Americas, 41st Floor New York, NY 10036 Attn:Michael Pompeo michael.pompeo@dbr.com

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United States Trustee Office of the United States Trustee
for the District of Delaware
844 King Street, Suite 2207
Wilmington, Delaware 19801
Attn:Richard L. Schepacarterrichard.schepacarter@usdoj.gov

After the Effective Date, the Reorganized Debtors shall have the authority to send a notice to parties in interest providing that, to continue to receive documents pursuant to Bankruptcy Rule 2002, such party must File a renewed request to receive documents pursuant to Bankruptcy Rule 2002. After the Effective Date, the Reorganized Debtors are authorized to limit the list of Entities receiving documents pursuant to Bankruptcy Rule 2002 to those Entities who have Filed such renewed requests.

13.6Entire Agreement

Except as otherwise indicated, the Plan supersedes all previous and contemporaneous negotiations, promises, covenants, agreements, understandings, and representations on such subjects, all of which have become merged and integrated into the Plan.

13.7Plan Supplement Exhibits

All exhibits and documents included in the Plan Supplement are incorporated into and are a part of the Plan as if set forth in full in the Plan.  After the exhibits and documents are filed, copies of such exhibits and documents shall be made available upon written request to the Debtors’ counsel at the address above or by downloading such exhibits and documents from https://dm.epiq11.com/case/RTF/infoor the Bankruptcy Court’s website at www.deb.uscourts.gov.  Unless otherwise ordered by the Bankruptcy Court, to the extent any exhibit or document in the Plan Supplement is inconsistent with the terms of any part of the Plan that does not constitute the Plan Supplement, such part of the Plan that does not constitute the Plan Supplement shall control.

13.8Non-Severability

If, prior to Confirmation, any term or provision of the Plan is held by the Bankruptcy Court to be invalid, void, or unenforceable, the Bankruptcy Court shall have the power to alter and interpret such term or provision to make it valid or enforceable to the maximum extent practicable, consistent with the original purpose of the term or provision held to be invalid, void, or unenforceable, and such term or provision shall then be applicable as altered or interpreted.  Notwithstanding any such holding, alteration, or interpretation, the remainder of the terms and provisions of the Plan will remain in full force and effect and will in no way be affected, impaired, or invalidated by such holding, alteration, or interpretation.  The Confirmation Order shall constitute a judicial determination and shall provide that each term and provision of the Plan, as it may have been altered or interpreted in accordance with the foregoing, is:  (a) valid and enforceable pursuant to its terms; (b) integral to the Plan and may not be deleted or modified without the Debtors’ consent; and (c) nonseverable and mutually dependent.

ARTICLE XIV

CRAMDOWN REQUEST

The Debtors hereby request Confirmation of the Plan pursuant to section 1129(b) of the Bankruptcy Code with respect to any rejecting Class(es) of Claims and Interests.  The Debtors reserve the right to modify the Plan in accordance with ARTICLE XI hereof to the extent, if any, that Confirmation pursuant to section 1129(b) of the Bankruptcy Code requires modification, including by modifying the treatment applicable to a Class of Claims to render such Class of Claims Unimpaired to the extent permitted by the Bankruptcy Code and the Bankruptcy Rules.

[Signature page follows.]

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Dated:October 14, 2019	RAIT FINANCIAL TRUST RAIT GENERAL, INC. RAIT LIMITED, INC. TABERNA REALTY FINANCE TRUST RAIT JV TRS, LLC RAIT JV TRS SUB, LLC RAIT FUNDING, LLC
	By: /s/ John J. Reyle
	Name:John J. Reyle Title:CEO, President, and General Counsel

117788643.15

 

EX-2.2

Exhibit 2.2

IN THE UNITED STATES BANKRUPTCY COURT
FOR THE DISTRICT OF DELAWARE

In re: RAIT FUNDING, LLC,
a Delaware limited liability company, et al.¹ Debtors. Chapter 11 Case No. 19-11915 (BLS)
(Jointly Administered)  

DISCLOSURE STATEMENT FOR DEBTORS’ JOINT CHAPTER 11 PLAN

PLEASE NOTE THAT THIS PROPOSED DRAFT DISCLOSURE STATEMENT HAS NOT YET BEEN APPROVED BY THE BANKRUPTCY COURT AS CONTAINING “ADEQUATE INFORMATION” WITHIN THE MEANING OF 11 U.S.C. § 1125 FOR USE IN THE SOLICITATION OF ACCEPTANCES OF THE CHAPTER 11 PLAN DESCRIBED HEREIN.  ACCORDINGLY, THE FILING AND DISTRIBUTION OF THIS DISCLOSURE STATEMENT IS NOT INTENDED, AND SHOULD NOT BE CONSTRUED, AS A SOLICITATION OF ACCEPTANCES OF SUCH PLAN, AND THE INFORMATION CONTAINED HEREIN SHOULD NOT BE RELIED UPON BY ANY PARTY FOR ANY PURPOSE.

Patrick A. Jackson (Del. Bar No. 4976) Joseph N. Argentina, Jr. (Del. Bar No. 5453) DRINKER BIDDLE & REATH LLP 222 Delaware Avenue, Suite 1410 Wilmington, DE 19801 Tel:  (302) 467-4200 Fax: (302) 467-4201 Patrick.Jackson@dbr.com Joseph.Argentina@dbr.com	Michael P. Pompeo (admitted pro hac vice) Brian P. Morgan (admitted pro hac vice) DRINKER BIDDLE & REATH LLP 1177 Avenue of the Americas, 41st Floor New York, NY 10036-2714 Tel:  (212) 248-3140 Fax:  (212) 248-3141 Michael.Pompeo@dbr.com Brian.Morgan@dbr.com
Proposed Counsel to the Debtors and Debtors in Possession
Dated:  October 14, 2019

Table of Contents

Article I - Introduction and Overview 1

A.Prefatory Statement and Definitions1

B.Introduction1

C.Disclaimers2

D.Plan Overview3

E.Eligibility to Vote8

F.Special Notice of Third-Party Releases12

G.The Confirmation Hearing12

Article II - Background of the Debtors and Chapter 11 Cases 13

A.Overview of the RAIT Enterprise13

B.Corporate Structure14

C.Debtors’ Capital Structure and Principal Indebtedness14

D.Summary of Assets and Liabilities17

E.Events Leading to Debtors’ Chapter 11 Filing21

F.The Chapter 11 Cases27

Article III - Summary of the Plan 29

A.Overview of Chapter 1129

B.Classification of Claims and Interests30

C.Treatment of Unclassified Claims37

D.Means for Implementation39

E.Treatment of Unexpired Leases and Executory Contracts40

F.Provisions Regarding Distributions43

G.Procedures for Resolving Disputed Claims and Interests47

H.The Plan Administrator48

I.Effect of Confirmation of the Plan51

J.Conditions Precedent to the Effective Date55

K.Modification, Revocation, or Withdrawal of the Plan56

L.Retention of Jurisdiction by the Court57

M.Miscellaneous Provisions59

Article IV - Cramdown Request 61

Article V - Certain Factors to be Considered Regarding the Plan 61

A.Parties in Interest May Object to Debtors’ Classification of Claims and Interests61

B.The Debtors May Not Be Able to Secure Confirmation of the Plan62

C.Nonconsensual Confirmation62

D.Risk of Non-Occurrence of the Effective Date63

E.Risk of Post-Effective Date Default63

F.Amount or Classification of a Claim or Interest May be Subject to Objection63

G.Estimated Claim Amounts by Class May Not be Accurate63

H.Validity of Votes Cast to Accept Plan Not Affected by Contingencies63

Article VI - Federal Income Tax Consequences of the Plan 64

Article VII - Acceptance and Confirmation of the Plan;
Voting Requirements 64

A.Best Interests Test65

B.Financial Feasibility Test65

C.Acceptance by Impaired Classes66

Article VIII - Recommendation and Conclusion 67

EXHIBITS

Accompanying this Disclosure Statement are:

• A copy of the Plan (Exhibit A)

• A copy of the Order approving the Disclosure Statement entered [_________], 2019 [D.I. ___] (Exhibit B)

• Analysis of recoveries under the Plan and a hypothetical liquidation of the Debtors under chapter 7 of the Bankruptcy Code (Exhibit C)

• An organizational chart of the Debtors and certain non-debtor affiliates (Exhibit D)

• A ballot for acceptance or rejection of the Plan for Holders of Impaired Claims entitled to vote to accept or reject the Plan.

• A notice setting forth (i) the deadline for casting ballots either accepting or rejecting the Plan; (ii) the deadline for filing objections to confirmation of the Plan; and (iii) the date, time, and location of the Confirmation Hearing.

Article I
Introduction and Overview

A. Prefatory Statement and Definitions

Under chapter 11 of the United States Code, 11 U.S.C. §§ 101‑1532 (the “Bankruptcy Code”), RAIT Funding, LLC and its Debtor affiliates in the above-captioned chapter 11 cases hereby submit this Disclosure Statement in support of Debtors’ Joint Chapter 11 Plan (the “Plan”).  The definitions contained in the Bankruptcy Code are incorporated herein by this reference.  The definitions set forth in Section 1.1 of the Plan shall also apply to capitalized terms used herein that are not otherwise defined.

B. Introduction

On August 30, 2019 (the “Petition Date”), the Debtors each filed a voluntary petition under chapter 11 of the Bankruptcy Code, thereby commencing the cases jointly administered under case number 19-11915 (the “Chapter 11 Cases”) currently pending before the United States Bankruptcy Court for the District of Delaware (the “Bankruptcy Court”).  Since filing for bankruptcy protection, the Debtors have continued to operate and manage their affairs as debtors in possession under sections 1107 and 1108 of the Bankruptcy Code.

This Disclosure Statement, submitted in accordance with section 1125 of the Bankruptcy Code, contains information regarding the Plan proposed by the Debtors.  A copy of the Plan is attached to this Disclosure Statement as Exhibit A.  This Disclosure Statement is being distributed to you for the purpose of enabling you to make an informed judgment about the Plan.

This Disclosure Statement contains information concerning, among other matters: (1) the Debtors’ background; (2) the assets available for distribution under the Plan; and (3) a summary of the Plan.  The Debtors strongly encourage you to review carefully the contents of this Disclosure Statement and the Plan (including the exhibits to each) before making a decision to accept or reject the Plan.  Particular attention should be paid to the provisions affecting or impairing your rights as a Creditor.

Following a hearing on [_________], 2019, the Bankruptcy Court approved this Disclosure Statement as containing sufficient information to enable a hypothetical reasonable investor to make an informed judgment about the Plan.  A copy of the order approving the Disclosure Statement is attached hereto as Exhibit B (the “Disclosure Statement Order”).  Under section 1125 of the Bankruptcy Code, this approval enabled the Debtor to send you this Disclosure Statement and solicit your acceptance of the Plan.  The Bankruptcy Court has not considered for approval the Plan itself or conducted a detailed investigation into the contents of this Disclosure Statement.

Your vote on the Plan is important.  Absent acceptance of the Plan, there may be protracted delays or a chapter 7 liquidation.  These alternatives may not provide for distribution of as much value to Holders of Allowed Claims as does the Plan.  Accordingly, the Debtors urge you to accept the Plan by completing and returning the enclosed ballot no later than [______], 2019.

C. Disclaimers

THIS DISCLOSURE STATEMENT WAS PREPARED BY THE DEBTORS’ PROFESSIONALS IN CONSULTATION WITH, AND BASED ON INFORMATION PROVIDED BY, THE DEBTORS THROUGHOUT THE CHAPTER 11 CASES AS WELL AS PUBLICLY AVAILABLE INFORMATION. THE DEBTORS ARE SOLELY RESPONSIBLE FOR THE INFORMATION CONTAINED IN THIS DISCLOSURE STATEMENT. THIS DISCLOSURE STATEMENT DOES NOT CONSTITUTE FINANCIAL OR LEGAL ADVICE. CREDITORS OF THE DEBTORS SHOULD CONSULT THEIR OWN ADVISORS IF THEY HAVE QUESTIONS ABOUT THE PLAN OR THIS DISCLOSURE STATEMENT. A REFERENCE IN THIS DISCLOSURE STATEMENT TO A “SECTION” REFERS TO A SECTION OF THIS DISCLOSURE STATEMENT, UNLESS OTHERWISE INDICATED.

WHILE THIS DISCLOSURE STATEMENT DESCRIBES CERTAIN BACKGROUND MATTERS AND THE MATERIAL TERMS OF THE PLAN, IT IS INTENDED AS A SUMMARY DOCUMENT ONLY AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE PLAN AND THE EXHIBITS ATTACHED TO THE PLAN AND THIS DISCLOSURE STATEMENT. SIMILARLY, DESCRIPTIONS IN THIS DISCLOSURE STATEMENT OF PLEADINGS, ORDERS, AND PROCEEDINGS IN THE CHAPTER 11 CASES ARE QUALIFIED IN THEIR ENTIRETY BY REFERENCE TO THE RELEVANT DOCKET ITEMS. YOU SHOULD READ THE PLAN AND THE EXHIBITS TO OBTAIN A FULL UNDERSTANDING OF THEIR PROVISIONS. ADDITIONAL COPIES OF THIS DISCLOSURE STATEMENT AND THE EXHIBITS ATTACHED TO THIS DISCLOSURE STATEMENT, AS WELL AS ANY DOCKET ITEMS FROM THE CHAPTER 11 CASES, ARE AVAILABLE FOR INSPECTION DURING REGULAR BUSINESS HOURS AT THE OFFICE OF THE CLERK OF THE BANKRUPTCY COURT, UNITED STATES BANKRUPTCY COURT FOR THE DISTRICT OF DELAWARE, 3RD FLOOR, 824 MARKET STREET, WILMINGTON, DELAWARE 19801. IN ADDITION, COPIES MAY BE OBTAINED FOR A CHARGE THROUGH DELAWARE DOCUMENT RETRIEVAL, 230 NORTH MARKET STREET, P.O. BOX 27, WILMINGTON, DELAWARE 19801, (302) 658-99 71, OR VIEWED ON THE INTERNET AT THE BANKRUPTCY COURT’S WEBSITE (HTTP://WWW.DEB.USCOURTS.GOV) BY FOLLOWING THE DIRECTIONS FOR ACCESSING THE ECF SYSTEM ON SUCH WEBSITE. COPIES ARE ALSO AVAILABLE FREE OF CHARGE ON EPIQ CORPORATE RESTRUCTURING, LLC’S WEBSITE (HTTPS://DM.EPIQ11.COM/CASE/RTF/INFO).

THE STATEMENTS AND INFORMATION CONCERNING THE DEBTORS AND THE PLAN SET FORTH IN THIS DISCLOSURE STATEMENT CONSTITUTE THE ONLY STATEMENTS OR INFORMATION CONCERNING SUCH MATTERS THAT HAVE BEEN APPROVED BY THE BANKRUPTCY COURT FOR THE PURPOSE OF SOLICITING ACCEPTANCES OR REJECTIONS  OF THE PLAN.  HOWEVER, APPROVAL OF THIS DISCLOSURE STATEMENT BY THE BANKRUPTCY COURT DOES NOT CONSTITUTE A FINDING OF FACT OR CONCLUSION OF LAW BY THE BANKRUPTCY COURT AS TO ANY FACTUAL OR LEGAL ASSERTION MADE BY THE DEBTORS HEREIN, NOR DOES IT MEAN THAT THE BANKRUPTCY COURT AGREES WITH ANY SUCH FACTUAL OR LEGAL ASSERTION MADE BY THE DEBTORS HEREIN, NOR DOES IT MEAN THAT THE BANKRUPTCY COURT RECOMMENDS ACCEPTANCE OR REJECTION OF THE PLAN.

THE STATEMENTS CONTAINED IN THIS DISCLOSURE STATEMENT ARE MADE AS OF THE DATE HEREOF UNLESS ANOTHER TIME IS SPECIFIED HEREIN. NEITHER DELIVERY OF THIS DISCLOSURE STATEMENT NOR ANY EXCHANGE OF RIGHTS MADE IN CONNECTION WITH THE PLAN WILL UNDER ANY CIRCUMSTANCES CREATE AN IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE INFORMATION SET FORTH HEREIN SINCE THE DATE THIS DISCLOSURE STATEMENT AND THE MATERIALS RELIED UPON IN PREPARATION OF THIS DISCLOSURE STATEMENT WERE COMPILED. THE DEBTORS ASSUME NO DUTY TO UPDATE OR SUPPLEMENT THE DISCLOSURES CONTAINED HEREIN AND DO NOT INTEND TO UPDATE OR SUPPLEMENT THE DISCLOSURES, EXCEPT AS PROVIDED HEREIN AND TO THE EXTENT NECESSARY AT THE HEARING ON CONFIRMATION OF THE PLAN.

THIS DISCLOSURE STATEMENT MAY NOT BE RELIED ON FOR ANY PURPOSE OTHER THAN TO DETERMINE WHETHER TO VOTE IN FAVOR OF OR AGAINST THE PLAN. CERTAIN OF THE INFORMATION CONTAINED IN THIS DISCLOSURE STATEMENT IS BY ITS NATURE FORWARD-LOOKING AND CONTAINS ESTIMATES, ASSUMPTIONS AND PROJECTIONS THAT MAY BE MATERIALLY DIFFERENT FROM ACTUAL FUTURE RESULTS, INCLUDING THOSE ESTIMATES OF THE VALUE OF PROPERTY THAT WILL BE DISTRIBUTED TO THE HOLDERS OF CLAIMS, ESTIMATES OF THE PERCENTAGE RECOVERY OF THE VARIOUS TYPES OF CLAIMS, ESTIMATES OF THE AGGREGATE FINAL ALLOWED AMOUNTS OF THE VARIOUS TYPES OF CLAIMS, ESTIMATES OF THE PROCEEDS FROM THE SALE, LIQUIDATION, OR OTHER DISPOSITION OF THE DEBTORS’ ASSETS AND ESTIMATES OF THE EXPENSES THAT WILL BE INCURRED DURING THE ADMINISTRATION OF THE PLAN. THERE CAN BE NO ASSURANCE THAT ANY FORECASTED OR PROJECTED RESULTS CONTAINED HEREIN WILL BE REALIZED. ACTUAL RESULTS MAY VARY FROM THOSE SHOWN HEREIN, POSSIBLY BY MATERIAL AMOUNTS.

D. Plan Overview

The following is a brief overview of the material provisions of the Plan and is qualified in its entirety by reference to the full text of the Plan. The Plan effectuates an orderly liquidation of the Debtors’ assets and maximizes recovery to Creditors. The Plan distributes substantially all of the Debtors’ cash to Holders of Allowed Claims.

The Plan provides that all Holders of Allowed Administrative Claims, Allowed Priority Claims, Allowed Secured Tax Claims, Allowed Senior Note Claims, and Allowed General Unsecured Claims against the Debtors will be paid in full, in cash, up to the Allowed amount of their Claims. Holders of Allowed Other Secured Claims, if any, against the Debtors generally will retain their Liens or receive the benefit of their collateral under the Plan. Holders of Interests will receive no distributions under the Plan.

The Plan proposes to fairly and efficiently liquidate and distribute the Debtors’ assets in a manner that will allow the Chapter 11 Cases to be promptly concluded, with minimal expenses.

The Plan designates a series of Classes of Claims against the Debtors.  Specifically, the Plan designates thirteen (13) Classes of Claims. These Classes take into account the differing nature of the various Claims and their relative priorities under the Bankruptcy Code and applicable non-bankruptcy law.

The following table (the “Plan Summary Table”) summarizes the classification and treatment of Claims (including certain unclassified Claims), along with the projected recoveries for each class.  THE PLAN SUMMARY TABLE IS INTENDED FOR ILLUSTRATIVE PURPOSES ONLY AND DOES NOT ADDRESS ALL ISSUES REGARDING CLASSIFICATION, TREATMENT, AND ULTIMATE RECOVERIES. THE PLAN SUMMARY TABLE IS NOT A SUBSTITUTE FOR A FULL REVIEW OF THIS DISCLOSURE STATEMENT AND THE PLAN IN THEIR ENTIRETY. IN ADDITION, NOTHING HEREIN IS INTENDED, NOR SHOULD IT BE CONSTRUED, AS AN ADMISSION BY THE DEBTORS AS TO THE ESTIMATED OR ALLOWED AMOUNT OF ANY CLAIM OR GROUP THEREOF, OR AS A GUARANTEE OR ASSURANCE OF A PARTICULAR RECOVERY, OR RANGE OF RECOVERIES, ON ANY ALLOWED CLAIM OR GROUP THEREOF. THE DEBTORS RESERVE ALL RIGHTS WITH RESPECT TO THE ESTIMATION AND ALLOWANCE OF CLAIMS.

AMOUNTS LISTED BELOW ARE ESTIMATES.  ALL RECOVERIES ARE APPROXIMATE, AND ACTUAL DISTRIBUTIONS MAY VARY AS A RESULT OF, AMONG OTHER THINGS, THE CLAIM ADJUDICATION PROCESS IN THESE CHAPTER 11 CASES.

Summary of Classification and Treatment of Claims and Interests under the Plan
Class	Description	Estimated Allowed Claim Amounts	Treatment of Allowed Claims and Interests Within Class	Anticipated Recovery2
n/a	Administrative Expense Claims	$6,300,000 to $8,600,000	Paid in full, in Cash either:  (a) on the Effective Date, or as soon as practicable thereafter; (b) if the Administrative Claim is not Allowed as of the Effective Date, no later than 30 days after the date on which an order Allowing such Administrative Claim becomes a Final Order, or as soon as reasonably practicable thereafter; or (c) if the Allowed Administrative Claim is based on liabilities incurred by the Debtors in the ordinary course of their business after the Petition Date, then in accordance with the terms and conditions of the particular transaction giving rise to such Allowed Administrative Claims without any further action by the Holders of such Allowed Administrative Claims.	100%
n/a	Priority Tax Claims	$3,303	Paid in full, in Cash on the Effective Date or as soon as practicable thereafter.	100%
1	Secured Tax Claims	$0	Unimpaired; presumed to accept.  Paid in full, in Cash on the Effective Date or as soon as practicable thereafter.	100%
2	Other Secured Claims	$0	Unimpaired; presumed to accept.  Receive, at the Debtors’ election: (a) payment in Cash in an amount equal to the amount of such Allowed Other Secured Claim; (b) delivery of the collateral securing any such Claim and payment of any interest required under section 506(b) of the Bankruptcy Code; (c) Reinstatement of such Claim; or (d) other treatment rendering such Claim Unimpaired.	100%
3	Other Priority Claims	$0	Unimpaired; presumed to accept.  Paid in full, in Cash on the Effective Date or as soon as practicable thereafter.	100%
4	Senior Note Claims and Senior Note Trustee Claims	$123,394,9723	Unimpaired; presumed to accept.  Paid in full, in Cash on the Effective Date or as soon as practicable thereafter.	100%
5	General Unsecured Claims	$1,500,000 to $3,600,000	Unimpaired; presumed to accept.  Receive, at the Debtors’ election: (a) payment in Cash in an amount equal to the amount of such Allowed General Unsecured Claim; or (b) Reinstatement of such Claim.	100%
6	Subordinated Taberna Note Claims	$18,670,743	Impaired; entitled to vote.  Receive, on or as soon as practicable after the Effective Date, payment in Cash of (i) $12,250,000 from Distribution Proceeds, plus (ii) after receipt by the Holder of the Allowed Subordinated RF Junior Note Claim of an amount equal to $1,750,000 from the Second-Half Sale Transaction Escrow, an amount equal to $250,000 (or such amount as may be available) from the Second-Half Sale Transaction Escrow, plus, subject to the payment in full of the Allowed RAIT Funding Claim Amount, (a) all other Distribution Proceeds, if any, plus (b) any funds, if any, remaining in the Disputed Claims Reserve after all Disputed Claims are Allowed or otherwise resolved, plus (c) any funds remaining in the Wind-Down Reserve.	65% to 66%
7	Subordinated RF Junior Note Claim and RAIT Parent Subordinated Guaranty Claim	$23,750,000	Impaired; entitled to vote.  Receive, on or as soon as practicable after the Effective Date, up to $23,750,000 from (a) the Distribution Proceeds after the Holder of the Subordinated Taberna Note Claim receives $12,250,000 from Distribution Proceeds, plus (b) any funds remaining in the Disputed Claims Reserve after all disputed Claims are Allowed or otherwise resolved, plus (c) all proceeds otherwise payable to the Sellers under the Purchase Agreement of the First-Half Sale Transaction Escrow, plus, (d) all proceeds otherwise payable to the Sellers under the Purchase Agreement of the Second-Half Transaction Escrow up to $1,750,000 on a first-out basis, plus (e) any funds remaining in the Wind-Down Reserve.	46% to 77%
8	Intercompany Claims	None	Unimpaired; presumed to accept.  Reinstated, unless otherwise provided for under the Plan.	None
9	Intercompany Interests	n/a	Unimpaired or fully Impaired; presumed to accept or deemed to reject, as applicable.  At the Debtors’ election, either (a) Reinstated for administrative convenience or (b) canceled and released without any distribution.	None
10	Section 510(b) Claims	None	Unimpaired; presumed to accept.  Receive, at the Debtors’ election: (a) payment in Cash in an amount equal to the amount of such Allowed Section 510(b) Claim; (b) Reinstatement of such Claim; or (C) in accordance with section 510(b) of the Bankruptcy Code, treatment as if such Holder held a number of Allowed Preferred Interests or Common Interests, as applicable, equal in value to the amount of its Allowed Section 510(b) Claim.	100%
11	Preferred Interests in RAIT Financial Trust	n/a	Fully Impaired; deemed to reject.  Canceled, released, and extinguished without any recovery or distribution under the Plan.	None
12	Preferred Interests in Taberna	n/a	Fully Impaired; deemed to reject.  Canceled, released, and extinguished without any recovery or distribution under the Plan.	None
13	Common Interests in RAIT Financial Trust	n/a	Fully Impaired; deemed to reject.  Canceled, released, and extinguished without any recovery or distribution under the Plan.	None

THE TREATMENT AND DISTRIBUTIONS, IF ANY, PROVIDED TO HOLDERS OF ALLOWED CLAIMS UNDER THE PLAN WILL BE IN FULL AND COMPLETE SATISFACTION OF ALL LEGAL, EQUITABLE, OR CONTRACTUAL RIGHTS PRESENTED BY SUCH CLAIMS.

E. Eligibility to Vote

1. Who may Vote

Pursuant to the provisions of the Bankruptcy Code, only classes of claims or interests that are “impaired” under a plan may vote to accept or reject such plan.  Generally, a claim or interest is impaired under a plan if the Holder’s legal, equitable, or contractual rights are changed under such plan.  In addition, if the Holders of claims or interests in an impaired class do not receive or retain any property under a plan on account of such claims or interests, such impaired class is deemed to have rejected the plan under section 1126(g) of the Bankruptcy Code, and, therefore, such Holder do not need to vote on the plan.

With respect to the Plan, a Claim must be “Allowed” for purposes of voting in order for such creditor to have the right to vote. Generally, for voting purposes, a Claim is deemed “Allowed” absent an objection to the Claim if (i) a Proof of Claim was timely filed, or (ii) if no Proof of Claim was filed, the Claim is identified in the Debtors’ Schedules as other than “disputed,”  “contingent,” or “unliquidated,” and an amount of the Claim is specified in the Schedules, in which case the Claim will be deemed Allowed for the specified amount.  In either case, when an objection to a Claim is filed, the Holder of such Claim cannot vote unless the Bankruptcy Court, after notice and hearing, either overrules the objection, or deems the Claim to be Allowed for voting purposes.

In connection with the Plan, therefore:

• Claims in Class 1 (Secured Tax Claims) are unimpaired; accordingly, Holders of such Claims are conclusively presumed to have accepted the Plan and are not entitled to vote to accept or reject the Plan.

• Claims in Class 2 (Other Secured Claims) are unimpaired; accordingly, Holders of such Claims are conclusively presumed to have accepted the Plan and are not entitled to vote to accept or reject the Plan.

• Claims in Classes 3 (Other Priority Claims) are unimpaired; accordingly, Holders of such Claims are conclusively presumed to have accepted the Plan and are not entitled to vote to accept or reject the Plan.

• Claims in Class 4 (Senior Note Claims and Senior Note Trustee Claims) are unimpaired; accordingly, Holders of such Claims are conclusively presumed to have accepted the Plan and are not entitled to vote to accept or reject the Plan.

• Claims in Class 5 (General Unsecured Claims) are unimpaired; accordingly, Holders of such Claims are conclusively presumed to have accepted the Plan and are not entitled to vote to accept or reject the Plan.

• The Claims in Class 6 (Subordinated Taberna Note Claims) are impaired; accordingly, the Holder of such Claims is entitled to vote to accept or reject the Plan.

• Claims in Class 7 (Subordinated RF Junior Note Claim and RAIT Parent Subordinated Guaranty Claim) are impaired; accordingly, the Holder of such Claims is entitled to vote to accept or reject the Plan.

• Claims in Class 8 (Intercompany Claims) are unimpaired; accordingly, Holders of such Claims are conclusively presumed to have accepted the Plan and are not entitled to vote to accept or reject the Plan.

• Claims in Class 9 (Intercompany Interests) are either (a) unimpaired, in which case Holders of such Claims are conclusively presumed to have accepted the Plan, or (b) fully impaired, in which case Holders of such Claims are deemed to reject the Plan; accordingly, Holders of such Interests are not entitled to vote to accept or reject the Plan.

• Claims in Class 10 (Section 510(b) Claims) are unimpaired; accordingly, Holders of such Claims are conclusively presumed to have accepted the Plan and are not entitled to vote to accept or reject the Plan.

• Claims in Class 11 (Preferred Interests in RAIT Financial Trust) are fully impaired; accordingly, Holders of such Claims are deemed to reject the Plan and are not entitled to vote to accept or reject the Plan.

• Claims in Class 12 (Preferred Interests in Taberna) are fully impaired; accordingly, Holders of such Claims are deemed to reject the Plan and are not entitled to vote to accept or reject the Plan.

• Claims in Class 13 (Common Interests) are fully impaired; accordingly, Holders of such Claims are deemed to reject the Plan and are not entitled to vote to accept or reject the Plan.

The Bankruptcy Code defines “acceptance” of a plan by (a) a class of claims as acceptance by creditors in that class that hold at least two-thirds in dollar amount and more than one-half in number of the claims that cast ballots for acceptance or rejection of the plan and (b) a class of interests as acceptance by Holders in the class that hold at least two-thirds of the number of interests that cast ballots for acceptance or rejection of the plan.  Your vote on the Plan is important.  The Bankruptcy Code requires as a condition to confirmation of a plan of reorganization that each class that is impaired and entitled to vote under a plan vote to accept such plan, unless the provisions of Section 1129(b) of the Bankruptcy Code are met.  In view of the deemed rejection of the Plan by Classes 9, 11, 12 and 13, the Debtors will request confirmation of the Plan pursuant to Section 1129(b) of the Bankruptcy Code as to such Classes, as well as with respect to any Class of Claims entitled to vote on the Plan that rejects the Plan. Section 1129(b) of the Bankruptcy Code permits the confirmation of a plan of reorganization notwithstanding the non­ acceptance of a plan by one or more impaired classes of claims or equity interests, so long as at least one impaired class of claims or interests votes to accept the plan.  Under that section, a plan may be confirmed by a bankruptcy court if it does not “discriminate unfairly” and is “fair and equitable” with respect to each non-accepting class.

2. How to Vote

If you are entitled to vote to accept or reject the Plan, a Ballot is enclosed for the purpose of voting on the Plan. This Disclosure Statement, the Exhibits attached hereto, the documents incorporated herein by reference, the Plan, and the related documents are the only materials the Debtors are providing to creditors for their use in determining whether to vote to accept or reject the Plan, and such materials may not be relied upon or used for any purpose other than to vote to accept or reject the Plan. Unless otherwise directed in your solicitation package, mail your completed Ballot(s) to the Debtors’ claims, noticing and balloting agent (the “Balloting Agent”) at the address below:

RAIT - Ballot Processing
c/o Epiq Corporate Restructuring LLC
10300 SW Allen Boulevard
Beaverton, OR 97005

BALLOTS MUST BE COMPLETED AND RECEIVED NO LATER THAN THE VOTING DEADLINE OF 4:00 P.M. (PREVAILING EASTERN TIME) ON [______], 2019.  ANY BALLOT THAT IS NOT EXECUTED BY A DULY AUTHORIZED PERSON WILL NOT BE COUNTED.  ANY BALLOT THAT IS EXECUTED BY THE HOLDER OF AN ALLOWED CLAIM BUT THAT DOES NOT INDICATE AN ACCEPTANCE OR REJECTION OF THE PLAN WILL NOT BE COUNTED. FACSIMILE, EMAIL OR ELECTRONICALLY TRANSMITTED BALLOTS WILL NOT BE ACCEPTED. IF A HOLDER OF A CLAIM SHOULD CAST MORE THAN ONE BALLOT VOTING THE SAME CLAIM PRIOR TO THE VOTING DEADLINE, ONLY THE LAST-DATED TIMELY BALLOT RECEIVED BY THE BALLOTING AGENT WILL BE COUNTED. ADDITIONALLY, YOU MAY NOT SPLIT YOUR VOTES FOR YOUR CLAIMS WITHIN A PARTICULAR CLASS UNDER THE PLAN EITHER TO ACCEPT OR REJECT THE PLAN. THEREFORE, A BALLOT OR A GROUP OF BALLOTS WITHIN A PLAN CLASS RECEIVED FROM A SINGLE CREDITOR THAT PARTIALLY REJECTS AND PARTIALLY ACCEPTS THE PLAN WILL NOT BE COUNTED.

Pursuant to the Disclosure Statement Order, the Bankruptcy Court has fixed 4:00 p.m. (prevailing Eastern Time) on [________], 2019 (the “Voting Record Date”) as the time and date for the determination of Persons who are entitled to receive a copy of this Disclosure Statement and all of the related materials and to vote whether to accept or reject the Plan.  Accordingly, only Holders of record of Claims as of the Voting Record Date that are entitled to vote on the Plan, will receive a Ballot and may vote on the Plan.

Unless the Bankruptcy Court permits you to do so after notice and hearing to determine whether sufficient cause exists to permit the change, you may not change your vote after the voting deadline passes.  DO NOT RETURN ANY DEBT INSTRUMENTS OR OTHER SECURITIES WITH YOUR BALLOT.  DO NOT RETURN BALLOTS TO THE BANKRUPTCY COURT.

IF YOU BELIEVE THAT YOU ARE A HOLDER OF A CLAIM IN A VOTING CLASS FOR WHICH YOU DID NOT RECEIVE A BALLOT, IF YOUR BALLOT IS DAMAGED OR LOST, OR IF YOU HAVE QUESTIONS CONCERNING VOTING PROCEDURES, PLEASE CONTACT EPIQ CORPORATE RESTRUCTURING, LLC AT  (855) 940-0841.  PLEASE NOTE THAT EPIQ CORPORATE RESTRUCTURING CANNOT PROVIDE YOU WITH LEGAL ADVICE.

If you did not receive a Ballot and believe that you are entitled to vote on the Plan, you must either (a) obtain a Ballot by contacting the Balloting Agent as set forth above and timely submit such Ballot by the Voting Deadline, or (b) file a Motion pursuant to Rule 3018 of the Bankruptcy Rules with the Bankruptcy Court for the temporary allowance of your Claim for voting purposes by [___________] at 4:00 p.m. (prevailing Eastern Time), or you will not be entitled to vote to accept or reject the Plan.

All properly completed Ballots received prior to the Voting Deadline from Holders of a Claim that are entitled to vote on the Plan will be counted for purposes of determining whether a voting Class of Impaired Claims has accepted the Plan. The Balloting Agent will prepare and file with the Bankruptcy Court a certification of the results of the balloting with respect to the Classes entitled to vote.

HOLDERS OF CLAIMS VOTING TO ACCEPT OR REJECT THE PLAN, WHO DID NOT EXERCISE THE OPT-OUT PROVISION INCLUDED ON THE BALLOT, WILL BE DEEMED TO HAVE GRANTED THE THIRD-PARTY RELEASES PROVIDED FOR IN SECTION 9.5 OF THE PLAN AND DESCRIBED BELOW.  HOLDERS WHO DO NOT DESIRE TO GRANT THE THIRD-PARTY RELEASE SHOULD GOVERN THEMSELVES ACCORDINGLY.

The Debtors reserve the right to object to any Proof of Claim after the Voting Record Date. With respect to any such objection, the Debtors may request, on notice, that any vote cast by the Holder of the subject claim not be counted in determining whether the requirements of Section 1126(c) of the Bankruptcy Code have been met. In the absence of any such request, the Holder of the subject claim will be entitled to vote or receive notice, as applicable under the Disclosure Statement Order, in accordance with its Proof of Claim.

Nothing in the solicitation procedures affects the right of the Debtors or the Reorganized Debtors to object to any Proof of Claim on any ground or for any purpose prior to the applicable Claims Objection Deadline established by the Plan.

3. Importance of Your Vote

YOUR VOTE IS IMPORTANT. ONLY THOSE CREDITORS WHO ACTUALLY VOTE ARE COUNTED FOR PURPOSES OF DETERMINING WHETHER A CLASS HAS VOTED TO ACCEPT THE PLAN.  YOUR FAILURE TO VOTE WILL LEAVE TO OTHERS THE DECISION TO ACCEPT OR REJECT THE PLAN.

THE DEBTORS [AND THE CREDITORS COMMITTEE] BELIEVE THAT CONFIRMATION OF THE PLAN IS IN THE BEST INTERESTS OF ALL HOLDERS OF CLAIMS AND RECOMMEND THAT ALL HOLDERS OF CLAIMS ENTITLED TO VOTE ON THE PLAN VOTE TO ACCEPT THE PLAN.

F. Special Notice of Third-Party Releases

THE PLAN PROVIDES THAT EACH HOLDER OF A CLAIM WHO VOTES TO ACCEPT OR REJECT THE PLAN AND DOES NOT EXERCISE THE OPT-OUT PROVISION INCLUDED ON THE BALLOT WILL BE DEEMED TO HAVE CONSENTED TO THE THIRD-PARTY RELEASE PROVISION DISCUSSED IN ARTICLE III(I)(5) BELOW.

Parties who do not desire to grant releases in favor of the Released Parties should govern themselves accordingly by exercising the opt-out provision on the Ballot.

G. The Confirmation Hearing

Section 1128(a) of the Bankruptcy Code requires the Bankruptcy Court, after notice, to hold a hearing on confirmation of the Plan.  Section 1128(b) of the Bankruptcy Code provides that any party in interest may object to confirmation of the Plan.

1. Time and Place of Confirmation Hearing

Pursuant to Section 1128 of the Bankruptcy Code and Rule 3017(c) of the Bankruptcy Rules, the Bankruptcy Court has scheduled the Confirmation Hearing to commence on [_________], 2019, at [_____].m. (prevailing Eastern Time) before the Honorable Brendan Linehan Shannon, of the United States Bankruptcy Court for the District of Delaware, 824 North Market Street, 6th Floor, Courtroom No. 1, Wilmington, Delaware 19801. A notice setting forth the time and date of the Confirmation Hearing has been included along with this Disclosure Statement.

2. Objections to the Plan

Any objection to confirmation of the Plan must be in writing; must comply with the Bankruptcy Code, Bankruptcy Rules, and the Local Rules of the Bankruptcy Court; and must be filed with the United States Bankruptcy Court for the District of Delaware, and served upon he following parties, so as to be received no later than [________], 2019, at 4:00 p.m. (prevailing Eastern Time): (a) Patrick A. Jackson and Joseph N. Argentina, Drinker Biddle & Reath LLP. 222 Delaware Avenue, Suite 1410, Wilmington, DE 19801 & Michael P. Pompeo and Brian P. Morgan, Drinker Biddle & Reath LLP, 1177 Avenue of the Americas, 41st Floor, New York, NY 10036-2714 (proposed counsel for the Debtors); (b) G. David Dean, Patrick J. Reilley, Katherine M. Devanney, Cole Schotz P.C., 500 Delaware Avenue, Suite 1410, Wilmington, DE 19801 & Douglas Mannal, Stephen D. Zide, and Jennifer Sharret,  Kramer Levin Naftalis & Frankel LLP, 1177 Avenue of the Americas,  New York, NY 10036 (proposed counsel for the Creditors Committee); and (c) Richard Schepacarter, 844 King Street, Room 2207; Lockbox #35; Wilmington, DE 19899-0035.

FOR THE REASONS SET FORTH BELOW, THE DEBTORS URGE YOU TO RETURN YOUR BALLOT TO “ACCEPT” THE PLAN.

Article II
Background of the Debtors and Chapter 11 Cases

A. Overview of the RAIT Enterprise

RAIT Financial Trust (collectively with its Debtor and non-debtor affiliates, “RAIT”) is an internally-managed real estate investment trust (“REIT”) that, until February 2018, focused primarily on providing debt financing options to owners of commercial real estate (“CRE”) throughout the United States.  RAIT also owns a portfolio of CRE properties located throughout the United States.  From its formation in 1997, RAIT had built a reputation for consistently executing efficiently with commercial real estate borrowers and their intermediaries by maximizing its experience in commercial real estate, deal structuring, and structured finance to deliver effective property-level financing solutions.  RAIT worked closely with its commercial real estate borrowers to meet their financing objectives, utilizing its in-house commercial real estate lending platform to originate, underwrite, close and service quality lending opportunities.  These directly originated opportunities were vetted through RAIT’s credit and risk management processes.  The loans RAIT made were secured by income-producing properties, including apartment, office and light-industrial properties and neighborhood retail centers.

Starting in early 2018, in response to certain recommendations of a special committee of the Board of Trustees of RAIT Financial Trust (the “Board”) (as further set forth in Part II) and in an effort to increase liquidity and better position RAIT to meet its financial obligations, RAIT made changes to its business operations, including the suspension of new investment opportunities and its loan origination business and the sale of a portion of its owned real estate and loan portfolio.  Following these changes, RAIT remains an internally-managed REIT and continues to conduct its business through its one reportable segment—i.e., its real estate lending, owning, and managing segment, which is concentrated on lending, and owning and managing RAIT’s commercial real estate assets.

B. Corporate Structure

RAIT Financial Trust is a Maryland REIT.  It owns 100% of the equity of Debtors RAIT General, Inc. and RAIT Limited, Inc., both Maryland corporations (“RAIT General” and “RAIT Limited,” respectively), which in turn are (i) the 1% general and 99% limited partner, respectively, of non-debtor RAIT Partnership, L.P. (“RAIT Partnership”) and (ii) the 1% and 99% members, respectively, of non-debtor RAIT Asset Holdings, LLC (“RAIT Asset Holdings”).⁴  RAIT Financial Trust also owns 100% of the common stock and approximately 82.76% of the preferred stock⁵ of Debtor Taberna Realty Finance Trust (“Taberna”), a Maryland REIT.

RAIT Asset Holdings owns a 90% membership interest in, and Taberna owns a 10% membership interest in, Debtor RAIT JV TRS, LLC, a Delaware limited liability company (“RAIT JV TRS”), which in turn is the sole member of Debtor RAIT JV TRS Sub, LLC, a Delaware limited liability company (“RAIT JV TRS Sub”).

An organizational chart of the Debtors and certain of their non-debtor subsidiaries is attached as Exhibit D hereto.  As shown on the chart, (i) Debtor Taberna has two active and seven inactive, wholly and directly owned non-debtor subsidiaries; (ii) Debtor RAIT Funding has one active and four inactive, wholly and directly owned non-debtor subsidiaries; (iii) Debtor RAIT JV TRS Sub has one active and two inactive, wholly and directly owned non-debtor subsidiaries (not including RAIT Funding’s subsidiaries); and (iv) non-debtor RAIT Partnership has approximately 25 active wholly and directly owned non-debtor subsidiaries and 35 indirectly owned non-debtor subsidiaries.⁶

C. Debtors’ Capital Structure and Principal Indebtedness

RAIT Financial Trust and certain of its Debtor and non-debtor affiliates maintain various forms of short-term and long-term financing arrangements.  Certain of these financing arrangements are collateralized by assets within securitizations, which are generally without recourse to the Debtor entities or their property.  Certain of these financing arrangements are with recourse to the applicable Debtor entity or entities.  The principal recourse indebtedness of the applicable Debtor entities as of the Petition Date, as well as any equity securities held by non-affiliated third parties, is described below.

(i) RAIT Financial Trust

On April 14, 2014, RAIT Financial Trust issued 7.625% senior notes with a maturity date of April 15, 2024 (the “7.625% Senior Notes”).  The 7.625% Senior Notes were issued pursuant to that certain Second Supplemental Indenture dated April 14, 2014 (the “Second Indenture”), by and between RAIT Financial Trust, as issuer, and Wells Fargo Bank, National Association (“Wells Fargo”), as trustee.  The Second Indenture supplemented the Indenture dated December 10, 2013, by and between RAIT Financial Trust and Wells Fargo. Interest on the 7.625% Senior Notes is payable quarterly on January 15, April 15, July 15, and October 15.  As of the Petition Date, approximately $56,324,125 of the 7.625% Senior Notes remain outstanding.  The 7.625% Senior Notes are publicly held and currently trade on the Pink Open Market of the OTC Markets Group (“OTCPK”) under the symbol “RFTTQ.”

On August 14, 2014, RAIT Financial Trust issued 7.125% senior notes with a maturity date of August 30, 2019 (the “7.125% Senior Notes” and, together with the 7.625% Senior Notes, the “Senior Notes”).  The 7.125% Senior Notes are publicly held and were issued pursuant to that certain Third Supplemental Indenture dated August 14, 2014 (“Third Supplemental Indenture”), by and between RAIT Financial Trust, as issuer, and Wells Fargo, as trustee.  The Third Supplemental Indenture supplemented the Indenture dated December 10, 2013, as amended, by and between RAIT Financial Trust and Wells Fargo.  Interest on the 7.125% Senior Notes is payable quarterly on February 28, May 30, August 30, and November 30.  As of the Petition Date, approximately $65,536,175 of the 7.125% Senior Notes remain outstanding.  The 7.125% Senior Notes are publicly held and currently trade on OTCPK under the symbol “RFTZQ.”

RAIT Financial Trust is the (i) subordinated guarantor of 100% of the Subordinated RF Junior Note (as defined below) pursuant to that certain Parent Guarantee Agreement between RAIT Financial Trust and The Bank of New York Trust Company, N.A. dated as of February 12, 2007, and (ii) the guarantor of 30% of the outstanding principal balance,⁷ plus all collection costs, of a certain Mortgage Note issued to Liberty Bank by non-debtors Executive Mews Phase 2 and 4 Associates, LLC and Pine Tree Plaza LLC (the “Liberty Bank Borrowers”), for which RAIT Financial Trust has also issued a guaranty of non-recourse carve-outs (e.g., in the event of fraud and other customary “bad boy acts” on the part of the borrower or guarantor).⁸

RAIT Financial Trust has three classes of preferred stock issued and outstanding, which share pari passu in the event of a liquidation, namely: (i) 7.75% Series A cumulative redeemable preferred shares ($143,187,500 liquidation value); (ii) 8.375% Series B cumulative redeemable preferred shares ($62,719,925 liquidation value); and (iii) 8.875% Series C cumulative redeemable preferred shares ($43,950,750 liquidation value) (collectively, the “RAIT Preferred Stock”).  The Series A, B, and C RAIT Preferred Stock is publicly held and currently trades on OTCPK under the symbols “RASGQ,” “RASLQ,” and “RASLQ,” respectively.  RAIT Financial Trust also has common stock, which is publicly held and junior in right of distribution to the RAIT Preferred Stock.  This common stock currently trades on OTCPK under the symbol “RASFQ.”

(ii) Taberna

On October 25, 2010, Taberna issued a junior subordinated note in the amount of $18,670,743, with a maturity date of March 30, 2035 (the “Subordinated Taberna Junior Note”).  At issuance, the “fair value” option was elected for this note under FASB ASC Topic 825, which requires the note to be measured at fair value on a recurring basis with all changes in fair value recorded in earnings.⁹  The Subordinated Taberna Junior Note was issued pursuant to that certain Junior Subordinated Indenture by and between Taberna and Wells Fargo, as trustee. The Subordinated Taberna Junior Note is secured by a pledge of Taberna’s interest in the Class F, Class G, and Class H Notes issued by RAIT CRE CDO I, Ltd.  The Subordinated Taberna Junior Note is held by Taberna Preferred Funding I, Ltd., an exempt company under the laws of the Cayman Islands (“TPF”). TP Management LLC (“TPF Collateral Manager”) is the delegate collateral manager for TPF pursuant to that certain Delegation Agreement, dated as of December 14, 2014, as amended or supplemented from time to time (the “Delegation Agreement”).  As of the Petition Date, the outstanding balance of the Subordinated Taberna Junior Note is approximately $18,670,743.

Taberna has one class of preferred stock issued and outstanding, namely: 12.5% Series A cumulative non-voting preferred stock (the “Taberna Preferred Stock”), 82.76% of which is held by RAIT Financial Trust, with the balance held by unaffiliated third-party investors.  Taberna also has common stock, which is held 100% by RAIT Financial Trust.

(iii) RAIT Funding

RAIT Funding and The Bank of New York Trust Company, National Association, in its capacity as Trustee (“Subordinated RF Junior Note Indenture Trustee”), are party to that certain Junior Subordinated Indenture dated as of February 12, 2007 (the “RF Note Indenture”), pursuant to which RAIT Funding issued that certain Junior Subordinated Note due 2037 in the principal sum of twenty-five million one hundred thousand dollars ($25,100,000) (the “Subordinated RF Junior Note” and, together with the Subordinated Taberna Junior Note, the “Junior Subordinated Notes”) to The Bank of New York Trust Company, National Association, in its capacity as Property Trustee under the Trust Agreement (as defined below) (“Property Trustee”).  The Subordinated RF Junior Note is guaranteed by RAIT Financial Trust on a subordinated basis pursuant to that certain Parent Guarantee Agreement dated as of February 12, 2007 (the “RAIT Subordinated Guarantee Agreement”), between RAIT Financial Trust and The Bank of New York Trust Company, National Association.  As of the Petition Date, the outstanding balance of the Subordinated RF Junior Note is approximately $25,100,000.

RAIT Funding and the Property Trustee, together with The Bank of New York (Delaware), in its capacity as Delaware Trustee, and certain individuals, are parties to that certain Amended and Restated Trust Agreement dated February 12, 2007 (the “RF Trust Agreement”), which provided for the issuance and sale of certain undivided preferred beneficial interests (the “TRuPs”) by Taberna Funding Capital Trust I, a Delaware statutory trust (the “TFC Trust”), the proceeds of which sale were used by TFC Trust to acquire the Subordinated RF Junior Note.  Kodiak CDO I, Ltd. (“Kodiak”) is the owner of all of the TRuPs and EJF CDO Manager LLC, is the designated collateral manager for Kodiak (the “Kodiak Collateral Manager”).

D. Summary of Assets and Liabilities

1. Debtors’ Principal Assets

The Debtors’ principal assets consist of their equity interests in their respective Debtor and non-debtor affiliates.  Other material assets of the Debtors are described below.¹⁰

(i) RAIT Financial Trust

RAIT Financial Trust’s other assets include (a) cash on hand as of the Petition Date of approximately $31,000,000, (b) certain tax attributes (including federal and state net operating loss carryforward deductions), and (c) rights under certain contracts (including customary insurance policies).

(ii) Taberna

Taberna’s other assets include (a) cash on hand as of the Petition Date of approximately $8,600,000, (b) a senior participation interest in a commercial mortgage loan, (c) Class F, G, and H Note holdings in the RAIT I (as defined below) securitization, and (d) certain tax attributes (including accrued capital losses).

(iii) RAIT JV TRS Sub

RAIT JV TRS Sub’s other assets include (a) certain tax attributes (including federal, state, and local net operating loss carryforward deductions and accrued capital losses), and (b) a $532,935 income-tax-related asset on account of a federal alternative-minimum-tax credit.

2. Principal Assets of Non-Debtor Affiliates

The assets of the Debtors’ non-debtor affiliates consist primarily of (i) cash, (ii) securities issued by, and residual equity interests in, three securitization transactions (“RAIT I,” “RAIT FL7,” and “RAIT FL8,” as discussed further below), (iii) interests in CRE mortgage loans, mezzanine loans, and preferred equity interests, and (iv) real estate owned (“REO”).

(i) Interests in Securitizations¹¹

RAIT I.  The RAIT I securitization closed in 2006 and is collateralized by $176.7 million principal amount of CRE loans and participations, of which $32.8 million is defaulted.  Debtor Taberna currently owns $24 million of the securities, at par value, that were originally rated investment grade issued by this securitization, which, as noted above, are pledged as collateral for the Subordinated Taberna Junior Note.  Non-debtor RAIT Preferred Holdings I, LLC, currently owns $15.04 million of the securities, at par value, that were originally rated investment grade, and $201.2 million of the non-investment grade securities and equity, at par value, issued by this securitization.

RAIT FL7.  The RAIT FL7 securitization closed in 2017, and it has $184.4 million of total collateral at par value, none of which is in default.  RAIT FL7 has classes of investment-grade senior notes with an aggregate principal balance outstanding of approximately $119.4 million to investors.  Non-debtors RAIT FL Asset Holdings, LLC and RAIT 2017-FL7, LLC currently own the less-than-investment-grade classes of notes with an aggregate principal balance of $65.5 million, and the equity, or the retained interests, of RAIT FL7.

RAIT FL8.  The RAIT FL8 securitization also closed in 2017, and it has $116.3 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 $72.1 million to investors.  Non-debtor RAIT 2017-FL8, LLC currently owns the less-than-investment-grade classes of notes 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 the foregoing securitizations as of the most recent payment date:¹²

(ii) CRE Lending

RAIT’s CRE lending platform previously focused on the origination of first lien loans, with some offerings of mezzanine loans and preferred equity interests in limited circumstances to support first lien loans.  RAIT’s 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.  RAIT generates a return on its preferred equity investments primarily through distributions to it at a fixed rate and the periodic payment of distributions are subject to there being sufficient net cash flow from the underlying real estate to make such payments.  RAIT 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.  RAIT’s CRE loans are in most cases non-recourse or limited-recourse loans secured by CRE assets or real estate entities.  This means that RAIT looks primarily to the assets securing the loan for repayment, subject to certain standard exceptions.  Where possible, RAIT sought to maintain direct lending relationships with borrowers, as opposed to investing in loans controlled by third-party lenders.

The table below describes certain characteristics of RAIT’s held-for-investment commercial mortgage loans, mezzanine loans, and preferred equity interests as of June 30, 2019 (dollars in thousands):¹³

The charts below describe the property types and the geographic breakdown of the CRE properties securing RAIT’s held-for-investment commercial mortgage loans, mezzanine loans, and preferred equity interests as of June 30, 2019:

(iii) REO Properties

In the course of owning and/or servicing mortgage loans and exercising default remedies, RAIT from time to time obtains ownership of collateral real estate properties, which become REO.  RAIT’s REO is classified as either “held and used” or “held for sale” in accordance with FASB ASC Topic 360.  The table below describes certain characteristics of RAIT’s held-and-used REO portfolio as of June 30, 2019 (dollars in thousands):¹⁴

The charts below describe the property types and the geographic breakdown of RAIT’s investments in REO as of June 30, 2019:

(iv) Loan Servicing Rights

RAIT Partnership serves as collateral manager, servicer, and/or special servicer to the securitizations it consolidates.  The loan servicing platform generates revenue for RAIT, provides additional oversight and information regarding the assets RAIT finances, and helps to maximize the value of RAIT’s REO.

E. Events Leading to Debtors’ Chapter 11 Filing

1. The 2017 Strategic Plan and Initial Process

As a result of the 2008-2009 financial crisis, ongoing market conditions, and other factors, RAIT incurred approximately $1.468 billion in losses between 2008 and 2018 through mortgage write-offs, asset write-downs, and losses on the sale of assets.

To fund its business during that period, RAIT issued convertible notes, senior notes, preferred stock, and common stock as follows:

2010:$18.7 million junior subordinated note at fair value;¹⁵

2011:$115 million in 7.0% convertible senior notes;¹⁶
$100 million in senior secured notes;¹⁷

2012:$100 million Series D preferred stock;¹⁸

2013:$125 million in 4.0% convertible senior notes;¹⁹

2014:$60 million in 7.625% Senior Notes; and
$72 million in 7.125% Senior Notes.

2012‑2016:$54 million in net proceeds from Series A, Series B, and Series C preferred stock issued through RAIT Financial Trust’s preferred ATM programs.

2012‑2017:$321 million in net proceeds from common stock issued in public offerings, through RAIT Financial Trust’s Capital on Demand program, and through RAIT Financial Trust’s Dividend Reinvestment and Share Purchase Plan program.

During 2016 and 2017, RAIT sold or divested $737.2 million of its property portfolio and reduced related indebtedness by approximately $652.0 million, as part of a plan to transition to a monoline commercial lending business model.

On September 7, 2017, RAIT Financial Trust announced that its Board had formed a committee of independent trustees (the “Special Committee”) to explore and evaluate strategic and financial alternatives to enhance stockholder value and capitalize on RAIT’s established and respected CRE lending platform and noted that such alternatives may include, 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 (the “Strategic Plan”).  RAIT engaged UBS Securities LLC (“UBS”) and Barclays Capital Inc. (“Barclays,” and together with UBS, the “Advisors”) to assist it in conducting a comprehensive evaluation of potential alternative transactions (the “Initial Process”).  The Initial Process was designed to solicit proposals for a broad range of potential transactions, including a sale of all or part of RAIT or a recapitalization.

During the Initial Process, RAIT and its Advisors contacted 84 potential buyers and investors, 33 of whom signed non-disclosure agreements.  On October 27, 2017, first-round bids were due; eight (8) potential counterparties submitted first-round bids on or shortly after this date.  On November 29, 2017, two counterparties submitted second-round proposals.

RAIT granted a 44-day exclusivity period to one of the second-round counterparties.  During the exclusivity period and for a period thereafter, the Advisors worked with the Special Committee and RAIT’s management team to provide due diligence information and financial projections to, and exchange and negotiate transaction documents with, this second-round counterparty.

On February 14, 2018, the counterparty notified RAIT that it would not consummate the transaction as contemplated.  Thereafter, RAIT and its Advisors solicited a revised proposal from the other second-round counterparty; however, that counterparty was not prepared to complete a transaction that was structurally agreeable to RAIT.

In and around this same time, RAIT Financial Trust faced a potential delisting by the New York Stock Exchange (“NYSE”) because the share price for its common stock was trading at levels approaching what the NYSE had considered to be “abnormally low” and could have resulted in RAIT’s market capitalization falling below the NYSE market capitalization standards.  A delisting would have triggered defaults and cross-defaults across RAIT Financial Trust’s capital structure.²⁰

On February 20, 2018, RAIT announced that the Special Committee had concluded its review pursuant to the Initial Process.  The Board determined that this review did not identify a suitable strategic or financial transaction with a counterparty, or otherwise.  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 its liquidity and better position RAIT to meet its financial obligations as they come due and to continue operating as a going concern.  These steps included, but were not limited to:

• The suspension of RAIT’s loan origination business along with the implementation of other steps to reduce costs within its other operating businesses;

• The continuation of the process of selling RAIT’s property portfolio while servicing and managing RAIT’s existing CRE loan portfolio;

• The reduction of RAIT’s outstanding indebtedness, with overall indebtedness declining by 54.7% during the 2018 fiscal year;

• The monetization of a portion of RAIT’s loans and real estate assets, which monetization included the sale of loans, sale of real estate assets and repayment of loans;

• The sale of Urban Retail Properties, LLC, the entity through which RAIT provided property management services to office and retail properties;

• The down-sizing of the Board and executive suite;

• The implementation of a reduction in force of certain RAIT employees determined to be non-essential to RAIT’s implementation of these strategic steps, which contributed to a reduced run rate of base compensation expenses from approximately $2.5 million per quarter as of December 31, 2017, to approximately $1.4 million per quarter subsequent to the reduction in force;

• The continued position of the Board not to declare any dividends on RAIT Financial Trust’s outstanding common shares; and

• The engagement of a financial advisor focused on and with expertise in restructuring, to assist and advise RAIT Financial Trust during this process.

2. The 2018 Marketing Process

During the second half of 2018, RAIT reinitiated the process of evaluating strategic and financial alternatives.  In the summer and fall of 2018, on its own, RAIT solicited meetings and proposals from nine potential counterparties that were either identified during the Initial Process or, subsequently expressed interest directly to RAIT or through RAIT’s advisors.  In late October and early November 2018, RAIT received five (5) preliminary proposals from four (4) of the counterparties.  In November 2018, RAIT re-engaged UBS as an advisor, to continue the marketing process pursuant to a new engagement letter dated as of November 26, 2018.

UBS engaged with the counterparties that had formerly been identified and had submitted proposals.  UBS also expanded the outreach soliciting five additional counterparties.  UBS and RAIT set a bid date of January 23, 2019, for all interested parties to submit best and final proposals, and worked with the interested parties on their respective diligence processes leading up to the bid date.  Four proposals were received and the Board, after considering the recommendations and advice of RAIT’s management and its legal and financial advisors, determined that RAIT should select the proposal submitted by Fortress Credit Advisors LLC (“FCA”), on behalf of certain funds and/or accounts managed by it or its affiliates, as the highest and best proposal. This proposal was deemed the most attractive in terms of value, form of consideration, and lack of execution risk.

3. The Purchase Agreement with Fortress

After the selection of FCA’s as the highest and best proposal, RAIT and FCA, on behalf of certain funds and/or accounts managed by it or its affiliates, entered into negotiations regarding the proposed structure and terms for the acquisition of RAIT.  On March 6, 2019, RAIT and FCA entered into a non-binding term sheet (the “Term Sheet”), which set forth the general terms for the acquisition by which certain funds and/or accounts managed by affiliates of Fortress Investment Group LLC (“Fortress”) would purchase all of the reorganized equity interests of RAIT Financial Trust.

After the execution of the Term Sheet, Fortress conducted approximately six to eight weeks of extensive due diligence regarding all of the RAIT entities and assets, and the parties spent approximately six months engaged in lengthy negotiations regarding the structure of the transaction and the proposed terms and conditions of, among other things, a definitive equity and asset purchase agreement and form bidding procedures to be used for the contemplated Bankruptcy Court-approved auction and sale process.

As a result of this diligence and negotiations, the proposed structure of the transaction was changed from a purchase of reorganized equity in RAIT Financial Trust to a purchase of all of the equity interests of RAIT Financial Trust’s non-debtor subsidiary RAIT Partnership, together with certain other assets, in a sale under section 363 of the Bankruptcy Code.  Under the revised structure, RAIT Financial Trust and certain of its other excluded subsidiaries would not be sold to Fortress, but would be wound down via a chapter 11 plan of liquidation.

On August 30, 2019, Debtors RAIT Financial Trust, RAIT General, RAIT Limited, and Taberna (collectively, the “Debtor Sellers”) and CF RFP Holdings LLC, an entity owned by funds managed by affiliates of Fortress (the “Stalking Horse Purchaser”), entered into a certain Equity and Asset Purchase Agreement (as thereafter amended, the “Stalking Horse Purchase Agreement”), pursuant to which the Stalking Horse Purchaser will acquire, directly or indirectly (including through one or more of Stalking Horse Purchaser’s affiliates), (i) from RAIT General and RAIT Limited the general partner and limited partner interests (the “RAIT Interests”) in RAIT Partnership, as a result of which the Stalking Horse Purchaser (or one or more of its affiliates) will indirectly acquire the equity interests held by RAIT Partnership in certain of its subsidiaries (as set forth in the Stalking Horse Agreement) and (ii) certain assets owned by certain of the Debtors ((i) and (ii), collectively, the “Purchased Assets”) for the cash purchase price of approximately $174.4 million, subject to certain adjustments set forth in the Stalking Horse Purchase Agreement and subject to higher and better offers pursuant to a Bankruptcy Court-approved auction and sale process, free and clear of all liens, claims, encumbrances and interests (the “Sale Transaction”).

4. Negotiations Regarding the Junior Subordinated Notes

Prior to the Petition Date, while RAIT was negotiating the definitive Stalking Horse Purchase Agreement, RAIT was also engaging in discussions with Holders of the beneficial interests in the Junior Subordinated Notes.  On August 29, 2019, RAIT Financial Trust, Taberna, and TPF Collateral Manager, as collateral manager for TPF, entered into that certain Restructuring and Plan Support Agreement (the “TPF RSA”).  TPF is the sole Holder of the Subordinated Taberna Junior Note.  The TPF RSA establishes the terms pursuant to which TPF Collateral Manager, as Collateral Manager for TPF, will support a chapter 11 plan for the Debtors (the “Plan”).  On August 31, 2019, RAIT Financial Trust, RAIT Funding, and Kodiak entered into that certain Restructuring and Plan Support Agreement (the “Kodiak RSA”, and together with the TPF RSA, the “RAIT RSAs”).  Kodiak is the sole owner of the TRuPs.  Kodiak is the beneficial owner of and controls claims arising under the Subordinated RF Junior Note and RAIT Subordinated Guarantee Agreement.  The Kodiak RSA establishes the terms pursuant to which Kodiak will support the Debtors’ Plan.  The RAIT RSAs were filed on the docket in the Chapter 11 Cases on September 9, 2019 [D.I. 52].

5. Failure to File 10-Qs and Senior Note Defaults

As of the Petition Date, RAIT had not filed its Quarterly Report on Form 10-Q for the quarterly periods ending March 31, 2019 and June 30, 2019 (collectively, the “10-Qs”) with the SEC.  RAIT was unable to timely file its 10-Qs because it required additional time to complete an evaluation of whether its owned preferred equity interests should be accounted for as loans, equity method investments, or debt securities, which RAIT reported in a public filing with the SEC on May 16, 2019.  Historically, RAIT has accounted for its preferred equity interests as loans, which were reflected on its balance sheets included in its 2018 Annual Report on Form 10-K.  However, shortly before the required filing date of RAIT’s 2019 First Quarter Report on Form 10-Q, questions arose in discussions with RAIT’s long-time auditor, KPMG LLP, related to RAIT’s historical accounting for these preferred equity interests.  On June 6, 2019, RAIT was authorized by the Audit Committee of its Board to request accounting guidance from the SEC’s Office of the Chief Accountant (the “OCA”) regarding the accounting treatment for its preferred equity interests. With the cooperation of KPMG, RAIT transmitted a written submission to the OCA to request such guidance on August 14, 2019.  On October 3, 2019, the OCA informed RAIT that, based upon the facts and circumstances described in the OCA submission and a subsequent discussion with RAIT’s management and KPMG LLP, the OCA does not object to RAIT accounting for such preferred equity interests under the loan accounting guidance (i.e., FASB ASC 310).  In light of the OCA’s guidance and in accordance with RAIT’s fiduciary duties as a debtor-in-possession under the Bankruptcy Code, RAIT is evaluating its options with respect to addressing the reporting requirements of the Securities Exchange Act of 1934, as amended.

As a result of RAIT’s failure to timely file the Q1 10-Q, RAIT Financial Trust is in default under both series of Senior Notes.  On July 1, 2019, as required under the applicable documents governing the Senior Notes, RAIT notified Wells Fargo, as trustee of the Senior Notes, of such defaults.  On August 20, 2019, RAIT received a notice of default from Wells Fargo, the Trustee under the Senior Notes, as a result of RAIT’s failure to file the Q1 10-Q.  As of the Petition Date, this default had not become an Event of Default (as defined in the Second Indenture and Third Supplemental Indenture).

F. The Chapter 11 Cases

On August 30, 2019, the Debtors filed for chapter 11 protection in order to preserve and maximize the value of their assets for the benefit of their stakeholders by pursuing the Sale Transaction with the Stalking Horse Purchaser through a public, Bankruptcy Court-supervised process that would be subject to higher and better offers.  The Debtors’ goal is to consummate the Sale Transaction as expeditiously as possible in order to minimize the time and expense necessarily attendant to the chapter 11 process, and thereafter, to promptly distribute the proceeds of such Sale Transaction pursuant to the Plan, so as to maximize and expedite recoveries to the Debtors’ creditors and other stakeholders.  As discussed below, during the Chapter 11 Cases, the Debtors have worked diligently to protect, preserve, monetize, and maximize the assets of their estates.

1. Debtor in Possession Status

Since filing for bankruptcy protection, the Debtors have continued to operate as debtors in possession subject to the supervision of the Bankruptcy Court and in accordance with the Bankruptcy Code. The Debtors are authorized to operate in the ordinary course of business. Transactions outside of the ordinary course of business must be approved by the Bankruptcy Court.

2. Entry of the Debtors’ First-Day Orders

On September 2, 2019, the Debtors filed several emergency motions (the “First-Day Motions”) with the Bankruptcy Court that were intended to facilitate the Debtors’ transition into, and operation in, chapter 11 with a minimum of interruption or disruption to their business, or loss of productivity or value.  Pursuant to the First-Day Motions, the Debtors sought and obtained the following relief from the Bankruptcy Court: (i) authority to jointly administer their chapter 11 cases [D.I. 25]; (ii) approval of the appointment of Epiq Corporate Restructuring, LLC as Claims and Noticing Agent [D.I. 26]; (iii) authority to maintain their prepetition cash management system and bank accounts [D.I. 122]; (iv) authority to pay certain prepetition employee wages and other compensation, benefits, business expenses, and related items [D.I. 123]; and (v) an order prohibiting utility companies from altering, refusing, or discontinuing utility services and granting related relief [D.I. 121].

3. The Sale Motion

On September 9, 2019, the Debtors filed the Debtors’ Motion for Entry of an Order (I) Establishing the Bidding Procedures, Including Approval of A Break-Up Fee and Expense Reimbursement, (II) Approving Sale of Substantially All of the Debtors Assets Free and Clear of All Liens, Claims, Interests and Encumbrances, and (III) Granting Related Relief [D.I. 53] (the “Sale Motion”).  Through the Sale Motion, the Debtors requested Court approval of bidding procedures (“Bidding Procedures”) related to the sale (the “Sale”) of the Purchased Assets as more fully described and pursuant to the terms of the Stalking Horse Purchase Agreement.

Under the Stalking Horse Purchase Agreement, the Stalking Horse Purchaser will acquire, directly or indirectly (including through one or more of Stalking Horse Purchaser’s affiliates), the Purchased Assets, consisting of a purchase (i) from RAIT General and RAIT Limited of the RAIT Interests, as a result of which the Stalking Horse Purchaser (or one or more of its affiliates) will indirectly acquire the equity interests held by RAIT Partnership in certain of its subsidiaries (as set forth in the Stalking Horse Purchase Agreement) and (ii) of certain assets owned by the Debtor Sellers for the cash purchase price of approximately $174.4 million, subject to certain adjustments set forth in the Stalking Horse Agreement and subject to higher and better offers pursuant to a Bankruptcy Court-approved auction and sale process, free and clear of all liens, claims, encumbrances, and interests (the “Encumbrances”).

On October 2, 2019, the Court entered the Order (I) Establishing the Bidding Procedures Including Approval of a Break-Up Fee and Expense Reimbursement, and (II) Granting Related Relief [D.I. 126].

4. Appointment of the Official Committee of Unsecured Creditors

On September 17, 2019, the acting United States Trustee for Region 3 (the “U.S. Trustee”) appointed an official committee of unsecured creditors (the “Creditors Committee”) [D.I. 65], consisting of the following members: (i) Wells Fargo, N.A.; (ii) The Bank of New York Mellon Trust Company, N.A.; (iii) UMB Bank, N.A.; (iv) Matthew A. Page; and (v) Rangeley Capital Partners, LP.  Subject to approval of the Bankruptcy Court, the Creditors Committee retained Kramer Levin Naftalis & Frankel LLP and Cole Shotz P.C. as its bankruptcy co-counsel, and FTI Consulting, Inc. as its financial advisor.  Since its formation, the Creditors Committee has participated in virtually every aspect of these Chapter 11 Cases.

5. Debtors’ Retention of Professionals

On September 27, 2019, the Debtors filed applications to retain (i) Drinker Biddle & Reath LLP as their bankruptcy counsel [D.I. 84], (ii) UBS as their investment banker [D.I. 103], (iii) M-III Partners LP as their financial advisor [D.I. 104], and (iv) Epiq Corporate Restructuring, LLC as their administrative advisor [D.I. 100].  In addition, the Debtors filed a motion seeking authority to retain and employ certain professionals in the ordinary course of their business [D.I. 101] and a motion to establish interim compensation procedures for the payment of fees and reimbursement of expenses of estate professionals [D.I.102].

6. Debtors’ Schedules, Statements, and Request for Rule 2015.3 Waiver

On September 27, 2019, the Debtors filed their Schedules of Assets and Liabilities and Statements of Financial Affairs [D.I. 85‑99], as well as a motion seeking a waiver of the Bankruptcy Rule 2015.3 reporting requirements with respect to the Debtors’ various direct and indirect non-debtor subsidiaries [D.I. 85].

Article III
Summary of the Plan

A. Overview of Chapter 11

Chapter 11 is the principal business reorganization chapter of the Bankruptcy Code. Under chapter 11, a debtor can reorganize its business for the benefit of itself, its Holders of claims and interests. Chapter 11 also strives to promote equality of treatment of similarly situated Holders of claims and similarly situated Holders of interests with respect to the distribution of a debtor’s assets.

The commencement of a chapter 11 case creates an estate that is comprised of all the legal and equitable interests of a debtor as of the petition date. The Bankruptcy Code provides that a debtor may continue to operate its business and remain in possession of its property as a “debtor in possession.”

The consummation of a plan of reorganization is the principal objective of a chapter 11 case. A plan of reorganization sets forth the means for satisfying claims against, and interests in, a debtor. Confirmation of a plan of reorganization by a bankruptcy court makes the plan binding upon the debtor, any issuer of securities under the plan, any person or entity acquiring property under the plan and any Holder of claims against or interests in the debtor, whether or not such Holders of claims or interests (1) is impaired under or has accepted the plan or (2) receives or retains any property under the plan. Subject to certain limited exceptions and other than as provided in the plan itself or confirmation order, a confirmation order discharges the debtor from any debt that arose prior to the date of confirmation of the plan and substitutes therewith the obligations specified under the confirmed plan.

Section 1123 of the Bankruptcy Code provides that a plan of reorganization will classify the debtor’s Holders of claims and interests. Pursuant to Section 1122 of the Bankruptcy Code, each class of claims against and interests in a debtor must contain claims or interests, whichever is applicable, that are substantially similar to the other claims or interests in such class. Further, a chapter 11 plan may specify that the legal, contractual and equitable rights of the Holders of claims or interests in certain classes are to remain unaltered by the reorganization effectuated by the plan. Such classes are Unimpaired and, because of such favorable treatment, are deemed to accept the plan. Accordingly, a debtor need not solicit votes from the Holders of claims or interests in such classes. A chapter 11 plan also may specify that certain classes will not receive any distribution of property or retain any claim against a debtor. Such classes are deemed not to accept the plan and, therefore, need not be solicited to vote to accept or reject the plan. Any classes with claims or interests which are receiving a distribution under the plan but which are not Unimpaired will be solicited to vote to accept or reject the plan.

In compliance with the requirements of Section 1123 of the Bankruptcy Code, the Plan divides Claims and Interests into various Classes and sets forth the treatment for each class. Further, the Debtors believe that the Plan is in compliance with the requirements of Section 1122 of the Bankruptcy Code, but it is possible that a Holder of a Claim or Interest may challenge the classification of Claims and Interests and that the Bankruptcy Court may find that a different classification is required for the Plan to be confirmed. In such event, the Debtors intend, to the extent permitted by the Bankruptcy Court and the Plan, to make such reasonable modifications to the classifications under the Plan to permit Confirmation and to use the Plan acceptances received in this solicitation for the purpose of obtaining the approval of the reconstituted Class or Classes of which the accepting Holder is ultimately deemed to be a member. Any such reclassification could adversely affect the Class in which such Holder was initially a member, or any other Class under the Plan, by changing the composition of such Class and the vote required of that Class for approval of the Plan.

The foregoing language, indicating that the Debtors may seek to modify classifications to overcome classification challenges, is disclosure only. It does not commit the Debtors to seek any such modification and it does not require the Bankruptcy Court to permit any such modification. If the Debtors do seek to modify any classifications, any party in interest is free to oppose the modification at that time. The Bankruptcy Court will then determine whether the modification should be permitted.

B. Classification of Claims and Interests

1. Introduction

The categories of Claims and Interests set forth below classify all Claims against and Interests in the Debtors for all purposes of the Plan. A Claim or Interest will be deemed classified in a particular Class only to the extent the Claim or Interest qualifies within the description of that Class and will be deemed classified in a different Class to the extent that any remainder of such Claim or Interest qualifies within the description of such different Class. A Claim or Interest in a particular Class is entitled to the treatment provided for such Class only to the extent that such Claim or Interest is Allowed and has not been paid or otherwise settled prior to the Effective Date. The treatment with respect to each Class of Claims and Interests provided for in the Plan will be in full and complete satisfaction of such Claims and Interests.

2. Classification

Article III of the Plan classifies Claims (except for Administrative Expense Claims, Professional Claims, Priority Tax Claims, and U.S. Trustee Fee Claims) and Interests for all purposes, including voting, confirmation and distribution pursuant to the Plan, as set forth on the following table. As provided in section 1123(a)(l) of the Bankruptcy Code, Administrative Expense Claims, Professional Claims, Priority Tax Claims, and claims for U.S. Trustee fees shall not be classified for the purposes of voting or receiving distributions under the Plan. Rather, all such Claims shall be treated separately as unclassified Claims on the terms set forth in Article II of the Plan.

Except as otherwise provided in the Plan, nothing under the Plan is intended to or will affect the Debtors’ or Reorganized Debtors’ rights and defenses in respect of any Claim that is “unimpaired” under the Plan, including, but not limited to, all rights in respect of legal and equitable defenses to or setoffs or recoupment against such Unimpaired Claims.  The classification of Claims against and Interests in the Debtor under the Plan is as follows:

CLASS	DESCRIPTION	STATUS
Class 1	Secured Tax Claims	Unimpaired; presumed to accept.
Class 2	Other Secured Claims	Unimpaired; presumed to accept.
Class 3	Other Priority Claims	Unimpaired; presumed to accept.
Class 4	Senior Note Claims and Senior Note Trustee Claims	Unimpaired; presumed to accept.
Class 5	General Unsecured Claims	Unimpaired; presumed to accept.
Class 6	Subordinated Taberna Note Claims	Impaired; entitled to vote.
Class 7	Subordinated RF Junior Note Claims	Impaired; entitled to vote.
Class 8	Intercompany Claims	Unimpaired; presumed to accept.
Class 9	Intercompany Interests	Unimpaired/Impaired; presumed to accept/deemed to reject.
Class 10	Section 510(b) Claims	Unimpaired; presumed to accept.
Class 11	Preferred Interests in RAIT Financial Trust	Fully Impaired; deemed to reject.
Class 12	Preferred Interests in Taberna	Fully Impaired; deemed to reject.
Class 13	Common Interests in RAIT Financial Trust	Fully Impaired; deemed to reject.

Consistent with section 1122 of the Bankruptcy Code, a Claim is classified by the Plan in a particular Class only to the extent the Claim is within the description of the Class, and a Claim is classified in a different Class to the extent it is within the description of that different Class.

3. Treatment

Article III of the Plan sets forth the treatment of classified Claims and Interests, which is summarized below. The treatment of Claims and Interests in the Plan is in full and complete satisfaction of the legal, contractual, and equitable rights that each Person holding an Allowed Claim or Interest may have in or against the Debtors or their property. This treatment supersedes and replaces any agreements or rights those Persons have in or against the Debtors or their property. The treatment of an Allowed Claim under the Plan is subject in all respects to any agreement by the Holder of such Allowed Claim to accept less favorable treatment. All distributions under the Plan will be tendered to the Person holding the Allowed Claim in accordance with the terms of the Plan. EXCEPT AS SPECIFICALLY SET FORTH IN THE PLAN, NO DISTRIBUTIONS WILL BE MADE AND NO RIGHTS WILL BE RETAINED ON ACCOUNT OF ANY CLAIM THAT IS NOT AN ALLOWED CLAIM.

(a) Class 1—Secured Tax Claims

The Plan defines Secured Tax Claims as any Secured Claim that, absent its secured status, would be entitled to priority in right of payment under section 507(a)(8) of the Bankruptcy Code (determined irrespective of time limitations), including any related Secured Claim for penalties.  

The Plan provides that a Holder of an Allowed Secured Tax Claim shall receive payment in Cash in an amount equal to the amount of such Allowed Secured Tax Claim.

This treatment satisfies the requirements of Section 1129(a)(9)(B) of the Bankruptcy Code.

Class 1 is Unimpaired.  The Holders of Secured Tax Claims are, therefore, not entitled to vote on and are deemed to accept the Plan.

The Debtors scheduled $0 of Claims as Secured Tax Claims.

(b) Class 2—Other Secured Claims

The Plan defines an Other Secured Claims as any Secured Claim other than a Secured Tax Claim or a Secured Subordinated Note Claim.

The Plan provides that a Holder of an Other Secured Claim shall receive, at the Debtors’ election: (a) payment in Cash in an amount equal to the amount of such Allowed Other Secured Claim; (b) delivery of the collateral securing any such Claim and payment of any interest required under section 506(b) of the Bankruptcy Code; (c) Reinstatement of such Claim; or (d) other treatment rendering such Claim Unimpaired.

This treatment satisfies the requirements of Section 1129(a)(9)(B) of the Bankruptcy Code.

Class 2 is Unimpaired.  The Holders of Other Secured Claims are, therefore, not entitled to vote on and are deemed to accept the Plan.

The Debtors scheduled $0 of Claims as Other Secured Claims.

(c) Class 3—Other Priority Claims

The Plan defines Other Priority Claims as any Claim other than an Administrative Claim or a Priority Tax Claim entitled to priority in right of payment under section 507(a) of the Bankruptcy Code.

The Plan provides that a Holder of an Other Priority Claim shall receive payment in Cash in an amount equal to the amount of such Allowed Other Priority Claim.

This treatment satisfies the requirements of Section 1129(a)(9)(B) of the Bankruptcy Code.

Class 3 is Unimpaired.  The Holders of Other Priority Claims are, therefore, not entitled to vote on and are deemed to accept the Plan.

The Debtors scheduled $0 of Claims as Other Priority Claims.

(d) Class 4—Senior Note Claims and Senior Note Trustee Claims

The Plan defines Senior Note Claims as Claims arising under (i) the certain 7.625% senior notes issued by RAIT Financial Trust on April 14, 2014, with a maturity date of April 15, 2024, and (ii) the certain 7.125% senior notes issued by RAIT Financial Trust on August 14, 2014, with a maturity date of August 30, 2019.

The Plan provides that a Holder of a Senior Note Claim and Senior Note Trustee Claim shall receivepayment in Cash in an amount equal to the amount of such Allowed Senior Note Claim and Senior Note Trustee.

This treatment satisfies the requirements of Section 1129(a)(9)(B) of the Bankruptcy Code.

Class 4 is Unimpaired.  The Holders of Senior Note Claims are, therefore, not entitled to vote on and are deemed to accept the Plan.

The Debtors scheduled $123,394,972 of Claims as Senior Note Claims.

(e) Class 5—General Unsecured Claims

The Plan defines General Unsecured Claims as any Claim other than an Administrative Claim, a Professional Claim, a Secured Tax Claim, an Other Secured Claim, a Priority Tax Claim, an Other Priority Claim, a Senior Note Claim, a RAIT Parent Subordinated Guaranty Claim, a Subordinated Taberna Note Claim, a Subordinated RF Junior Note Claim, a Section 510(b) Claim, or an Intercompany Claim.

The Plan provides that a Holder of a General Unsecured Claims shall receive shall receive, at the Debtors’ election: (a) payment in Cash in an amount equal to the amount of such Allowed General Unsecured Claim; or (b) Reinstatement of such Claim.

Class 5 is Unimpaired.  The Holders of General Unsecured Claims are, therefore, not entitled to vote on and are deemed to accept the Plan.

The Debtors did not schedule any non-contingent, liquidated, undisputed Claims as General Unsecured Claims, but they estimate there will be approximately $1,500,000 to $3,600,000 of General Unsecured Claims that could potentially be Allowed in the Chapter 11 Cases.

(f) Class 6—Subordinated Taberna Note Claim

The Plan defines Subordinated Taberna Note Claim as a Claim arising under that certain $18,670,743 junior subordinated note issued by Taberna on October 25, 2010, with a maturity date of March 30, 2035.

Under the Plan, the Subordinated Taberna Note Claims shall be Allowed as a single Claim in the aggregate amount of $18,670,743 (the “Allowed Taberna Note Claim Amount”).

The Plan provides that the Holder of the Allowed Subordinated Taberna Note Claim shall receive up to the Allowed Taberna Note Claim Amount payment in cash of (i) $12,250,000 from Distribution Proceeds, plus (ii) after receipt by the Holder of the Allowed Subordinated RF Junior Note Claim of an amount equal to $1,750,000 from the Second-Half Sale Transaction Escrow, an amount equal to $250,000 (or such amount as may be available)from the Second-Half Sale Transaction Escrow, plus, subject to the payment in full of the Allowed RAIT Funding Claim Amount, (a) all other Distribution Proceeds, if any, plus (b) any funds, if any, remaining in the Disputed Claim Reserve after all Disputed Claims are Allowed or otherwise resolved, plus (c) any funds remaining in the Wind-Down Reserve, provided however, that the amount paid pursuant to the Plan shall not exceed the Allowed Taberna Note Claim Amount.

Class 6 is Impaired.  The Holder of the Subordinated Taberna Note Claim in Class 6 is, therefore, entitled to vote to accept or reject the Plan.

(g) Class 7—Subordinated RF Junior Note Claim and RAIT Parent Subordinated Guaranty Claim

The Plan defines the Subordinated RF Junior Note Claims as Claims arising under the Subordinated RF Junior Note pursuant to the RF Note Indenture, which shall include claims for fees and charges by the Subordinated RF Junior Note Indenture Trustee pursuant to the RF Note Indenture, provided that (i) the Subordinated RF Junior Note Indenture Trustee shall reasonably estimate its fees and charges, and shall deliver such estimate to the Debtors no later than five days before the Effective Date (which estimate shall not be deemed to limit the amount of the fees and charges that are the subject of the Subordinated RF Junior Note Indenture Trustee’s request for payment of its fees and charges) and (ii) if the Subordinated RF Junior Note Indenture Trustee does not provide an estimate, the Debtors or the Plan Administrator may estimate the fees and charges of the Subordinated RF Junior Note Indenture Trustee..

The Plan defines the RAIT Parent Subordinated Guaranty Claim as the Claim arising under that certain Parent Guarantee Agreement dated as of February 12, 2007, by and between RAIT Financial Trust, as Parent Guarantor, and The Bank of New York Trust Company, National Association, as Guarantee Trustee.

The Plan provides that the Subordinated RF Junior Note Claim and the RAIT Parent Subordinated Guaranty Claim shall be Allowed as a single Claim (the “Allowed RAIT Funding Claim”) against RAIT Financial Trust in the aggregate amount of $23,750,000 (the “Allowed RAIT Funding Claim Amount”).

Under the Plan, the Holders of the Allowed RAIT Funding Claim shall receive up to the Allowed RAIT Funding Claim Amount from (a) the Distribution Proceeds after the Holder of the Subordinated Taberna Note Claim receives $12,250,000 from Distribution Proceeds plus (b) any funds remaining in the Disputed Claims Reserve after all disputed Claims are Allowed or otherwise resolved, plus (c) all proceeds otherwise payable to the Sellers under the Purchase Agreement of the First-Half Sale Transaction Escrow, plus, (d) all proceeds otherwise payable to the Sellers under the Purchase Agreement of the Second-Half Transaction Escrow up to $1,750,000 on a first-out basis, plus (e) any funds remaining in the Wind-Down Reserve.

Class 7 is Impaired.  The Holder of the Allowed RAIT Funding Claim in Class 7 is, therefore, entitled to vote to accept or reject the Plan.

(h) Class 8—Intercompany Claims

The Plan defines Intercompany Claims as any Claim held by a Debtor or a Debtor’s Affiliate against a Debtor or a Debtor’s Affiliate.

The Plan provides that each Allowed Intercompany Claim, unless otherwise provided for under the Plan, will be Reinstated.

Class 8 is Unimpaired.  The Holders of the Intercompany Claims are, therefore, not entitled to vote on and are deemed to accept the Plan.

The Debtor did not schedule any Claims as Intercompany Claims.

(i) Class 9—Intercompany Interests

The Plan defines Intercompany Interests as an Interest in one Debtor held by another Debtor or a Debtor’s Affiliate.  Class 9 consists of any Intercompany Interests in RAIT General, RAIT Limited, Taberna, RAIT JV TRS, RAIT JV TRS Sub, and RAIT Funding.

The Plan provides that each Allowed Intercompany Interest shall, at the Debtors’ election: (a) be Reinstated for administrative convenience; or (b) be canceled and released without any distribution on account to of such Interests.

Class 9 is either Unimpaired, and the Holders of Intercompany Interests are conclusively presumed to have accepted the Plan under section 1126(f) of the Bankruptcy Code, or Impaired, and the Holders of Intercompany Interests are deemed to have rejected the Plan under section 1126(g) of the Bankruptcy Code. Therefore, Holders of Intercompany Interests are not entitled to vote to accept or reject the Plan.

(j) Class 10—Section 510(b) Claim

The Plan defines Section 510(b) Claims as any Claim subject to subordination under section 510(b) of the Bankruptcy Code.

The Plan requires that a Class 10 Claim, if existing, may only become Allowed by Final Order of the Bankruptcy Court.  

The Plan provides that each Holder of an Allowed Section 510(b) Claim (if any) shall receive, at the Debtors’ election: (a) payment in Cash in an amount equal to the amount of such Allowed Section 510(b) Claim; (b) Reinstatement of such Claim; or (C) in accordance with section 510(b) of the Bankruptcy Code, treatment as if such Holder held a number of Allowed Preferred Interests or Common Interests, as applicable, equal in value to the amount of its Allowed Section 510(b) Claim.

The Debtors are not aware of any asserted Class 10 Claim and believe that no Class 10 Claim exists.

Class 10 is Unimpaired.  The Holders (if any) of the Section 510(b) Claims (if any) are, therefore, not entitled to vote on and are deemed to accept the Plan.

(k) Class 11—Preferred Interests in RAIT Financial Trust

The Plan defines Preferred Interests in RAIT Financial Trust as the following series of preferred stock in RAIT Financial Trust (excluding any Intercompany Interests):  (a) 7.75% Series A cumulative redeemable preferred shares of RAIT Financial Trust (OTCPK: RASGQ); (b) 8.375% Series B cumulative redeemable preferred shares of RAIT Financial Trust (OTCPK: RASJQ); and (c) 8.875% Series C cumulative redeemable preferred shares of RAIT Financial Trust (OTCPK: RASLQ).

The Plan provides that each Preferred Interest in RAIT Financial Trust shall be canceled, released, and extinguished, and will be of no further force or effect and no Holder of Preferred Interests in RAIT Financial Trust shall be entitled to any recovery or distribution under the Plan on account of such Interests.

Class 11 is Fully Impaired.  Holders of Class 11 Interests are deemed to have rejected the Plan under section 1126(g) of the Bankruptcy Code.  Holders of Class 11 Interests are, therefore, not entitled to vote to accept or reject the Plan.

(l) Class 12—Preferred Interests in Taberna

The Plan defines Preferred Interests in Taberna as the 12.5% Series A cumulative non-voting preferred shares of Taberna (excluding any Intercompany Interests).

The Plan provides that each Preferred Interest in Taberna shall be canceled, released, and extinguished, and will be of no further force or effect and no Holder of Preferred Interests in Taberna shall be entitled to any recovery or distribution under the Plan on account of such Interests.

Class 12 is Fully Impaired.  Holders of Class 12 Interests are deemed to have rejected the Plan under section 1126(g) of the Bankruptcy Code.  Holders of Class 12 Interests are, therefore, not entitled to vote to accept or reject the Plan.

(m) Class 13—Common Interests

The Plan defines Common Interests as the common stock of RAIT Financial Trust (OTCPK: RASFQ).

The Plan provides that each Common Interest shall be canceled, released, and extinguished, and will be of no further force or effect and no Holder of Common Interests shall be entitled to any recovery or distribution under the Plan on account of such Interests.

Class 13 is Fully Impaired.  Holders of Class 13 Interests are deemed to have rejected the Plan under section 1126(g) of the Bankruptcy Code.  Holders of Class 13 Interests are, therefore, not entitled to vote to accept or reject the Plan.

C. Treatment of Unclassified Claims

1. Summary

In accordance with section 1123(a)(1) of the Bankruptcy Code, Administrative Claims, Professional Claims, and Priority Tax Claims have not been classified and thus are excluded from the Classes of Claims set forth in Article III of the Plan.  The Plan sets for the treatment of Administrative and Priority Claims in Article II of the Plan.

2. Treatment of Administrative Claims

The Plan defines Administrative Claim as a Claim for costs and expenses of administration of the Chapter 11 Cases pursuant to sections 503(b), 507(a)(2), 507(b), or 1114(e)(2) of the Bankruptcy Code, including:  (a) the actual and necessary costs and expenses incurred on or after the Petition Date until and including the Effective Date of preserving the Estates and operating the businesses of the Debtors; (b) Allowed Professional Claims; and (c) all fees and charges assessed against the Estates pursuant to section 1930 of chapter 123 of title 28 of the United States Code.

The Plan provides that unless otherwise agreed to by the Holder of an Allowed Administrative Claim and the Debtors or the Plan Administrator, as applicable, each Holder of an Allowed Administrative Claim (other than Holders of Professional Claims and Claims for fees and expenses pursuant to section 1930 of chapter 123 of title 28 of the United States Code) will receive in full and final satisfaction of its Administrative Claim an amount of Cash equal to the amount of such Allowed Administrative Claim either:  (a) on the Effective Date, or as soon as practicable thereafter; (b) if the Administrative Claim is not Allowed as of the Effective Date, no later than 30 days after the date on which an order Allowing such Administrative Claim becomes a Final Order, or as soon as reasonably practicable thereafter; or (c) if the Allowed Administrative Claim is based on liabilities incurred by the Debtors in the ordinary course of their business after the Petition Date, then in accordance with the terms and conditions of the particular transaction giving rise to such Allowed Administrative Claims without any further action by the Holders of such Allowed Administrative Claims.

This treatment satisfies the requirements of Section 1129(a)(9)(A) of the Bankruptcy Code.

3. Administrative Claims Bar Date

Requests for the payment of Administrative Claims other than Professional Claims must be filed and served on the Reorganized Debtors pursuant to the procedures specified in the Confirmation Order no later than thirty (30) days after the Effective Date (the “Administrative Claims Bar Date”). Holders of Administrative Claims that are required to, but do not, file and serve a request for payment of such claims by such date shall be forever barred, estopped, and enjoined from asserting such Claims against the Debtors, the Reorganized Debtors, or their assets or properties. Notwithstanding the foregoing, no request for payment of an Administrative Claim need be filed with respect to an Administrative Claim previously allowed by Final Order, including all Administrative Claims expressly allowed under the Plan.

4. Deadline for Professional Claims

All final requests for payment of Professional Claims incurred during the period from the Petition Date through the Effective Date shall be Filed no later than forty-five (45) days after the Effective Date. All such final requests will be subject to approval by the Bankruptcy Court after notice and a hearing in accordance with the procedures established by the Bankruptcy Code, Bankruptcy Rules, and prior orders of the Bankruptcy Court, including the Interim Compensation Order, and once approved by the Bankruptcy Court, shall be promptly paid from the Professional Fee Escrow Account up to the full Allowed amount. To the extent that funds held in the Professional Fee Escrow Account are insufficient to satisfy the amount of Professional Claims owing to the Professionals, such Professionals shall have an Allowed Administrative Claim for any such deficiency, and the Plan Administrator shall pay the full unpaid amount of such Allowed Administrative Claim in Cash.

5. Priority Tax Claims

The Plan defines Priority Tax Claims as any Claim of a Governmental Unit of the kind specified in section 507(a)(8) of the Bankruptcy Code.  Under the Plan, each Holder of an Allowed Priority Tax Claim shall receive, on the Effective Date or as soon as practicable thereafter, payment in Cash in an amount equal to the amount of such Allowed Priority Tax Claim.

This treatment satisfies the requirements of Section 1129(a)(9)(C) of the Bankruptcy Code.

6. Statutory Fees

All fees due and payable pursuant to section 1930 of Title 28 of the United States Code before the Effective Date shall be paid by the Debtors. On and after the Effective Date, to the extent applicable, the Reorganized Debtors shall pay any and all such fees when due and payable, and shall File with the Bankruptcy Court quarterly reports in a form reasonably acceptable to the U.S. Trustee. Each Reorganized Debtor shall remain obligated to pay quarterly fees to the U.S. Trustee until the earliest of the applicable Debtor’s Chapter 11 Case being closed, dismissed, or converted to a case under chapter 7 of the Bankruptcy Code.

D. Means for Implementation

1. Sources of Consideration for Monetary Plan Distributions

The Reorganized Debtors will fund distributions under the Plan with Cash on hand on the Effective Date and the revenues and proceeds of all assets of the Debtors or Reorganized Debtors, including the Sale Transaction proceeds and all Causes of Action not settled, released, discharged, enjoined, or exculpated under the Plan or otherwise on or prior to the Effective Date.

2. Vesting of Assets in the Reorganized Debtors

Except as otherwise provided in the Plan, the Purchase Agreement, or any agreement, instrument, or other document incorporated herein or therein, on the Effective Date, the assets of the Debtors shall vest in the Reorganized Debtors for the purpose of liquidating the Estates, free and clear of all Liens, Claims, charges, or other encumbrances. On and after the Effective Date, except as otherwise provided for in the Plan, the Debtors and the Reorganized Debtors may operate their business and use, acquire, or dispose of property, and compromise or settle any Claims, Interests, or Causes of Action without supervision or approval by the Bankruptcy Court and free of any restrictions of the Bankruptcy Code or Bankruptcy Rules.

3. Designation of the Plan Administrator

A Plan Administrator shall be designated by the Debtors prior to the Confirmation Hearing, who shall act for the Reorganized Debtors after the Effective Date in the same fiduciary capacity as applicable to a board of managers, directors, and officers, subject to the provisions hereof (and all certificates of formation, membership agreements, and related documents are deemed amended by the Plan to permit and authorize the same), solely for the benefit of the Holders of Class 6 and Class 7 Claims. On the Effective Date, the authority, power, and incumbency of the persons acting as managers, directors, and officers of the Debtors shall terminate, and the Plan Administrator shall be appointed as the sole manager, sole director, and sole officer of the Reorganized Debtors, and shall succeed to the powers of the Debtors’ managers, directors, and officers. From and after the Effective Date, the Plan Administrator shall be the sole representative of, and shall act for, the Reorganized Debtors.

4. Dissolution of the Debtors

Unless otherwise provided in the Plan, the Reorganized Debtors shall be dissolved as soon as practicable on or after the Effective Date.  The Plan Administrator shall have the power and authority to take any action necessary to wind down and dissolve any of the Debtors, and shall: (a) file a certificate of dissolution for any of the Debtors, together with all other necessary corporate and company documents, to effect the dissolution of such Debtor under the applicable laws of its state of formation; and (b) complete and file all final or otherwise required federal, state, and local tax returns and shall pay taxes required to be paid for any of the Debtors, and pursuant to section 505(b) of the Bankruptcy Code, request an expedited determination of any unpaid tax liability of any of the Debtors or their Estates for any tax incurred during the administration of such Debtor’s Chapter 11 Case, as determined under applicable tax laws.

The filing by the Plan Administrator of any of the Reorganized Debtors’ certificate of dissolution or similar document shall be authorized and approved in all respects without further action under applicable law, regulation, order, or rule.

5. Effectuating Documents; Further Transactions

Prior to the Effective Date, the Debtors are, and on and after the Effective Date, the Reorganized Debtors and the Plan Administrator are, authorized to and may issue, execute, deliver, file, or record such contracts, securities, instruments, releases, and other agreements or documents and take such actions as may be necessary or appropriate to effectuate, implement, and further evidence the terms and conditions of the Plan, without the need for any approvals, authorizations, notice, or consents, except for those expressly required pursuant to the Plan.

6. Retiree Benefits

In accordance with section 1129(a)(13) of the Bankruptcy Code, from and after the Effective Date, all retiree benefits (as that term is defined in section 1114 of the Bankruptcy Code), if any, shall continue to be paid in accordance with applicable law.

E. Treatment of Unexpired Leases and Executory Contracts

Article V of the Plan sets forth the treatment of executory contracts and unexpired leases of the Debtors.

1. Rejection or Assumption of Remaining Executory Contracts and Unexpired Leases

On the Effective Date, except as otherwise provided in the Plan, each Executory Contract and Unexpired Lease not previously rejected, assumed, or assumed and assigned, including any employee benefit plans and other Executory Contracts under which employee obligations arise, shall be deemed automatically rejected pursuant to sections 365 and 1123 of the Bankruptcy Code, unless such Executory Contract or Unexpired Lease: (1) is specifically described in the Plan as to be assumed in connection with confirmation of the Plan, or is specifically scheduled to be assumed or assumed and assigned pursuant to the Plan or the Plan Supplement; (2) is subject to a pending motion to assume such Unexpired Lease or Executory Contract as of the Effective Date; (3) is to be assumed by the Debtors or assumed by the Debtors and assigned to another third party, as applicable, in connection with the Sale Transaction; (4) is a contract, instrument, release, indenture, or other agreement or document entered into in connection with the Plan; or (5) is an insurance policy, including but not limited to, any D&O Liability Insurance Policy.

Notwithstanding the foregoing, on the Effective Date, the Employee Retention and Severance Plans Reorganized shall be deemed assumed and the Plan Administrator shall be authorized to make payments, subject to the satisfaction of the applicable terms and conditions of such plans.

2. Approval or Rejection or Assumption of Executory Contracts and Unexpired Leases

Entry of the Confirmation Order by the Bankruptcy Court shall constitute approval of such assumptions, assignments, and rejections, including the assumption of the Executory Contracts or Unexpired Leases as provided in the Plan Supplement, pursuant to sections 365(a) and 1123 of the Bankruptcy Code.

3. Modifications, Amendments, Supplements, Restatements, or Other Agreements

Unless otherwise provided in the Plan, each Executory Contract or Unexpired Lease that is assumed shall include all modifications, amendments, supplements, restatements, or other agreements that in any manner affect such Executory Contract or Unexpired Lease, and Executory Contracts and Unexpired Leases related thereto, if any, including easements, licenses, permits, rights, privileges, immunities, options, rights of first refusal, and any other interests, unless any of the foregoing agreements has been previously rejected or repudiated or is rejected or repudiated under the Plan.

Modifications, amendments, supplements, and restatements to prepetition Executory Contracts and Unexpired Leases that have been executed by the Debtors during the Chapter 11 Cases shall not be deemed to alter the prepetition nature of the Executory Contract or Unexpired Lease, or the validity, priority, or amount of any Claims that may arise in connection therewith.

4. Cure of Defaults and Objections to Cure and Assumption

The Debtors or the Plan Administrator, as applicable, shall pay Cure Claims on the Effective Date or as soon as practicable thereafter.  Unless otherwise agreed upon in writing by the parties to the applicable Executory Contract or Unexpired Lease, all requests for payment of Cure Claims that differ from the amounts paid or proposed to be paid by the Debtors or Plan Administrator must be filed with the Claims and Solicitation Agent on or before 30 days after the Effective Date.  Any such request that is not timely filed shall be disallowed and forever barred, estopped, and enjoined from assertion, and shall not be enforceable against any Reorganized Debtor, without the need for any objection by the Plan Administrator or any further notice to or action, order, or approval of the Bankruptcy Court.  Any Cure shall be deemed fully satisfied, released, and discharged upon payment by the Debtors or the Plan Administrator of the Cure; provided, however, that nothing herein shall prevent the Plan Administrator from paying any Cure despite the failure of the relevant counterparty to file such request for payment of such Cure.  The Plan Administrator also may settle any Cure without any further notice to or action, order, or approval of the Bankruptcy Court.  In addition, any objection to the assumption of an Executory Contract or Unexpired Lease pursuant to the Plan must be filed with the Bankruptcy Court on or before thirty (30) days after the Effective Date.  Any such objection will be scheduled to be heard by the Bankruptcy Court at the Debtors’ or Plan Administrator’, as applicable, first scheduled omnibus hearing for which such objection is timely filed.  Any counterparty to an Executory Contract or Unexpired Lease that fails to timely object to the proposed assumption of any Executory Contract or Unexpired Lease will be deemed to have consented to such assumption.

If there is a dispute regarding a Cure Claim, the ability of the Reorganized Debtors or any assignee to provide “adequate assurance of future performance” within the meaning of section 365 of the Bankruptcy Code, or any other matter pertaining to assumption, then payment of the applicable Cure Claim shall occur as soon as practicable after entry of a Final Order resolving such dispute, approving such assumption (and, if applicable, assignment), or as may be agreed upon by the Debtors or Plan Administrator, as applicable, and the counterparty to the Executory Contract or Unexpired Lease.  The Debtors or Plan Administrator, as applicable, reserve the right either to reject or nullify the assumption of any Executory Contract or Unexpired Lease within 45 days after a Final Order resolving an objection to assumption or determining the Cure Claim or any request for adequate assurance of future performance required to assume such Executory Contract or Unexpired Lease, is entered.

Assumption of any Executory Contract or Unexpired Lease pursuant to the Plan or otherwise shall result in the full release and satisfaction of any Cure Claims or defaults, whether monetary or nonmonetary, including defaults of provisions restricting the change in control or ownership interest composition or other bankruptcy-related defaults, arising under any assumed Executory Contract or Unexpired Lease at any time prior to the effective date of assumption.  Any and all Proofs of Claim based upon Executory Contracts or Unexpired Leases that have been assumed in the Chapter 11 Cases, including pursuant to the Confirmation Order, shall be deemed satisfied as of the Effective Date without the need for any objection thereto or any further notice to or action, order, or approval of the Bankruptcy Court.

5. Rejection Damage Claims and Objections to Rejections

Pursuant to section 502(g) of the Bankruptcy Code, counterparties to Executory Contracts or Unexpired Leases that are rejected shall have the right to assert Claims, if any, on account of the rejection of such contracts and leases.  Unless otherwise provided by a Bankruptcy Court order, any Proofs of Claim asserting Claims arising from the rejection of Executory Contracts and Unexpired Leases pursuant to the Plan must be filed with the Claims and Solicitation Agent no later than 30 days after the later of the Confirmation Date or the effective date of rejection.  Any such Proofs of Claim that are not timely filed shall be disallowed without the need for any further notice to or action, order, or approval of the Bankruptcy Court.  Such Proofs of Claim shall be forever barred, estopped, and enjoined from assertion.  Moreover, such Proofs of Claim shall not be enforceable against any Reorganized Debtor, without the need for any objection by the Plan Administrator or any further notice to or action, order, or approval of the Bankruptcy Court, and any Claim arising out of the rejection of the Executory Contract or Unexpired Lease shall be deemed fully satisfied, released, and discharged notwithstanding anything in a Proof of Claim to the contrary.  All Allowed Claims arising from the rejection of Executory Contracts and Unexpired Leases shall be classified as Class 5 - General Unsecured Claims against the applicable Debtor counterparty thereto.

6. Indemnification Obligations

Pursuant to Section 5.6 of the Plan, all indemnification obligations in place as of the Effective Date (whether in the by-laws, certificates of incorporation or formation, limited liability company agreements, other organizational or formation documents, board resolutions, indemnification agreements, employment contracts, or otherwise) for the post-petition directors, officers, trustees, managers, employees, attorneys, accountants, investment bankers, and other professionals of the Debtors, as applicable, shall be assumed and remain in full force and effect after the Effective Date, and shall not be modified, reduced, discharged, impaired, or otherwise affected in any way, and shall survive Unimpaired and unaffected, irrespective of when such obligation arose.

7. Director and Officer Liability Insurance

Pursuant to Section 5.7 of the Plan, to the extent that the D&O Liability Insurance Policies are considered to be Executory Contracts, notwithstanding anything in the Plan to the contrary, effective as of the Effective Date, the Debtors shall be deemed to have assumed all D&O Liability Insurance Policies with respect to the Debtors’ and each of its or their, as appropriate, Affiliates’, directors, trustees, managers, officers, and employees serving on or before the Petition Date pursuant to section 365(a) of the Bankruptcy Code, and coverage for defense and indemnity under any of the D&O Liability Insurance Policies shall remain available to all individuals within the definition of “Insured” in any of the D&O Liability Insurance Policies. Entry of the Confirmation Order will constitute the Bankruptcy Court’s approval of the Debtors’ foregoing assumption of each of the unexpired D&O Liability Insurance Policies. Notwithstanding anything to the contrary contained herein, Confirmation of the Plan shall not discharge, impair, or otherwise modify any indemnity obligations assumed by the foregoing assumption of the D&O Liability Insurance Policies, and each such indemnity obligation will be deemed and treated as an Executory Contract that has been assumed by the Debtors under the Plan as to which no Proof of Claim need be Filed.

8. Contracts, Intercompany Contracts, and Leases Entered Into After the Petition Date

Contracts, Intercompany Contracts, and leases entered into after the Petition Date by any Debtor and any Executory Contracts and Unexpired Leases assumed by any Debtor may be performed by the applicable Reorganized Debtor in the ordinary course of business.

F. Provisions Regarding Distributions

Article VI of the Plan sets forth the provisions governing distributions on account of claims and interests allowed as of the Effective Date.

1. Allowance Requirement

Only Holders of Allowed Claims are entitled to receive distributions under the Plan.

An Allowed Administrative Expense Claim is an Administrative Expense Claim that has been allowed, or adjudicated in favor of the Holder by estimation or liquidation, by a Final Order, that was incurred by the Debtors in the ordinary course of business during the Chapter 11 Case and as to which there is no dispute as to the Debtors’ liability, or that has become allowed by failure to object pursuant to the Plan.

As to all other types of Claims, an Allowed Claim is (i) any Claim, proof of which has been timely Filed by the applicable Claims Bar Date; (ii) any Claim that is listed in the Schedules, as such Schedules may be amended by the Debtors from time to time in accordance with Bankruptcy Rule 1009, as liquidated in amount and not disputed or contingent, and with respect to which no contrary Proof of Claim has been timely Filed; (iii) any Claim Allowed pursuant to the Plan or a Final Order of the Bankruptcy Court; provided, however, that with respect to any Claim described in clauses (i) and (ii) above, such Claim shall be considered Allowed only if and to the extent that no objection to the allowance thereof has been interposed within the applicable period fixed by the Plan, the Bankruptcy Code, the Bankruptcy Rules, or by a Final Order of the Bankruptcy Court.

2. Delivery of Distributions in General

Pursuant to Section 6.1 of the Plan, except as otherwise provided in the Plan, a Final Order, or as otherwise agreed to by the Debtors or the Reorganized Debtors, as applicable, and the Holder of the applicable Claim or Interest, on the first Distribution Date, the Distribution Agent shall make initial distributions under the Plan on account of Claims and Interests Allowed on or before the Effective Date, subject to the Reorganized Debtors’ right to object to Claims and Interests; provided, however, that (1) Allowed Administrative Claims with respect to liabilities incurred by the Debtors in the ordinary course of business during the Chapter 11 Cases or assumed by the Debtors prior to the Effective Date shall be paid or performed in the ordinary course of business in accordance with the terms and conditions of any controlling agreements, course of dealing, course of business, or industry practice, and (2) Allowed Priority Tax Claims and Allowed Secured Tax Claims shall be paid in accordance with Sections 2.3 and 3.2(a)(1), respectively.  The first Distribution Date for Claims Allowed on or before the Effective Date shall be as soon as reasonably practical after the Effective Date, but no later than thirty (30) days following the Effective Date.  To the extent any Allowed Priority Tax Claim or Allowed Secured Tax Claim is not due and owing on the Effective Date, such Claim shall be paid in full in Cash in accordance with the terms of any agreement between the Debtors and the Holder of such Claim or as may be due and payable under applicable non-bankruptcy law or in the ordinary course of business.  Distribution Dates shall occur no less frequently than every thirty (30) days, as necessary in the Plan Administrator’s sole discretion, after the Effective Date.  Each distribution to the Trustees on Allowed Claims in Class 4, Class 6, and Class 7 shall be subject in all respects to the right of the Trustees to assert any applicable charging liens against the respective distribution in accordance to the terms of the applicable Indentures.

3. Record Date for Distributions

On the Distribution Record Date, the Claims Register shall be closed and the Distribution Agent shall be authorized and entitled to recognize only those record Holders, if any, listed on the Claims Register as of the close of business on the Distribution Record Date.  Notwithstanding the foregoing, if a Claim or Interest, other than one based on a publicly traded Certificate, is transferred fewer than twenty (20) days before the Distribution Record Date, the Distribution Agent shall make distributions to the transferee only to the extent practical and in any event only if the relevant transfer form contains an unconditional and explicit certification and waiver of any objection to the transfer by the transferor.

4. Distribution Process

The Distribution Agent shall make all distributions required under the Plan, except that distributions to Holders of Allowed Claims or Interests governed by a separate agreement and administered by a Servicer shall be deposited with the appropriate Servicer, at which time such distributions shall be deemed complete, and the Servicer shall deliver such distributions in accordance with the Plan and the terms of the governing agreement.

5. Undeliverable, and Unclaimed Distributions

(1) Undeliverable Distributions.  If any distribution to a Holder of an Allowed Claim or Interest is returned to a Distribution Agent as undeliverable, no further distributions shall be made to such Holder unless and until such Distribution Agent is notified in writing of such Holder’s then-current address or other necessary information for delivery, at which time all currently due missed distributions shall be made to such Holder on the next Distribution Date.  Undeliverable distributions shall remain in the possession of the Reorganized Debtors until such time as a distribution becomes deliverable, or such distribution reverts to the Reorganized Debtors or is cancelled pursuant to Section (2), and shall not be supplemented with any interest, dividends, or other accruals of any kind.

(2) Reversion.  Any distribution under the Plan that is an Unclaimed Distribution for a period of six months after distribution shall be deemed unclaimed property under section 347(b) of the Bankruptcy Code and such Unclaimed Distribution shall revest in the applicable Reorganized Debtor.  Upon such revesting, the Claim or Interest of any Holder or its successors with respect to such property shall be cancelled, discharged, and forever barred notwithstanding any applicable federal or state escheat, abandoned, or unclaimed property laws, or any provisions in any document governing the distribution that is an Unclaimed Distribution, to the contrary.

6. Claims Paid or Payable by Third Parties

A Claim shall be reduced in full, and such Claim shall be disallowed without a Claims objection having to be filed and without any further notice to or action, order, or approval of the Bankruptcy Court, to the extent that the Holder of such Claim receives payment in full on account of such Claim from a party that is not a Debtor or Reorganized Debtor.  To the extent a Holder of a Claim receives a distribution on account of such Claim and receives payment from a party that is not a Debtor or a Reorganized Debtor on account of such Claim, such Holder shall repay, return or deliver any distribution held by or transferred to the Holder to the applicable Reorganized Debtor to the extent the Holder’s total recovery on account of such Claim from the third party and under the Plan exceeds the amount of such Claim as of the date of any such distribution under the Plan.

7. Claims Paid by Insurance Carriers; Applicability of Insurance Policies

No distributions under the Plan shall be made on account of an Allowed Claim that is payable pursuant to one of the Debtors’ insurance policies until the Holder of such Allowed Claim has exhausted all remedies with respect to such insurance policy.  To the extent that one or more of the Debtors’ insurers agrees to satisfy in full a Claim (if and to the extent adjudicated by a court of competent jurisdiction), then immediately upon such insurers’ agreement, such Claim may be disallowed to the extent of any agreed upon satisfaction on the Claims Register by the Claims and Solicitation Agent without a Claims objection having to be filed and without any further notice to or action, order, or approval of the Bankruptcy Court.

Except as otherwise provided herein, distributions to Holders of Allowed Claims shall be in accordance with the provisions of an applicable insurance policy.  Nothing contained in the Plan shall constitute or be deemed a waiver of any Cause of Action that the Debtors or any Entity may hold against any other Entity, including insurers under any policies of insurance, nor shall anything contained herein constitute or be deemed a waiver by such insurers of any defenses, including coverage defenses, held by such insurers.

8. Setoffs

Except as otherwise expressly provided for herein, each Reorganized Debtor, pursuant to the Bankruptcy Code (including section 553 of the Bankruptcy Code), applicable non-bankruptcy law, or as may be agreed to by the Holder of a Claim, may set off against any Allowed Claim and the distributions to be made pursuant to the Plan on account of such Allowed Claim (before any distribution is made on account of such Allowed Claim), any Claims, rights, and Causes of Action of any nature that such Debtor or Reorganized Debtor, as applicable, may hold against the Holder of such Allowed Claim, to the extent such Claims, rights, or Causes of Action against such Holder have not been otherwise compromised or settled on or prior to the Effective Date (whether pursuant to the Plan or otherwise); provided, however, that neither the failure to effect such a setoff nor the allowance of any Claim pursuant to the Plan shall constitute a waiver or release by such Reorganized Debtor of any such Claims, rights, and Causes of Action that such Reorganized Debtor may possess against such Holder.  In no event shall any Holder of Claims be entitled to set off any Claim against any Claim, right, or Cause of Action of the Debtor or Reorganized Debtor, as applicable, unless such Holder has filed a motion with the Bankruptcy Court requesting the authority to perform such setoff on or before the Confirmation Date, and notwithstanding any indication in any Proof of Claim or otherwise that such Holder asserts, has, or intends to preserve any right of setoff pursuant to section 553 or otherwise.

9. Allocation Between Principal and Accrued Interest

Except as otherwise provided in the Plan, the aggregate consideration paid to Holders with respect to their Allowed Claims shall be treated pursuant to the Plan as allocated first to the principal amount of such Allowed Claims (to the extent thereof) and, thereafter, to the interest, if any, accrued through the Effective Date.

G. Procedures for Resolving Disputed Claims and Interests

Article VII of the Plan sets forth the procedures for resolving Disputed Claims and Interests.

1. Disputed Claims Process

Except as otherwise provided in the Plan, if a party files a proof of claim and the Debtors or Plan Administrator, as applicable, do not determine in their sole discretion, and without the need for notice to or action, order or approval of the Bankruptcy Court, that the Claim subject to such proof of claim is Allowed, such Claim shall be Disputed unless Allowed or disallowed by a Final Order or as otherwise set forth in Article VII of the Plan.  Except as otherwise provided in the Plan, all proofs of claim filed after the Effective Date shall be disallowed and forever barred, estopped, and enjoined from assertion, and shall not be enforceable against any Reorganized Debtor, without the need for any objection by the Plan Administrator or any further notice to or action, order, or approval of the Bankruptcy Court.

2. Prosecution of Objections to Claims and Interests

Except insofar as a Claim or Interest is Allowed under the Plan, the Debtors, the Reorganized Debtors or any other party in interest shall be entitled to object to the Claim or Interest.  Any objections to Claims and Interests shall be served and filed on or before the Claims Objection Bar Date.  All Claims and Interests not objected to by the end of such period shall be deemed Allowed.  For the avoidance of doubt, except as otherwise provided in the Plan, from and after the Effective Date, each Reorganized Debtor shall have and retain any and all rights and defenses such Debtor had immediately prior to the Effective Date with respect to any Disputed Claim or Interest, including any Causes of Action against the Holder of such Disputed Claim or Interest.

3. Late Claims

EXCEPT AS OTHERWISE AGREED BY THE DEBTOR OR THE REORGANIZED DEBTOR, AS APPLICABLE, ANY PERSON OR ENTITY THAT WAS REQUIRED TO FILE A TIMELY PROOF OF CLAIM AND FAILED TO DO SO ON OR BEFORE THE CLAIMS BAR DATE SHALL NOT, WITH RESPECT TO SUCH CLAIM, BE TREATED AS A CREDITOR OF THE DEBTOR FOR THE PURPOSE OF VOTING ON, OR RECEIVING DISTRIBUTIONS UNDER, THIS PLAN.

4. Interest

Unless otherwise specifically provided for in the Plan or by order of the Bankruptcy Court, postpetition interest shall not accrue or be paid on Claims, and no Holder of a Claim shall be entitled to interest accruing on or after the Petition Date on any Claim or right.  Additionally, and without limiting the foregoing, interest shall not accrue or be paid on any Disputed Claim with respect to the period from the Effective Date to the date a final distribution is made on account of such Disputed Claim, if and when such Disputed Claim becomes an Allowed Claim.  To the extent that there are surplus Distribution Proceeds or funds remaining in the Disputed Claim Reserve or Wind-Down Reserve after payment in full of the Allowed Taberna Note Claim Amount and Allowed RAIT Funding Claim Amount, the Plan Administrator shall file a motion with the Bankruptcy Court to distribute such funds in accordance with applicable law.

5. Disallowance of Claims

All Claims of any Entity from which property is sought by the Debtors under section 542, 543, 550, or 553 of the Bankruptcy Code or that the Debtors or the Reorganized Debtors allege is a transferee of a transfer that is avoidable under section 522(f), 522(h), 544, 545, 547, 548, 549, or 724(a) of the Bankruptcy Code shall be disallowed if:  (a) the Entity, on the one hand, and the Debtors or the Reorganized Debtors, on the other hand, agree or the Bankruptcy Court has determined by Final Order that such Entity or transferee is liable to turn over any property or monies under any of the aforementioned sections of the Bankruptcy Code and (b) such Entity or transferee has failed to turn over such property by the date set forth in such agreement or Final Order.

H. The Plan Administrator

Pursuant to Article VIII of the Plan, the powers of the Plan Administrator shall include any and all powers and authority to implement the Plan and to administer and distribute the Distribution Proceeds and the proceeds, if any, from the Sale Transaction Escrow and wind down the business and affairs of the Debtors and the Reorganized Debtors, including: (1) liquidating, receiving, holding, investing, supervising, and protecting the assets of the Reorganized Debtors; (2) taking all steps to execute all instruments and documents necessary to effectuate the distributions to be made under the Plan from the Distribution Proceeds or otherwise; (3) making distributions as contemplated under the Plan; (4) establishing and maintaining bank accounts in the name of the Reorganized Debtors; (5) subject to the terms set forth herein, employing, retaining, terminating, or replacing professionals to represent it with respect to its responsibilities or otherwise effectuating the Plan to the extent necessary; (6) paying all reasonable fees, expenses, debts, charges, and liabilities of the Reorganized Debtors; (7) administering and paying taxes of the Reorganized Debtors, including filing tax returns; (8) representing the interests of the Reorganized Debtors or the Estates before any taxing authority in all matters, including any action, suit, proceeding, or audit; and (9) exercising such other powers as may be vested in it pursuant to order of the Bankruptcy Court or pursuant to the Plan, or as it reasonably deems to be necessary and proper to carry out the provisions of the Plan.

1. Plan Administrator Rights and Powers

The Plan Administrator shall retain and have all the rights, powers, and duties necessary to carry out its responsibilities under the Plan, and as otherwise provided in the Confirmation Order. The Plan Administrator shall be the exclusive trustee of the assets of the Reorganized Debtors for the purposes of 31 U.S.C. § 3713(b) and 26 U.S.C. § 6012(b)(3), as well as the representative of the Estates appointed pursuant to section 1123(b)(3)(B) of the Bankruptcy Code.

2. Retention of Professionals

The Plan Administrator shall have the right to retain the services of attorneys, accountants, and other professionals that, in the discretion of the Plan Administrator, are necessary to assist the Plan Administrator in the performance of its duties. The reasonable fees and expenses of such professionals shall be paid by the Reorganized Debtors from the Wind-Down Reserve upon the monthly submission of statements to the Plan Administrator. The payment of the reasonable fees and expenses of the Plan Administrator’s retained professionals shall be made in the ordinary course of business from the Wind-Down Reserve and shall not be subject to the approval of the Bankruptcy Court.

3. Compensation of the Plan Administrator

The Plan Administrator’s compensation, on a post-Effective Date basis, shall be as described in the Plan Supplement and paid out of the Wind-Down Reserve. Except as otherwise ordered by the Bankruptcy Court, the fees and expenses incurred by the Plan Administrator on or after the Effective Date (including taxes) and any reasonable compensation and expense reimbursement Claims (including attorney fees and expenses) made by the Plan Administrator in connection with such Plan Administrator’s duties shall be paid without any further notice to, or action, order, or approval of, the Bankruptcy Court in Cash from the Wind-Down Reserve if such amounts relate to any actions taken hereunder.

4. Wind-Down

On and after the Effective Date, the Plan Administrator will be authorized to implement the Plan and any applicable orders of the Bankruptcy Court, and the Plan Administrator shall have the power and authority to take any action necessary to wind down and dissolve the Debtors’ Estates.

As soon as practicable after the Effective Date, the Plan Administrator shall: (1) to the extent applicable, file a certificate of dissolution or equivalent document, together with all other necessary corporate and company documents, to effect the dissolution of the Debtors under the applicable laws of their state of incorporation or formation (as applicable); and (2) take such other actions as the Plan Administrator may determine to be necessary or desirable to carry out the purposes of the Plan. Any certificate of dissolution or equivalent document may be executed by the Plan Administrator without need for any action or approval by the shareholders or board of directors, trustees, or managers of any Debtor. From and after the Effective Date, except with respect to the Reorganized Debtors as set forth herein, the Debtors (1) for all purposes shall be deemed to have withdrawn their business operations from any state in which the Debtors were previously conducting, or are registered or licensed to conduct, their business operations, and shall not be required to file any document, pay any sum, or take any other action in order to effectuate such withdrawal, (2) shall be deemed to have canceled pursuant to this Plan all Interests, and (3) shall not be liable in any manner to any taxing authority for franchise, business, license, or similar taxes accruing on or after the Effective Date. Notwithstanding the Debtors’ dissolution, the Debtors shall be deemed to remain intact solely with respect to the preparation, filing, review, and resolution of applications for Professional Claims.

The filing of the final monthly report (if required for the month in which the Effective Date occurs) and all subsequent quarterly reports shall be the responsibility of the Plan Administrator.

5. Exculpation, Indemnification, Insurance, and Liability Limitation

The Plan Administrator and all professionals retained by the Plan Administrator, each in their capacities as such, shall be deemed exculpated and indemnified, except for fraud, willful misconduct, or gross negligence, in all respects by the Reorganized Debtors. The Plan Administrator may obtain, at the expense of the Reorganized Debtors and with funds from the Wind-Down Reserve, commercially reasonable liability, errors and omissions, directors and officers, or other appropriate insurance with respect to the indemnification obligations of the Reorganized Debtors. The Plan Administrator may rely upon written information previously generated by the Debtors.

Notwithstanding anything to the contrary contained in the Plan, the Plan Administrator in its capacity as such, shall have no liability whatsoever to any party for the liabilities and/or obligations, however created, whether direct or indirect, in tort, contract, or otherwise, of the Debtors.

6. Tax Returns

After the Effective Date, the Plan Administrator, or an accounting firm that the Plan Administrator designates and provides oversight, shall complete and file all final or otherwise required federal, state, and local tax returns for each of the Debtors and non-debtor Affiliates, as applicable, and, pursuant to section 505(b) of the Bankruptcy Code, may request an expedited determination of any unpaid tax liability of any Debtor or its Estate for any tax incurred during the administration of such Debtor’s Chapter 11 Case, as determined under applicable tax laws.

7. Dissolution of the Reorganized Debtors

Upon a certification to be Filed with the Bankruptcy Court by the Plan Administrator of all distributions having been made and completion of all its duties under the Plan and entry of a final decree closing the last of the Chapter 11 Cases, the Reorganized Debtors shall be deemed to be dissolved without any further action by the Reorganized Debtors, including the filing of any documents with the secretary of state for the state in which the Reorganized Debtors is formed or any other jurisdiction. The Plan Administrator, however, shall have authority to take all necessary actions to dissolve the Reorganized Debtors in and withdraw the Reorganized Debtors from applicable state(s).

I. Effect of Confirmation of the Plan

1. Discharge of Claims and Termination of Interests

To the maximum extent permitted by section 1141(d) of the Bankruptcy Code, and except as otherwise specifically provided in the Plan or in any contract, instrument, or other agreement or document created pursuant to the Plan, the distributions, rights, and treatment that are provided in the Plan shall be in complete satisfaction, discharge, and release, effective as of the Effective Date, of Claims (including any Intercompany Claims resolved or compromised after the Effective Date by the Reorganized Debtors), Interests, and Causes of Action against any Debtor of any nature whatsoever, including any interest accrued on Claims from and after the Petition Date, whether known or unknown, against, liabilities of, Liens on, obligations of, rights against, and Interests in, the Debtors or any of their assets or properties, regardless of whether any property shall have been distributed or retained pursuant to the Plan on account of such Claims and Interests, including demands, liabilities, and Causes of Action that arose before the Effective Date, any liability to the extent such Claims or Causes of Action accrued before the Effective Date, and all debts of the kind specified in sections 502(g), 502(h), or 502(i) of the Bankruptcy Code, in each case whether or not: (1) a Proof of Claim based upon such debt or right is filed or deemed filed pursuant to section 501 of the Bankruptcy Code; (2) a Claim based upon such debt or right is Allowed pursuant to section 502 of the Bankruptcy Code; or (3) the Holder of such a Claim or Interest has accepted the Plan. Any default or “event of default” by the Debtors or their Affiliates with respect to any Claim that existed immediately before or on account of the filing of the Chapter 11 Cases shall be deemed cured (and no longer continuing) as of the Effective Date. Unless expressly provided in the Plan, the Confirmation Order shall be a judicial determination of the discharge of all Claims and Interests subject to the Effective Date occurring.

2. Term of Injunction or Stays

Unless otherwise provided in the Plan or the Confirmation Order, all injunctions or stays in effect in the Chapter 11 Cases pursuant to sections 105 or 362 of the Bankruptcy Code or any order of the Bankruptcy Court, and extant on the Confirmation Date (excluding any injunctions or stays contained in the Plan or the Confirmation Order), shall remain in full force and effect until the Effective Date. All injunctions or stays contained in the Plan or the Confirmation Order shall remain in full force and effect in accordance with their terms.

3. Release of Liens

Except as otherwise provided in the Plan or in any contract, instrument, release, or other agreement or document created pursuant to the Plan, on the Effective Date, all mortgages, deeds of trust, Liens, pledges, or other security interests against any property of the Estates shall be fully released and discharged, and all of the right, title, and interest of any Holder of such mortgages, deeds of trust, Liens, pledges, or other security interests shall revert to the Reorganized Debtor and its successors and assigns.

4. Releases by the Debtors

Pursuant to section 1123(b) of the Bankruptcy Code, for good and valuable consideration, on and after the Effective Date, each Released Party is deemed released and discharged by the Debtors, the Reorganized Debtors, Plan Administrator, and their Estates from any and all Causes of Action, including any derivative claims asserted on behalf of the Debtors, that the Debtors, the Reorganized Debtors, Plan Administrator, or their Estates would have been legally entitled to assert in their own right (whether individually or collectively) or on behalf of the Holder of any Claim or Interest, or that any Holder of any Claim or Interest could have asserted on behalf of the Debtors, based on or relating to, or in any manner arising from, in whole or in part:

(a) the Debtors, the Debtors’ in- or out-of-court restructuring efforts, intercompany transactions, the formulation, preparation, dissemination, negotiation, or filing of the Plan Documents;

(b) any Plan Document, contract, instrument, release, or other agreement or document (including providing any legal opinion requested by any Entity regarding any transaction, contract, instrument, document, or other agreement contemplated by the Plan or the reliance by any Released Party on the Plan or the Confirmation Order in lieu of such legal opinion) created or entered into in connection with the Disclosure Statement or the Plan;

(c) the Chapter 11 Cases, the Disclosure Statement, the Plan, the Purchase Agreement, the filing of the Chapter 11 Cases, the pursuit of Confirmation, the pursuit of Consummation, the administration and implementation of the Plan, including the distribution of property under the Plan or any other related agreement; or

(d) the business or contractual arrangements between any Debtor and any Released Party, and any other act or omission, transaction, agreement, event, or other occurrence taking place on or before the Effective Date relating to any of the foregoing.

Notwithstanding anything to the contrary in the foregoing, the releases set forth above do not release any post-Effective Date obligations of any party or Entity under the Plan, any Plan Document, or any document, instrument, or agreement (including those set forth in the Plan Supplement) executed to implement the Plan.

Entry of the Confirmation Order shall constitute the Bankruptcy Court’s approval, pursuant to Bankruptcy Rule 9019, of the foregoing release, which includes by reference each of the related provisions and definitions contained herein, and further, shall constitute the Bankruptcy Court’s finding that such release is:  (a) in exchange for the good and valuable consideration provided by the Released Parties; (b) a good faith settlement and compromise of the Claims so released; (c) in the best interests of the Debtors and all Holders of Claims and Interests; (d) fair, equitable, and reasonable; (e) given and made after due notice and opportunity for hearing; and (f) a bar to any of the Debtors asserting any Claim or Cause of Action so released.

5. Releases by Holder of Claims and Interests

Pursuant to section 1123(b) of the Bankruptcy Code, for good and valuable consideration, on and after the Effective Date, each Releasing Party is deemed to have released and discharged each Debtor or Reorganized Debtor, as applicable, and each other Released Party from any and all Causes of Action, including any derivative claims asserted on behalf of the Debtors, that such Entity would have been legally entitled to assert (whether individually or collectively), based on or relating to, or in any manner arising from, in whole or in part:

(a) the Debtors, the Debtors’ in- or out-of-court restructuring efforts, intercompany transactions, the formulation, preparation, dissemination, negotiation, or filing of the Plan Documents;

(b) any Plan Document, contract, instrument, release, or other agreement or document (including providing any legal opinion requested by any Entity regarding any transaction, contract, instrument, document, or other agreement contemplated by the Plan or the reliance by any Released Party on the Plan or the Confirmation Order in lieu of such legal opinion) created or entered into in connection with the Disclosure Statement or the Plan;

(c) the Chapter 11 Cases, the Disclosure Statement, the Plan, the Purchase Agreement, the filing of the Chapter 11 Cases, the pursuit of Confirmation, the pursuit of Consummation, the administration and implementation of the Plan, including the distribution of property under the Plan or any other related agreement; or

(d) the business or contractual arrangements between any Debtor and any Released Party, and any other act or omission, transaction, agreement, event, or other occurrence taking place on or before the Effective Date relating to any of the foregoing.

Notwithstanding anything to the contrary in the foregoing, the releases set forth above do not release any post-Effective Date obligations of any party or Entity under the Plan, any Plan Document, or any document, instrument, or agreement (including those set forth in the Plan Supplement) executed to implement the Plan.

Entry of the Confirmation Order shall constitute the Bankruptcy Court’s approval, pursuant to Bankruptcy Rule 9019, of the foregoing release, which includes by reference each of the related provisions and definitions contained herein, and further, shall constitute the Bankruptcy Court’s finding that such release is:  (a) in exchange for the good and valuable consideration provided by the Released Parties; (b) a good faith settlement and compromise of the Claims so released; (c) in the best interests of the Debtors and all Holders of Claims and Interests; (d) fair, equitable, and reasonable; (e) given and made after due notice and opportunity for hearing; and (f) a bar to any of the Releasing Parties asserting any Claim or Cause of Action so released against any of the Released Parties.

6. Exculpation

Except as otherwise specifically provided in the Plan, no Exculpated Party shall have or incur, and each Exculpated Party is hereby released and exculpated from any Cause of Action for any claim related to any act or omission in connection with, relating to, or arising out of, the Chapter 11 Cases, the Disclosure Statement, the Plan, the Sale Transaction, the Purchase Agreement, or any Plan Document, contract, instrument, release or other agreement or document (including providing any legal opinion requested by any Entity regarding any transaction, contract, instrument, document, or other agreement contemplated by the Plan or the reliance by any Exculpated Party on the Plan or the Confirmation Order in lieu of such legal opinion) created or entered into in connection with the Disclosure Statement or the Plan, the filing of the Chapter 11 Cases, the pursuit of Confirmation, the pursuit of Consummation, the administration and implementation of the Plan, including the distribution of property under the Plan or any other related agreement, except for claims related to any act or omission that is determined in a final order to have constituted actual fraud, willful misconduct, or gross negligence, but in all respects such Entities shall be entitled to reasonably rely upon the advice of counsel with respect to their duties and responsibilities pursuant to the Plan. The Exculpated Parties have, and upon closing of the Chapter 11 Cases or the Effective Date shall be deemed to have, participated in good faith and in compliance with the applicable laws with regard to the solicitation of, and distribution of, consideration pursuant to the Plan and, therefore, are not, and on account of such distributions shall not be, liable at any time for the violation of any applicable law, rule, or regulation governing the solicitation of acceptances or rejections of the Plan or such distributions made pursuant to the Plan.

7. Injunction

Except with respect to the obligations arising under the Plan or the Confirmation Order, and except as otherwise expressly provided in the Plan or the Confirmation Order, all Entities that held, hold, or may hold claims or interests that have been released, discharged, or exculpated pursuant to the Plan, are permanently enjoined, from and after the Effective Date, from taking any of the following actions against, as applicable, the Debtors or Reorganized Debtors, or the other Released Parties: (1) commencing or continuing in any manner any action or other proceeding of any kind on account of or in connection with or with respect to any such claims or interests; (2) enforcing, attaching, collecting, or recovering by any manner or means any judgment, award, decree, or order against such Entities on account of or in connection with or with respect to any such claims or interests; (3) creating, perfecting, or enforcing any Lien or encumbrance of any kind against such Entities or the property of such Entities on account of or in connection with or with respect to any such claims or interests; (4) asserting any right of setoff, subrogation, or recoupment of any kind against any obligation due from such Entities or against the property of such Entities on account of or in connection with or with respect to any such claims or interests unless such Entity has timely asserted such setoff right in a document filed with the Bankruptcy Court explicitly preserving such setoff, and notwithstanding an indication of a claim or interest or otherwise that such Entity asserts, has, or intends to preserve any right of setoff pursuant to applicable law or otherwise; and (5) commencing or continuing in any manner any action or other proceeding of any kind on account of or in connection with or with respect to any such claims or interests released or settled pursuant to the Plan.

8. Protection Against Discriminatory Treatment

In accordance with section 525 of the Bankruptcy Code, and consistent with paragraph 2 of Article VI of the United States Constitution, no Governmental Unit shall discriminate against any Reorganized Debtor, or any Entity with which a Reorganized Debtor has been or is associated, solely because such Reorganized Debtor was a Debtor under chapter 11, may have been insolvent before the commencement of the Chapter 11 Cases (or during the Chapter 11 Cases but before such Debtor was granted or denied a discharge), or has not paid a debt that is dischargeable in the Chapter 11 Cases.

9. Reimbursement or Contribution

If the Bankruptcy Court disallows a Claim for reimbursement or contribution of an Entity pursuant to section 502(e)(1)(B) of the Bankruptcy Code, then to the extent that such Claim is contingent as of the Effective Date, such Claim shall be forever disallowed notwithstanding section 502(j) of the Bankruptcy Code, unless prior to the Effective Date (a) such Claim has been adjudicated as noncontingent or (b) the relevant Holder of a Claim has filed a noncontingent Proof of Claim on account of such Claim and a Final Order has been entered determining such Claim as no longer contingent.

10. Dissolution of Creditors Committee

On the Effective Date, the Creditors Committee shall dissolve automatically and the members thereof shall be released and discharged from all rights, duties, responsibilities, and liabilities arising from, or related to, the Chapter 11 Cases and under the Bankruptcy Code, except for the limited purpose of prosecuting requests for payment of Professional Claims for services and reimbursement of expenses incurred prior to the Effective Date by such Creditors Committee and its Professionals.

J. Conditions Precedent to the Effective Date

1. Conditions Precedent to the Effective Date

Under Section 10.1 of the Plan, it shall be a condition to the Effective Date that the following conditions shall have been satisfied or waived pursuant to Section 10.2 of the Plan:

(a) The Plan Documents shall be in form and substance reasonably acceptable to the RSA Counterparties;

(b) the Confirmation Order shall have been entered, shall be in form and substance reasonably acceptable to the RSA Counterparties, and such order shall not have been stayed, modified, or vacated on appeal;

(c) the Sale Transaction shall have been consummated;

(d) the Debtors shall have obtained all authorizations, consents, regulatory approvals, rulings, or documents that are necessary to implement and effectuate the Plan and each of the other transactions contemplated by the Plan Documents;

(e) the Debtors shall have paid or reserved for all statutory fees due to the United States Trustee;

(f) the Debtors shall have paid or reserved for all expenses and payments due to be made on the Effective Date of the Plan; and

(g) not more than 240 days shall have passed from the Petition Date.

2. Waiver of Conditions Precedent

The Debtors, with the written consent of the RSA Counterparties, may waive any of the conditions to the Effective Date set forth in Section 10.1 of the Plan any time without any notice to any other parties in interest and without any further notice to or action, order, or approval of the Bankruptcy Court, and without any formal action other than proceeding to confirm or consummate the Plan.

3. Effect of Non-Occurrence of Conditions to Consummation

If prior to Consummation, the Confirmation Order is vacated pursuant to a Final Order, then except as provided in any order of the Bankruptcy Court vacating the Confirmation Order, the Plan will be null and void in all respects, and nothing contained in the Plan or Disclosure Statement shall:  (a) constitute a waiver or release of any Claims, Interests, or Causes of Action; (b) prejudice in any manner the rights of any Debtor or any other Entity; or (c) constitute an admission, acknowledgment, offer, or undertaking of any sort by any Debtor or any other Entity.

K. Modification, Revocation, or Withdrawal of the Plan

1. Modification and Amendments

Effective as of the date hereof:  (a) the Debtors reserve the right, with the reasonable consent of the Creditors Committee and RSA Counterparties, in accordance with the Bankruptcy Code and the Bankruptcy Rules, to amend or modify the Plan before the entry of the Confirmation Order, subject to the limitations set forth herein; and (b) after the entry of the Confirmation Order (and before the Effective Date with the reasonable consent of the Creditors Committee and RSA Counterparties), the Debtors or the Reorganized Debtors, as applicable, may, upon order of the Bankruptcy Court, amend or modify the Plan, in accordance with section 1127(b) of the Bankruptcy Code, remedy any defect or omission, or reconcile any inconsistency in the Plan in such manner as may be necessary to carry out the purpose and intent of the Plan, subject to the limitations set forth herein.

2. Revocation or Withdrawal of Plan

The Debtors reserve the right to revoke or withdraw the Plan before the Confirmation Date and to file subsequent chapter 11 plans.  If the Debtors revoke or withdraw the Plan, or if Confirmation or the Effective Date does not occur, then:  (a) the Plan will be null and void in all respects; (b) any settlement or compromise embodied in the Plan, assumption or rejection of Executory Contracts or Unexpired Leases effected by the Plan, and any document or agreement executed pursuant hereto will be null and void in all respects; and (c) nothing contained in the Plan shall (1) constitute a waiver or release of any Claims, Interests, or Causes of Action, (2) prejudice in any manner the rights of any Debtor or any other Entity, or (3) constitute an admission, acknowledgement, offer, or undertaking of any sort by any Debtor or any other Entity

L. Retention of Jurisdiction by the Court

Notwithstanding the entry of the Confirmation Order and the occurrence of the Effective Date, the Bankruptcy Court shall retain jurisdiction, to the maximum extent permitted by applicable law, over all matters arising out of, or related to, the Chapter 11 Cases and the Plan pursuant to sections 105(a) and 1142 of the Bankruptcy Code, including specifically jurisdiction to:

(a) allow, disallow, determine, liquidate, classify, estimate, or establish the priority, secured or unsecured status, or amount of any Claim or Interest, including the resolution of any request for payment of any Claim or Interest and the resolution of any and all objections to the secured or unsecured status, priority, amount, or allowance of Claims or Interests;

(b) decide and resolve all matters related to the granting and denying, in whole or in part, any applications for allowance of compensation or reimbursement of expenses to Professionals authorized pursuant to the Bankruptcy Code or the Plan;

(c) resolve any matters related to Executory Contracts or Unexpired Leases, including:  (a) the assumption, assumption and assignment, or rejection of any Executory Contract or Unexpired Lease to which a Debtor is party or with respect to which a Debtor may be liable and to hear, determine, and, if necessary, liquidate, any Cure or Claims arising therefrom, including pursuant to section 365 of the Bankruptcy Code; (b) any potential contractual obligation under any Executory Contract or Unexpired Lease that is assumed; (c) the Reorganized Debtors’ amendment, modification, or supplement, after the Effective Date, pursuant to Article V of the Plan, of the list of Executory Contracts and Unexpired Leases to be rejected or otherwise; and (d) any dispute regarding whether a contract or lease is or was executory or expired;

(d) ensure that distributions to Holders of Allowed Claims are accomplished pursuant to the provisions of the Plan and adjudicate any and all disputes arising from or relating to distributions under the Plan;

(e) adjudicate, decide, or resolve any motions, adversary proceedings, contested or litigated matters, and any other matters, and grant or deny any applications involving a Debtor that may be pending on the Effective Date;

(f) enter and implement such orders as may be necessary or appropriate to execute, implement, or consummate the provisions of (a) contracts, instruments, releases, indentures, and other agreements or documents approved by Final Order in the Chapter 11 Cases and (b) the Plan or the Confirmation Order, including contracts, instruments, releases, indentures, and other agreements or documents created in connection with the Plan;

(g) enforce any order for the sale of property pursuant to sections 363, 1123, or 1146(a) of the Bankruptcy Code;

(h) grant any consensual request to extend the deadline for assuming or rejecting Unexpired Leases pursuant to section 365(d)(4) of the Bankruptcy Code;

(i) issue injunctions, enter and implement other orders, or take such other actions as may be necessary or appropriate to restrain interference by any Entity with Consummation or enforcement of the Plan;

(j) hear, determine, and resolve any cases, matters, controversies, suits, disputes, or Causes of Action in connection with or in any way related to the Chapter 11 Cases, including:  (a) with respect to the repayment or return of distributions and the recovery of additional amounts owed by the Holder of a Claim or Interest for amounts not timely repaid pursuant to Section 6.4(a) of the Plan; (b) with respect to the releases, injunctions, and other provisions contained in Article IX of the Plan, including entry of such orders as may be necessary or appropriate to implement such releases, injunctions, and other provisions; (c) that may arise in connection with the Consummation, interpretation, implementation, or enforcement of the Plan or the Confirmation Order, or any Entity’s obligations incurred in connection with the Plan or the Confirmation Order, including those arising under agreements, documents, or instruments executed in connection with the Plan; or (d) related to section 1141 of the Bankruptcy Code;

(k) enter and implement such orders as are necessary or appropriate if the Confirmation Order is for any reason modified, stayed, reversed, revoked, or vacated;

(l) consider any modifications of the Plan, to cure any defect or omission, or to reconcile any inconsistency in any Bankruptcy Court order, including the Confirmation Order;

(m) hear and determine matters concerning state, local, and federal taxes in accordance with sections 346, 505, and 1146 of the Bankruptcy Code;

(n) enter an order or Final Decree concluding or closing the Chapter 11 Cases;

(o) enforce all orders previously entered by the Bankruptcy Court;

(p) hear any other matter not inconsistent with the Bankruptcy Code.

M. Miscellaneous Provisions

1. Additional Documents

On or before the Effective Date, the Debtors may file with the Bankruptcy Court such agreements and other documents as may be necessary or appropriate to effectuate and further evidence the terms and conditions of the Plan.  The Debtors or the Reorganized Debtors, as applicable, and all Holders of Claims and Interests receiving distributions pursuant to the Plan and all other parties in interest shall, from time to time, prepare, execute, and deliver any agreements or documents and take any other actions as may be necessary or advisable to effectuate the provisions and intent of the Plan.

2. Payment of Statutory Fees

All fees payable pursuant to 28 U.S.C. § 1930(a) shall be paid for each quarter (including any fraction thereof) until the Chapter 11 Cases are converted, dismissed, or a Final Decree is issued, whichever occurs first.

3. Reservation of Rights

Except as expressly set forth herein, the Plan shall have no force or effect unless the Bankruptcy Court shall enter the Confirmation Order.  None of the filing of the Plan, any statement or provision contained in the Plan, or the taking of any action by any Debtor with respect to the Plan, the Disclosure Statement, or the Plan Supplement shall be or shall be deemed to be an admission or waiver of any rights of any Debtor with respect to the Holders of Claims or Interests prior to the Effective Date.

4. Successors and Assigns

The rights, benefits, and obligations of any Entity named or referred to in the Plan shall be binding on, and shall inure to the benefit of any heir, executor, administrator, successor or assign, affiliate, officer, director, trustee, agent, representative, attorney, beneficiary, or guardian, if any, of each Entity.

5. Service of Documents

After the Effective Date, any pleading, notice, or other document required by the Plan to be served on or delivered to the Reorganized Debtors shall be served on:

Reorganized Debtors	RAIT Financial Trust Two Logan Square, 23rd Floor Philadelphia, PA 19103 Attn:  Jamie Reyle           CEO, President & General Counsel           jreyle@rait.com
Counsel to Reorganized Debtors	Drinker Biddle & Reath LLP 1177 Avenue of the Americas, 41st Floor New York, NY 10036 Attn:  Michael Pompeo           michael.pompeo@dbr.com
United States Trustee	Office of the United States Trustee for the District of Delaware 844 King Street, Suite 2207 Wilmington, Delaware 19801 Attn:  Richard L. Schepacarter           richard.schepacarter@usdoj.gov

6. Entire Agreement

Except as otherwise indicated, the Plan supersedes all previous and contemporaneous negotiations, promises, covenants, agreements, understandings, and representations on such subjects, all of which have become merged and integrated into the Plan.

7. Plan Supplement Exhibits

All exhibits and documents included in the Plan Supplement are incorporated into and are a part of the Plan as if set forth in full in the Plan.  After the exhibits and documents are filed, copies of such exhibits and documents shall be made available upon written request to the Debtors’ counsel at the address above or by downloading such exhibits and documents from https://dm.epiq11.com/case/RTF/info or the Bankruptcy Court’s website at www.deb.uscourts.gov.  Unless otherwise ordered by the Bankruptcy Court, to the extent any exhibit or document in the Plan Supplement is inconsistent with the terms of any part of the Plan that does not constitute the Plan Supplement, such part of the Plan that does not constitute the Plan Supplement shall control.

8. Non-Severability

If, prior to Confirmation, any term or provision of the Plan is held by the Bankruptcy Court to be invalid, void, or unenforceable, the Bankruptcy Court shall have the power to alter and interpret such term or provision to make it valid or enforceable to the maximum extent practicable, consistent with the original purpose of the term or provision held to be invalid, void, or unenforceable, and such term or provision shall then be applicable as altered or interpreted.  Notwithstanding any such holding, alteration, or interpretation, the remainder of the terms and provisions of the Plan will remain in full force and effect and will in no way be affected, impaired, or invalidated by such holding, alteration, or interpretation.  The Confirmation Order shall constitute a judicial determination and shall provide that each term and provision of the Plan, as it may have been altered or interpreted in accordance with the foregoing, is:  (a) valid and enforceable pursuant to its terms; (b) integral to the Plan and may not be deleted or modified without the Debtors’ consent; and (c) nonseverable and mutually dependent.

Article IV
Cramdown Request

Through the Plan, the Debtors request Confirmation pursuant to section 1129(b) of the Bankruptcy Code with respect to any rejecting Class(es) of Claims and Interests.  

The Bankruptcy Code provides that the Plan may be confirmed even if it is not accepted by all Impaired Classes. To confirm the Plan without the requisite number of acceptances of each Impaired Class, the Bankruptcy Court must find that at least one Impaired Class has accepted the Plan without regard to the acceptances of insiders, and the Plan does not discriminate unfairly against, and is otherwise fair and equitable, to any Impaired Class that does not accept the Plan. Accordingly, if any Impaired Class votes to reject or is deemed to reject the Plan, the Debtor will seek to confirm the Plan under the “cramdown” provisions of Section 1129(b) of the Bankruptcy Code.

Article V
Certain Factors to be Considered Regarding the Plan

PRIOR TO VOTING TO ACCEPT OR REJECT THE PLAN, ALL IMPAIRED HOLDERS OF CLAIMS SHOULD READ AND CAREFULLY CONSIDER THE FACTORS SET FORTH BELOW, AS WELL AS ALL OTHER INFORMATION SET FORTH OR OTHERWISE REFERENCED IN THIS DISCLOSURE STATEMENT.

The following provides a summary of various important considerations and risk factors associated with the Plan. However, it is not exhaustive. In considering whether to vote for or against the Plan, Holders of Claims or Interests should read and carefully consider the factors set forth below, as well as all other information set forth or otherwise referenced in this Disclosure Statement.

A. Parties in Interest May Object to Debtors’ Classification of Claims and Interests

Section 1122 of the Bankruptcy Code provides that a plan of reorganization may place a claim or an interest in a particular class only if such claim or interest is substantially similar to the other claims or interests in such class. The Debtors believe that the classification of Claims and Interests under the Plan complies with the requirements set forth in the Bankruptcy Code because the Debtor created seven classes of Claims and Interests, each encompassing Claims or Interests that are substantially similar to the other Claims or Interests in each such class.

B. The Debtors May Not Be Able to Secure Confirmation of the Plan

There can be no assurance that the requisite acceptances to confirm the Plan will be received. Even if the requisite acceptances are received, there can be no assurance that the Bankruptcy Court will confirm the Plan. A non-accepting creditor or interest Holder might challenge the adequacy of this Disclosure Statement or the balloting procedures and results as not being in compliance with the Bankruptcy Code or Bankruptcy Rules. Even if the Bankruptcy Court determined that this Disclosure Statement and the balloting procedures and results were appropriate, the Bankruptcy Court could still decline to confirm the Plan if it found that any of the statutory requirements for confirmation had not been met, including that the terms of the Plan are fair and equitable to non-accepting Classes. Section 1129 of the Bankruptcy Code sets forth the requirements for confirmation and requires, among other things, a finding by the Bankruptcy Court that the Plan “does not unfairly discriminate” and is “fair and equitable” with respect to any non-accepting Classes, confirmation of the Plan is not likely to be followed by a liquidation or a need for further financial reorganization, and the value of distributions to non-accepting Holders of claims and interests within a particular class under the Plan will not be less than the value of distributions such Holders would receive if the Debtors were liquidated under Chapter 7 of the Bankruptcy Code. While there can be no assurance that these requirements will be met, the Debtors believe that the Plan will not be followed by a need for further financial reorganization and that non-accepting Holders within each Class under the Plan will receive distributions at least as great as would be received following a liquidation under Chapter 7 of the Bankruptcy Code when taking into consideration all administrative expense claims and costs associated with any such Chapter 7 case. The Debtors believe that Holders of unsecured Claims would receive significantly less of a distribution under either a liquidation pursuant to Chapter 7 or Chapter 11.

If the Plan is not confirmed, it is unclear whether a restructuring of the Debtors could be implemented and what distributions Holders of Claims or Interests ultimately would receive with respect to their Claims or Interests. If an alternative reorganization could not be agreed to, it is possible that the Debtors would have to liquidate its assets, in which case Holders of Claims would receive substantially less favorable treatment than they would receive under the Plan.

C. Nonconsensual Confirmation

The “cramdown” provisions of section 1129 of the Bankruptcy Code permit the Bankruptcy Court to confirm the Plan if at least one Impaired Class of Claims against the Debtor has accepted the Plan (with such acceptance being determined without including the acceptance of any “insider” in such Class) and, as to each Impaired Class of Claims that has not accepted the Plan, the Bankruptcy Court determines that the Plan “does not discriminate unfairly” and is “fair and equitable” with respect to such Impaired Class.

The Debtor reserves the right to modify the terms of the Plan as necessary for Confirmation without the acceptance of all Impaired Classes. Such modification could result in less favorable treatment for any non-accepting Classes than the treatment currently provided by the Plan.

D. Risk of Non-Occurrence of the Effective Date

Although the Debtors believe that the Effective Date may occur shortly following the Confirmation Date, there can be no assurance that the Effective Date will occur or as to the actual timing of the Effective Date.

Any delay in Confirmation and effectiveness of the Plan could result in, among other things, increased Administrative Claims (including Professional Claims). These or any other negative effects of delays in Confirmation or effectiveness of the Plan could endanger the ultimate consummation of the Plan and materially alter creditor outcomes.

E. Risk of Post-Effective Date Default

In the Confirmation Order, the Court will be required to make a judicial determination that the Plan is feasible, but that determination does not serve as any guarantee that there will not be any post-Effective Date defaults. The Debtors believe that their post-Effective Date cash reserves will be sufficient to meet the Reorganized Debtors’ operating requirements and other post-Effective Date obligations under the Plan.

F. Amount or Classification of a Claim or Interest May be Subject to Objection

Except as otherwise provided in the Plan, the Debtors reserve the right to object to the amount or classification of any Claim. The estimates set forth in this Disclosure Statement cannot be relied on by any Holder of a Claim where such Claim is subject to an objection. Any Holder of a Claim may not receive its specified share of the estimated distributions described in this Disclosure Statement.

G. Estimated Claim Amounts by Class May Not be Accurate

There can be no assurance that the estimated Claim amounts assumed for the purposes of preparing the Plan are correct. The actual amount of Allowed Claims likely will differ in some respect from the estimates. The estimated amounts are subject to certain risks, uncertainties, and assumptions. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, the actual amount of Allowed Claims may vary from those estimated for the purpose of preparing the Disclosure Statement. Depending on the outcome of claims objections, the estimated recovery percentages provided in this Disclosure Statement may be different than the actual recovery percentages that are realized under the Plan.

H. Validity of Votes Cast to Accept Plan Not Affected by Contingencies

The distributions available to Holders of Allowed Claims under the Plan can be affected by a variety of contingencies, including, without limitation, whether the Bankruptcy Court orders certain Claims to be subordinated to other Claims. The occurrence of any and all such contingencies that could affect distributions available to Holders of Allowed Claims underthe Plan, however, will not affect the validity of the vote taken by the Impaired Classes to accept or reject the Plan or require any sort of revote by the Impaired Classes.

ARTICLE VI
Federal Income Tax Consequences of the Plan

Confirmation of a chapter 11 plan can have a number of tax implications for the debtor and for Holders of claims against and interests in the debtor, including discharge/cancellation of indebtedness and capital gains/losses. The tax consequences to Holders of claims or interests may vary based upon the individual circumstances of each Holder. Moreover, the tax consequences of certain aspects of a plan may be uncertain due to, in some cases, the lack of applicable legal precedent and the possibility of changes in the law.

Given the relative size of the Debtors' Estates and the diverse nature of the Claims against and Interests in the Debtors, the Debtors have not undertaken an analysis of the tax consequences of the Plan upon the Debtors or the Holders of Claims or Interests, as applicable. In addition, no ruling has been applied for or obtained from the Internal Revenue Service or any State or local taxing authority, and no opinion of counsel has been requested or obtained, by the Debtors with respect to the tax aspects of the Plan.

Accordingly, there can be no assurance that the Internal Revenue Service or any State or local taxing authority will not challenge any position taken by a Holder of a Claim or Interest as to the tax consequences of the Plan, or that such a challenge, if asserted, would not be upheld. Furthermore, the Debtors do not provide any representations or warranties to any Holders of Claims or Interests with respect to any tax attributes of the Debtors or their extent or availability following confirmation and consummation of the Plan.

**Please note that the foregoing discussion does not constitute tax advice or a tax opinion concerning the Plan. Holders of Claims and Interests and other parties in interest are strongly urged to consult with their own tax advisors regarding the tax consequences of the Plan.**

Article VII
Acceptance and Confirmation of the Plan; Voting Requirements

The Bankruptcy Code requires that, in order to confirm the Plan, the Bankruptcy Court must make a series of findings concerning the Plan and the Debtor, including that (i) the Plan has classified Claims in a permissible manner; (ii) the Plan complies with applicable provisions of the Bankruptcy Code; (iii) the Debtors have complied with applicable provisions of the Bankruptcy Code; (iv) the Debtors have proposed the Plan in good faith and not by any means forbidden by law; (v) the disclosure required by section 1125 of the Bankruptcy Code has been made; (vi) the Plan has been accepted by the requisite votes of Creditors in each class (except to the extent that cramdown is available under section 1129(b) of the Bankruptcy Code); (vii) the Plan is feasible and confirmation is not likely to be followed by further financial restructuring of the Debtors; (viii) the Plan is in the “best interests” of all Holders of Claims in an Impaired class (see “Best Interests Test” below); and (ix) all fees and expenses payable under 28 U.S.C. § 1930, as determined by the Bankruptcy Court at the hearing on confirmation, have been paid or the Plan provides for the payment of such fees on the Effective Date. The Debtors believe that the Plan satisfies all the requirements for confirmation.

A. Best Interests Test

Section 1129(a)(7) of the Bankruptcy Code requires that each Holder of an impaired allowed claim or interest either (i) accepts the plan or (ii) receives or retains under the plan property of a value, as of the effective date, that is not less than the value such Holder would receive or retain if the debtor were liquidated under chapter 7 of the Bankruptcy Code on the Effective Date (the “Best Interests Test”). To determine whether the Best Interests Test is satisfied, the Bankruptcy Court must estimate the aggregate cash proceeds that would be generated from the liquidation of the Debtors’ assets by a chapter 7 trustee, net of administrative expenses, and the aggregate claims that would be allowed against the chapter 7 estate, to determine the estimated creditor payout, which is then compared to the estimated creditor payouts under the Plan. A hypothetical chapter 7 liquidation analysis prepared by the Debtors (the “Liquidation Analysis”) is attached to this Disclosure Statement as Exhibit C. As is evident from the Liquidation Analysis, the Debtors believe that Creditors will receive a higher percentage payout on their Claims under the Plan than they would receive in a chapter 7 liquidation. The conversion to chapter 7 may also give rise to certain Causes of Action against the Estate.

In addition, chapter 7 liquidation would result in a significant delay in payments being made to Creditors. Under Bankruptcy Rule 3002(c), conversion of the Chapter 11 Case to a case under chapter 7 of the Bankruptcy Code would trigger a new bar date for filing claims against the Estate, which would be more than 90 days after the Chapter 11 Case converts. Not only would a chapter 7 liquidation delay distribution to Creditors, but it is possible that additional Claims that were not asserted (or were filed late) in the Chapter 11 Cases, could be filed against the Estates. Moreover, the Debtors would lose the benefit of having an established Administrative Bar Date.

For the reasons set forth above and in the Liquidation Analysis, the Debtors believe that confirmation of the Plan would provide a superior outcome for the Holders of Claims when compared to a chapter 7 liquidation. Accordingly, the Plan meets the requirements of the Best Interests Test.

B. Financial Feasibility Test

In order to confirm a plan, the Bankruptcy Code requires the Bankruptcy Court to find that confirmation of the plan is not likely to be followed by the need for further financial restructuring of the Debtors (the “Feasibility Test”).Thus, for the Plan to meet the Feasibility Test, the Bankruptcy Court must find that there is a reasonable likelihood that the Reorganized Debtors will possess sufficient assets to meet its obligations under the Plan. Given the anticipated cash position of the Estates as of the Effective Date of the Plan (as a result of the anticipated closing of the Sale Transaction with the Stalking Horse Purchaser), and the cessation of the Debtors’ business operations going forward, the Debtors believe that the Plan Administrator will be able to make all distributions required pursuant to the Plan and, therefore, that Confirmation of the Plan is not likely to be followed by the need for further financial restructuring.

C. Acceptance by Impaired Classes

Section 1129(a) of the Bankruptcy Code requires that each Class of Claims or Interests that is Impaired under the Plan accept the Plan, subject to the “cramdown” exception contained in section l l 29(b) of the Bankruptcy Code. Under section 1129(b), if at least one but not all Impaired Classes do not accept the Plan, the Bankruptcy Court may nonetheless confirm the Plan if the non-accepting Classes are treated in the manner required by the Bankruptcy Code. The process by which non-accepting Classes are forced to be bound by the terms of the Plan is commonly referred to as “cramdown.” The Bankruptcy Code allows the Plan to be “crammed down” on non-accepting Classes if (i) the Plan meets all confirmation requirements except the requirement of section 1129(a)(8) of the Bankruptcy Code (i.e., that the Plan be accepted by each Impaired Class) and (ii) the Plan does not “discriminate unfairly” and is “fair and equitable” toward each Impaired Class that has not voted to accept the Plan, as referred to in section 1129(b) of the Bankruptcy Code and applicable case law.

Voting Classes under the Plan will “accept” the Plan if the Plan is accepted by Creditors that hold at least two-thirds in amount and more than one-half in number of the Allowed Claims in the Class that actually vote on the Plan.

Classes that are not Impaired under the Plan will be conclusively presumed to accept the Plan, so solicitation of acceptances from such Classes is not required. A Class is “impaired” unless (i) the legal, equitable and contractual rights to which a Claim or Interest in the Class entitles the Holder are not modified or (ii) the effect of any default is cured and the original terms of the obligation are reinstated. Under the Plan, Class 1 (Secured Tax Claims), Class 2 (Other Secured Claims), Class 3 (Other Priority Claims), Class 4 (Senior Note Claims), Class 5 (General Unsecured Claims), Class 8 (Intercompany Claims), and Class 10 (Section 510(b) Claims) are not Impaired and will, therefore, be deemed to accept the Plan; and Class 11 (Preferred Interests in RAIT Financial Trust), Class 12 (Preferred Interests in Taberna), Class 13 (Common Interests) will not receive or retain any property under the Plan on account of the Interests therein, and will therefore be deemed to have rejected the Plan. Class 9 (Intercompany Interests) is either not Impaired or fully Impaired, and thus will be presumed to accept or deemed to reject the Plan, as applicable.  The remaining Classes of Claims—i.e., Classes 6 and 7—are Impaired under the Plan and Holders of Claims in such Classes are entitled to vote to accept or reject the Plan.

Article VIII
Recommendation and Conclusion

THE DEBTORS BELIEVE THAT CONFIRMATION AND CONSUMMATION OF THE PLAN IS IN THE BEST INTERESTS OF CREDITORS AND THAT THE PLAN SHOULD BE CONFIRMED. THE DEBTORS STRONGLY RECOMMEND THAT ALL CREDITORS RECEIVING A BALLOT VOTE IN FAVOR OF THE PLAN.

Dated: October 14, 2019	RAIT FINANCIAL TRUST RAIT GENERAL, INC. RAIT LIMITED, INC. TABERNA REALTY FINANCE TRUST RAIT JV TRS, LLC RAIT JV TRS SUB, LLC RAIT FUNDING, LLC
	By: /s/ John J. Reyle
	Name:  John J. Reyle Title:    CEO, President, and General Counsel

List of Omitted Exhibits

The following exhibit to the Disclosure Statement for Debtors’ Joint Chapter 11 Plan has not been provided herein:

Exhibit D - An organizational chart of the Debtors and certain non-debtor affiliates

The registrant hereby undertakes to furnish supplementally a copy of such omitted exhibit to the Securities and Exchange Commission upon request.

EXHIBIT A

The Plan

[Filed at D.I. __]

EXHIBIT B

The Disclosure Statement Order

[To be included in solicitation version]

EXHIBIT C

Liquidation Analysis

[To be filed]

EXHIBIT D

Organizational Chart

11  The Debtors in these chapter 11 cases, along with the last four digits of each Debtor’s federal tax identification number, are as follows: RAIT Funding, LLC, a Delaware limited liability company (9983); RAIT Financial Trust, a Maryland real estate investment trust (9819); RAIT General, Inc., a Maryland corporation (9987); RAIT Limited, Inc., a Maryland corporation (9773); Taberna Realty Finance Trust, a Maryland real estate investment trust (3577); RAIT JV TRS, LLC, a Delaware limited liability company (3190); and RAIT JV TRS Sub, LLC, a Delaware limited liability company (4870).  The mailing address for all Debtors is Two Logan Square, 100 N. 18th Street, 23rd Floor, Philadelphia, Pennsylvania 19103 (Attn: John J. Reyle).

22  The bases for the recovery estimates are discussed in the Liquidation Analysis attached as Exhibit C hereto.

33  This estimated amount does not include the fees or expenses of the Indenture Trustee that may be Allowed as part of the Senior Note Claim.

44  RAIT Asset Holdings was an inactive indirect subsidiary of RAIT Financial Trust and was contributed to RAIT General and RAIT Limited in connection with the internal restructuring noted in footnote 5 to hold certain of the RAIT subsidiaries that the Stalking Horse Purchaser is not acquiring, including RAIT Asset Holdings.

55  The remaining preferred stock is held by unaffiliated third parties.

66  In August 2019, to facilitate a sale of the equity of RAIT Partnership to the Stalking Horse Purchaser, all of RAIT Partnership’s 26 inactive subsidiaries and its 90% interest in RAIT JV TRS, LLC, were contributed by RAIT Partnership to RAIT Asset Holdings, the equity in which was, in turn, distributed pro rata to RAIT General (1%) and RAIT Limited (99%).

77  The principal balance is approximately $6,712,616 as of the Petition Date.

88  The Liberty Bank Borrowers, who are managed by non-members that are affiliates of RAIT Partnership (RAIT Executive Mews Manager III, Inc. and RAIT Executive Mews Manager II, Inc.), own certain commercial real property in Cherry Hill, New Jersey that secures the referenced Mortgage Note.  This property is master leased by the Liberty Bank Borrower to an affiliate of RAIT Partnership (REM Cherry Hill, LLC), which also has an option to purchase the equity in the Liberty Bank Borrowers.

99  Upon the adoption of Accounting Standards Update (ASU) 2016-01 issued by the Financial Accounting Standards Board, changes in fair value for the note due to changes in the obligor’s credit risk were required to be recognized in other comprehensive income, and changes in fair value due to all other factors were required to be recognized in earnings.

1010  RAIT General and RAIT Limited do not have any material assets apart from their equity interests in non-debtor affiliates RAIT Partnership and RAIT Asset Holdings.  RAIT Funding does not have any material assets apart from its equity interest in non-debtor affiliate Taberna Funding Capital Trust I.  RAIT JV TRS does not have any material assets apart from its equity interest in Debtor RAIT JV TRS Sub.

1111  Stated balances are current as of the July 2019 reports from the securitization trustees.

1212  RAIT ownership of bonds and equity interests includes ownership of all RAIT entities, whether they are Debtor or non-Debtor entities.

1313  More specifically, these assets are owned by Debtor Taberna or non-debtors RAIT Partnership; Edgerton Preferred Member, LLC; Grange Preferred Member, LLC; Walnut Ridge Preferred Member, LLC; Bluemound Preferred Member, LLC; Walnut Ridge Preferred Member, LLC; RAIT Capital Corp.; RAIT 2017-FL7 Intermediate Trust; RAIT 2017-FL8 Intermediate Trust; and RAIT CRE CDO I, Ltd., as applicable.

1414  More specifically, these assets are owned by non-debtors RAIT Partnership; Beachcomber Beach Resort Florida, LLC; St. Pete Beach Holdings, LLC; Oakland Plaza Owner, LLC; Oakland Square Owner, LLC; Union Medical Campus Owner, LLC; Washington SC SPE Owner, LLC; or Raritan Center SPE Owner, LLC, as applicable.  In addition, two of these assets are controlled by non-debtors REM Cherry Hill, LLC and REM-Willow Grove, L.P., as applicable.  The underlying entities that own that REO are considered “variable-interest entities” under FASB ASC Topic 810 and are consolidated by non-debtors REM Cherry Hill, LLC and REM Willow Grove, L.P., as applicable, under that accounting standard.

1515  This note was issued by Taberna.

1616  Prior to 2018, all but $0.9 million of the 7.0% convertible notes were repurchased by RAIT Financial Trust in the open market or put to RAIT Financial Trust.  In 2018, RAIT Financial Trust exercised its right to optionally redeem and cancel the remaining 7.0% convertible secured notes.

1717  All of these notes were fully repaid by September 2018.

1818  Prior to 2018, RAIT Asset Holdings IV, LLC redeemed some of its preferred units, which resulted in the cancellation of the linked Series D Preferred Shares issued by RAIT Financial Trust.  In 2018, RAIT Asset Holdings IV, LLC redeemed its remaining preferred units, which resulted in the cancellation of the remaining Series D Preferred Shares issued by RAIT Financial Trust.

1919  Prior to and during 2018, RAIT Financial Trust repurchased some of the 4.0% convertible secured notes in the open market.  In 2018, some of the 4.0% convertible notes were put to RAIT Financial Trust, and RAIT Financial Trust exercised its right to optionally redeem and cancel the remaining notes.

2020  On May 11, 2018 when the common share price fell below $0.16, the NYSE suspended trading in RAIT Financial Trust’s common shares and commenced delisting proceedings with respect to all of RAIT’s publicly traded securities.  The delisting became effective on December 17, 2018.  Due to the strategic decisions made by RAIT’s Board and management beginning in late February 2018, the delisting did not ultimately result in triggering defaults across RAIT Financial Trust’s capital structure.

EX-2.3

Exhibit 2.3

IN THE UNITED STATES BANKRUPTCY COURT
FOR THE DISTRICT OF DELAWARE

In re: RAIT FUNDING, LLC,
a Delaware limited liability company, et al.,¹ Debtors. Chapter 11 Case No. 19-11915 (BLS)
(Jointly Administered) Re: Docket No. 53

ORDER (I) ESTABLISHING THE BIDDING PROCEDURES,
INCLUDING APPROVAL OF A BREAK-UP FEE AND EXPENSE
REIMBURSEMENT, AND (II) GRANTING RELATED RELIEF

Upon the motion (the “Motion”) of the above-captioned debtors and debtors in possession (the “Debtors”) for the entry of an order (the “Bidding Procedures Order”): (a) authorizing and approving the bidding procedures attached hereto as Exhibit A (the “Bidding Procedures”), by which the Debtors will solicit and select the highest or otherwise best offer for the sale (the “Sale”) of the Purchased Assets,² (b) establishing certain dates and deadlines including the Bid Deadline, and the date of Auction, if any, (c) approving the Debtors’ selection of CF RFP Holdings LLC as the stalking horse bidder (the “Stalking Horse Bidder”), the Break-up Fee and the Expense Reimbursement, (d) approving the manner of notice of the Auction, if any, and (e) granting related relief; and it appearing that (i) the Court has jurisdiction over these chapter 11 cases and the Motion under 28 U.S.C. §§ 1334(b) and 157, and the Amended Standing

¹  The Debtors in these chapter 11 cases, along with the last four digits of each Debtor’s federal tax identification number, are as follows: RAIT Funding, LLC, a Delaware limited liability company (9983); RAIT Financial Trust, a Maryland real estate investment trust (9819); RAIT General, Inc., a Maryland corporation (9987); RAIT Limited, Inc., a Maryland corporation (9773); Taberna Realty Finance Trust, a Maryland real estate investment trust (3577); RAIT JV TRS, LLC, a Delaware limited liability company (3190); and RAIT JV TRS Sub, LLC, a Delaware limited liability company (4870).  The mailing address for all Debtors is Two Logan Square, 100 N. 18th Street, 23rd Floor, Philadelphia, Pennsylvania 19103 (Attn: John J. Reyle).

²  Capitalized terms used herein and not otherwise defined shall have the meaning ascribed to them in the Motion or the Bidding Procedures, as applicable.

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Order of Reference from the United States District Court for the District of Delaware dated as of February 29, 2012, (ii) venue of these chapter 11 cases and the Motion in this Court is proper under 28 U.S.C. §§ 1408 and 1409, (iii) the Motion is a core proceeding pursuant to 28 U.S.C. § 157(b), and the Court may enter a final order consistent with Article III of the United States Constitution, and (iv) notice of the Motion was adequate and proper under the circumstances, and no other or further notice need be given; and the Court having held a hearing to consider the relief requested in the Motion (the “Bidding Procedures Hearing”); and upon the record of the hearing and all of the proceedings held before this Court; and it appearing that the relief requested in the Motion is in the best interests of the Debtors, their estates, their creditors, and all other parties in interest, and that the legal and factual bases set forth in the Motion establish just cause for the relief granted herein; and after due deliberation and sufficient cause appearing therefor,

the Court hereby finds that:

A.The findings and conclusions set forth herein constitute the Court’s findings of fact and conclusions of law pursuant to Bankruptcy Rule 7052, made applicable to this proceeding pursuant to Bankruptcy Rule 9014.  To the extent that any of the following findings of fact constitute conclusions of law, they are adopted as such.  To the extent any of the following conclusions of law constitute findings of fact, they are adopted as such.

B.This Court has jurisdiction over this matter pursuant to 28 U.S.C. §§ 157 and 1334. This is a core proceeding pursuant to 28 U.S.C. § 157(b)(2) and the Court may enter a final order consistent with Article III of the Unites States Constitution.  Venue in this Court is proper pursuant to 28 U.S.C. §§ 1408 and 1409.

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C.Notice of the Motion, as relates to the Bidding Procedures Hearing and the proposed entry of this Bidding Procedures Order, was adequate and sufficient under the circumstances of these chapter 11 cases, and such notice complied with all applicable requirements of the Bankruptcy Code, the Bankruptcy Rules, and the Local Rules.  No further notice of the Motion is necessary or required.

D.The statutory bases for the relief requested in the Motion are sections 105, 363, 503, and 507 of the Bankruptcy Code, Bankruptcy Rules 2002, 6004, 6006, 9007 and 9014, and Local Rule 6004-1.  The legal and factual bases set forth in the Motion establish just cause for the relief granted herein.  Entry of this Bidding Procedures Order is in the best interests of the Debtors and their respective estates, creditors, and all other parties in interest.

E.The Debtors have articulated good and sufficient reasons for this Court to grant the relief requested in the Motion as relates to the entry of this Bidding Procedures Order, including without limitation: (i) approval of the Bidding Procedures; (ii) approval of the selection of the Stalking Horse Bidder; (iii) approval of the Break-up Fee and the Expense Reimbursement; (iv) authorizing payment of the Break-up Fee and Expense Reimbursement to the Stalking Horse Bidder under the circumstances described in the Bidding Procedures and in that certain Equity and Asset Purchase Agreement, dated as of August 30, 2019, by and among the Stalking Horse Bidder and the Debtor Sellers, a copy of which is attached hereto as Exhibit B (as the same may be further amended, supplemented or modified, from time to time in accordance with its terms, the “Stalking Horse Agreement”); (v) approval of the form and manner of notice of all procedures, protection and agreements described in the Motion; (vi) scheduling of the Auction and approval of the manner of notice thereof; and (vii) all related relief set forth herein.  The good and sufficient reasons articulated by the Debtors, which were set forth

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in the Motion and on the record at the Bidding Procedures Hearing, reflect the exercise of the Debtors’ business judgment, are incorporated herein by reference and, among other things, form the basis for the findings of fact and conclusions of law set forth herein.  

F.Entry into the Stalking Horse Agreement with the Stalking Horse Bidder is in the best interest of the Debtors and the Debtors’ estates and creditors, and it reflects a sound exercise of the Debtors’ business judgment.  The Stalking Horse Agreement provides the Debtors with the opportunity to sell the Purchased Assets in order to preserve and realize their optimal value.  The Debtors’ and Stalking Horse Bidder’s entry into the Stalking Horse Agreement was done in good faith and is the result of arms-length negotiations between the parties.

G.The Bidding Procedures, in the form attached hereto as Exhibit A and incorporated herein by reference as if fully set forth in this Bidding Procedures Order, are fair, reasonable, and appropriate, represent the best method for maximizing the value of the Debtors’ estates and are within the sound business judgment of the Debtors.  The Break-up Fee and the Expense Reimbursement, on the terms set forth in the Bidding Procedures and the Stalking Horse Agreement, as modified by this Bidding Procedures Order: (i) shall, if triggered, be deemed actual and necessary costs and expenses of preserving the Debtors’ estates, within the meaning of 503(b) and 507(a)(2) of the Bankruptcy Code treated as an allowed superpriority administrative expense claim against the Debtors’ estates pursuant to sections 105(a), 503(b), and 507(a)(2) of the Bankruptcy Code in accordance with the Stalking Horse Agreement; (ii) are commensurate to the real and substantial benefit conferred upon the Debtors’ estates by the Stalking Horse Bidder; (iii) are reasonable and appropriate, including in light of the size and nature of the Sale transaction and comparable transactions, the commitments that have been made, and the efforts that have been and will be expended by the Stalking Horse Bidder,

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notwithstanding that the proposed transaction may be subject to better and higher offers, and are necessary to induce the Stalking Horse Bidder to pursue the transaction, and (iv) were conditions to, and necessary for, the Stalking Horse Bidder to pursue the Sale and to be bound by the Stalking Horse Agreement and were designed to ensure the highest and best offers are attained.  

H.The Debtors have demonstrated a reasonable business justification for the payment of the Break-up Fee and the Expense Reimbursement, respectively, under the circumstances set forth in the Stalking Horse Sale Agreement.  The Bidding Procedures, the Break-up Fee and the Expense Reimbursement were each a material inducement to, and an express condition of, the willingness of the Stalking Horse Bidder to submit a bid through execution of the Stalking Horse Agreement that will serve as a minimum floor bid on which the Debtors, their creditors, and other bidders, may rely.  Unless it is assured that the Break-up Fee and the Expense Reimbursement will be available, the Stalking Horse Bidder is unwilling to be bound under the Stalking Horse Agreement (including the obligation to maintain its committed offer while such offer is subject to higher or otherwise better offers as contemplated in the Bidding Procedures).  The Stalking Horse Bidder has provided a material benefit to the Debtors and their creditors by increasing the likelihood that the best possible purchase price for the Purchased Assets will be realized.  

I.The notice of the Auction and Sale is appropriate and reasonably calculated to provide all interested parties with timely and proper notice of the sale of the Purchased Assets, including, without limitation, (i) the date, time and place of the Auction (if one is held); (ii) the Bidding Procedures; (iii) identification of the assets to be sold; (iv) instructions for promptly obtaining copies of the Stalking Horse Agreement; (v) a description of the Sale as being free and clear of all Claims (as defined in the Bidding Procedures), with all such Claims attaching with

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the same validity and priority to the proceeds of theSale; and (vi) the date and time for the Sale Hearing and all related objection deadlines.  No other or further notice of the Sale shall be required.  

J.The Debtors’ marketing process has been reasonably calculated to maximize value for the benefit of all stakeholders and the Bidding Procedures comply with the requirements of Local Rule 6004-1.  

IT IS HEREBY ORDERED that:

1.The Motion is GRANTED as set forth herein.

2.All objections to the relief requested in the Motion that have not been withdrawn with prejudice, waived, or settled, and all reservation of rights included in such objections are overruled and denied on the merits with prejudice.

3.The Debtors are authorized to perform any obligations of the Debtors set forth in the Stalking Horse Agreement that are intended to be performed prior to approval of the Sale at the Sale Hearing, or such other hearing as may be scheduled by this Court.

A.Important Dates and Deadlines

4.Bid Deadline.  November 27, 2019, at 12:00 p.m. (prevailing Eastern Time), is the deadline by which bids must be submitted to participate at the Auction as a potential higher or better offer.

5.Good Faith Deposit Deadline.  At least two business days prior to the Bid Deadline, any potential bidder must provide to an escrow agent designated by the Debtors, by wire transfer of immediately available funds, in the form of cash or a letter of credit reasonably acceptable to the Debtors, an earnest money cash deposit of not less than five percent (5%) of the total value of the purchase price of the competing Bid, but in no event less than five percent (5%) of the Initial Overbid Amount (a “Good Faith Deposit”).

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B.Auction, Bidding Procedures and Related Relief

6.The Bidding Procedures, substantially in the form attached hereto as Exhibit A, are fully incorporated herein and are hereby approved in their entirety.  The Bidding Procedures shall govern the submission, receipt, and analysis of all Bids relating to any Proposed Transaction.  Any party desiring to submit a Bid shall comply with the Bidding Procedures and this Bidding Procedures Order.  The Debtors are authorized to take any and all actions necessary to implement the Bidding Procedures, in accordance therewith and the Stalking Horse Agreement.

7.The process and requirements associated with submitting a Qualified Bid are approved as fair, reasonable, appropriate, and designed to maximize recoveries for the benefit of the Debtors’ estates, creditors and other parties in interest.  

8.All bidders submitting a Bid are deemed to have submitted to the exclusive jurisdiction of the Court with respect to all matters related to the Bidding Procedures, the Auction, the Sale Hearing, and the terms and conditions of the sale or transfer of the Purchased Assets.  

9.The Stalking Horse Bidder is deemed a Qualified Bidder for all purposes, and the Stalking Horse Bid as set forth in the Stalking Horse Agreement is deemed a Qualified Bid.  In the event that no other Qualified Bids are submitted, no auction will be conducted, the Debtors shall deem the Stalking Horse Bidder to be the Winning Bidder with respect to the Purchased Assets and the Debtors will seek final approval at the Sale Hearing of the Sale of the Purchased Assets to the Stalking Horse Bidder in accordance with the terms of the Stalking Horse Agreement.  

10.After the Bid Deadline, the Debtors shall determine, in consultation with the Official Committee of Unsecured Creditors (the “Creditors’ Committee”) which Qualified Bid

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represents the then-highest or otherwise best bid (the “Initial Highest Bid” and the person or entity submitting such Bid, the “Initial Highest Bidder”), taking into account the factors that may be considered by the Debtors under Section 2(b) of the Bidding Procedures, including such additional information requested by the Debtors in consultation with the Creditors’ Committee, pursuant to Section 2(b)(vii)(11) of the Bidding Procedures.At least one business day prior to the Auction, each Qualified Bidder that timely submitted a Qualified Bid will be advised of such Initial Highest Bid and the Debtors shall distribute copies of such Initial Highest Bid to other Qualified Bidders.

11.If one or more Qualified Bids has been submitted for the Purchased Assets in accordance with the Bidding Procedures, the Debtors will conduct an Auction on December 3, 2019, at 10:00 a.m. prevailing Eastern time (or such later time as the Debtors shall timely notify the Auction Participants), with respect to such Qualified Bids in order to determine the Winning Bid and the Backup Bid to submit for approval by the Bankruptcy Court.  The Auction shall be organized and conducted by the Debtors at the offices of their counsel, Drinker Biddle & Reath LLP, 1177 Avenue of the Americas, 41st Floor, New York, New York 10036 (or such other location as may be announced prior to the Auction to the Auction Participants).

12.At the Auction, the Debtors may: (a) select, in their business judgment, in consultation with the Creditors’ Committee, pursuant to the Bidding Procedures, the highest or otherwise best Bid and the Winning Bid or Backup Bid; and (b) reject any Bid (regardless of whether such Bid is a Qualified Bid) that, in the Debtors’ business judgment, upon consultation with the Creditors’ Committee’s is (i) inadequate, insufficient, or not the highest or best Bid, (ii) not in conformity with the requirements of the Bankruptcy Code, the Bankruptcy Rules, or the

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Bidding Procedures, or (iii) contrary to, or otherwise not in the best interests of, the Debtors’ estates, affected stakeholders, or other parties in interest.

13.For the avoidance of doubt, the Debtors reserve the right, and are authorized to, subject to consultation with the Creditors’ Committee (or the reasonable consent of the Creditors’ Committee, where applicable under the Bidding Procedures or this Order), modify the above timeline and bidding procedures in accordance with the provisions of the Bidding Procedures, subject to the terms of the Stalking Horse Agreement.  

C.Stalking Horse Bidder, Bid Protections and Stalking Horse Agreement

14.The Debtors are authorized to enter into the Stalking Horse Agreement, subject to higher or better offers at the Auction.  The Break-up Fee in the amount of $5,000,000, is approved.  The remaining Expense Reimbursement in an amount not to exceed $984,224³ is approved.  Except as provided in section 5.6(a) of the Stalking Horse Agreement, if, prior to the consummation of the Sale, RAIT Parent, on behalf of Debtor Sellers, terminates the Stalking Horse Agreement pursuant to the Fiduciary Out (as defined in the Stalking Horse Agreement) or the Stalking Horse Agreement is terminated pursuant to section 7.1(b), section 7.1(h), section 7.1(i) or section 7.1(j) of the Stalking Horse Agreement, then, in accordance with this Bidding Procedures Order, the Debtors shall be obligated to pay to the Stalking Horse Bidder the Break-up Fee, payable in full upon the consummation of an Alternative Transaction (as defined in the Stalking Horse Agreement) (or the first in a series of transactions that would constitute an Alternative Transaction). In addition to the foregoing, upon any termination of the Stalking Horse Agreement, other than a termination pursuant to section 7.2(b) of the Stalking Horse Agreement and except as provided in section 5.6(a) of the Stalking Horse Agreement, the

³  The Expense Reimbursement of $1,744,000 has been reduced by the $759,776 in payments received by the Stalking Horse Bidder’s advisors prior to the Petition Date.

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Debtors shall pay to the Stalking Horse Bidder the remaining ExpenseReimbursement in an amount not to exceed $984,224 within three (3) days after (i) the expiration of the fourteen (14)-day review and objection period provided below (for any Expense Reimbursement amounts for which there was no objection) or (ii) the date upon which any objection made in accordance with the procedure below is resolved (for any Expense Reimbursement amounts for which a timely objection is raised), as applicable.The Stalking Horse Bidder shall submitdocumentation for the Expense Reimbursement (which may be redacted for privilege, as appropriate) within three (3) business days after termination of the Stalking Horse Agreementto the Debtors, the Creditors’ Committee, and the Office of the United States Trustee for the District of Delaware, who shall have a fourteen (14)-day review period and opportunity to object.  If an objection is submitted in writing to the Stalking Horse Bidder prior to the expiration of the fourteen (14)-day review period, the portion of the Expense Reimbursement subject to any such objection shall not be paid until the objection is resolved.Each of the Break-up Fee and the Expense Reimbursement, on the terms set forth in this Bidding Procedures Order, the Bidding Procedures and in the Stalking Horse Agreement: (i) shall, if triggered, constitute an allowedsuperpriority administrative expense claim against the Debtors’ estates pursuant to sections 105(a), 503(b), and 507(a)(2) of the Bankruptcy Code, which claim shall be senior to all other general administrative expense claims and superpriority administrative expense claims granted such status pursuant to sections 503(b)(1) and 507(a)(2) of the Bankruptcy Code; and (ii) shall be payable, in accordance with the terms of this Bidding Procedures Order and the Stalking Horse Agreement, without further order of this Court.  No Claims shall attach to the proceeds of any Alternative Transaction equal to any amounts owed to the Stalking Horse Bidder on account of the Break-up Fee and/or the

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remaining Expense Reimbursement.  For the avoidance of doubt, this Bidding Procedures Order shall govern the amount of the Break-up Fee and Expense Reimbursement.

15.  No person or entity, other than the Staking Horse Bidder, shall be entitled to any expense reimbursement, break-up fees, “topping,” termination, or other similar fee or payment, and by submitting a bid, such person or entity is deemed to have waived their right to request or to file with this Court any request for expense reimbursement or any fee of any nature, whether by virtue of section 503(b) of Bankruptcy Code or otherwise.

D.Notice Procedures

16.The Sale Notice, substantially in the form attached hereto as Exhibit C, is hereby approved.  Within three (3) days of the entry of this Bidding Procedures Order, the Debtors shall cause the Sale Notice to be served upon (i) the US Trustee, (ii) the Internal Revenue Service, (iii) any parties who have expressed a written interest in the Debtors’ assets, (iv) parties who are known or reasonably believed to have asserted any lien, encumbrance, claim or other interest in the Debtors’ assets that are the subject of the proposed sale of the Purchased Assets, if any, (v) all applicable state and local taxing authorities in the jurisdictions in which the Debtors may have tax liability, (vi) each governmental agency that is an interested party with respect to the sale of the Purchased Assets contemplated by the Stalking Horse Agreement and the transactions proposed thereunder, (vii) counsel to the Stalking Horse Bidder, (viii) counsel to the Creditors’ Committee and (ix) all parties who have requested notice under Bankruptcy Rule 2002.  In addition, as soon as practicable, but in any event no later than five (5) days after entry of this Bidding Procedures Order, the Debtors shall publish the Sale Notice (modified for publication, as necessary) once in the National Edition of the Wall Street Journal or the USA Today and, to the extent the Debtors deem appropriate, in any other local or regional publications.  The

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foregoing methods of such service shall constitute good and sufficient notice of the Sale of the Purchased Assets, this Order, the Auction and all proceedings held thereon.

17.As soon as reasonably practicable after the Bid Deadline, if no Qualified Bid other than the Stalking Horse Agreement is received by the Bid Deadline, or after the conclusion of the Auction, if a Qualified Bid other than the Stalking Horse Agreement is received by the Bid Deadline, the Debtors shall file on the docket, but not serve, a notice which shall identify the Winning Bidder and, if applicable, the Backup Bidder.

E.Sale Hearing

18.A hearing to consider approval of the Winning Bid will take place at the Sale Hearing (or such other intervening hearing, if applicable), which will be held on December 5, 2019 at 10:00 a.m. (prevailing Eastern Time) and may be adjourned to a later date by the Debtors by filing a notice of adjournment or making an announcement at the Sale Hearing.  No further notice of any such continuance will be required to be provided to any party.

19.The deadline to file objections, if any, to the transactions contemplated by the Stalking Horse Agreement or to entry of the Sale Order is November 18, 2019 at 4:00 p.m. (prevailing Eastern Time).  Objections, if any, must:  (i) be in writing, (ii) conform to the applicable provisions of the Bankruptcy Rules, the Local Rules and any orders of the Court, (iii) state with particularity the legal and factual basis for the objection and the specific grounds therefor and (iv) be filed with the Court and served so as to be actually received no later than the deadlines described in this paragraph 19, as applicable, by the following parties (the “Notice Parties”) who may be served by email at the addresses indicated below: (a) the Debtors: RAIT Financial Trust, Two Logan Square, 23rd Floor, Philadelphia, Pennsylvania 19103 Attn: Jamie Reyle, Esq. (jreyle@rait.com); (b) proposed counsel to the Debtors: Drinker Biddle & Reath LLP, 1177 Avenue of the Americas, 41st Floor, New York, NY 10036-2714, Attn: Michael P.

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Pompeo, Esq. (michael.pompeo@dbr.com) and 222 Delaware Avenue, Suite 1410, Wilmington, DE 19801, Attn: Patrick A. Jackson, Esq.(patrick.jackson@dbr.com) and Joseph N. Argentina, Jr., Esq. (joseph.argentina@dbr.com); (c) counsel to the Stalking Horse Bidder: (i) Stroock & Stroock & Lavan LLP, 180 Maiden Lane, New York, NY 10038, Attn: Daniel P. Ginsberg, Esq. (dginsberg@stroock.com) and Elizabeth Taveras, Esq. (etaveras@stroock.com) and (ii) Young Conaway Stargatt & Taylor, LLP, Rodney Square, 1000 North King Street, Wilmington, Delaware 19801; Attn: Matthew Lunn, Esq. (mlunn@ycst.com) and Robert F. Poppiti, Jr., Esq. (rpoppiti@ycst.com); (d) the Office of the United States Trustee for the District of Delaware (the “US Trustee”): J. Caleb Boggs Federal Building, 844 King Street, Lockbox 35, Wilmington, Delaware 19801 (Attn: Richard L. Schepacarter, Esquire) (richard.schepacarter@usdoj.gov); and (e) proposed counsel to the Creditors’ Committee: (i) Kramer Levin Naftalis & Frankel LLP, 1177 Avenue of the Americas, New York, NY 10036, Attn: Douglas H. Mannal (dmannal@kramerlevin.com), Stephen Zide (szide@kramerlevin.com), Jennifer Sharret (jsharret@kramerlevin.com) and (ii) Cole Schotz P.C., 500 Delaware Avenue, Suite 1410, Wilmington, DE 19801, Attn: David Dean (ddean@coleschotz.com).  

20.The deadline for filing a response to any timely-filed objection to entry of the Sale Order is December 4, 2019 at 10:00 a.m. (prevailing Eastern Time).

F. Miscellaneous.

21.The failure to include or reference a particular provision of the Bidding Procedures specifically in this Bidding Procedures Order shall not diminish or impair the effectiveness or enforceability of such provision.

22.In the event of any inconsistencies between this Bidding Procedures Order and the Motion and/or the Bidding Procedures, this Bidding Procedures Order shall govern in all respects.  

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Exhibit 2.3

23.Notwithstanding Bankruptcy Rule 6004(h), the terms and conditions of this Bidding Procedures Order are immediately effective and enforceable upon its entry.

24.The Debtors are authorized to take all actions necessary to effectuate the relief granted in this Bidding Procedures Order in accordance with the Motion.

25.The Stalking Horse Bidder has standing to enforce the terms of this Bidding Procedures Order.

26.This Court shall retain jurisdiction with respect to all matters arising from or related to implementation of this Bidding Procedures Order.

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Exhibit 2.3

EXHIBIT A

Bidding Procedures

120617511.10

 

Exhibit 2.3

Bidding Procedures

The Stalking Horse Bidder has submitted a Qualified Bid (as defined below) to acquire, directly or indirectly (including through one or more Affiliates (as defined in the Bankruptcy Code)), (i) from RAIT General and RAIT Limited the general partner and limited partner interests (the “RAIT Interests”)¹ in RAIT Partnership, L.P. (“RAIT Partnership”), as a result of which the Stalking Horse Bidder will indirectly acquire the equity interests of RAIT Partnership in certain of its subsidiaries (as set forth in the Stalking Horse Agreement) and (ii) certain assets owned by certain of the Debtors ((i) and (ii), collectively, the “Purchased Assets”), as set forth more fully in, and pursuant to the terms and conditions of, the Stalking Horse Agreement and related documents and agreements (the “Stalking Horse Bid”).

1) Participation Requirements and Due Diligence

a) In order to participate in the bidding process, the auction for a Proposed Transaction (as defined below), if any (the “Auction”), or otherwise be considered for any purpose hereunder, a person or entity interested in acquiring the Purchased Assets (each, a “Potential Bidder”) must first deliver the following materials to the Debtors and their advisors, which will be shared with the Official Committee of Unsecured Creditors (the “Creditors’ Committee”) and its advisors:

i) An executed confidentiality agreement in form and substance acceptable to the Debtors and their advisors (the “Confidentiality Agreement”) (to be delivered prior to the distribution of any confidential information by the Debtors to any Potential Bidder), whereby the Potential Bidder agrees that all non-public information about the Debtors received by a Potential Bidder will be kept strictly confidential in accordance therewith and used only in connection with analyzing a proposed transaction (a “Proposed Transaction”) for the purchase of the Purchased Assets pursuant to Section 363 of the Bankruptcy Code.  The Confidentiality Agreement shall provide for the Creditors’ Committee to promptly receive all confidential information regarding the Potential Bidder received by the Debtors, subject to the terms of any non-disclosure agreement with counsel to the Creditors’ Committee.

ii) Written evidence that enables the Debtors and their advisors, in consultation with the Creditors’ Committee, to reasonably determine, whether a Potential Bidder has the financial and other ability to close a Proposed Transaction and provide adequate assurance of future performance under all contracts and leases to be assumed in connection therewith.

iii) Fully discloses whether the Potential Bidder and any members of its investor group, if applicable, or any equity holders in the case of a Potential Bidder which is an entity specially formed for the purpose of effectuating a Proposed Transaction, has any connections or relationships (business or otherwise) to, or agreements or understandings with, the Debtors, RAIT Partnership or any of their Affiliates and/or

¹     Capitalized terms used herein but not otherwise defined have the meanings ascribed to them in the Stalking Horse Agreement, as may be modified by the Bidding Procedures Order.

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Exhibit 2.3

any officer, director or equity security holder of the Debtors, RAIT Partnership or any of their Affiliates.

b) The Debtors or their advisors shall post in the Debtors’ electronic data room (the “Data Room”) these Bidding Procedures, together with a WORD copy of the Stalking Horse Agreement (as approved by the Bankruptcy Court pursuant to the Bidding Procedures Order as the “stalking horse” bid for the Purchased Assets).  All Potential Bidders, whether deemed Qualified Bidders (as defined below) or not, consent to the jurisdiction of the Bankruptcy Court to determine matters concerning a Proposed Transaction and their bids (each, a “Bid”) (whether or not one is made), the Auction, or the marketing process generally and waive any right to any other venue.

c) Any qualified Potential Bidder wishing to conduct due diligence concerning a Proposed Transaction shall be granted (subject to execution and delivery of the required Confidentiality Agreement) (i) reasonable access to the Debtors’ management during normal business hours and (ii) access to all relevant information regarding the business of each of the Debtors and their subsidiaries reasonably necessary to enable a Potential Bidder to evaluate a Proposed Transaction.  The Debtors shall make such document access available to Potential Bidders through the Data Room as soon as reasonably practicable following (x) execution of the Confidentiality Agreement and (y) the Potential Bidder’s provision of preliminary proof of its financial capacity to close a Proposed Transaction.  Potential Bidders interested in conducting due diligence should contact UBS Securities, LLC (“UBS”), Attn: Andrew Kramer, Telephone: (212) 821-6009, Email: andrew.kramer@ubs.com. Notwithstanding the foregoing, UBS is not required to provide confidential, business-sensitive or proprietary information to any person or entity if the Debtors reasonably believe that such disclosure would be detrimental to the interests of the Debtors’ estates.  All due diligence must be completed before the Bid Deadline (as defined below).  No condition(s) allowing or regarding further due diligence after the Bid Deadline will be permitted in any Bid unless otherwise determined by the Debtors, in consultation with the Creditors’ Committee, provided that the Debtors shall continue to provide due diligence to the Stalking Horse Bidder.  Potential Bidders are required to exercise their own discretion before relying on any information provided by the Debtors regarding a Proposed Transaction.  Neither the Debtors nor their representatives or advisors (X) are responsible for, and will bear no liability with respect to, any information obtained by Potential Bidders pursuant hereto and (Y) shall be obligated to furnish any information of any kind whatsoever to any person or entity that is not a Potential Bidder.

d) The Debtors and their advisors shall in their reasonable discretion: (i) receive and evaluate any Bids from Potential Bidders; (ii) negotiate offers made to purchase the Purchased Assets; (iii) request information from Potential Bidders, engage in discussions with Potential Bidders, and take such other actions to determine whether any Bid constitutes or could lead to a Qualified Bid; and (iv) take any other actions contemplated under these Bidding Procedures, except as otherwise subject to consultation with or consent by the Creditors’ Committee as described herein.

2

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Exhibit 2.3

e) At least three (3) days prior to the Bid Deadline, the Debtors will post in the Data Room, the Estimated Purchase Price as of the Bid Deadline (assuming that the Bid Deadline is the Closing Date).

2) Submission of Bids

a) Any Potential Bidder interested in a Proposed Transaction must submit a Bid prior to 12:00 p.m. prevailing Eastern Time on November 27, 2019, 2019 (or such later date and time as the Debtors may announce, subject to the terms of the Stalking Horse Agreement) (the “Bid Deadline”).  In order for a Bid to be considered, it must be a “Qualified Bid”.  A Potential Bidder will be deemed to be a “Qualified Bidder” if the Debtors and their advisors in consultation with the Creditors’ Committee, determine that such Potential Bidder submitted a Qualified Bid. For the avoidance of doubt, the Stalking Horse Bidder shall be automatically deemed a Qualified Bidder and be entitled to participate in the Auction.  The Stalking Horse Bid is a Qualified Bid.

b) A Bid, other than the Stalking Horse Bid, will be considered a “Qualified Bid” only if the Bid (x) is for an acquisition of the Purchased Assets pursuant to a purchase agreement in the form of the Stalking Horse Agreement that contains terms no less favorable to the Debtors’ estates than the Stalking Horse Agreement, as determined by the Debtors in consultation with the Creditors’ Committee, and (y) fulfills, inter alia, at a minimum, the following requirements prior to the Bid Deadline:

i) Provides that the Bid shall remain irrevocable until the consummation of the Proposed Transaction (the “Effective Date”) implementing the Winning Bid(s) or the Backup Bid(s) (each, as defined below) (such date, the “Bid Expiration Date”);

ii) Is made by a person or entity that reasonably demonstrates evidence of fully committed and firm financing for each component of cash, debt or equity in support of such Bid and other ability to consummate the applicable Proposed Transaction, in each case as acceptable to the Debtors after consultation with the Creditors’ Committee;

iii) Provides written evidence, in form and substance reasonably satisfactory to the Debtors, the Potential Bidder has obtained authorization and approval from the Potential Bidder’s board of directors (or comparable governing body) or, if required, the equity holders of the Potential Bidder, with respect to the submission of its Bid and the execution, delivery, performance and closing of the agreements associated therewith, or a representation that no such authorization or approval is required;

iv) Provides, in the case of a Bid for all of the Purchased Assets (or a bid for a portion of the Purchased Assets which, taken together with other Bids, represents a purchase of all of the Purchased Assets), that the total consideration for the Purchased Assets will be an amount or value equal to or greater than the sum of (a) the Purchase Price (as defined in the Stalking Horse Agreement), plus (b) the Break-up Fee in the amount of $5,000,000 and the remaining Expense Reimbursement in an amount not to exceed $984,224, plus (c) $1,000,000 in cash (such sum, the “Initial Overbid Amount”), and otherwise has a value to the Debtors, in the exercise of their reasonable business

3

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Exhibit 2.3

judgment, after consultation with their advisors and the Creditors’ Committee, that is greater or otherwise better than the value offered under the Stalking Horse Agreement;

v) Provides, by wire transfer of immediately available funds prior to the Bid Deadline, in the form of cash or a letter of credit reasonably acceptable to the Debtors, to an escrow agent designated by the Debtors at least two business days before the Bid Deadline (the “Escrow Agent”) of an earnest money cash deposit of not less than five percent (5%) of the total value of the purchase price of the competing Bid, but in no event less than five percent (5%) of the Initial Overbid Amount (a “Good Faith Deposit”);

vi) Provides evidence reasonably satisfactory to the Debtors in consultation with the Creditors’ Committee that the Potential Bidder is reasonably likely to obtain prompt regulatory approval, if any is required, to consummate the Proposed Transaction;

vii) Is submitted in the form of a legally binding purchase agreement, together with such exhibits, schedules, annexes, appendices and attachments thereto as required by the Debtors in their reasonable discretion and in consultation with the Creditors’ Committee, fully executed by the Potential Bidder in a clean copy and, in the case of a Bid for the Purchased Assets, marked to show the proposed changes from the Stalking Horse Agreement and applicable exhibits, schedules, annexes, appendices and attachments thereto in a redlined copy, that further:

(1) Fully discloses the identity of the Potential Bidder and any members of its investor group, if applicable, or any equity holders in the case of a Potential Bidder which is an entity specially formed for the purpose of effectuating the Proposed Transaction, and whether any such person or entity is an insider (as defined in section 101 of the Bankruptcy Code) of any Debtor;

(2) Is not subject to any conditions, representations, or terms that the Debtors determine to be unacceptable;

(3) Describes with specificity the total consideration proposed to be paid for the Purchased Assets;

(4) Is not conditioned upon the Bankruptcy Court’s approval of, and includes an express acknowledgement and representation that the Potential Bidder is not entitled to, any Bid protections, such as a break-up fee, termination fee, expense reimbursement, working fee or similar type of payment in connection with its Bid;

(5) Is not conditioned upon tax or other due diligence or the receipt of financing;

(6) Does not contain any condition to closing of a Proposed Transaction relating to the receipt of any third party approvals (excluding required Bankruptcy Court approval and any required governmental and/or regulatory approval or third party consents required under the Stalking Horse Agreement);

(7) Expressly acknowledges and represents that the Potential Bidder: (A) has had an opportunity to conduct any and all due diligence regarding the RAIT

4

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Exhibit 2.3

Entities (as defined in the Stalking Horse Agreement) and the applicable Proposed Transaction prior to making its Bid, (B) has relied solely upon its own independent review, investigation and/or inspection of any documents and/or the RAIT Entities in making its Bid, and (C) did not rely upon any written or oral statements, representations, promises, warranties or guaranties whatsoever, whether express or implied (by operation of law or otherwise), regarding the Purchased Assets, the business of the Debtors or the Proposed Transaction, or the completeness or accuracy of any information provided in connection therewith or with the Auction, except as expressly stated in the representations and warranties contained in the purchase agreement ultimately accepted and executed by the Debtors;

(8) Identifies with particularity each and every executory contract and unexpired lease that the Potential Bidder desires the Debtors to assume and assign at the closing and provides evidence of such Potential Bidder’s ability to provide adequate assurance of future performance to counterparties to such contracts or leases to be assumed (as required by section 365(b)(1)(C) of the Bankruptcy Code) along with the Bid, which shall include: (i) the Potential Bidder’s most recent audited financial statements (or unaudited, if audited financials are not available); and (ii) financial projections or financial pro-formas for the reorganized Debtors (collectively, the “Adequate Assurance Information”);¹

(9) States that the Potential Bidder consents to the jurisdiction of the Bankruptcy Court;

(10) Includes a commitment to close the applicable Proposed Transaction within the timeframe contemplated by the Stalking Horse Agreement; and

(11) Contains such other information reasonably requested by the Debtors and their advisors, upon consultation with the Creditors’ Committee;

viii) Sets forth the representatives who are authorized to appear and act on behalf of the Potential Bidder at the Auction;

ix) Contains written confirmation that the Potential Bidder has not engaged in any collusion with respect to the bidding or the sale process; and

x) Represents that the Bid constitutes a good faith, bona fide offer to effectuate the Proposed Transaction.

c) A Potential Bidder that desires to make a Bid must deliver written electronic copies of its Bid prior to the Bid Deadline to (x) the Debtors, RAIT Financial Trust, Two Logan Square,

¹     By submitting a Bid, Potential Bidders agree that the Debtors may disseminate their Adequate Assurance Information to affected contract and lease counterparties in the event the Debtors determine in consultation with the Creditors’ Committee such Bid to be a Qualified Bid.

5

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Exhibit 2.3

23rd Floor, Philadelphia, Pennsylvania 19103 Attn: Jamie Reyle, Esq. (e-mail: jreyle@rait.com) and (y) the following representatives of the Debtors: (i) Drinker Biddle & Reath LLP, 1177 Avenue of the Americas, 41st Floor, New York, New York 10036, Attn: Michael P. Pompeo, Esq. (e-mail: Michael.Pompeo@dbr.com); and (ii) UBS Securities, LLC, 1285 Avenue of the Americas, 10th Floor, New York, New York 10019, Attn: Andrew Kramer (e-mail: andrew.kramer@ubs.com).  The Debtors shall promptly deliver copies of any such Bids to the Office of the U.S. Trustee, counsel to the Creditors’ Committee: (i) Kramer Levin Naftalis & Frankel LLP, 1177 Avenue of the Americas, New York, NY 10036, Attn: Douglas H. Mannal (dmannal@kramerlevin.com), Stephen Zide (szide@kramerlevin.com), Jennifer Sharret (jsharret@kramerlevin.com) and (ii)and counsel to the Stalking Horse Bidder.  

d) Promptly after the Bid Deadline, the Debtors shall determine, in consultation with their advisors and the Creditors’ Committee and their advisors, and notify the Potential Bidder whether such Potential Bidder has submitted acceptable Bid documents such that it is deemed a Qualified Bidder.  However, the Debtors’ determination that a Potential Bidder is not a Qualified Bidder is subject to the Creditors’ Committee’s reasonable consent, to the extent such Potential Bidder satisfies the requirements of section 2(b) above.

e) The Debtors may facilitate a submission of a Qualified Bid or multiple Qualified Bids that collectively provide for the purchase of all of the Purchased Assets by one or more unrelated Potential Bidders.

f) A Qualified Bid will be valued based upon several factors including, without limitation: (i) the amount of such Bid; (ii) the form of consideration of such Bid; (iii) the risks and timing associated with consummating such Bid; (iv) any proposed revisions to the Stalking Horse Agreement (including any additional conditions to closing); and (v) any other factors deemed relevant by the Debtors in consultation with the Creditors’ Committee.

g) After the Bid Deadline, the Debtors in consultation with the Creditors’ Committee, shall determine which Qualified Bid represents the then-highest or otherwise best bid (the “Initial Highest Bid” and the person or entity submitting such Bid, the “Initial Highest Bidder”) for the Purchased Assets, taking into account the factors that may be considered by the Debtors in consultation with the Creditors’ Committee, under Section 2(b) of these Bidding Procedures.  At least one business day prior to the Auction, each Qualified Bidder that timely submitted a Qualified Bid will be advised of such Initial Highest Bid and, to the extent not previously received, shall receive from the Debtors copies of such Initial Highest Bid.

3) Due Diligence From Potential Bidders or Qualified Bidders

Each Potential Bidder shall comply with all reasonable requests for additional information by the Debtors or their advisors or the Creditors’ Committee or their advisors regarding such Potential Bidder’s financial wherewithal to consummate and perform obligations in connection with a Proposed Transaction.  Failure by a Potential Bidder to comply with requests for additional information may be a basis for the Debtors and their advisors, subject to the reasonable consent of the Creditors’ Committee, to determine that a Potential Bidder is not a

6

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Exhibit 2.3

Qualified Bidder. Similarly, each Qualified Bidder shall comply with all reasonable requests for additional information by the Debtors or their advisors or the Creditors’ Committee or their advisors regarding such Qualified Bidder’s financial wherewithal to consummate and perform obligations in connection with a Proposed Transaction as the Auction progresses.  Failure by a Qualified Bidder to comply with requests for additional information may be a basis for the Debtors and their advisors, subject to the reasonable consent of the Creditors’ Committee, to determine that the Qualified Bidder may no longer participate in the Auction.  Other than the Stalking Horse Bidder and the Stalking Horse Bid, the Debtors may, subject to the reasonable consent of the Creditors’ Committee, disqualify any Qualified Bidder and Qualified Bid from participation in the Auction.

4) “As Is, Where Is”

The sale and transfer of the Purchased Assets shall be without representations or warranties of any kind, nature or description by the Debtors, their advisors, agents or estates or any other party, except to the extent set forth in the purchase agreement between the Debtors and the Winning Bidder. Except as otherwise provided in the Winning Bidder’s or Bidders’ purchase agreement, the Purchased Assets shall be sold and transferred free and clear of all pledges, liens, security interests, encumbrances, claims, charges, options and interests therein (collectively, the “Claims”) pursuant to section 363(f) of the Bankruptcy Code.

5) The Auction

a) If one or more Qualified Bids has been submitted for the Purchased Assets in accordance with these Bidding Procedures, the Debtors will conduct an Auction on December 3, 2019, at 10:00 a.m. prevailing Eastern time (or such later time as the Debtors shall timely notify the Auction Participants (as defined below)), with respect to such Qualified Bids in order to determine the Winning Bid and the Backup Bid to submit for approval by the Bankruptcy Court.  The Auction shall be organized and conducted by the Debtors at the offices of their counsel, Drinker Biddle & Reath LLP, 1177 Avenue of the Americas, 41st Floor, New York, New York 10036 or such other location as may be announced prior to the Auction to the Auction Participants.  The Auction will be recorded by stenographic means by an authorized court reporter.

b) The only persons or entities who will be permitted to Bid at the Auction are the authorized representatives of each Qualified Bidder (the “Auction Participants”).  While only the Auction Participants may make Qualified Bids at the Auction, the Auction may be attended and viewed also by the Debtors, the Creditors’ Committee, or any creditor, and their respective advisors and/or other authorized representatives.  Any such person wishing to attend the Auction (“Auction Attendees”) may do so by contacting, no later than three (3) days prior to the start of the Auction, (i) Drinker Biddle & Reath LLP, 1177 Avenue of the Americas, 41st Floor, New York, New York 10036, Attn: Brian P. Morgan, Esq.; Telephone: (212) 248-3140 (e-mail: Brian.Morgan@dbr.com); and (ii) Kramer Levin Naftalis & Frankel LLP, 1177 Avenue of the Americas, New York, New York 10036, Attn: Stephen Zide, Esq.; Telephone: (212) 715-9492 (e-mail: SZide@kramerlevin.com).

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Exhibit 2.3

c) Each Qualified Bidder shall be required to confirm on the record that it has not engaged in any collusion with respect to the marketing process or the Proposed Transactions, including communicating with other Potential Bidders during the Auction, concerning any aspect of the Auction or bidding without the consent of the Debtors on the record of the Auction.

d) The Auction shall be conducted by the Debtors in accordance with such procedures and requirements as may be established at the discretion of the Debtors and their advisors, in consultation with the Creditors’ Committee, to result in the highest or otherwise best offer for the Purchased Assets, which rules shall be announced prior to commencement of the Auction and may include the determination of the amount of time between Qualified Bids, the conducting of multiple rounds of open bidding, and to declare that the Auction has ended when no further Bids are timely made or otherwise.  The Debtors may, after consultation with their advisors and the Creditors’ Committee, from time to time waive and/or employ and announce at the Auction additional rules that are reasonable under the circumstances for conducting the Auction provided that such rules are: (i) not inconsistent with the Bidding Procedures Order, the Bankruptcy Code, the Federal Rules of Bankruptcy Procedure, the Local Bankruptcy Rules of the Bankruptcy Court, or any order of the Bankruptcy Court entered in connection with the Debtors’ chapter 11 cases and (ii) disclosed to each Qualified Bidder.  Subject to the Debtors’ fiduciary duties as debtors and debtors-in-possession and the Fiduciary Out as set forth in Section 7.2 of the Stalking Horse Agreement, the Debtors will present and request Bankruptcy Court approval of the Winning Bid (as defined below) from the Auction at the Sale Hearing (as defined below).

e) With respect to the Purchased Assets, the first Qualified Bid at the Auction shall be deemed to have been made by the Initial Highest Bidder for the applicable assets or equity in the amount of the Initial Highest Bid.  Thereafter, the Auction will continue in the manner determined by the Debtors, in consultation with the Creditors’ Committee, above; provided, however, (i) additional Bids must be Qualified Bids (except that subsequent Qualified Bids made at the Auction, although received from a Qualified Bidder prior to the Bid Deadline, need not be received by the Bid Deadline) and (ii) additional Qualified Bids must be made in higher increments of at least $1,000,000 in cash (the “Minimum Bid Increment”).  The Debtors may modify the Minimum Bid Increment from time to time as necessary to the extent the Debtors deem appropriate, provided that the Debtors may not increase the Minimum Bid Increment (or Initial Overbid Amount) without the reasonable consent of the Creditors’ Committee (which consent shall not be unreasonably withheld or delayed), which modification for the Purchased Assets (if any) will be announced on the record at the Auction.

f) The Debtors shall determine, in consultation with the Creditors’ Committee, subject to final determination by the Bankruptcy Court, whether a Qualified Bid by a Qualified Bidder at the Auction is higher or otherwise better than the prior Qualified Bid.

g) At the conclusion of the Auction, the Debtors, in the exercise of their reasonable, good faith business judgment and in consultation with the Creditors’ Committee, shall select the highest or otherwise best Bid (the “Winning Bid”) and the second highest or otherwise best Bid (the “Backup Bid”) that, in the exercise of their fiduciary duties, the Debtors in good faith and in consultation with the Creditors’ Committee, believe are in the best interests of

8

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Exhibit 2.3

the Debtors’ estates and stakeholders, which will be determined by considering, among other things:

i) the total expected consideration to be received by the Debtors;

ii) the likelihood of the Qualified Bidder’s or Qualified Bidders’ ability to close the Proposed Transaction and the timing thereof;

iii) the ability of the Qualified Bidder to satisfy necessary regulatory approvals and the timing for obtaining such; and

iv) the expected net benefit to the Debtors’ estates, including enhanced treatment of the Debtors’ creditors and other parties in interest.

In addition, at the conclusion of the Auction, the Debtors shall: (i) notify each Qualified Bidder that made the Winning Bid (the “Winning Bidder”) that such Bid has been determined by the Debtors, in consultation with the Creditors’ Committee, to be the Winning Bid, subject only to Bankruptcy Court approval; (ii) notify the Qualified Bidder that made the Backup Bid (the “Backup Bidder”) that such Bid has been determined by the Debtors, in consultation with the Creditors’ Committee, to be the Backup Bid, subject to Bankruptcy Court approval; and (iii) file a notice with the Bankruptcy Court announcing the Winning Bidder and Backup Bidder and approval of the same at a hearing to consider approval of the sale of the Purchased Assets (the “Sale Hearing”) or at an intervening hearing scheduled by the Bankruptcy Court.  Prior to the commencement of the Sale Hearing (or such intervening hearing, if applicable), the Winning Bidder shall (X) provide, by wire transfer of immediately available funds, in the form of cash or a letter of credit reasonably acceptable to the Debtors, to the Escrow Agent of an additional earnest money cash deposit of not less than an additional five percent (5%) of the total value of the purchase price of the Winning Bid, or, in the case of a Backup Bid, an additional earnest money cash deposit of not less than an additional five percent (5%) of the total value of the purchase price for the Backup Bid, and (Y)complete and sign all agreements and documents as necessary to bind the Winning Bidder to all of the terms and conditions contemplated by the Winning Bid.  The Stalking Horse Bidder has the option, but is not obligated, to increase its Bid at the Auction.  If the Stalking Horse Bidder (i) participates in the Auction and submits an increased Bid that the Debtors, in consultation with the Creditors’ Committee, determine to be the Backup Bid, or (ii) is the only Qualified Bidder other than the Winning Bidder, and is selected by the Debtors, in consultation with the Creditors’ Committee, as the Backup Bidder, then the Stalking Horse Bidder is obligated to be the Backup Bidder.  Otherwise, the Stalking Horse Bidder may, but is not obligated to, be the Backup Bidder if so selected by the Debtors, in consultation with the Creditors’ Committee.  In the event the Stalking Horse Bidder is not selected as the Winning Bidder and is not the Backup Bidder for the Purchased Assets at the conclusion of the Auction, its Good Faith Deposit shall be returned to the Stalking Horse Bidder in accordance with the terms of the Stalking Horse Agreement and the escrow agreement among the Stalking

9

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Exhibit 2.3

Horse Bidder, the Debtors and the escrow agent (the “Stalking Horse Deposit Escrow Agreement”).

h) The Backup Bid shall remain irrevocable until the Effective Date or the Bid Expiration Date; provided that if the Stalking Horse Bidder agrees to be the Backup Bidder, its offer will remain open on the terms set forth in the Stalking Horse Agreement.  The Debtors shall promptly provide the Backup Bidder written notice if the Debtors are no longer seeking to consummate a transaction with the Winning Bidder but instead seek to consummate a transaction with the Backup Bidder.  In such instance, upon receipt of such written notice by the Backup Bidder, the Debtors (in consultation with the Creditors’ Committee) and the Backup Bidder shall negotiate an acceptable form of sale order and shall submit such agreed-upon sale order to the Bankruptcy Court for approval.

i) If no Qualified Bids for the Purchased Assets other than the Stalking Horse Agreement are received by the Debtors by the Bid Deadline, the Debtors shall not hold an Auction and the Stalking Horse Agreement shall be deemed the Winning Bid with respect to the Purchased Assets.

j) The Good Faith Deposit(s) of the Winning Bidder(s) shall be applied by the Debtors against the purchase price to be paid by the Winning Bidder(s) or held by the Debtors and forfeited, as the case may be, in accordance with the terms of the purchase agreement(s) associated with the Winning Bid(s).

k) The Debtors shall not be deemed to have finally accepted any Qualified Bid(s) unless and until such Qualified Bid(s) and the Debtors’ acceptance thereof have been authorized by order of the Bankruptcy Court following the conclusion of the Sale Hearing (or such other intervening hearing, if applicable).

6) Sale Hearing

A hearing to consider approval of the Winning Bid(s) will take place at a Sale Hearing (or such other intervening hearing, if applicable), which will be held on December 5, 2019 at 10:00 a.m. (prevailing Eastern Time), which may be adjourned (subject to the terms of the Stalking Horse Agreement, if applicable) to a later date by the Debtors by filing a notice of adjournment or making an announcement at the hearing.  No further notice of any such continuance will be required to be provided to any party.

7) Good Faith Deposit(s)

No later than three (3) business days after the Auction, the Debtors (or the Escrow Agent) shall return to each Qualified Bidder(s) other than the Winning Bidder(s) and the Backup Bidder(s) their respective Good Faith Deposit(s). If a Winning Bidder fails to consummate an approved sale because of a breach or failure to perform on the part of such Winning Bidder, the Debtors will not have any obligation to return the Good Faith Deposit deposited by such Winning Bidder, which may be retained by the Debtors as liquidated damages, in addition to any and all rights, remedies and/or causes of action that may be available to the Debtors at law or in equity, and, the Debtors shall be free to consummate the applicable Proposed

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Exhibit 2.3

Transaction with the applicable Backup Bidder, withoutthe need for an additional hearing or order of the Bankruptcy Court. Notwithstanding anyprovision hereof, the terms pertaining to (a) any good faith deposit submitted by the StalkingHorse Bidder pursuant to the Stalking Horse Agreement(including, without limitation, theentitlements of the Stalking Horse Bidder and Debtors to such good faith deposit and the timing ofreturn of any good faith deposit to the Stalking Horse Bidder) and (b) any rights, remedies and causes of action of the Stalking Horse Bidder and the Debtors against one another shall be governed by the terms ofthe Stalking Horse Agreement, the Stalking Horse Deposit Escrow Agreement and the Bidding Procedures Order.

8) Bid Protections

a) In recognition of the expenditure of time, energy, and resources, and because the agreement to make payment thereof is necessary to preserve the value of each of the Debtors’ estates, the Debtors have agreed that, among other triggering events, if the Stalking Horse Bidder is not the Winning Bidder for the Purchased Assets, then the Debtors will pay the Stalking Horse Bidder, pursuant to and in accordance with the terms of the Stalking Horse Agreement, (i) an aggregate “break-up” fee of $5,000,000, as more fully described in the Stalking Horse Agreement (as defined therein, the “Break-up Fee”), as modified by the Bidding Procedures Order and (ii) an amount in cash equal to the remaining Expense Reimbursement (as such term is defined in the Stalking Horse Agreement, the “Expense Reimbursement”), as modified by the Bidding Procedures Order, which remaining payment is not to exceed $984,224. The Break-up Fee and remaining Expense Reimbursement shall be payable as provided for pursuant to the terms of the Stalking Horse Agreement and the Bidding Procedures Order, and nothing herein shall be deemed to limit or otherwise modify the terms thereof, including other circumstances pursuant to which the Break-up Fee and Expense Reimbursement may be payable.  As set forth in the Bidding Procedures Order, the Stalking Horse Bidder shall submit documentation of the Expense Reimbursement (which may be redacted for privilege, as appropriate) within three (3) business days after termination of the Stalking Horse Agreement to the Debtors, the Creditors’ Committee, and the Office of the United States Trustee for the District of Delaware, who shall have a fourteen (14)-day review period and opportunity to object.  If an objection is submitted in writing to the Stalking Horse Bidder prior to the expiration of the fourteen (14)-day review period, the portion of the Expense Reimbursement subject to any such objection shall not be paid until the objection is resolved.

b) Except for the Stalking Horse Bidder, no Qualified Bidder or other party submitting a bid shall be entitled to any expense reimbursement, break-up fee, termination or other similar fee or payment.

9) Miscellaneous

a) The Auction and the Bidding Procedures are solely for the benefit of the Debtors and the Stalking Horse Bidder, and nothing contained in the Bidding Procedures Order, the Bidding Procedures or the Stalking Horse Agreement shall create any rights in any other person or bidder (including, without limitation, rights as third-party beneficiaries or

11

120617511.10

 

Exhibit 2.3

otherwise) other than the rights expressly granted to the Winning Bidder(s) under the Bidding Procedures Order.

b) Notwithstanding anything herein to the contrary, the Debtors reserve their rights to modify these Bidding Procedures in consultation with the Creditors’ Committee (or with the reasonable consent of the Creditors’ Committee, where applicable under these Bidding Procedures or the Bidding Procedures Order) in any manner that will best promote the goals of the bidding process or impose, at or prior to the Auction, additional customary terms and conditions on the applicable Proposed Transaction; provided however, that the Debtors may not (i) modify the Break-up Fee, Expense Reimbursement, or other bid protections afforded to the Stalking Horse Bidder in accordance with the Stalking Horse Agreement, as modified by the Bidding Procedures Order, without approval from the Bankruptcy Court or (ii) otherwise modify these Bidding Procedures in a manner that would adversely affect the Stalking Horse Bidder, unless agreed in writing by the Stalking Horse Bidder and with the reasonable consent of the Creditors’ Committee. For the avoidance of doubt, the Debtors may not modify the rules, procedures, or deadlines set forth herein, or adopt new rules, procedures, or deadlines that would impair in any material respect the Stalking Horse Bidder’s right to payment of the Break-up Fee or the Expense Reimbursement or otherwise adversely affect the Stalking Horse Bidder without the express written consent of the Stalking Horse Bidder and the reasonable consent of the Creditors’ Committee. All such modifications and additional rules will be communicated to each of the Potential Bidders and Qualified Bidders (including the Stalking Horse Bidder) or announced at the Auction

c) The Bankruptcy Court shall retain exclusive jurisdiction to hear and determine all matters arising from or relating to implementation of the Bidding Procedures Order.

12

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Exhibit 2.3

EXHIBIT B

Stalking Horse Agreement

13

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Exhibit 2.3

EXHIBIT C

Sale Notice

1

120617511.10

 

Exhibit 2.3

IN THE UNITED STATES BANKRUPTCY COURT
FOR THE DISTRICT OF DELAWARE

In re: RAIT FUNDING, LLC,
a Delaware limited liability company, et al.¹, Debtors. Chapter 11 Case No. 19-11915 (BLS)
(Jointly Administered)

NOTICE OF SALE OF CERTAIN ASSETS AT AUCTION

PLEASE TAKE NOTICE THAT:  

1. Pursuant to the Order (I) Establishing the Bidding Procedures, Including Approval of a Break-up Fee and Expense Reimbursement, and (II) Granting Related Relief (the “Bidding Procedures Order”) entered by the United States Bankruptcy Court for the District of Delaware (the “Bankruptcy Court”) on October 2, 2019 certain of the above captioned debtors (the “Debtors”), have entered into an Equity and Asset Purchase Agreement, dated as of August 30, 2019 (the “Stalking Horse Agreement”) with CF RFP Holdings LLC (the “Stalking Horse Bidder”) for the sale of substantially all of the Debtors’ assets subject to a competitive bidding process as set forth in the Bidding Procedures Order.  Capitalized terms used but not otherwise defined in this notice have the meanings ascribed to them in the Bidding Procedures Order or the Stalking Horse Agreement, as applicable.

2. Copies of (i) the Stalking Horse Agreement, (ii) the Bidding Procedures, and (iii) the Bidding Procedures Order can be obtained by contacting the Debtor’s investment banker at UBS Securities, LLC (“UBS”), Attn: Andrew Kramer, Telephone: (212) 821-6009, Email: andrew.kramer@ubs.com or by download from the Debtors’ claims and noticing agent, Epiq, at: https://dm.epiq11.com/case/RTF/info.

3. Once filed with the Bankruptcy Court, which will be at least twenty-one (21) days prior to the Sale Hearing, copies of the Sale Order may be obtained by contacting UBS or Epiq as set forth in paragraph 2 above.  

4. All interested parties are invited to make an offer to purchase the Purchased Assets in accordance with the terms and conditions approved by the Bankruptcy Court (the

¹  The Debtors in these chapter 11 cases, along with the last four digits of each Debtor’s federal tax identification number, are as follows: RAIT Funding, LLC, a Delaware limited liability company (9983); RAIT Financial Trust, a Maryland real estate investment trust (9819); RAIT General, Inc., a Maryland corporation (9987); RAIT Limited, Inc., a Maryland corporation (9773); Taberna Realty Finance Trust, a Maryland real estate investment trust (3577); RAIT JV TRS, LLC, a Delaware limited liability company (3190); and RAIT JV TRS Sub, LLC, a Delaware limited liability company (4870).  The mailing address for all Debtors is Two Logan Square, 100 N. 18th Street, 23rd Floor, Philadelphia, Pennsylvania 19103 (Attn: John J. Reyle).

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Exhibit 2.3

“Bidding Procedures”) by 12:00 p.m. (prevailing Eastern Time) onNovember 27, 2019.  Pursuant to the Bidding Procedures, the Debtor may conduct an auction for the Purchased Assets (the “Auction”) beginning at 10:00 a.m. (prevailing Eastern Time) on December 3, 2019 at the offices of Debtors’ counsel, Drinker Biddle & Reath LLP, 1177 Avenue of the Americas, 41st Floor, New York, New York 10036 or such other location as may be announced prior to the Auction to the Auction Participants.  Contact the Debtor’s investment banker, UBS, Attn: Andrew Kramer, Telephone: (212) 821-6009, Email: andrew.kramer@ubs.com, for further information regarding the Debtors’ assets and/or making a bid.

5. Participation at the Auction is subject to the Bidding Procedures and the Bidding Procedures Order.

6. A hearing to approve the Sale of the Purchased Assets to the highest and best bidder will be held on December 5, 2019, at 10:00 a.m. (prevailing Eastern Time) at the Bankruptcy Court.  The hearing on the Sale may be adjourned without notice other than an adjournment in open court.

7. Objections, if any, to the proposed Sale must be filed and served in accordance with the Bidding Procedures Order, and actually received no later than 5:00 p.m. (prevailing Eastern Time) onNovember 18, 2019.  

8. This notice is qualified in its entirety by the Bidding Procedures Order.

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120617511.10

 

Exhibit 2.3

Dated:Wilmington, DelawareOctober 2, 2019 DRINKER BIDDLE & REATH LLP /s/ Patrick A. Jackson
Patrick A. Jackson (Del. Bar No. 4976)
Joseph N. Argentina, Jr. (Del. Bar No. 5453)
222 Delaware Avenue, Suite 1410
Wilmington, DE 19801
Tel:  (302) 467-4200
Fax: (302) 467-4201
Patrick.Jackson@dbr.com
Joseph.Argentina@dbr.com -and- Michael P. Pompeo (admitted pro hac vice)
Brian P. Morgan (admitted pro hac vice)
1177 Avenue of the Americas, 41st Floor
New York, NY 10036-2714
Tel:  (212) 248-3140
Fax:  (212) 248-3141
Michael.Pompeo@dbr.com
Brian.Morgan@dbr.com
Proposed Counsel to the Debtors
and Debtors in Possession

3

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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 7, 2019		/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 7, 2019		/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 March 31, 2019 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 7, 2019

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 March 31, 2019 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 7, 2019

XML

VARIABLE INTEREST ENTITIES

3 Months Ended

Mar. 31, 2019

Organization Consolidation And Presentation Of Financial Statements [Abstract]

VARIABLE INTEREST ENTITIES

NOTE 7: 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 March 31, 2019 and December 31, 2018, our consolidated VIEs were: RAIT I, RAIT FL7, RAIT FL8, and the RAIT VIE Properties (Willow Grove and Cherry Hill). Also, as of March 31, 2019, we consolidated the Collins Avenue VIE (included within RAIT VIE Properties in the table below). During the first quarter of 2019, we entered into an agreement with the borrower of our Collins Avenue loan whereby the borrower agreed to cooperate with us in a deed-in-lieu of foreclosure transaction by June 30, 2019.  The terms of this agreement resulted in the determination that the entity that owns the collateral property is a VIE and that we are the primary beneficiary of the VIE.

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 March 31, 2019, we consolidated the VIE properties as we own the entities that possess and control these properties 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 March 31, 2019
	RAIT Securitizations			RAIT VIE Properties			Total
Assets
Investments in commercial mortgage loans, mezzanine loans and preferred equity interests	$	496,167		$	—		$	496,167
Investments in real estate		—			25,264			25,264
Cash and cash equivalents		—			273			273
Restricted cash		36,146			422			36,568
Accrued interest receivable		18,207			—			18,207
Other assets		115			3,861			3,976
Total assets	$	550,635		$	29,820		$	580,455
Liabilities and Equity
Indebtedness, net	$	568,318		$	28,353		$	596,671
Accrued interest payable		1,497			6,013			7,510
Accounts payable and accrued expenses		64			3,304			3,368
Deferred taxes, borrowers’ escrows and other liabilities		—			271			271
Total liabilities		569,879			37,941			607,820
Equity:
Shareholders’ equity:
RAIT investment and Retained earnings (deficit)		(19,244	)		(8,121	)		(27,365	)
Total shareholders’ equity		(19,244	)		(8,121	)		(27,365	)
Total liabilities and equity	$	550,635		$	29,820		$	580,455

	As of December 31, 2018
	RAIT Securitizations			RAIT VIE Properties			Total
Assets
Investments in commercial mortgage loans, mezzanine loans and preferred equity interests	$	561,101		$	—		$	561,101
Investments in real estate		—			18,020			18,020
Cash and cash equivalents		—			209			209
Restricted cash		29,658			374			30,032
Accrued interest receivable		18,849			—			18,849
Other assets		153			3,854			4,007
Total assets	$	609,761		$	22,457		$	632,218
Liabilities and Equity
Indebtedness, net	$	618,516		$	19,495		$	638,011
Accrued interest payable		1,534			5,883			7,417
Accounts payable and accrued expenses		74			3,315			3,389
Deferred taxes, borrowers’ escrows and other liabilities		2			197			199
Total liabilities		620,126			28,890			649,016
Equity:
Shareholders’ equity:
RAIT investment and Retained earnings (deficit)		(10,365	)		(6,433	)		(16,798	)
Total shareholders’ equity		(10,365	)		(6,433	)		(16,798	)
Total liabilities and equity	$	609,761		$	22,457		$	632,218

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 $87,126 of total investments in mortgage loans and $205,996 of indebtedness as of March 31, 2019 and $93,445 of total investments in mortgage loans and $197,235 of indebtedness as of December 31, 2018. 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.

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

3 Months Ended

Mar. 31, 2019

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 March 31, 2019:

	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	$	388,913		$	(64	)	$	388,849			30		6.9	%	Apr. 2019 to Jun. 2025
Mezzanine loans		21,114			164			21,278			3		13.3	%	Jun. 2020 to Mar. 2023
Preferred equity interests		28,515			(1	)		28,514			13		6.0	%	Mar. 2023 to Jun. 2029
Total CRE (2)		438,542			99			438,641			46		7.2	%
Deferred fees and costs, net (3)		(397	)		-			(397	)
Total	$	438,145		$	99		$	438,244

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

(2) Includes $53,128 of cash flow loans, of which $7,148 are commercial mortgage loans, $21,114 are mezzanine loans and $24,866 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 $1,703 of deferred fees, net of $1,306 of deferred costs.

The following table summarizes our investments in commercial mortgage loans, mezzanine loans and preferred equity interests as of December 31, 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	$	453,283		$	(66	)	$	453,217			35		6.9	%	Feb. 2019 to Jun. 2025
Mezzanine loans		21,114			164			21,278			3		13.3	%	Jun. 2020 to Mar. 2023
Preferred equity interests		28,577			(1	)		28,576			13		6.0	%	Mar. 2023 to Jun. 2029
Total CRE (2)		502,974			97			503,071			51		7.2	%
Deferred fees and costs, net (3)		(674	)		-			(674	)
Total	$	502,300		$	97		$	502,397

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

(2) Includes $54,621 of cash flow loans, of which $8,579 are commercial mortgage loans, $21,114 are mezzanine loans and $24,928 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 $2,558 of deferred fees, net of $1,884 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 as of March 31, 2019 and December 31, 2018:

	As of March 31, 2019
Delinquency Status	Current		30 to 59 days		60 to 89 days		90 days or more		Total		Non-accrual (1)
Commercial mortgage loans	$	351,906	$	—	$	—	$	37,007	$	388,913	$	65,952
Mezzanine loans		21,114		—		—		—		21,114		8,245
Preferred equity interests		28,515		—		—		—		28,515		7,770
Total	$	401,535	$	—	$	—	$	37,007	$	438,542	$	81,967

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

	As of December 31, 2018
Delinquency Status	Current		30 to 59 days		60 to 89 days		90 days or more		Total		Non-Accrual (1)
Commercial mortgage loans	$	414,735	$	—	$	—	$	47,440	$	453,283	$	46,793
Mezzanine loans		12,222		—		—		—		21,114		8,892
Preferred equity interests		28,577		—		—		—		28,577		37,308
Total	$	455,534	$	—	$	—	$	47,440	$	502,974	$	92,993

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

As of March 31, 2019 and December 31, 2018, all of our held for investment 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.  As of March 31, 2019, $53,128 of our loans are cash flow loans, which permanently 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 March 31, 2019, and December 31, 2018, $81,967 and $92,993, respectively, of our loans were on non-accrual status and had a weighted-average interest rate of 6.8% and 6.9%, respectively. Also, as of March 31, 2019 and December 31, 2018, five loans with unpaid principal balances of $25,703, and weighted average interest rate of 11.4%, were not recognizing interest based on the estimated value of the underlying collateral.

Allowance For Loan Losses And Impaired Loans

During the three months ended March 31, 2019, we recognized a benefit for loan losses of $583 primarily driven by the receipt of payments on several impaired loans, partially offset by an additional reserve taken on a previously impaired commercial mortgage loan.

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 recent operating performance of the underlying property and history of the borrower’s ability to provide financial support. We have classified our investment in loans by credit risk category as of March 31, 2019 and December 31, 2018 as follows:

	As of March 31, 2019
Credit Status	Commercial Mortgage Loans		Mezzanine Loans		Preferred Equity		Total
Satisfactory	$	257,796	$	—	$	5,063	$	262,859
Watchlist (1)		131,117		21,114		23,452		175,683
Total	$	388,913	$	21,114	$	28,515	$	438,542

(1) Includes $115,618 of loans that are considered to be impaired and $60,065 of loans that are not considered to be impaired.

	As of December 31, 2018
Credit Status	Commercial Mortgage Loans		Mezzanine Loans		Preferred Equity		Total
Satisfactory	$	314,104	$	—	$	5,063	$	319,167
Watchlist (1)		139,179		21,114		23,514		183,807
Total	$	453,283	$	21,114	$	28,577	$	502,974

(1) Includes $126,645 of loans that are considered to be impaired and $57,162 of loans that are not considered to be 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 for the three months ended March 31, 2019 and 2018:

	For the Three Months Ended March 31, 2019
	Commercial Mortgage Loans			Mezzanine Loans		Preferred Equity			Total
Beginning balance	$	11,912		$	6,496	$	3,928		$	22,336
Provision (benefit) for loan losses		(485	)		—		(98	)		(583	)
Charge-offs, net of recoveries		(1,026	)		—		—			(1,026	)
Ending balance	$	10,401		$	6,496	$	3,830		$	20,727

	For the Three Months Ended March 31, 2018
	Commercial Mortgage Loans			Mezzanine Loans			Preferred Equity		Total
Beginning balance	$	9,019		$	5,622		$	242	$	14,883
Provision (benefit) for loan losses		5,248			2,784			—		8,032
Charge-offs, net of recoveries (1)		(6,008	)		(3,175	)		—		(9,183	)
Ending balance	$	8,259		$	5,231		$	242	$	13,732

(1) Includes $3,908 of charge-offs related to loans transferred to held for sale during the three months ended March 31, 2018.

Information on those loans considered to be impaired as of March 31, 2019 and December 31, 2018 was as follows:

	As of March 31, 2019
Impaired Loans	Commercial Mortgage Loans		Mezzanine Loans		Preferred Equity		Total
Impaired loans expecting full recovery	$	7,148	$	12,869	$	19,332	$	39,349
Impaired loans with reserves		63,904		8,245		4,120		76,269
Total Impaired Loans (1)		71,052		21,114		23,452		115,618
Allowance for loan losses	$	10,401	$	6,496	$	3,830	$	20,727

(1) As of March 31, 2019, there was no unpaid principal relating to previously identified TDRs that are on accrual status.

	As of December 31, 2018
Impaired Loans	Commercial Mortgage Loans		Mezzanine Loans		Preferred Equity		Total
Impaired loans expecting full recovery	$	8,579	$	12,869	$	19,334	$	40,782
Impaired loans with reserves		73,438		8,245		4,180		85,863
Total Impaired Loans (1)		82,017		21,114		23,514		126,645
Allowance for loan losses	$	11,912	$	6,496	$	3,928	$	22,336

(1) As of December 31, 2018, 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 $121,132 and $124,887 during the three months ended March 31, 2019 and 2018, respectively. We recorded interest income from impaired loans of $0 and $127 for the three months ended March 31, 2019 and 2018, 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 March 31, 2019, we determined that restructuring of one commercial real estate loan with an unpaid principal balance totaling $29,478 constituted a TDR as the interest payment rate was decreased through September 2019 although interest continues to accrue at the original contractual interest rate. During the three months ended March 31, 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 months ended March 31, 2019, and March 31, 2018, there were no TDRs that subsequently defaulted for restructurings that had been entered into within the previous 12 months.

In May 2019, we received $9,000 pursuant to a Settlement Agreement and Mutual Release related to a loan that was previously charged off. This will be recorded as a recovery of amounts previously charged off in the second quarter of 2019. See Note 13: Commitments and Contingencies for further information related to this Settlement Agreement and Mutual Release.

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 an 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 these loans.

During March 2018, we transferred nine additional loans to held for sale as we had the intent and ability to sell these loans. The transfer was made at the lower of cost or fair value for each respective loan. During the year ended December 31, 2018, six of these loans were sold or repaid, resulting in a net loss of $3,280. As of March 31, 2019, the three remaining loans held for sale were measured at the lower of cost or fair value, resulting in a gain of $303, an unpaid principal balance of $6,967, and a carrying amount of $5,131.

Loan-to-Real Estate Conversions

In June 2019, we completed the conversion of a portion of a commercial mortgage loan portfolio to real estate owned property. See Note 4: Investments in Real Estate - Acquisitions for further information.

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RELATED PARTY TRANSACTIONS

3 Months Ended

Mar. 31, 2019

Related Party Transactions [Abstract]

RELATED PARTY TRANSACTIONS

NOTE 11: 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 8: Series D Preferred Shares.  Subsequent to June 27, 2018, Almanac is not considered a related party.

Ballard Spahr LLP

Justin P. Klein has served as a Trustee on our Board since June 2017 and is a partner of the law firm Ballard Spahr LLP, or Ballard Spahr.  RAIT did not have any transactions with Ballard Spahr during the three months ended March 31, 2019.  RAIT has paid Ballard Spahr LLP $32 during the three months ended March 31, 2018. The approximate dollar value of Mr. Klein’s interest in these fees was $1 for the three months ended March 31, 2018, based on Mr. Klein’s Ballard partnership interest.

Mr. Klein is a member of the RAIT board and receives board fees.  The fees are paid to Ballard Spahr.

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.

There were no transactions with Highland in 2019 or 2018. It is noted that remaining obligations under the previously disclosed cooperation agreement between RAIT and Highland entered into on May 26, 2017 relating to a defined “standstill period” ended on May 26, 2019 and that Highland and certain of its affiliates filed a Schedule 13G/A with the SEC on February 14, 2019 disclosing that their aggregate holdings of RAIT’s common shares had reduced to 4.9% of RAIT’s outstanding common shares.

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Summary of Significant Accounting Policies - Additional Information (Detail) $ in Thousands			3 Months Ended		12 Months Ended
		Aug. 30, 2019 USD ($)	Mar. 31, 2019 USD ($) Loan Property Instrument	Mar. 31, 2018 USD ($)	Dec. 31, 2018 USD ($) Loan	Jan. 01, 2019 USD ($) Property
Significant Accounting Policies [Line Items]
Decrease to cash flows from operating activities				$ (89,583)
Increase to cash flows from investing activities				89,583
Principal amount outstanding			$ 591,296		$ 642,559
Federal deposit insurance corporation, insurance limit per institution			250
Restricted cash			65,000	152,962	63,067
Accrued interest receivable			17,399		18,044
Earned asset management fees from consolidated securitizations, eliminated			59	162
Intangible assets, accumulated amortization			5,876		5,703
Intangible assets, amortization expenses			193	$ 427
Expected amortization expense of intangible assets, remainder of 2019			513
Expected amortization expense of intangible assets in 2020			434
Expected amortization expense of intangible assets in 2021			249
Expected amortization expense of intangible assets in 2022			145
Expected amortization expense of intangible assets in 2023			72
Expected amortization expense of intangible assets thereafter			$ 131
Number of derivative instruments outstanding | Instrument			0
Lease liability			$ 2,995
ROU asset			2,399
ASU Topic 842
Significant Accounting Policies [Line Items]
Lease liability						$ 3,008
ROU asset						$ 2,416
Number of real estate operating leases, recognition of lease liability and ROU asset | Property						1
In-place leases
Significant Accounting Policies [Line Items]
Intangible assets, gross carrying amount			$ 7,420		7,420
Multifamily real estate properties
Significant Accounting Policies [Line Items]
Number of real estate properties held | Property			0
Loans and Finance Receivables
Significant Accounting Policies [Line Items]
Accrued interest receivable			$ 15,503		15,870
Impairment of loans			$ 32,968		$ 33,030
Number of impaired loans | Loan			7		7
Minimum | Loans and Finance Receivables
Significant Accounting Policies [Line Items]
Stated interest rate			0.00%
Minimum | Building and Building Improvements
Significant Accounting Policies [Line Items]
Property, useful lives			30 years
Minimum | Furniture, fixtures, and equipment
Significant Accounting Policies [Line Items]
Property, useful lives			5 years
Maximum | Building and Building Improvements
Significant Accounting Policies [Line Items]
Property, useful lives			40 years
Maximum | Furniture, fixtures, and equipment
Significant Accounting Policies [Line Items]
Property, useful lives			10 years
Tenant escrows and borrowers' funds
Significant Accounting Policies [Line Items]
Restricted cash			$ 29,021		$ 33,300
Securitizations
Significant Accounting Policies [Line Items]
Restricted cash			35,979		29,767
Purchase Agreement | CF RFP Holdings LLC | Subsequent Event
Significant Accounting Policies [Line Items]
Purchase price		$ 174,424
Recourse Indebtedness
Significant Accounting Policies [Line Items]
Principal amount outstanding			$ 165,451		165,451
Recourse Indebtedness | 7.125% Senior Notes
Significant Accounting Policies [Line Items]
Stated interest rate			7.125%
Principal amount outstanding			$ 65,356		65,356
Contractual maturity date			Aug. 30, 2019
Recourse Indebtedness | 7.625% Senior Notes due 2024
Significant Accounting Policies [Line Items]
Stated interest rate			7.625%
Principal amount outstanding			$ 56,324		56,324
Recourse Indebtedness | Junior Subordinated Notes, at Amortized Cost
Significant Accounting Policies [Line Items]
Principal amount outstanding			25,100		25,100
Recourse Indebtedness | Junior Subordinated Notes, at Fair Value
Significant Accounting Policies [Line Items]
Principal amount outstanding	[1]		$ 18,671		$ 18,671

[1] Relates to liabilities which we elected to record at fair value under FASB ASC Topic 825.

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Delinquency Statistics of Commercial Real Estate Loans (Detail) - USD ($) $ in Thousands	Mar. 31, 2019		Dec. 31, 2018
Mortgage Loans On Real Estate [Line Items]
Delinquency statistics, Total	$ 438,542		$ 502,974
Commercial Mortgage Loans
Mortgage Loans On Real Estate [Line Items]
Delinquency statistics, Total	388,913		453,283
Mezzanine Loans
Mortgage Loans On Real Estate [Line Items]
Delinquency statistics, Total	21,114		21,114
Preferred Equity Interests
Mortgage Loans On Real Estate [Line Items]
Delinquency statistics, Total	28,515		28,577
Current
Mortgage Loans On Real Estate [Line Items]
Delinquency statistics, Total	401,535		455,534
Current | Commercial Mortgage Loans
Mortgage Loans On Real Estate [Line Items]
Delinquency statistics, Total	351,906		414,735
Current | Mezzanine Loans
Mortgage Loans On Real Estate [Line Items]
Delinquency statistics, Total	21,114		12,222
Current | Preferred Equity Interests
Mortgage Loans On Real Estate [Line Items]
Delinquency statistics, Total	28,515		28,577
90 days or more
Mortgage Loans On Real Estate [Line Items]
Delinquency statistics, Total	37,007		47,440
90 days or more | Commercial Mortgage Loans
Mortgage Loans On Real Estate [Line Items]
Delinquency statistics, Total	37,007		47,440
Non-accrual
Mortgage Loans On Real Estate [Line Items]
Delinquency statistics, Total	81,967	[1]	92,993	[2]
Non-accrual | Commercial Mortgage Loans
Mortgage Loans On Real Estate [Line Items]
Delinquency statistics, Total	65,952	[1]	46,793	[2]
Non-accrual | Mezzanine Loans
Mortgage Loans On Real Estate [Line Items]
Delinquency statistics, Total	8,245	[1]	8,892	[2]
Non-accrual | Preferred Equity Interests
Mortgage Loans On Real Estate [Line Items]
Delinquency statistics, Total	$ 7,770	[1]	$ 37,308	[2]

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

[2] Includes five loans that are current but are on non-accrual status due to uncertainty over whether we will fully collect principal and interest. Also includes three loans that are 90 days or more past due in accordance with their terms.

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Information of Assets and Liabilities Measured at Fair Value on Recurring Basis (Detail) - USD ($) $ in Thousands	Mar. 31, 2019		Dec. 31, 2018
Liabilities:
Junior subordinated notes, at fair value	$ 5,500		$ 6,110
Total liabilities	5,500		6,110
Significant Unobservable Inputs (Level 3)
Liabilities:
Junior subordinated notes, at fair value	5,500	[1]	6,110	[2]
Total liabilities	$ 5,500	[1]	$ 6,110	[2]

[1] During the three months ended March 31, 2019, 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, 2018, 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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Indebtedness - Non-Recourse Indebtedness - Additional Information (Detail)	Mar. 31, 2019 USD ($)
Debt Instrument [Line Items]
Real estate investment	$ 6,967,000
CMBS securitizations | Non Recourse Indebtedness | RAIT FL7
Debt Instrument [Line Items]
Real estate investment	224,094,000
Collateral default amount	9,000,000
CMBS securitizations | Non Recourse Indebtedness | RAIT FL8
Debt Instrument [Line Items]
Real estate investment	167,940,000
Collateral default amount	0
CMBS securitizations | Investment Grade Senior Notes | RAIT FL7
Debt Instrument [Line Items]
Outstanding principal balance of classes of investment grade senior notes	158,615,000
CMBS securitizations | Investment Grade Senior Notes | RAIT FL8
Debt Instrument [Line Items]
Outstanding principal balance of classes of investment grade senior notes	123,778,000
CMBS securitizations | Investment Grade Junior Notes | RAIT FL7
Debt Instrument [Line Items]
Real estate investment	65,479,000
CMBS securitizations | Investment Grade Junior Notes | RAIT FL8
Debt Instrument [Line Items]
Real estate investment	$ 44,162,000

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Summary of Cash and Cash Equivalents and Restricted Cash Balances (Detail) - USD ($) $ in Thousands	Mar. 31, 2019	Dec. 31, 2018	Mar. 31, 2018
Supplemental Cash Flow Elements [Abstract]
Cash and cash equivalents	$ 39,139	$ 42,453	$ 84,483
Restricted cash	65,000	$ 63,067	152,962
Total cash and cash equivalents and restricted cash	$ 104,139		$ 237,445

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Consolidated Balance Sheets (Parenthetical) - USD ($) $ in Thousands	3 Months Ended	12 Months Ended
	Mar. 31, 2019	Dec. 31, 2018
Real estate, accumulated depreciation	$ 9,742	$ 8,768
Investments in real estate, net of accumulated depreciation	106,996	107,824
Intangible assets, accumulated amortization	5,876	5,703
Indebtedness, unamortized discounts, premiums and deferred financing costs	16,033	16,643
Indebtedness, net of unamortized discounts, premiums and deferred financing costs	$ 575,263	$ 625,916
Preferred shares, authorized	25,000,000	25,000,000
Common shares, par value	$ 1.50	$ 1.50
Common shares, shares authorized	200,000,000	200,000,000
Common shares, shares issued	1,849,530	1,850,451
Common shares, shares outstanding	1,849,530	1,850,451
Unvested restricted common share awards	4,997	6,844
VIE
Investment in mortgage loans	$ 409,041	$ 467,656
Investments in real estate, net of accumulated depreciation	25,264	18,020
Indebtedness, net of unamortized discounts, premiums and deferred financing costs	$ 390,675	$ 440,776
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	5,727,500
Cumulative redeemable preferred shares, shares outstanding	5,727,500	5,727,500
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	2,508,797
Cumulative redeemable preferred shares, shares outstanding	2,508,797	2,508,797
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	1,758,030
Cumulative redeemable preferred shares, shares outstanding	1,758,030	1,758,030
Preferred shares, par value	$ 0.01	$ 0.01

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Consolidated Statements of Cash Flows - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2019	Mar. 31, 2018
Operating activities:
Net income (loss)	$ (6,201)	$ (27,705)
Adjustments to reconcile net income (loss) to cash flow from operating activities:
Provision (benefit) for loan losses	(583)	8,032
Share-based compensation expense	89	(539)
Depreciation and amortization expense	1,384	3,443
Amortization of deferred financing costs and debt discounts	933	3,046
(Amortization) of loan origination fees and costs, net	(280)	(383)
(Amortization) of above/below market leases	(16)	(146)
(Gains) Losses on assets	(303)	937
(Gains) Losses on extinguishments of debt	285	991
Asset impairment	26	9,191
Change in fair value of financial instruments	(30)	(87)
Changes in assets and liabilities:
Decrease in accrued interest receivable	645	317
(Increase) decrease in other assets	(774)	1,054
(Decrease) increase in accrued interest payable	(49)	984
(Decrease) in accounts payable and accrued expenses	(695)	(1,427)
(Decrease) increase in other liabilities	(130)	(22)
Cash flows provided by (used in) operating activities	(5,699)	(2,314)
Investing activities:
Origination of loans for investment	(4,442)	(50,492)
Principal repayments on loans	60,027	136,664
Investments in real estate	(147)	(828)
Proceeds from sale of loans originated for investment		89,583
Proceeds from the disposition of real estate	4,918	16,607
(Decrease) in borrowers' escrows	(4,745)	(25,487)
Cash flows provided by (used in) investing activities	55,611	166,047
Financing activities:
Repayments on secured credit facilities and loans payable on real estate	(189)	(332)
Repayments and repurchase of CDO notes payable and floating rate securitizations	(51,073)	(90,796)
Repurchase of convertible notes and senior notes		(5,722)
Repayments of senior secured notes		(2,000)
Net proceeds (repayments) related to floating rate loan repurchase agreements		(22,313)
Acquisition of noncontrolling interests		(343)
Issuance of noncontrolling interests		76
Common share issuance, net of costs incurred	(2)	(71)
Repurchase of Series D preferred shares		(4,863)
Distributions paid to preferred shareholders		(11,113)
Distributions paid to common shareholders	(29)	(105)
Cash flows (used in) provided by financing activities	(51,293)	(137,582)
Net change in cash, cash equivalents, and restricted cash	(1,381)	26,151
Cash, cash equivalents, and restricted cash at the beginning of the period	105,520	211,294
Cash, cash equivalents, and restricted cash at the end of the period	$ 104,139	$ 237,445

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Loans Considered to be Impaired (Detail) - USD ($) $ in Thousands	Mar. 31, 2019		Dec. 31, 2018		Mar. 31, 2018	Dec. 31, 2017
Financing Receivable Impaired [Line Items]
Impaired loans expecting full recovery	$ 39,349		$ 40,782
Impaired loans with reserves	76,269		85,863
Total Impaired Loans	115,618	[1]	126,645	[2]
Allowance for loan losses	20,727		22,336		$ 13,732	$ 14,883
Commercial Mortgage Loans
Financing Receivable Impaired [Line Items]
Impaired loans expecting full recovery	7,148		8,579
Impaired loans with reserves	63,904		73,438
Total Impaired Loans	71,052	[1]	82,017	[2]
Allowance for loan losses	10,401		11,912		8,259	9,019
Mezzanine Loans
Financing Receivable Impaired [Line Items]
Impaired loans expecting full recovery	12,869		12,869
Impaired loans with reserves	8,245		8,245
Total Impaired Loans	21,114	[1]	21,114	[2]
Allowance for loan losses	6,496		6,496		5,231	5,622
Preferred Equity Interests
Financing Receivable Impaired [Line Items]
Impaired loans expecting full recovery	19,332		19,334
Impaired loans with reserves	4,120		4,180
Total Impaired Loans	23,452	[1]	23,514	[2]
Allowance for loan losses	$ 3,830		$ 3,928		$ 242	$ 242

[1] As of March 31, 2019, there was no unpaid principal relating to previously identified TDRs that are on accrual status.

[2] As of December 31, 2018, there was no unpaid principal relating to previously identified TDRs that are on accrual status.

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Summary of Minimum Future Lease Payments (Detail) $ in Thousands	Mar. 31, 2019 USD ($)
Lessor Disclosure [Abstract]
2019	$ 7,072
2020	7,746
2021	5,620
2022	3,690
2023	1,980
2024 and thereafter	5,168
Total	$ 31,276

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Series D Preferred Shares - Additional Information (Detail)	Jun. 27, 2018 USD ($) shares	Mar. 19, 2018 USD ($) shares	Jun. 22, 2017 USD ($) shares	Dec. 07, 2016 USD ($) shares	Mar. 31, 2019 $ / shares shares	Dec. 31, 2018 $ / shares	Dec. 31, 2017 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
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 repurchase and cancel, shares		194,530	402,280	464,000
Repurchase shares price | $		$ 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
Preferred Series D | Redemption and Exchange Agreement
Temporary Equity [Line Items]
Repurchase shares price | $	$ 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
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
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
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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Fair Value Hierarchy for Financial Instruments Not Fair Valued but For Which Fair Value Is Required To Be Disclosed (Detail) - USD ($) $ in Thousands	Mar. 31, 2019		Dec. 31, 2018
Fair Value Measurement Inputs Disclosure [Line Items]
Junior subordinated notes	$ 5,500		$ 6,110
Significant Unobservable Inputs (Level 3)
Fair Value Measurement Inputs Disclosure [Line Items]
Junior subordinated notes	$ 5,500	[1]	$ 6,110	[2]
Total investment in mortgage loans, held for investment, net, Valuation Technique	us-gaap:ValuationTechniqueDiscountedCashFlowMember		us-gaap:ValuationTechniqueDiscountedCashFlowMember
Investment in mortgage loans, held for sale, Valuation Technique	us-gaap:ValuationTechniqueDiscountedCashFlowMember		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
Estimated Fair Value
Fair Value Measurement Inputs Disclosure [Line Items]
Total investment in mortgage loans, held for investment, net	$ 380,819		$ 444,962
Investment in mortgage loans, held for sale	5,131		4,873
Estimated Fair Value | Significant Unobservable Inputs (Level 3)
Fair Value Measurement Inputs Disclosure [Line Items]
Total investment in mortgage loans, held for investment, net	380,819		444,962
Investment in mortgage loans, held for sale	5,131		4,873
Estimated Fair Value | CMBS securitizations | Significant Unobservable Inputs (Level 3)
Fair Value Measurement Inputs Disclosure [Line Items]
Notes payable	282,856		320,711
Carrying Amount
Fair Value Measurement Inputs Disclosure [Line Items]
Total investment in mortgage loans, held for investment, net	417,517		480,061
Investment in mortgage loans, held for sale	5,131		4,873
Carrying Amount | CMBS securitizations
Fair Value Measurement Inputs Disclosure [Line Items]
Notes payable	$ 281,126		$ 318,008
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 | Estimated Fair Value | Significant Other Observable Inputs (Level 2)
Fair Value Measurement Inputs Disclosure [Line Items]
Indebtedness	$ 41,117		$ 41,229
7.625% Senior Notes due 2024 | Carrying Amount
Fair Value Measurement Inputs Disclosure [Line Items]
Indebtedness	$ 55,158		$ 55,100
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 | Estimated Fair Value | Significant Other Observable Inputs (Level 2)
Fair Value Measurement Inputs Disclosure [Line Items]
Indebtedness	$ 60,128		$ 58,010
7.125% Senior Notes due 2019 | Carrying Amount
Fair Value Measurement Inputs Disclosure [Line Items]
Indebtedness	$ 65,131		$ 64,997
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 | Estimated Fair Value | Significant Unobservable Inputs (Level 3)
Fair Value Measurement Inputs Disclosure [Line Items]
Junior subordinated notes	$ 5,780		$ 6,550
Junior subordinated notes, at amortized cost | Carrying Amount
Fair Value Measurement Inputs Disclosure [Line Items]
Junior subordinated notes	$ 25,100		$ 25,100
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 | Estimated Fair Value | Significant Unobservable Inputs (Level 3)
Fair Value Measurement Inputs Disclosure [Line Items]
Notes payable	$ 83,595		$ 94,513
CDO notes payable, at amortized cost | Carrying Amount
Fair Value Measurement Inputs Disclosure [Line Items]
Notes payable	$ 102,918		$ 116,102
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 | Estimated Fair Value | Significant Unobservable Inputs (Level 3)
Fair Value Measurement Inputs Disclosure [Line Items]
Loans payable on real estate	$ 40,698		$ 40,608
Loan Payable On Real Estate | Carrying Amount
Fair Value Measurement Inputs Disclosure [Line Items]
Loans payable on real estate	$ 40,330		$ 40,499

[1] During the three months ended March 31, 2019, 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, 2018, 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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Related Party Transactions - Additional Information (Detail) - USD ($) $ in Thousands			3 Months Ended
	May 11, 2018	Apr. 06, 2018	Mar. 31, 2019	Mar. 31, 2018	Mar. 30, 2018
Ballard Spahr LLP
Related Party Transaction [Line Items]
Trustee fee paid				$ 32
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
Related party transaction standstill date			May 26, 2019
Reduction of outstanding common shares holdings percentage			4.90%

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INDEBTEDNESS (Tables)

3 Months Ended

Mar. 31, 2019

Debt Disclosure [Abstract]

Summary of Total Recourse and Non-Recourse Indebtedness

The following tables summarizes our total recourse and non-recourse indebtedness as of March 31, 2019 and December 31, 2018, but do not reflect any potential impacts of the Chapter 11 Cases or any other “Event of Default” as discussed in Note 1: The Company or otherwise in “Defaults on Recourse Indebtedness” below.

The following table summarizes our total recourse and non-recourse indebtedness as of March 31, 2019:

Description	Unpaid Principal Balance		Unamortized Discount/Premium and Deferred Financing Costs			Carrying Amount		Weighted- Average Interest Rate			Contractual Maturity
Recourse indebtedness:
7.625% Senior Notes	$	56,324	$	(1,166	)	$	55,158		7.6	%	Apr. 2024
7.125% Senior Notes		65,356		(225	)		65,131		7.1	%	Aug. 2019
Junior subordinated notes, at fair value (1)		18,671		(13,171	)		5,500		6.8	%	Mar. 2035
Junior subordinated notes, at amortized cost		25,100		—			25,100		5.3	%	Apr. 2037
Total recourse indebtedness		165,451		(14,562	)		150,889		7.0	%
Non-recourse indebtedness:
CDO notes payable, at amortized cost (2)(3)		102,918		—			102,918		3.2	%	Nov. 2046
CMBS securitizations (4)(5)		282,393		(1,267	)		281,126		4.2	%	Jun. 2037 to Dec. 2037
Loans payable on real estate		40,534		(204	)		40,330		4.7	%	Oct. 2021 to Dec. 2021
Total non-recourse indebtedness		425,845		(1,471	)		424,374		4.0	%
Total indebtedness	$	591,296	$	(16,033	)	$	575,263		4.8	%

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

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

(3) Collateralized by $150,845 principal amount of commercial mortgage loans, mezzanine loans, other loans and preferred equity interests, $78,979 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.

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

(5) Collateralized by $355,699 principal amount of commercial mortgage loans and participation interests in commercial mortgage loans, $8,892 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.

The following table summarizes our total recourse and non-recourse indebtedness as of December 31, 2018:

Description	Unpaid Principal Balance		Unamortized Discount/Premium and Deferred Financing Costs			Carrying Amount		Weighted- Average Interest Rate			Contractual Maturity
Recourse indebtedness:
7.625% Senior Notes	$	56,324	$	(1,224	)	$	55,100		7.6	%	Apr. 2024
7.125% Senior Notes		65,356		(359	)		64,997		7.1	%	Aug. 2019
Junior subordinated notes, at fair value (1)		18,671		(12,561	)		6,110		6.4	%	Mar. 2035
Junior subordinated notes, at amortized cost		25,100		—			25,100		5.0	%	Apr. 2037
Total recourse indebtedness		165,451		(14,144	)		151,307		6.9	%
Non-recourse indebtedness:
CDO notes payable, at amortized cost (2)(3)		116,102		—			116,102		3.1	%	Nov. 2046
CMBS securitizations (4)(5)		320,282		(2,274	)		318,008		4.0	%	Jun. 2037 to Dec. 2037
Loans payable on real estate		40,724		(225	)		40,499		4.7	%	Oct. 2021 to Dec. 2021
Total non-recourse indebtedness		477,108		(2,499	)		474,609		3.9	%
Total indebtedness	$	642,559	$	(16,643	)	$	625,916		4.6	%

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

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

(3) Collateralized by $170,124 principal amount of commercial mortgage loans, mezzanine loans, other loans and preferred equity interests, $94,191 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.

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

(5) Collateralized by $409,218 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.

Aggregate Contractual Maturities of Indebtedness Outstanding, by Year

The following table displays the aggregate contractual maturities of our indebtedness outstanding as of March 31, 2019, by year, but does not reflect any potential impacts of the Chapter 11 Cases as discussed in Note 1:

	Recourse indebtedness		Non-recourse indebtedness
2019	$	65,356	$	559
2020		-		779
2021		-		39,196
2022		-		-
2023		-		-
Thereafter		100,095		385,311
Total	$	165,451	$	425,845

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies)

3 Months Ended

Mar. 31, 2019

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, 2018 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, equity 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 statement of cash flows for the three-month period ended March 31, 2018 includes the impact of correcting the reporting of certain activity that occurred in 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 $89,583 for the three-month period ended March 31, 2018. This correction had no impact to cash and cash equivalents as of March 31, 2018, nor did it impact any other consolidated financial statement amounts as of March 31, 2018 or for the three-month period ended March 31, 2018.

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) the impacts of the Chapter 11 Cases including the Events of Default as described in Note 1: The Company, and (ii) RAIT’s recurring costs of operating its business.

As described in Note 1: The Company, the filing of the Chapter 11 Cases with the Bankruptcy Court triggered the Bankruptcy Events of Default and RAIT’s failure to pay the principal amount of the 7.125% Senior Notes by their maturity date on August 30, 2019 also constituted an Event of Default. Each of the Debt Instruments provides that upon the occurrence of such an Event of Default, all obligations of RAIT and/or its applicable affiliates thereunder were accelerated and the principal and accrued interest due thereunder was automatically and immediately due and payable. Any efforts to enforce such payment obligations under the Debt Instruments are automatically stayed pursuant to Section 362 of the Bankruptcy Code, and the respective creditors’ rights of enforcement in respect of the Debt Instruments are limited. As of the date hereof, the Debt Instruments of RAIT and/or its applicable affiliates had (i) $65,356 of principal amount of 7.125% Senior Notes outstanding, (ii) $56,324 of principal amount of 7.625% Senior Notes outstanding, (iii) $25,100 of principal amount of the 2037 Note, or the junior subordinated note, at amortized cost, outstanding, and (iv) $18,671 of principal amount of the 2035 Note, or the junior subordinated note, at fair value, outstanding.

RAIT’s current sources of liquidity, including its current cash and cash equivalents balance, are not sufficient to satisfy RAIT’s obligations arising over the next twelve months. Subject to receiving a higher and otherwise better bid as a result of the Bidding Procedures, RAIT expects to sell substantially all of its assets pursuant to the Purchase Agreement under Section 363 of the Bankruptcy Code and the Bidding Procedures Order for a purchase price of $174,424, adjusted as provided in the Purchase Agreement, including the assumption of certain liabilities. RAIT’s proposed plan of reorganization under the Chapter 11 Cases provides for the ultimate wind down of RAIT’s affairs once the transactions contemplated by the Purchase Agreement and the Bidding Procedures are completed and the plan of reorganization is confirmed.

Due to the inherent risks and significant uncertainties associated with the completion of the transactions under the Purchase Agreement, the Plan, the Chapter 11 Cases, and RAIT’s recurring costs of operations, there is substantial doubt about RAIT’s ability to continue as a going concern within one year after the date that these financial statements are issued.

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 7: Variable Interest Entities for additional disclosures pertaining to VIEs.

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 March 31, 2019 and December 31, 2018, we had $29,021 and $33,300, respectively, of 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 March 31, 2019 and December 31, 2018, we had $35,979 and $29,767, 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 recognize recoveries when they are received, and 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.

Loans which experience a modification to their contractual terms which result in a concession being granted to a borrower experiencing financial difficulties are considered troubled debt restructurings, or TDRs. A concession is deemed granted when, as a result of the restructuring, we do not expect to collect all amounts due, including interest accrued, at the original contractual interest rate. As appropriate, we also consider other qualitative factors in determining whether a concession is deemed granted, including the value of the underlying collateral. We do not consider restructurings that result in a delay in payment, in timing or amount, which is insignificant, to be a concession.

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, and other securities on a yield to maturity basis. Certain of our commercial mortgage loans, mezzanine loans and preferred equity interests permanently provide for the accrual of interest at specified rates which differ from current payment terms (which may have minimum payment rates as low as zero percent). 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 the interest income is not collectible 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 March 31, 2019 and December 31, 2018 was $15,503 and $15,870, respectively.  These loans are considered to be impaired when the total amount owed exceeds the estimated value of the underlying collateral.  Seven of these loans, with an unpaid principal balance of $32,968 and $33,030, respectively, were considered to be impaired as of March 31, 2019 and December 31, 2018, respectively.

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 rental income from tenant rent and other tenant-related activities at our consolidated real estate properties. For multifamily real estate properties (which we owned none of as of March 31, 2019), 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. Such reimbursements are generally recognized on a monthly basis as billed to tenants.

3) Fee and other income—We have generated and/or generate, as applicable, fee and other income through our various subsidiaries by (a) providing ongoing asset management services to investment portfolios under cancelable management agreements, and (b) prior to the sale of our retail property manager subsidiary in August 2018, providing property management services to third parties. We recognize revenue for these activities when: (i) a contract has been mutually approved and each party is committed to perform; (ii) both parties can identify the rights of each party; (iii) both parties can identify the payment terms of the contract; (iv) the contract has commercial substance; and (v) it is probable that we will collect substantially all of the consideration to which we are entitled. 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 months ended March 31, 2019 and 2018, we received $59 and $162, respectively, of earned 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 March 31,
Revenue from Contracts with customers	2019		2018
Property Management Fee income	$	—	$	766
Parking		—		202
Leasing Commission income		—		320
Other miscellaneous		70		248
Total	$	70	$	1,536

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 unsecured REIT note receivables, commercial mortgage-backed securities, or CMBS, receivables and certain financial instruments classified as 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. Generally, assets and liabilities carried at fair value and included in this category are subordinated debentures, and historically included trust preferred obligations and CDO notes payable, where observable market inputs do not exist.

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 valuation models that include discounted cash flow analyses. These internal valuation models include discounted cash flow analyses 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. 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 March 31, 2019 and December 31, 2018. The accumulated amortization for our intangible assets was $5,876 and $5,703 as of March 31, 2019 and December 31, 2018, respectively. We recorded amortization expense of $193, and $427 for the three months ended March 31, 2019 and 2018, respectively. Based on the intangible assets identified above, we expect to record amortization expense of intangible assets of $513 for 2019, $434 for 2020, $249 for 2021, $145 for 2022, $72 for 2023 and $131 thereafter. As of March 31, 2019, we have determined that no triggering events occurred that would indicate an impairment to our intangible assets.

Derivative Instruments

o. Derivative Instruments

We have historically entered into interest rate derivative contracts to hedge all or a portion of the interest rate risk associated with certain of our borrowings and/or our fixed rate assets. The principal objective of these 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.

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 in hedging relationships, we determine at inception whether the hedge agreement is highly effective in offsetting the related risk by using regression analysis.  For derivatives not designated as hedges, the changes in fair value of the derivative instrument are recorded 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 March 31, 2019, we had no derivative instruments outstanding.

Income Taxes

p. Income Taxes

RAIT and Taberna Realty Finance Trust, or TRFT, 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. Accordingly, we generally will not be subject to U.S. federal income tax to the extent of any 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. Management believes that all of the criteria to maintain RAIT’s and TRFT’s 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.  

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 the prior year, our TRS entities generated taxable revenue primarily from property management fees for services provided to RAIT properties and third-party properties.  In the current year, our TRS entities have not generated any significant taxable revenue. 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.

Recent Accounting Pronouncements

q. Recent Accounting Pronouncements

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 have adopted the new standard effective January 1, 2019 and have used the effective date as our date of initial application. The new standard provides a number of optional practical expedients in transition. We have elected 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 have elected the practical expedient to not separate lease and non-lease components for all of our leases. The adoption of FASB ASC Topic 842 resulted in the recognition of a lease liability of $3,008 and a ROU asset of $2,416 as of the adoption date for one of our operating leases for which we are the lessee. The standard did not have an impact on any of our real estate leases for which we are the lessor.

Not Yet Adopted Within These Financial Statements

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. During 2019, the FASB issued an amendment to this accounting standard which provides further clarification to this accounting standard. This standard and its amendment are 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 August 2018, the FASB issued an accounting standard classified under FASB ASC Topic 820, “Fair Value Measurement”. The amendments in this standard eliminate, add and modify certain disclosure requirements for fair value measurements. For example, entities will no longer have to disclose the amount of and reasons for transfers between Level 1 and Level 2 of the fair value hierarchy, but public companies will be required to disclose the range and weighted average used to develop significant unobservable inputs for Level 3 fair value measurements. The amendments in this accounting standard are effective for fiscal years beginning after December 15, 2019. Management is currently evaluating the impact that this standard will have on our consolidated financial statements.

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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	3 Months Ended
	Mar. 31, 2018 USD ($)
Receivables [Abstract]
Impairments related to loans transferred to held for sale	$ 3,908

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Investments in Real Estate - Additional Information (Detail) $ in Thousands	1 Months Ended	3 Months Ended
	Jun. 30, 2019 USD ($)	Mar. 31, 2019 USD ($) Property	Dec. 31, 2018 USD ($)
Real Estate Properties [Line Items]
Investments in real estate, net, Book Value		$ 106,996	$ 107,824
Investments in real estate		116,738	116,592
Mortgages loans or other debt held by third parties		40,534	40,724
Mortgages loans held by consolidated securitizations		80,562	80,562
Investments in real estate, held for sale		7,448	4,918
Retail real estate properties
Real Estate Properties [Line Items]
Investments in real estate		$ 49,108	49,088
Number of real estate properties disposed | Property		1
Commercial mortgage loans | Subsequent Event
Real Estate Properties [Line Items]
Investments in real estate, net, Book Value	$ 7,448
Carrying Value, Transfer of commercial real estate loan to real estate owned	$ 7,448
Land
Real Estate Properties [Line Items]
Investments in real estate, net, Book Value		$ 36,905	36,905
Building and Building Improvements
Real Estate Properties [Line Items]
Investments in real estate, net, Book Value		$ 79,833	$ 79,687

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Supplemental Disclosure to Statement of Cash Flows (Detail) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2019	Mar. 31, 2018
Supplemental Cash Flow Elements [Abstract]
Cash paid for interest	$ 7,270	$ 12,925
Cash paid (refunds received) for taxes	$ (38)	(2)
Non-cash increase (decrease) in indebtedness from debt extinguishments		$ (293)

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Shareholders' Equity - Additional Information (Detail) - USD ($) $ / shares in Units, $ in Thousands		3 Months Ended		12 Months Ended
	Mar. 16, 2018	Mar. 31, 2019	Mar. 31, 2018	Dec. 31, 2018
Class Of Stock [Line Items]
Common stock, dividend paid		$ 29	$ 105
Plaz America
Class Of Stock [Line Items]
Acquired the non-controlling interests	$ 343		$ 343
Acquired the non-controlling interests carrying amount	$ 3,582
Restricted Stock
Class Of Stock [Line Items]
Common stock, dividend paid		29
Preferred Stock
Class Of Stock [Line Items]
Dividends unpaid and arrears		20,250
Preferred Stock | RAIT Joint Venture VIE
Class Of Stock [Line Items]
Cumulative redeemable preferred shares, shares issued				125
Weighted-average price per share				$ 1,000
Preferred share issuance, net of costs incurred				$ 76
Common Shares
Class Of Stock [Line Items]
Total shareholders’ equity, deficit		$ 186,915

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Realized and Unrealized Gains and Losses on Assets and Liabilities (Detail) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2019	Mar. 31, 2018
Fair Value Assets And Liabilities Measured On Unobservable Inputs [Line Items]
Change in fair value of financial instruments, Liabilities	$ (610)
Change in fair value of financial instruments	30	$ 87
Junior subordinated notes
Fair Value Assets And Liabilities Measured On Unobservable Inputs [Line Items]
Change in fair value of financial instruments, Liabilities	$ 30	(269)
Derivative
Fair Value Assets And Liabilities Measured On Unobservable Inputs [Line Items]
Change in fair value of financial instruments, Liabilities		$ 356

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FAIR VALUE OF FINANCIAL INSTRUMENTS (Tables)

3 Months Ended

Mar. 31, 2019

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 March 31, 2019:

Financial Instrument	Carrying Amount		Estimated Fair Value
Assets
Total investment in mortgage loans, held for investment, net	$	417,517	$	380,819
Investment in mortgage loans, held for sale		5,131		5,131
Cash and cash equivalents		39,139		39,139
Restricted cash		65,000		65,000
Liabilities
Recourse indebtedness:
7.625% Senior Notes		55,158		41,117
7.125% Senior Notes		65,131		60,128
Junior subordinated notes, at fair value		5,500		5,500
Junior subordinated notes, at amortized cost		25,100		5,780
Non-recourse indebtedness:
CDO notes payable, at amortized cost		102,918		83,595
CMBS securitizations		281,126		282,856
Loans payable on real estate		40,330		40,698

The following table summarizes the carrying amount and the fair value of our financial instruments as of December 31, 2018:

Financial Instrument	Carrying Amount		Estimated Fair Value
Assets
Total investment in mortgage loans, held for investment, net	$	480,061	$	444,962
Investment in mortgage loans, held for sale		4,873		4,873
Cash and cash equivalents		42,453		42,453
Restricted cash		63,067		63,067
Liabilities
Recourse indebtedness:
7.625% Senior Notes		55,100		41,229
7.125% Senior Notes		64,997		58,010
Junior subordinated notes, at fair value		6,110		6,110
Junior subordinated notes, at amortized cost		25,100		6,550
Non-recourse indebtedness:
CDO notes payable, at amortized cost		116,102		94,513
CMBS securitizations		318,008		320,711
Loans payable on real estate		40,499		40,608

Information of Assets and Liabilities Measured at Fair Value on Recurring Basis

The following tables summarize information about our assets and liabilities measured at fair value on a recurring basis as of March 31, 2019, 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 March 31, 2019
Junior subordinated notes, at fair value	$	—	$	—	$	5,500	$	5,500
Total liabilities	$	—	$	—	$	5,500	$	5,500

(1) During the three months ended March 31, 2019, 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, 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 December 31, 2018
Junior subordinated notes, at fair value	$	—	$	—	$	6,110	$	6,110
Total liabilities	$	—	$	—	$	6,110	$	6,110

(1) During the year ended December 31, 2018, 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 three months ended March 31, 2019:

Liabilities	Junior Subordinated Notes, at Fair Value			Total Level 3 Liabilities
Balance, as of December 31, 2018	$	6,110		$	6,110
Change in fair value of financial instruments		(610	)		(610	)
Balance, as of March 31, 2019	$	5,500		$	5,500

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 recorded at fair value in the accompanying consolidated balance sheets but for which fair value is required to be disclosed. The fair value of cash and cash equivalents and restricted cash approximates cost due to the nature of these instruments and are not included in the tables below.

	Carrying Amount as of March 31, 2019		Estimated Fair Value as of March 31, 2019		Valuation Technique	Level in Fair Value Hierarchy
Total investment in mortgage loans, held for investment, net	$	417,517	$	380,819	Discountedcash flows	Three
Investment in mortgage loans, held for sale		5,131		5,131	Discounted cash flows	Three
7.625% Senior Notes		55,158		41,117	Trading price	Two
7.125% Senior Notes		65,131		60,128	Trading price	Two
Junior subordinated notes, at amortized cost		25,100		5,780	Discounted cash flows	Three
CDO notes payable, at amortized cost		102,918		83,595	Discounted cash flows	Three
CMBS securitizations		281,126		282,856	Discounted cash flows	Three
Loans payable on real estate		40,330		40,698	Discounted cash flows	Three

	Carrying Amount as of December 31, 2018		Estimated Fair Value as of December 31, 2018		Valuation Technique	Level in Fair Value Hierarchy
Total investment in mortgage loans, held for investment, net	$	480,061	$	444,962	Discounted cash flows	Three
Investment in mortgage loans, held for sale		4,873		4,873	Discounted cash flows	Three
7.625% Senior Notes		55,100		41,229	Trading price	Two
7.125% Senior Notes		64,997		58,010	Trading price	Two
Junior subordinated notes, at amortized cost		25,100		6,550	Discounted cash flows	Three
CDO notes payable, at amortized cost		116,102		94,513	Discounted cash flows	Three
CMBS securitizations		318,008		320,711	Discounted cash flows	Three
Loans payable on real estate		40,499		40,608	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 March 31,
Description	2019		2018
Change in fair value of junior subordinated notes	$	30	$	(269	)
Change in fair value of derivatives		—		356
Change in fair value of financial instruments	$	30	$	87

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Tables)

3 Months Ended

Mar. 31, 2019

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 March 31,
Revenue from Contracts with customers	2019		2018
Property Management Fee income	$	—	$	766
Parking		—		202
Leasing Commission income		—		320
Other miscellaneous		70		248
Total	$	70	$	1,536

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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SUPPLEMENTAL DISCLOSURE TO STATEMENT OF CASH FLOWS

3 Months Ended

Mar. 31, 2019

Supplemental Cash Flow Elements [Abstract]

SUPPLEMENTAL DISCLOSURE TO STATEMENT OF CASH FLOWS

NOTE 12: SUPPLEMENTAL DISCLOSURE TO STATEMENT OF CASH FLOWS

The following are supplemental disclosures to the statements of cash flows for the three months ended March 31, 2019 and 2018:

	For the Three Months Ended March 31,
	2019			2018
Cash paid for interest	$	7,270		$	12,925
Cash paid (refunds received) for taxes		(38	)		(2	)
Non-cash increase (decrease) in indebtedness from debt extinguishments		—			(293	)

During the three months ended March 31, 2019, we consolidated the Collins Avenue VIE as described in Note 7: Variable Interest Entities. This resulted in a non-cash increase of $7,448 to investments in real estate, held for sale, and a non-cash decrease of $7,866 to investments in mortgage loans.

During the three months ended March 31, 2018, we transferred certain loans with an unpaid principal balance of $90,260 held for investment to held for sale, which were sold in March 2018.  During the three months ended March 31, 2018, we transferred nine additional loans from held for investment to held for sale with a carrying amount of $38,394. See Note 3: Investment in Commercial Mortgage Loans, Mezzanine Loans, and Preferred Equity Interests for further discussion.

During the three months ended March 31, 2018, we acquired the noncontrolling interests related to PlazAmericas Mall for $343, including transaction costs. See Note 9: Shareholders’ Equity for further discussion.

The following table summarizes our cash and cash equivalents and restricted cash balances as of March 31, 2019 and March 31, 2018:

	As of March 31, 2019		As of March 31, 2018
Cash and cash equivalents	$	39,139	$	84,483
Restricted cash		65,000		152,962
Total cash and cash equivalents and restricted cash	$	104,139	$	237,445

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SERIES D PREFERRED SHARES

3 Months Ended

Mar. 31, 2019

Temporary Equity Disclosure [Abstract]

SERIES D PREFERRED SHARES

NOTE 8: 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). We subsequently repurchased a number of Series D preferred shares in transactions described below.  We purchased and cancelled the warrants and the investor SARs in October 2017 pursuant to the Investor’s exercise of put rights described below.  We used the proceeds received under the purchase agreement to fund our loan origination and investment activities, including CMBS and bridge lending.

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 Asset Holdings IV, LLC, or 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 the Investor 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 preferred units of RAIT IV and RAIT’s corresponding Series D preferred shares issued and outstanding to 2,939,190 preferred units of RAIT IV and RAIT’s corresponding Series D preferred shares issued and outstanding.

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 FL5 and FL6 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.

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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INVESTMENTS IN REAL ESTATE

3 Months Ended

Mar. 31, 2019

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 March 31, 2019			As of December 31, 2018
Office real estate properties	$	48,886		$	48,760
Retail real estate properties		49,108			49,088
Parcels of land		18,744			18,744
Subtotal		116,738			116,592
Less: Accumulated depreciation and amortization		(9,742	)		(8,768	)
Investments in real estate, net	$	106,996		$	107,824

As of March 31, 2019, our investments in real estate were comprised of land of $36,905 and buildings and improvements of $79,833. As of December 31, 2018, our investments in real estate were comprised of land of $36,905 and buildings and improvements of $79,687.

As of March 31, 2019, our investments in real estate of $116,738 were financed through $40,534 of mortgage loans or other debt held by third parties and $80,562 of mortgage loans held directly by RAIT or through our RAIT I securitization. As of December 31, 2018, our investments in real estate of $116,592 were financed through $40,724 of mortgage loans or other debt held by third parties and $80,562 of mortgage loans held directly by RAIT or through our RAIT I securitization. Together, along with the other commercial real estate loans held by our RAIT I securitization, these mortgage loans serve as collateral for the CDO notes payable issued by our RAIT I securitization. All intercompany balances and interest charges are eliminated in consolidation.

The following table represents the minimum future lease payments for our office and retail properties as of March 31, 2019.

2019	$	7,072
2020		7,746
2021		5,620
2022		3,690
2023		1,980
2024 and thereafter		5,168
Total	$	31,276

Investments in real estate, held for sale:

During the first quarter of 2019, we consolidated the Collins Avenue VIE as described in Note 7: Variable Interest Entities.  As of March 31, 2019, the real estate property owned by this entity, with a carrying amount of $7,448, was considered held-for-sale.  This property was subsequently sold in May 2019. We expect to recognize a gain as a result of the sale.

Acquisitions:

As described in Note 3: Investments in Commercial Mortgage Loans, Mezzanine Loans and Preferred Equity Interests, in June 2019, we completed the conversion of a portion of a commercial mortgage loan portfolio with a carrying value of $7,448 to real estate owned property. The conversion resulted in approximately $7,448 of real estate assets being reflected on our consolidated balance sheet.

Property Sales:

During the three months ended March 31, 2019, we disposed of one real estate owned property.  The below table summarizes the current year dispositions and also presents each property’s contribution to net income (loss) allocable to common shares, excluding the impact of any 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 March 31, 2019
Rte 18 Central Plaza	Retail	2/26/2019	$	5,100	$	-	$	(60	)
Total			$	5,100	$	-	$	(60	)

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The Company - Additional Information (Detail) - USD ($) $ in Thousands			3 Months Ended
		Aug. 30, 2019	Mar. 31, 2019	Oct. 04, 2019	Dec. 31, 2018
Nature Of Operations [Line Items]
Principal amount outstanding			$ 591,296		$ 642,559
Recourse Indebtedness
Nature Of Operations [Line Items]
Principal amount outstanding			$ 165,451		165,451
7.125% Senior Notes due 2019 | Recourse Indebtedness
Nature Of Operations [Line Items]
Stated interest rate			7.125%
Principal amount outstanding			$ 65,356		65,356
Contractual maturity date			Aug. 30, 2019
7.625% Senior Notes due 2024 | Recourse Indebtedness
Nature Of Operations [Line Items]
Stated interest rate			7.625%
Principal amount outstanding			$ 56,324		56,324
Junior Subordinated Notes, at Amortized Cost | Recourse Indebtedness
Nature Of Operations [Line Items]
Principal amount outstanding			25,100		25,100
Junior Subordinated Notes, at Fair Value | Recourse Indebtedness
Nature Of Operations [Line Items]
Principal amount outstanding	[1]		$ 18,671		$ 18,671
Purchase Agreement | CF RFP Holdings LLC | Subsequent Event
Nature Of Operations [Line Items]
Purchase price		$ 174,424
Earnest money deposits		$ 8,721
Amendment | CF RFP Holdings LLC | Subsequent Event
Nature Of Operations [Line Items]
Additional deposits				$ 8,721

[1] Relates to liabilities which we elected to record at fair value under FASB ASC Topic 825.

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Loans Held for Investment (Parenthetical) (Detail) - USD ($) $ in Thousands	3 Months Ended		12 Months Ended
	Mar. 31, 2019		Dec. 31, 2018
Mortgage Loans On Real Estate [Line Items]
Carrying Amount	$ 6,967
Commercial Portfolio Segment
Mortgage Loans On Real Estate [Line Items]
Carrying Amount	438,641	[1]	$ 503,071	[2]
Commercial Portfolio Segment | Cash Flow Loans
Mortgage Loans On Real Estate [Line Items]
Carrying Amount	53,128		54,621
Commercial Portfolio Segment | Commercial mortgage loans
Mortgage Loans On Real Estate [Line Items]
Carrying Amount	388,849		453,217
Commercial Portfolio Segment | Commercial mortgage loans | Cash Flow Loans
Mortgage Loans On Real Estate [Line Items]
Carrying Amount	7,148		8,579
Commercial Portfolio Segment | Commercial mortgage loans | Conduit Loans
Mortgage Loans On Real Estate [Line Items]
Deferred fees	1,703		2,558
Deferred costs	1,306		1,884
Commercial Portfolio Segment | Mezzanine Loans
Mortgage Loans On Real Estate [Line Items]
Carrying Amount	21,278		21,278
Commercial Portfolio Segment | Mezzanine Loans | Cash Flow Loans
Mortgage Loans On Real Estate [Line Items]
Carrying Amount	21,114		21,114
Commercial Portfolio Segment | Preferred Equity Interests
Mortgage Loans On Real Estate [Line Items]
Carrying Amount	28,514		28,576
Commercial Portfolio Segment | Preferred Equity Interests | Cash Flow Loans
Mortgage Loans On Real Estate [Line Items]
Carrying Amount	$ 24,866		$ 24,928

[1] Includes $53,128 of cash flow loans, of which $7,148 are commercial mortgage loans, $21,114 are mezzanine loans and $24,866 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 $54,621 of cash flow loans, of which $8,579 are commercial mortgage loans, $21,114 are mezzanine loans and $24,928 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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Information of Assets and Liabilities Measured at Fair Value on Recurring Basis (Parenthetical) (Detail) - USD ($)	Mar. 31, 2019	Dec. 31, 2018
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

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Aggregate Contractual Maturities of Indebtedness Outstanding, by Year (Detail) - USD ($) $ in Thousands	Mar. 31, 2019	Dec. 31, 2018
Extinguishment Of Debt [Line Items]
Total	$ 591,296	$ 642,559
Recourse Indebtedness
Extinguishment Of Debt [Line Items]
2019	65,356
Thereafter	100,095
Total	165,451	165,451
Non Recourse Indebtedness
Extinguishment Of Debt [Line Items]
2019	559
2020	779
2021	39,196
Thereafter	385,311
Total	$ 425,845	$ 477,108

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Consolidated Balance Sheets - USD ($) $ in Thousands	Mar. 31, 2019	Dec. 31, 2018
Investment in mortgage loans, held for investment:
Commercial mortgage loans, mezzanine loans, and preferred equity interests	$ 438,244	$ 502,397
Allowance for loan losses	(20,727)	(22,336)
Investments in real estate, net of accumulated depreciation	106,996	107,824
Investments in real estate, held for sale	7,448	4,918
Cash and cash equivalents	39,139	42,453
Restricted cash	65,000	63,067
Accrued interest receivable	17,399	18,044
Other assets	13,608	10,807
Intangible assets, net of accumulated amortization of $5,876 and $5,703, respectively	1,544	1,717
Total assets	673,782	733,764
Liabilities and Shareholders' Equity
Indebtedness, net of unamortized discounts, premiums and deferred financing costs of $16,033 and $16,643 respectively (including $390,675 and $440,776 held by consolidated VIEs, respectively)	575,263	625,916
Accrued interest payable	2,352	2,401
Accounts payable and accrued expenses	2,671	3,330
Borrowers' escrows	26,074	31,343
Other liabilities	4,479	2,268
Total liabilities	610,839	665,258
Common shares, $1.50 par value per share, 200,000,000 shares authorized 1,849,530 and 1,850,451 issued and outstanding, respectively, including 4,997 and 6,844 unvested restricted common share awards, respectively	2,774	2,776
Additional paid in capital	2,102,363	2,102,274
Accumulated other comprehensive income (loss)	12,053	11,473
Retained earnings (deficit)	(2,054,347)	(2,048,117)
Total shareholders' equity	62,943	68,506
Total liabilities and shareholders' equity	673,782	733,764
Held For Investment
Investment in mortgage loans, held for investment:
Investment in mortgage loans	417,517	480,061
Held For Sale
Investment in mortgage loans, held for investment:
Investment in mortgage loans	5,131	4,873
7.75% Series A Cumulative Redeemable Preferred Stock
Liabilities and Shareholders' Equity
Preferred shares, $0.01 par value per share	57	57
Total shareholders' equity	57	57
8.375% Series B Cumulative Redeemable Preferred Stock
Liabilities and Shareholders' Equity
Preferred shares, $0.01 par value per share	25	25
Total shareholders' equity	25	25
8.875% Series C Cumulative Redeemable Preferred Stock
Liabilities and Shareholders' Equity
Preferred shares, $0.01 par value per share	18	18
Total shareholders' equity	$ 18	$ 18

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Supplemental Disclosure to Statement of Cash Flows - Additional Information (Detail) $ in Thousands		1 Months Ended	3 Months Ended
	Mar. 16, 2018 USD ($)	Mar. 31, 2018 USD ($) Loan	Mar. 31, 2019 USD ($)		Mar. 31, 2018 USD ($) Loan	Dec. 31, 2018 USD ($)	[2]
Cash Flow Supplemental Disclosures [Line Items]
Unpaid principal balance		$ 90,260			$ 90,260
Number of loans held for sale | Loan		9			9
Principal balance			$ 6,967
Increase in non-cash investment in real estate			7,448
Decrease in non-cash invesment in mortgage loans			7,866
Plaz America
Cash Flow Supplemental Disclosures [Line Items]
Acquired the non-controlling interests	$ 343				$ 343
Commercial Portfolio Segment
Cash Flow Supplemental Disclosures [Line Items]
Unpaid principal balance			438,542	[1]		$ 502,974
Principal balance			$ 438,641	[1]		$ 503,071
Commercial Portfolio Segment | Commercial Mortgage Loans Sold
Cash Flow Supplemental Disclosures [Line Items]
Unpaid principal balance		$ 90,260			90,260
Commercial Portfolio Segment | Commercial Mortgage Loans Held for Sale
Cash Flow Supplemental Disclosures [Line Items]
Principal balance		$ 38,394			$ 38,394

[1] Includes $53,128 of cash flow loans, of which $7,148 are commercial mortgage loans, $21,114 are mezzanine loans and $24,866 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 $54,621 of cash flow loans, of which $8,579 are commercial mortgage loans, $21,114 are mezzanine loans and $24,928 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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Annual Minimum Rent Due Pursuant to Leases Topic 840 (Detail) $ in Thousands	Dec. 31, 2018 USD ($)
Commitments And Contingencies Disclosure [Abstract]
2019	$ 479
2020	438
2021	447
2022	456
2023	465
Thereafter	4,626
Total	$ 6,911

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Consolidated Statement of Changes in Equity - 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
Cumulative effect adjustments from adoption of recently issued accounting pronouncements	$ 761						$ 9,257	$ (8,496)	$ 761
Adjusted Balance	180,548	$ 53	$ 23	$ 17	$ 2,791	$ 2,094,804	9,257	(1,930,029)	176,916	$ 3,632
Adjusted Balance (in shares)		5,344,353	2,340,969	1,640,425	1,860,903
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
Net income (loss)	(27,705)							(27,705)	(27,705)
Preferred dividends paid	(6,389)							(6,389)	(6,389)
Common dividends declared	(105)							(105)	(105)
Other comprehensive income (loss), net	1,266						1,266		1,266
Share-based compensation	(539)					(539)			(539)
Issuance of noncontrolling interests	76									76
Acquisition of noncontrolling interests	(343)					3,239			3,239	(3,582)
Common shares activity related to equity compensation	(71)				$ (14)	(57)			(71)
Common shares activity related to equity compensation (in shares)					(9,369)
Ending Balance at Mar. 31, 2018	146,738	$ 53	$ 23	$ 17	$ 2,777	2,097,447	10,523	(1,964,228)	146,612	$ 126
Ending Balance (in shares) at Mar. 31, 2018		5,344,353	2,340,969	1,640,425	1,851,535
Beginning Balance at Dec. 31, 2018	68,506	$ 57	$ 25	$ 18	$ 2,776	2,102,274	11,473	(2,048,117)	68,506
Beginning Balance (in shares) at Dec. 31, 2018		5,727,500	2,508,797	1,758,030	1,850,451
Net income (loss)	(6,201)							(6,201)	(6,201)
Common dividends declared	(29)							(29)	(29)
Other comprehensive income (loss), net	580						580		580
Share-based compensation	89					89			89
Common shares activity related to equity compensation	(2)				$ (2)				(2)
Common shares activity related to equity compensation (in shares)					(921)
Ending Balance at Mar. 31, 2019	$ 62,943	$ 57	$ 25	$ 18	$ 2,774	$ 2,102,363	$ 12,053	$ (2,054,347)	$ 62,943
Ending Balance (in shares) at Mar. 31, 2019		5,727,500	2,508,797	1,758,030	1,849,530

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Earnings (Loss) Per Share - Additional Information (Detail) - shares	3 Months Ended
	Mar. 31, 2019	Mar. 31, 2018
Earnings Per Share [Abstract]
Anti-dilutive shares not included in computation of earnings per common share	6,015	250,799

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Variable Interest Entities - Additional Information (Detail) - USD ($) $ in Thousands	Mar. 31, 2019	Dec. 31, 2018
Variable Interest Entity [Line Items]
Indebtedness	$ 575,263	$ 625,916
VIE
Variable Interest Entity [Line Items]
Total investment in mortgages and loans,net	409,041	467,656
Indebtedness	390,675	440,776
VIE | Consolidation Eliminations
Variable Interest Entity [Line Items]
Total investment in mortgages and loans,net	87,126	93,445
Indebtedness	$ 205,996	$ 197,235

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Summary of Disposition and Each Property's Contribution (Detail) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2019	Mar. 31, 2018
Real Estate Properties [Line Items]
Net income (loss) allocable to common shares	$ (11,264)	$ (34,094)
Disposal Group Held For Sale Or Disposed Of By Sale Not Discontinued Operations
Real Estate Properties [Line Items]
Sale Price	5,100
Net income (loss) allocable to common shares	$ (60)
Disposal Group Held For Sale Or Disposed Of By Sale Not Discontinued Operations | Rte 18 Central Plaza | Retail
Real Estate Properties [Line Items]
Date of Sale	Feb. 26, 2019
Sale Price	$ 5,100
Net income (loss) allocable to common shares	$ (60)

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Investment in Loans by Credit Risk Category (Parenthetical) (Detail) - Watchlist - USD ($) $ in Thousands	Mar. 31, 2019	Dec. 31, 2018
Financing Receivable Recorded Investment [Line Items]
Total Impaired Loans	$ 115,618	$ 126,645
Loans not impaired	$ 60,065	$ 57,162

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Loans Considered to be Impaired (Parenthetical) (Detail) - USD ($) $ in Thousands	Mar. 31, 2019	Dec. 31, 2018
Receivables [Abstract]
Unpaid principal relating to previously identified TDRs that are on accrual status	$ 0	$ 0

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INVESTMENTS IN REAL ESTATE (Tables)

3 Months Ended

Mar. 31, 2019

Banking And Thrift [Abstract]

Summary of Investments in Real Estate

The table below summarizes our investments in real estate:

	Book Value
	As of March 31, 2019			As of December 31, 2018
Office real estate properties	$	48,886		$	48,760
Retail real estate properties		49,108			49,088
Parcels of land		18,744			18,744
Subtotal		116,738			116,592
Less: Accumulated depreciation and amortization		(9,742	)		(8,768	)
Investments in real estate, net	$	106,996		$	107,824

Summary of Minimum Future Lease Payments

The following table represents the minimum future lease payments for our office and retail properties as of March 31, 2019.

2019	$	7,072
2020		7,746
2021		5,620
2022		3,690
2023		1,980
2024 and thereafter		5,168
Total	$	31,276

Summary of Disposition and Each Property's Contribution

The below table summarizes the current year dispositions and also presents each property’s contribution to net income (loss) allocable to common shares, excluding the impact of any 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 March 31, 2019
Rte 18 Central Plaza	Retail	2/26/2019	$	5,100	$	-	$	(60	)
Total			$	5,100	$	-	$	(60	)

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SUBSEQUENT EVENTS

3 Months Ended

Mar. 31, 2019

Subsequent Events [Abstract]

SUBSEQUENT EVENTS

NOTE 14: SUBSEQUENT EVENTS

We have evaluated subsequent events or transactions that have occurred after the consolidated balance sheet date of March 31, 2019, but prior to the filing of the consolidated financial statements with the SEC on this Quarterly Report on Form 10-Q. We have determined that, except as disclosed within this Note and other Notes, including, without limitation, Note 1: The Company, there are no subsequent events that require disclosure in this Quarterly Report on Form 10-Q.

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EARNINGS (LOSS) PER SHARE (Tables)

3 Months Ended

Mar. 31, 2019

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 months ended March 31, 2019 and 2018:

	For the Three Months Ended March 31,
	2019			2018
Income (loss)	$	(6,201	)	$	(27,705	)
(Income) loss allocated to preferred shares		(5,063	)		(6,389	)
Net income (loss) allocable to common shares	$	(11,264	)	$	(34,094	)
Weighted-average shares outstanding—Basic (1)		1,844,037			1,837,493
Weighted-average shares outstanding—Diluted (1)		1,844,037			1,837,493
Earnings (loss) per share—Basic:
Earnings (loss) per share—Basic	$	(6.11	)	$	(18.55	)
Earnings (loss) per share—Diluted:
Earnings (loss) per share—Diluted	$	(6.11	)	$	(18.55	)

(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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Investments in Commercial Mortgage Loans, Mezzanine Loans and Preferred Equity Interests - Additional Information (Detail) $ in Thousands		1 Months Ended		3 Months Ended			12 Months Ended
	May 08, 2019 USD ($)	May 31, 2019 USD ($)	Mar. 31, 2018 USD ($) Loan	Mar. 31, 2019 USD ($) Loan		Mar. 31, 2018 USD ($) Loan	Dec. 31, 2018 USD ($) Loan
Accounts Notes And Loans Receivable [Line Items]
Principal balance				$ 6,967
Unpaid Principal Balance			$ 90,260			$ 90,260
Benefit for loan losses				583		(8,032)
Average impaired loans unpaid balance				121,132		124,887
Interest income from impaired loans				0		$ 127
Recovery of amounts which previously charged off				$ 9,000
Proceeds from sale of loans held-for-sale			43,384
Loss on sale of loans			$ 930
Number of loans held for sale | Loan			9			9
Number of loans sold | Loan							6
Net loss on sale of loans							$ 3,280
Number of loans available for sale | Loan				3
Gain on loans available for sale				$ 303
Carrying amount of loans held for sale				5,131
Secured warehouse facility
Accounts Notes And Loans Receivable [Line Items]
Repayments of debt			$ 45,850
Interest paid			349
Subsequent Event
Accounts Notes And Loans Receivable [Line Items]
Settlement agreement, amount to be paid by related securitization trust	$ 9,000	$ 9,000
Commercial Portfolio Segment
Accounts Notes And Loans Receivable [Line Items]
Principal balance				$ 438,641	[1]		$ 503,071	[2]
Number of Loans | Loan				46	[1]		51	[2]
Unpaid Principal Balance				$ 438,542	[1]		$ 502,974	[2]
Commercial Portfolio Segment | One Commercial Mortgage Loan
Accounts Notes And Loans Receivable [Line Items]
Modification troubled debt restructuring, subsequently defaulted, number of loans | Loan				0		0
Modification troubled debt restructuring, number of loans | Loan				1		1
Unpaid principal balance constituted a TDR			$ 7,948	$ 29,478		$ 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				$ 53,128			$ 54,621
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				$ 81,967			$ 92,993
Weighted-average interest rate				6.80%			6.90%
Recognizing interest on the cash basis | Commercial Portfolio Segment
Accounts Notes And Loans Receivable [Line Items]
Weighted-average interest rate				11.40%			11.40%
Number of Loans | Loan				5			5
Unpaid Principal Balance				$ 25,703			$ 25,703
Loans Originated Prior to 2010
Accounts Notes And Loans Receivable [Line Items]
Benefit for loan losses				$ 583

[1] Includes $53,128 of cash flow loans, of which $7,148 are commercial mortgage loans, $21,114 are mezzanine loans and $24,866 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 $54,621 of cash flow loans, of which $8,579 are commercial mortgage loans, $21,114 are mezzanine loans and $24,928 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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SUPPLEMENTAL DISCLOSURE TO STATEMENT OF CASH FLOWS (Tables)

3 Months Ended

Mar. 31, 2019

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 three months ended March 31, 2019 and 2018:

	For the Three Months Ended March 31,
	2019			2018
Cash paid for interest	$	7,270		$	12,925
Cash paid (refunds received) for taxes		(38	)		(2	)
Non-cash increase (decrease) in indebtedness from debt extinguishments		—			(293	)

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 March 31, 2019 and March 31, 2018:

	As of March 31, 2019		As of March 31, 2018
Cash and cash equivalents	$	39,139	$	84,483
Restricted cash		65,000		152,962
Total cash and cash equivalents and restricted cash	$	104,139	$	237,445

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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
	Mar. 31, 2019	Mar. 31, 2018
Disaggregation Of Revenue [Line Items]
Revenue from Contracts with customers	$ 70	$ 1,536
Property Management Fee income
Disaggregation Of Revenue [Line Items]
Revenue from Contracts with customers		766
Parking
Disaggregation Of Revenue [Line Items]
Revenue from Contracts with customers		202
Leasing Commission income
Disaggregation Of Revenue [Line Items]
Revenue from Contracts with customers		320
Other miscellaneous
Disaggregation Of Revenue [Line Items]
Revenue from Contracts with customers	$ 70	$ 248

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EARNINGS (LOSS) PER SHARE

3 Months Ended

Mar. 31, 2019

Earnings Per Share [Abstract]

EARNINGS (LOSS) PER SHARE

NOTE 10: EARNINGS (LOSS) PER SHARE

The following table presents a reconciliation of basic and diluted earnings (loss) per share for the three months ended March 31, 2019 and 2018:

	For the Three Months Ended March 31,
	2019			2018
Income (loss)	$	(6,201	)	$	(27,705	)
(Income) loss allocated to preferred shares		(5,063	)		(6,389	)
Net income (loss) allocable to common shares	$	(11,264	)	$	(34,094	)
Weighted-average shares outstanding—Basic (1)		1,844,037			1,837,493
Weighted-average shares outstanding—Diluted (1)		1,844,037			1,837,493
Earnings (loss) per share—Basic:
Earnings (loss) per share—Basic	$	(6.11	)	$	(18.55	)
Earnings (loss) per share—Diluted:
Earnings (loss) per share—Diluted	$	(6.11	)	$	(18.55	)

(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 months ended March 31, 2019, securities convertible into 6,015 common shares, were excluded from the earnings (loss) per share computations because their effect would have been anti-dilutive. For the three months ended March 31, 2018, securities convertible into 250,799 common shares, were excluded from the earnings (loss) per share computations because their effect would have been anti-dilutive.

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FAIR VALUE OF FINANCIAL INSTRUMENTS

3 Months Ended

Mar. 31, 2019

Fair Value Disclosures [Abstract]

FAIR VALUE OF FINANCIAL INSTRUMENTS

NOTE 6: 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 and restricted cash 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 March 31, 2019:

Financial Instrument	Carrying Amount		Estimated Fair Value
Assets
Total investment in mortgage loans, held for investment, net	$	417,517	$	380,819
Investment in mortgage loans, held for sale		5,131		5,131
Cash and cash equivalents		39,139		39,139
Restricted cash		65,000		65,000
Liabilities
Recourse indebtedness:
7.625% Senior Notes		55,158		41,117
7.125% Senior Notes		65,131		60,128
Junior subordinated notes, at fair value		5,500		5,500
Junior subordinated notes, at amortized cost		25,100		5,780
Non-recourse indebtedness:
CDO notes payable, at amortized cost		102,918		83,595
CMBS securitizations		281,126		282,856
Loans payable on real estate		40,330		40,698

The following table summarizes the carrying amount and the fair value of our financial instruments as of December 31, 2018:

Financial Instrument	Carrying Amount		Estimated Fair Value
Assets
Total investment in mortgage loans, held for investment, net	$	480,061	$	444,962
Investment in mortgage loans, held for sale		4,873		4,873
Cash and cash equivalents		42,453		42,453
Restricted cash		63,067		63,067
Liabilities
Recourse indebtedness:
7.625% Senior Notes		55,100		41,229
7.125% Senior Notes		64,997		58,010
Junior subordinated notes, at fair value		6,110		6,110
Junior subordinated notes, at amortized cost		25,100		6,550
Non-recourse indebtedness:
CDO notes payable, at amortized cost		116,102		94,513
CMBS securitizations		318,008		320,711
Loans payable on real estate		40,499		40,608

Fair Value Measurements

The following tables summarize information about our assets and liabilities measured at fair value on a recurring basis as of March 31, 2019, 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 March 31, 2019
Junior subordinated notes, at fair value	$	—	$	—	$	5,500	$	5,500
Total liabilities	$	—	$	—	$	5,500	$	5,500

(1) During the three months ended March 31, 2019, 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, 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 December 31, 2018
Junior subordinated notes, at fair value	$	—	$	—	$	6,110	$	6,110
Total liabilities	$	—	$	—	$	6,110	$	6,110

(1) During the year ended December 31, 2018, 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 March 31, 2019 include a discount rate of 29% and as of December 31, 2018 include a discount rate of 27%. 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 three months ended March 31, 2019:

Liabilities	Junior Subordinated Notes, at Fair Value			Total Level 3 Liabilities
Balance, as of December 31, 2018	$	6,110		$	6,110
Change in fair value of financial instruments		(610	)		(610	)
Balance, as of March 31, 2019	$	5,500		$	5,500

Non-Recurring Fair Value Measurements

Our 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 March 31, 2019, we measured the underlying collateral of five of our loans at a fair value of $56,310 in our consolidated balance sheet as they were impaired.

Our other non-recurring fair value measurements relate to our commercial real estate loans that are considered held for sale and are recorded at the lower of cost or fair value in our consolidated balance sheets. In evaluating our loans held for sale, we estimate the fair value of each loan and compare that fair value to our total investment in the loan. The estimate of fair value for each loan is determined using a discounted cash flow analysis. The significant inputs to these valuations are estimated future cash flows for each loan and market discount rates. The discount rates are based on underlying property performance and recent data from comparable lending markets. As of March 31, 2019, we measured three loans held for sale at a fair value of $5,131 in our consolidated balance sheet.

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 recorded at fair value in the accompanying consolidated balance sheets but for which fair value is required to be disclosed. The fair value of cash and cash equivalents and restricted cash approximates cost due to the nature of these instruments and are not included in the tables below.

	Carrying Amount as of March 31, 2019		Estimated Fair Value as of March 31, 2019		Valuation Technique	Level in Fair Value Hierarchy
Total investment in mortgage loans, held for investment, net	$	417,517	$	380,819	Discountedcash flows	Three
Investment in mortgage loans, held for sale		5,131		5,131	Discounted cash flows	Three
7.625% Senior Notes		55,158		41,117	Trading price	Two
7.125% Senior Notes		65,131		60,128	Trading price	Two
Junior subordinated notes, at amortized cost		25,100		5,780	Discounted cash flows	Three
CDO notes payable, at amortized cost		102,918		83,595	Discounted cash flows	Three
CMBS securitizations		281,126		282,856	Discounted cash flows	Three
Loans payable on real estate		40,330		40,698	Discounted cash flows	Three

	Carrying Amount as of December 31, 2018		Estimated Fair Value as of December 31, 2018		Valuation Technique	Level in Fair Value Hierarchy
Total investment in mortgage loans, held for investment, net	$	480,061	$	444,962	Discounted cash flows	Three
Investment in mortgage loans, held for sale		4,873		4,873	Discounted cash flows	Three
7.625% Senior Notes		55,100		41,229	Trading price	Two
7.125% Senior Notes		64,997		58,010	Trading price	Two
Junior subordinated notes, at amortized cost		25,100		6,550	Discounted cash flows	Three
CDO notes payable, at amortized cost		116,102		94,513	Discounted cash flows	Three
CMBS securitizations		318,008		320,711	Discounted cash flows	Three
Loans payable on real estate		40,499		40,608	Discounted cash flows	Three

Change in Fair Value of Financial Instruments

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 March 31,
Description	2019		2018
Change in fair value of junior subordinated notes	$	30	$	(269	)
Change in fair value of derivatives		—		356
Change in fair value of financial instruments	$	30	$	87

The changes in the fair value for the junior subordinated notes for which the fair value option was elected for the three months ended March 31, 2019 and 2018 was primarily attributable to changes in base market interest rates. The changes in the fair value of derivatives for the three months ended March 31, 2018 was primarily attributable to changes in interest rates.

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Commitments and Contingencies - Additional Information (Detail) - USD ($) $ in Thousands			1 Months Ended	3 Months Ended
	May 08, 2019	Sep. 20, 2017	May 31, 2019	Mar. 31, 2019	Apr. 30, 2019	Dec. 31, 2018
Commitment And Contingencies [Line Items]
Outstanding funding commitment				$ 575,263		$ 625,916
Remaining operating lease term				13 years 1 month 6 days
Operating lease extended term				5 years
Incremental borrowing rate				12.60%
Operating Lease, Liability, Statement of Financial Position [Extensible List]				us-gaap:OtherLiabilities
Operating Lease, Right-of-Use Asset, Statement of Financial Position [Extensible List]				us-gaap:OtherAssets
Operating lease liabitity				$ 2,995
Operating lease asset				2,399
Other General and Administrative Expenses
Commitment And Contingencies [Line Items]
Operating lease costs				107
Variable lease costs				79
Lending Arrangements
Commitment And Contingencies [Line Items]
Outstanding funding commitment				3,190	$ 0
Subsequent Event
Commitment And Contingencies [Line Items]
Settlement agreement, amount to be paid by related securitization trust	$ 9,000		$ 9,000
Note B
Commitment And Contingencies [Line Items]
Payment to purchase mortgage loan		$ 18,500
Mortgage loan principal to be received				$ 18,500
Note A
Commitment And Contingencies [Line Items]
Payment to purchase mortgage loan		$ 190,000

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Consolidated Statements of Operations - USD ($) $ in Thousands		3 Months Ended
		Mar. 31, 2019	Mar. 31, 2018
Revenue:
Investment interest income		$ 6,921	$ 18,865
Investment interest expense		(4,163)	(10,549)
Net interest margin		2,758	8,316
Property income		3,307	8,816
Fee and other income		88	1,209
Total revenue		6,153	18,341
Expenses:
Interest expense		3,996	6,771
Real estate operating expense		2,003	5,790
Property management expenses			1,931
General and administrative expenses:
Compensation expense		2,229	2,925
Other general and administrative expense		3,451	6,338
Total general and administrative expenses		5,680	9,263
Acquisition and integration expenses			133
Provision (benefit) for loan losses		(583)	8,032
Depreciation and amortization expense		1,384	3,443
Total expenses		12,480	35,363
Operating (Loss) Income		(6,327)	(17,022)
Interest and other income (expense), net		104	349
Gains (losses) on assets		303	(937)
Gains (losses) on extinguishments of debt		(285)	(991)
Asset impairment		(26)	(9,191)
Change in fair value of financial instruments		30	87
Income (loss) before taxes		(6,201)	(27,705)
Net income (loss)		(6,201)	(27,705)
(Income) loss allocated to preferred shares		(5,063)	(6,389)
Net income (loss) allocable to common shares		$ (11,264)	$ (34,094)
Earnings (loss) per share-Basic:
Earnings (loss) per share-Basic		$ (6.11)	$ (18.55)
Weighted-average shares outstanding-Basic	[1]	1,844,037	1,837,493
Earnings (loss) per share-Diluted:
Earnings (loss) per share-Diluted		$ (6.11)	$ (18.55)
Weighted average shares outstanding-Diluted	[1]	1,844,037	1,837,493

[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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THE COMPANY

3 Months Ended

Mar. 31, 2019

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.  

On August 30, 2019, RAIT and its affiliates RAIT Funding LLC (“RAIT Funding”), RAIT General, Inc. (“RAIT General”), RAIT Limited, Inc. (“RAIT Limited”), Taberna Realty Finance Trust (“TRFT”), RAIT JV TRS, LLC, and RAIT JV TRS Sub, LLC (each, a “Debtor”, and together, the “Debtors”) filed voluntary bankruptcy cases (the “Chapter 11 Cases”) under chapter 11, Title 11 of the U.S. Code (the “Bankruptcy Code”) in the United States Bankruptcy Court for the District of Delaware (the “Bankruptcy Court”). No other subsidiaries of RAIT filed for bankruptcy protection. The Chapter 11 Cases are jointly administered under the caption In re: RAIT Funding, LLC, a Delaware limited liability company, et. al. Each of the Debtors will continue to operate its business as a “debtor in possession” under the jurisdiction of the Bankruptcy Court and in accordance with the applicable provisions of the Bankruptcy Code and the orders of the Bankruptcy Court. The Bankruptcy Court entered orders approving a variety of first-day relief designed primarily to minimize the impact of the Chapter 11 Cases on our operations and employees. We expect to continue our operations during the pendency of the Chapter 11 Cases.

Immediately prior to the filing of the Chapter 11 Cases, on August 30, 2019, RAIT, RAIT General, RAIT Limited and TRFT (together, the “Sellers”), entered into an Equity and Asset Purchase Agreement (the “Purchase Agreement”) with CF RFP Holdings LLC, a Delaware limited liability company and an entity owned by funds managed by affiliates of Fortress Investment Group LLC (“Buyer”), pursuant to which, among other things, Buyer agreed to purchase certain subsidiaries and assets of the Sellers (together, the “Purchased Assets”) for a purchase price of $174,424, as adjusted pursuant to a cash adjustment (the “Purchase Price”), including the assumption of certain liabilities. Buyer deposited $8,721 as an earnest money deposit. The transactions contemplated by the Purchase Agreement (the “Transactions”) will be effected pursuant to a sale process under Section 363 of the Bankruptcy Code.   On October 4, 2019, RAIT and the Sellers and the Buyer entered into Amendment No. 1 (the “Amendment”) to the Purchase Agreement which, among other things, (i) provided for an additional deposit by the Buyer in the amount of $8,721 if Buyer is the winning bidder or back-up bidder in the auction contemplated by the Purchase Agreement or if there is no such auction and (ii) added a mechanism to adjust the Purchase Price for approved expenses associated with certain new, renewed, modified or amended leases that with the consent of Buyer are entered into by a Seller or an affiliate of Seller after the date of the Amendment and prior to the closing of the transactions contemplated by the Purchase Agreement. The Amendment further provided that if Buyer does not approve a proposed new, renewed, modified or amended lease or, if Buyer approves a proposed new, renewed, modified or amended lease, but does not approve all expenses associated therewith, the Sellers will not be in breach of the Purchase Agreement for the consequences of the determination not to enter into such new, renewed, modified or amended lease or make such unapproved payments, as applicable.

On August 29, 2019, RAIT entered into a Restructuring and Plan Support Agreement with TRFT and TP Management LLC, an affiliate of Buyer, in its capacity as delegate collateral manager (“TPM”) (the “Taberna RSA”). On August 31, 2019, RAIT entered into a Restructuring and Plan Support Agreement with RAIT Funding and Kodiak CDO I., Ltd., as holder of certain preferred securities (“Kodiak”, and together with TPM, the “RSA Counterparties”) (the “Kodiak RSA”, and together with the Taberna RSA, the “RSAs”). TPM is the collateral manager and Kodiak is the holder of certain securities that are collateralized by the 2035 Note (defined below, and also referred to as the junior subordinated note, at fair value) and the 2037 Note (defined below, and also referred to as the junior subordinated note, at amortized cost), respectively. Pursuant to the RSAs, each of the RSA Counterparties agreed, among other things, to support, and take reasonable necessary actions in furtherance of, the Transactions, including, among other things, the consummation of the sale of the Purchased Assets under Section 363 of the Bankruptcy Code and support the confirmation of a plan of reorganization of the Debtors. Pursuant to the RSAs, each of the RSA Counterparties has agreed, subject to certain conditions, to accept less than the total unpaid amounts due under the 2035 Note and the 2037 Note. The RSAs contain customary representations and warranties by RAIT, the applicable RAIT subsidiary and the applicable RSA Counterparty. RAIT, the applicable RAIT subsidiary and the applicable RSA Counterparty may terminate their respective RSA under certain circumstances, including, among other things, (a) the failure to satisfy certain bankruptcy-related milestones, (b) the entry of certain orders by, or upon certain actions taken by, the Bankruptcy Court, (c) breaches of representations and obligations under the applicable RSA, and (d) upon the occurrence of a material adverse change.    

Subject to certain specific exceptions under the Bankruptcy Code, the Chapter 11 Cases automatically stayed most judicial or administrative actions against the Debtors as well as efforts by creditors to collect on or otherwise exercise rights or remedies with respect to pre-petition claims. As a result, for example, most creditor actions to obtain possession of property from the Debtors, or to create, perfect or enforce any lien against the Debtors, or to collect on or otherwise exercise rights or remedies with respect to a pre-petition claim are stayed.

On October 2, 2019, the Bankruptcy Court entered an order (the “Bidding Procedures Order”) approving the bidding procedures (the “Bidding Procedures”) by which the Debtors expect to solicit and select the highest and otherwise best offer for the sale (the “Sale”) of the Purchased Assets, establishing related dates and deadlines, approving the Debtor’s selection of the Buyer as the “stalking horse bidder,” the break-up fee and expense reimbursement contemplated by the Purchase Agreement, approving the process of any auction that might be required under the Bidding Procedures, and granting related relief.  Pursuant to the Bidding Procedures Order, the Debtors intend to sell all of their right, title and interest in and to the Purchased Assets free and clear of any pledges, liens, security interests, encumbrances, claims, charges, options, and interests thereon to the maximum extent permitted by Section 363 of the Bankruptcy Code. The deadline for the submission of bids that satisfies the requirements of the Bidding Procedures Order is November 27, 2019 at 12:00 p.m. (prevailing Eastern Time).

On September 27, 2019, the Debtors filed with the Bankruptcy Court its schedules of assets and liabilities and statements of financial affairs setting forth, among other things, the assets and liabilities of each of the Debtors, subject to the assumptions filed in connection therewith. These schedules and statements of financial affairs may be subject to further amendment or modification after filing. On October 14, 2019, the Debtors filed with the Bankruptcy Court its disclosure statement for Debtors’ Joint Chapter 11 Plan (the “Disclosure Statement”) and the Debtors’ Joint Chapter 11 Plan (the “Plan”). 

Under the priority requirements established by the Bankruptcy Code, pre-petition and post-petition liabilities to creditors must be satisfied in full before the holders of our outstanding preferred shares and common shares are entitled to receive any distribution or retain any property under a plan of reorganization. The ultimate recovery for creditors, if any, will not be determined until confirmation and implementation of a plan of reorganization. The outcome of the Chapter 11 Cases remains uncertain at this time and, as a result, we cannot accurately estimate the amounts or value of distributions that creditors may receive. The Plan contemplates that our senior notes, which are publicly traded, RAIT’s 7.125% Senior Notes due 2019 (the “7.125% Senior Notes”) and 7.625% Senior Notes due 2024 (the “7.625% Senior Notes,” and, together with the 7.125% Senior Notes, the “Senior Notes”), will be paid all outstanding principal and all accrued and unpaid interest as of (but excluding) the petition date in accordance with the Bankruptcy Code. The Plan contemplates that our junior subordinated notes will receive less than the total unpaid amounts due under each note consistent with the RSAs. The Plan contemplates that our outstanding preferred shares and common shares will be cancelled upon the effective date of the Plan and that the holders of our outstanding preferred shares and common shares will be entitled to no recovery. Article III of the Disclosure Statement sets forth a summary of the Plan, including a Plan Summary Table summarizing the classification and treatment of claims, along with projected recoveries for each class, all of which is subject to all the qualifications and disclaimers set forth in the Plan.

The filing of the Chapter 11 Cases with the Bankruptcy Court constituted an “Event of Default” under each of: (a) that certain Indenture, dated as of December 10, 2013, by and between RAIT and Wells Fargo Bank, National Association, as trustee, as subsequently modified by supplemental indentures setting forth the terms of the 7.125% Senior Notes (such indenture, the “Supplemental Indenture”) and 7.625% Senior Notes, (b) that certain Junior Subordinated Indenture, dated February 12, 2007, by and between RAIT Funding and The Bank of New York Trust Company, National Association, as Trustee, relating to the 2037 Note, and (c) that certain Junior Subordinated Indenture, dated October 25, 2010, by and between TRFT and Wells Fargo Bank, National Association, as Trustee, relating to the 2035 Note (collectively, the “Debt Instruments”). We refer to the Events of Default described in this paragraph as the “Bankruptcy Events of Default.” Each of the Debt Instruments provides that upon the occurrence of such an Event of Default, all obligations of RAIT or its applicable affiliate thereunder are accelerated and the principal and accrued interest due thereunder shall be automatically and immediately due and payable. Any efforts to enforce such payment obligations under the Debt Instruments were automatically stayed as a result of the filing of the Chapter 11 Cases with the Bankruptcy Court, and the respective creditors’ rights of enforcement in respect of the Debt Instruments are subject to the applicable provisions of the Bankruptcy Code and orders of the Bankruptcy Court. As of the date hereof, RAIT or its applicable affiliates had (i) $65,356 of principal amount of 7.125% Senior Notes outstanding, (ii) $56,324 of principal amount of 7.625% Senior Notes outstanding, (iii) $25,100 of principal amount of the 2037 Note, or the junior subordinated note, at amortized cost, outstanding and (iv) $18,671 of principal amount of the 2035 Note, or the junior subordinated note, at fair value, outstanding.

Furthermore, RAIT’s failure to pay the principal amount of 7.125% Senior Notes by their maturity date on August 30, 2019 constituted an “Event of Default” under the Supplemental Indenture.

The Plan contemplates the appointment of a Plan Administrator (the “Plan Administrator”) to implement the Plan and to distribute any proceeds of the Plan upon confirmation of the Plan by the Bankruptcy Court. We expect that, for the duration of the of the Chapter 11 Cases, our operations will be subject to significant risks and uncertainties associated with Chapter 11 Cases. As a result of these significant risks and uncertainties, our assets, liabilities, shareholders’ equity (deficit), officers and/or trustees could be significantly different following the outcome of the Chapter 11 Cases, and the description of our operations, equity, assets and liabilities included in this report may not accurately reflect our operations, assets and liabilities following the conclusion of the Chapter 11 Cases.

Any fair values utilized or disclosed in our consolidated financial statements to determine the amounts of our assets, liabilities, shareholders’ equity or otherwise were developed for the purpose of complying with the accounting principles established for fair value measurements, as described below. The fair values of our assets, liabilities, shareholders’ equity or otherwise for enterprise value in our Chapter 11 Cases or as a component of the Plan may reflect differing assumptions and methodologies. These estimates of fair value will be subject to a number of approvals and reviews and therefore may be materially different than any fair values utilized in our consolidated financial statements.

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Carrying Amount and Fair Value of Financial Instruments (Detail) - USD ($) $ in Thousands	Mar. 31, 2019	Dec. 31, 2018
Liabilities
Junior subordinated notes	$ 5,500	$ 6,110
Carrying Amount
Assets
Total investment in mortgage loans, held for investment, net	417,517	480,061
Investment in mortgage loans, held for sale	5,131	4,873
Cash and cash equivalents	39,139	42,453
Restricted cash	65,000	63,067
Carrying Amount | CMBS securitizations
Liabilities
Notes payable	281,126	318,008
Carrying Amount | 7.625% Senior Notes due 2024
Liabilities
Indebtedness	55,158	55,100
Carrying Amount | 7.125% Senior Notes due 2019
Liabilities
Indebtedness	65,131	64,997
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	102,918	116,102
Carrying Amount | Loan Payable On Real Estate
Liabilities
Loans payable on real estate	40,330	40,499
Carrying Amount | Recourse Indebtedness | Junior subordinated notes, at fair value
Liabilities
Junior subordinated notes	5,500	6,110
Carrying Amount | Recourse Indebtedness | 7.625% Senior Notes due 2024
Liabilities
Indebtedness	55,158	55,100
Carrying Amount | Recourse Indebtedness | 7.125% Senior Notes due 2019
Liabilities
Indebtedness	65,131	64,997
Carrying Amount | Recourse Indebtedness | Junior subordinated notes, at amortized cost
Liabilities
Junior subordinated notes	25,100	25,100
Carrying Amount | Non Recourse Indebtedness | CMBS securitizations
Liabilities
Notes payable	281,126	318,008
Carrying Amount | Non Recourse Indebtedness | CDO notes payable, at amortized cost
Liabilities
Notes payable	102,918	116,102
Carrying Amount | Non Recourse Indebtedness | Loan Payable On Real Estate
Liabilities
Loans payable on real estate	40,330	40,499
Estimated Fair Value
Assets
Total investment in mortgage loans, held for investment, net	380,819	444,962
Investment in mortgage loans, held for sale	5,131	4,873
Cash and cash equivalents	39,139	42,453
Restricted cash	65,000	63,067
Estimated Fair Value | Recourse Indebtedness | Junior subordinated notes, at fair value
Liabilities
Junior subordinated notes	5,500	6,110
Estimated Fair Value | Recourse Indebtedness | 7.625% Senior Notes due 2024
Liabilities
Indebtedness	41,117	41,229
Estimated Fair Value | Recourse Indebtedness | 7.125% Senior Notes due 2019
Liabilities
Indebtedness	60,128	58,010
Estimated Fair Value | Recourse Indebtedness | Junior subordinated notes, at amortized cost
Liabilities
Junior subordinated notes	5,780	6,550
Estimated Fair Value | Non Recourse Indebtedness | CMBS securitizations
Liabilities
Notes payable	282,856	320,711
Estimated Fair Value | Non Recourse Indebtedness | CDO notes payable, at amortized cost
Liabilities
Notes payable	83,595	94,513
Estimated Fair Value | Non Recourse Indebtedness | Loan Payable On Real Estate
Liabilities
Loans payable on real estate	$ 40,698	$ 40,608

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Indebtedness - Recourse Indebtedness - Additional Information (Detail) - USD ($) $ in Thousands	Mar. 31, 2019	Dec. 31, 2018	Mar. 31, 2018
Debt Instrument [Line Items]
Unpaid Principal Balance	$ 591,296	$ 642,559
Recourse Indebtedness
Debt Instrument [Line Items]
Unpaid Principal Balance	$ 165,451	165,451
Recourse Indebtedness | 7.625% Senior Notes due 2024
Debt Instrument [Line Items]
Stated interest rate	7.625%
Unpaid Principal Balance	$ 56,324	56,324
Convenant leverage ratio			74.60%
Convenant fixed charge coverage ratio			134.00%
Recourse Indebtedness | 7.625% Senior Notes due 2024 | Maximum
Debt Instrument [Line Items]
Convenant leverage ratio			80.00%
Recourse Indebtedness | 7.625% Senior Notes due 2024 | Minimum
Debt Instrument [Line Items]
Convenant 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	$ 65,356
Convenant leverage ratio			74.60%
Convenant fixed charge coverage ratio			134.00%
Recourse Indebtedness | 7.125% Senior Notes due 2019 | Maximum
Debt Instrument [Line Items]
Convenant leverage ratio			80.00%
Recourse Indebtedness | 7.125% Senior Notes due 2019 | Minimum
Debt Instrument [Line Items]
Convenant fixed charge coverage ratio			120.00%
Recourse Indebtedness | Junior subordinated notes, at fair value
Debt Instrument [Line Items]
Aggregate principal amount of notes issued	18,671
Fair value of indebtedness	$ 5,500

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Additional Information about Assets and Liabilities That Are Measured at Fair Value on Recurring Basis (Detail) $ in Thousands	3 Months Ended
	Mar. 31, 2019 USD ($)
Fair Value, Assets and Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]
Beginning Balance	$ 6,110
Change in fair value of financial instruments	(610)
Ending Balance	5,500
Junior Subordinated Notes, at Fair Value
Fair Value, Assets and Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]
Beginning Balance	6,110
Change in fair value of financial instruments	(610)
Ending Balance	$ 5,500

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COMMITMENTS AND CONTINGENCIES (Tables)

3 Months Ended

Mar. 31, 2019

Commitments And Contingencies Disclosure [Abstract]

Annual Minimum Rent Due Pursuant to Leases Topic 842

The annual minimum rent due pursuant to the office lease for each of the next five years and thereafter is estimated to be as follows as of March 31, 2019:

2019	$	322
2020		438
2021		447
2022		456
2023		465
Thereafter		4,626
Total undiscounted payments		6,754
Less imputed interest		(3,759	)
Total lease liability	$	2,995

Annual Minimum Rent Due Pursuant to Leases Topic 840

The annual minimum rent due pursuant to the office lease for each of the next five years and thereafter is estimated to be as follows as of December 31, 2018:

2019	$	479
2020		438
2021		447
2022		456
2023		465
Thereafter		4,626
Total	$	6,911

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Loans Held for Investment (Detail) $ in Thousands		3 Months Ended		12 Months Ended
		Mar. 31, 2019 USD ($) Loan		Dec. 31, 2018 USD ($) Loan		Mar. 31, 2018 USD ($)
Mortgage Loans On Real Estate [Line Items]
Unpaid Principal Balance						$ 90,260
Carrying Amount		$ 6,967
Commercial Portfolio Segment
Mortgage Loans On Real Estate [Line Items]
Unpaid Principal Balance		438,542	[1]	$ 502,974	[2]
Total investment in loans, Unamortized (Discounts) Premiums		99	[1]	97	[2]
Carrying Amount		$ 438,641	[1]	$ 503,071	[2]
Number of Loans | Loan		46	[1]	51	[2]
Weighted-Average Coupon	[3]	7.20%	[1]	7.20%	[2]
Deferred fees and costs, net		$ (397)	[4]	$ (674)	[5]
Total investments in loans, Unpaid Principal Balance		438,145		502,300
Commercial mortgages, mezzanine loans and other loans, Carrying Amount		438,244		502,397
Commercial mortgage loans | Commercial Portfolio Segment
Mortgage Loans On Real Estate [Line Items]
Unpaid Principal Balance		388,913		453,283
Total investment in loans, Unamortized (Discounts) Premiums		(64)		(66)
Carrying Amount		$ 388,849		$ 453,217
Number of Loans | Loan		30		35
Weighted-Average Coupon	[3]	6.90%		6.90%
Range of Maturity Dates, Minimum		Apr. 30, 2019		Feb. 28, 2019
Range of Maturity Dates, Maximum		Jun. 30, 2025		Jun. 30, 2025
Mezzanine Loans | Commercial Portfolio Segment
Mortgage Loans On Real Estate [Line Items]
Unpaid Principal Balance		$ 21,114		$ 21,114
Total investment in loans, Unamortized (Discounts) Premiums		164		164
Carrying Amount		$ 21,278		$ 21,278
Number of Loans | Loan		3		3
Weighted-Average Coupon	[3]	13.30%		13.30%
Range of Maturity Dates, Minimum		Jun. 30, 2020		Jun. 30, 2020
Range of Maturity Dates, Maximum		Mar. 31, 2023		Mar. 31, 2023
Preferred Equity Interests | Commercial Portfolio Segment
Mortgage Loans On Real Estate [Line Items]
Unpaid Principal Balance		$ 28,515		$ 28,577
Total investment in loans, Unamortized (Discounts) Premiums		(1)		(1)
Carrying Amount		$ 28,514		$ 28,576
Number of Loans | Loan		13		13
Weighted-Average Coupon	[3]	6.00%		6.00%
Range of Maturity Dates, Minimum		Mar. 31, 2023		Mar. 31, 2023
Range of Maturity Dates, Maximum		Jun. 30, 2029		Jun. 30, 2029

[1] Includes $53,128 of cash flow loans, of which $7,148 are commercial mortgage loans, $21,114 are mezzanine loans and $24,866 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 $54,621 of cash flow loans, of which $8,579 are commercial mortgage loans, $21,114 are mezzanine loans and $24,928 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 $1,703 of deferred fees, net of $1,306 of deferred costs.

[5] Includes $2,558 of deferred fees, net of $1,884 of deferred costs.

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Investment in Loans by Credit Risk Category (Detail) - USD ($) $ in Thousands	Mar. 31, 2019		Dec. 31, 2018		Mar. 31, 2018
Financing Receivable Recorded Investment [Line Items]
Unpaid Principal Balance					$ 90,260
Commercial Portfolio Segment
Financing Receivable Recorded Investment [Line Items]
Unpaid Principal Balance	$ 438,542	[1]	$ 502,974	[2]
Commercial Portfolio Segment | Commercial Mortgage Loans
Financing Receivable Recorded Investment [Line Items]
Unpaid Principal Balance	388,913		453,283
Commercial Portfolio Segment | Mezzanine Loans
Financing Receivable Recorded Investment [Line Items]
Unpaid Principal Balance	21,114		21,114
Commercial Portfolio Segment | Preferred Equity Interests
Financing Receivable Recorded Investment [Line Items]
Unpaid Principal Balance	28,515		28,577
Commercial Portfolio Segment | Satisfactory
Financing Receivable Recorded Investment [Line Items]
Unpaid Principal Balance	262,859		319,167
Commercial Portfolio Segment | Satisfactory | Commercial Mortgage Loans
Financing Receivable Recorded Investment [Line Items]
Unpaid Principal Balance	257,796		314,104
Commercial Portfolio Segment | Satisfactory | Preferred Equity Interests
Financing Receivable Recorded Investment [Line Items]
Unpaid Principal Balance	5,063		5,063
Commercial Portfolio Segment | Watchlist
Financing Receivable Recorded Investment [Line Items]
Unpaid Principal Balance	175,683	[3]	183,807	[4]
Commercial Portfolio Segment | Watchlist | Commercial Mortgage Loans
Financing Receivable Recorded Investment [Line Items]
Unpaid Principal Balance	131,117	[3]	139,179	[4]
Commercial Portfolio Segment | Watchlist | Mezzanine Loans
Financing Receivable Recorded Investment [Line Items]
Unpaid Principal Balance	21,114	[3]	21,114	[4]
Commercial Portfolio Segment | Watchlist | Preferred Equity Interests
Financing Receivable Recorded Investment [Line Items]
Unpaid Principal Balance	$ 23,452	[3]	$ 23,514	[4]

[1] Includes $53,128 of cash flow loans, of which $7,148 are commercial mortgage loans, $21,114 are mezzanine loans and $24,866 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 $54,621 of cash flow loans, of which $8,579 are commercial mortgage loans, $21,114 are mezzanine loans and $24,928 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 $115,618 of loans that are considered to be impaired and $60,065 of loans that are not considered to be impaired.

[4] Includes $126,645 of loans that are considered to be impaired and $57,162 of loans that are not considered to be impaired.

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SHAREHOLDERS' EQUITY

3 Months Ended

Mar. 31, 2019

Equity [Abstract]

SHAREHOLDERS' EQUITY

NOTE 9: SHAREHOLDERS’ EQUITY

Preferred Shares

Dividends:

RAIT’s Board of Trustees (the “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. As of March31, 2019, $20,250 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.

Common Shares

Dividends:

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

During the three months ended March 31, 2019, we paid $29 of dividends on restricted common share awards that vested in this 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.

Shareholders’ Equity Attributable to Common Shares:

As of March 31, 2019, total shareholders’ equity attributable to common shares was a deficit of $186,915.  

Noncontrolling Interests

RAIT Venture VIEs:

During the year ended December31, 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.

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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INDEBTEDNESS

3 Months Ended

Mar. 31, 2019

Debt Disclosure [Abstract]

INDEBTEDNESS

NOTE 5: INDEBTEDNESS

We maintain various forms of short-term and long-term financing arrangements.

The following tables summarizes our total recourse and non-recourse indebtedness as of March 31, 2019 and December 31, 2018, but do not reflect any potential impacts of the Chapter 11 Cases or any other “Event of Default” as discussed in Note 1: The Company or otherwise in “Defaults on Recourse Indebtedness” below.

The following table summarizes our total recourse and non-recourse indebtedness as of March 31, 2019:

Description	Unpaid Principal Balance		Unamortized Discount/Premium and Deferred Financing Costs			Carrying Amount		Weighted- Average Interest Rate			Contractual Maturity
Recourse indebtedness:
7.625% Senior Notes	$	56,324	$	(1,166	)	$	55,158		7.6	%	Apr. 2024
7.125% Senior Notes		65,356		(225	)		65,131		7.1	%	Aug. 2019
Junior subordinated notes, at fair value (1)		18,671		(13,171	)		5,500		6.8	%	Mar. 2035
Junior subordinated notes, at amortized cost		25,100		—			25,100		5.3	%	Apr. 2037
Total recourse indebtedness		165,451		(14,562	)		150,889		7.0	%
Non-recourse indebtedness:
CDO notes payable, at amortized cost (2)(3)		102,918		—			102,918		3.2	%	Nov. 2046
CMBS securitizations (4)(5)		282,393		(1,267	)		281,126		4.2	%	Jun. 2037 to Dec. 2037
Loans payable on real estate		40,534		(204	)		40,330		4.7	%	Oct. 2021 to Dec. 2021
Total non-recourse indebtedness		425,845		(1,471	)		424,374		4.0	%
Total indebtedness	$	591,296	$	(16,033	)	$	575,263		4.8	%

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

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

(3) Collateralized by $150,845 principal amount of commercial mortgage loans, mezzanine loans, other loans and preferred equity interests, $78,979 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.

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

(5) Collateralized by $355,699 principal amount of commercial mortgage loans and participation interests in commercial mortgage loans, $8,892 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.

The following table summarizes our total recourse and non-recourse indebtedness as of December 31, 2018:

Description	Unpaid Principal Balance		Unamortized Discount/Premium and Deferred Financing Costs			Carrying Amount		Weighted- Average Interest Rate			Contractual Maturity
Recourse indebtedness:
7.625% Senior Notes	$	56,324	$	(1,224	)	$	55,100		7.6	%	Apr. 2024
7.125% Senior Notes		65,356		(359	)		64,997		7.1	%	Aug. 2019
Junior subordinated notes, at fair value (1)		18,671		(12,561	)		6,110		6.4	%	Mar. 2035
Junior subordinated notes, at amortized cost		25,100		—			25,100		5.0	%	Apr. 2037
Total recourse indebtedness		165,451		(14,144	)		151,307		6.9	%
Non-recourse indebtedness:
CDO notes payable, at amortized cost (2)(3)		116,102		—			116,102		3.1	%	Nov. 2046
CMBS securitizations (4)(5)		320,282		(2,274	)		318,008		4.0	%	Jun. 2037 to Dec. 2037
Loans payable on real estate		40,724		(225	)		40,499		4.7	%	Oct. 2021 to Dec. 2021
Total non-recourse indebtedness		477,108		(2,499	)		474,609		3.9	%
Total indebtedness	$	642,559	$	(16,643	)	$	625,916		4.6	%

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

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

(3) Collateralized by $170,124 principal amount of commercial mortgage loans, mezzanine loans, other loans and preferred equity interests, $94,191 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.

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

(5) Collateralized by $409,218 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.

Recourse indebtedness refers to indebtedness that is recourse to our general assets. 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 activity in our financing arrangements occurring as of or during the three months ended March 31, 2019 is as follows:

Recourse Indebtedness

7.625% Senior Notes.  During the three months ended March 31, 2019, there was no activity other than recurring interest. As of March 31, 2019, $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 March 31, 2019, there was no activity other than recurring interest. As of March 31, 2019, $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.

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, with all subsequent changes in fair value recorded in earnings. Starting in January 2018, in accordance with an update to FASB ASC Topic 825, we began recording the change in fair value due to instrument-specific credit risk in other comprehensive income, with all other changes in fair value recorded in earnings. As of March 31, 2019, the fair value, or carrying amount, of this indebtedness was $5,500. These notes do not contain financial covenants.

Junior subordinated notes, at amortized cost.  During the three months ended March 31, 2019, there was no activity other than recurring interest. These notes do not contain financial covenants.

Non-Recourse Indebtedness

CDO notes payable, at amortized cost. CDO notes payable at amortized cost represent notes issued by RAIT I which were used to finance the acquisition of 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. The RAIT I securitization contains interest coverage trigger tests, or IC triggers, and overcollateralization trigger tests, or OC triggers. If the IC triggers or OC triggers are not met in a given period, then the interest distributions 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 interest distributions continue until the triggers are met by curing the underlying cause of the IC trigger or OC trigger failure, which may include curing payment defaults, paying down the CDO notes payable, or other actions permitted under the relevant securitization indenture.

As of December 31, 2018, RAIT I was meeting all its OC and IC trigger tests. Starting in January 2019 through the date of the filing of this Quarterly Report on Form 10-Q, the Class F/G/H OC test for RAIT I has not been met. In October 2019, the Class F/G/H IC test for RAIT I was not met. As a result, certain interest payments that would have otherwise been directed to the Class J notes and equity issued by RAIT I, which are owned by us, are instead being redirected to pay principal on the most senior class of CDO notes payable that are outstanding.  The failure of these tests do not represent an event of default under the RAIT I securitization indenture.

CMBS securitizations As of March 31, 2019, our subsidiary, RAIT 2017-FL7 Trust, or RAIT FL7, had $224,094 of total collateral at par value, $9,000 of which is in default. As of March 31, 2019, RAIT FL7 had classes of investment grade senior notes with an aggregate principal balance outstanding of approximately $158,615 to investors.  We currently own the unrated classes of junior notes, including a class 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 March 31, 2019, our subsidiary, RAIT 2017-FL8 Trust, or RAIT FL8, had $167,940 of total collateral at par value, none of which was defaulted. As of March 31, 2019, RAIT FL8 had classes of investment grade senior notes with an aggregate principal balance outstanding of approximately $123,778 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.

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 March 31, 2019, by year, but does not reflect any potential impacts of the Chapter 11 Cases as discussed in Note 1:

	Recourse indebtedness		Non-recourse indebtedness
2019	$	65,356	$	559
2020		-		779
2021		-		39,196
2022		-		-
2023		-		-
Thereafter		100,095		385,311
Total	$	165,451	$	425,845

Defaults on Recourse Indebtedness

The filing of the Chapter 11 Cases with the Bankruptcy Court triggered the Bankruptcy Events of Default, see Note 1: The Company for further information. Furthermore, RAIT’s failure to pay the principal amount of the 7.125% Senior Notes by their maturity date on August 30, 2019 constituted an “Event of Default” under the applicable supplemental indenture.

Prior to the filing of the Chapter 11 Cases, on August 20, 2019, RAIT received a notice of default relating to the 7.125% Senior Notes and the 7.625% Senior Notes from the indenture trustee. The notice stated that RAIT has defaulted under Section 4.02 of each of the supplemental indentures that govern those Senior Notes because RAIT failed to timely file the quarterly report for the fiscal quarter ended March 31, 2019 that RAIT is required to file with the Securities and Exchange Commission. The notice demanded RAIT remedy such default. Under the supplemental indentures, the default will not become an “Event of Default” unless RAIT failed to remedy the default within 60 days after the date on which notice was received. If such an “Event of Default” occurred, then in lieu of acceleration of the repayment obligation, RAIT may at its option elect to pay additional interest on the respective Senior Note at an annual rate equal to 0.50% of the principal amount of the respective Senior Note for up to one year after the occurrence of such “Event of Default”. Notwithstanding the foregoing, subject to certain specific exceptions under the Bankruptcy Code, the Chapter 11 Cases automatically stayed most judicial or administrative actions against the Debtors as well as efforts by creditors to collect on or otherwise exercise rights or remedies with respect to pre-petition claims.

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

3 Months Ended

Mar. 31, 2019

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, 2018 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, equity 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 statement of cash flows for the three-month period ended March 31, 2018 includes the impact of correcting the reporting of certain activity that occurred in 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 $89,583 for the three-month period ended March 31, 2018. This correction had no impact to cash and cash equivalents as of March 31, 2018, nor did it impact any other consolidated financial statement amounts as of March 31, 2018 or for the three-month period ended March 31, 2018.

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) the impacts of the Chapter 11 Cases including the Events of Default as described in Note 1: The Company, and (ii) RAIT’s recurring costs of operating its business.

As described in Note 1: The Company, the filing of the Chapter 11 Cases with the Bankruptcy Court triggered the Bankruptcy Events of Default and RAIT’s failure to pay the principal amount of the 7.125% Senior Notes by their maturity date on August 30, 2019 also constituted an Event of Default. Each of the Debt Instruments provides that upon the occurrence of such an Event of Default, all obligations of RAIT and/or its applicable affiliates thereunder were accelerated and the principal and accrued interest due thereunder was automatically and immediately due and payable. Any efforts to enforce such payment obligations under the Debt Instruments are automatically stayed pursuant to Section 362 of the Bankruptcy Code, and the respective creditors’ rights of enforcement in respect of the Debt Instruments are limited. As of the date hereof, the Debt Instruments of RAIT and/or its applicable affiliates had (i) $65,356 of principal amount of 7.125% Senior Notes outstanding, (ii) $56,324 of principal amount of 7.625% Senior Notes outstanding, (iii) $25,100 of principal amount of the 2037 Note, or the junior subordinated note, at amortized cost, outstanding, and (iv) $18,671 of principal amount of the 2035 Note, or the junior subordinated note, at fair value, outstanding.

RAIT’s current sources of liquidity, including its current cash and cash equivalents balance, are not sufficient to satisfy RAIT’s obligations arising over the next twelve months. Subject to receiving a higher and otherwise better bid as a result of the Bidding Procedures, RAIT expects to sell substantially all of its assets pursuant to the Purchase Agreement under Section 363 of the Bankruptcy Code and the Bidding Procedures Order for a purchase price of $174,424, adjusted as provided in the Purchase Agreement, including the assumption of certain liabilities. RAIT’s proposed plan of reorganization under the Chapter 11 Cases provides for the ultimate wind down of RAIT’s affairs once the transactions contemplated by the Purchase Agreement and the Bidding Procedures are completed and the plan of reorganization is confirmed.

Due to the inherent risks and significant uncertainties associated with the completion of the transactions under the Purchase Agreement, the Plan, the Chapter 11 Cases, and RAIT’s recurring costs of operations, there is substantial doubt about RAIT’s ability to continue as a going concern within one year after the date that these financial statements are issued.

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 7: Variable Interest Entities for additional disclosures pertaining to VIEs.

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 March 31, 2019 and December 31, 2018, we had $29,021 and $33,300, respectively, of 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 March 31, 2019 and December 31, 2018, we had $35,979 and $29,767, 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 recognize recoveries when they are received, and 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.

Loans which experience a modification to their contractual terms which result in a concession being granted to a borrower experiencing financial difficulties are considered troubled debt restructurings, or TDRs. A concession is deemed granted when, as a result of the restructuring, we do not expect to collect all amounts due, including interest accrued, at the original contractual interest rate. As appropriate, we also consider other qualitative factors in determining whether a concession is deemed granted, including the value of the underlying collateral. We do not consider restructurings that result in a delay in payment, in timing or amount, which is insignificant, to be a concession.

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, and other securities on a yield to maturity basis. Certain of our commercial mortgage loans, mezzanine loans and preferred equity interests permanently provide for the accrual of interest at specified rates which differ from current payment terms (which may have minimum payment rates as low as zero percent). 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 the interest income is not collectible 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 March 31, 2019 and December 31, 2018 was $15,503 and $15,870, respectively.  These loans are considered to be impaired when the total amount owed exceeds the estimated value of the underlying collateral.  Seven of these loans, with an unpaid principal balance of $32,968 and $33,030, respectively, were considered to be impaired as of March 31, 2019 and December 31, 2018, respectively.

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 rental income from tenant rent and other tenant-related activities at our consolidated real estate properties. For multifamily real estate properties (which we owned none of as of March 31, 2019), 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. Such reimbursements are generally recognized on a monthly basis as billed to tenants.

3) Fee and other income—We have generated and/or generate, as applicable, fee and other income through our various subsidiaries by (a) providing ongoing asset management services to investment portfolios under cancelable management agreements, and (b) prior to the sale of our retail property manager subsidiary in August 2018, providing property management services to third parties. We recognize revenue for these activities when: (i) a contract has been mutually approved and each party is committed to perform; (ii) both parties can identify the rights of each party; (iii) both parties can identify the payment terms of the contract; (iv) the contract has commercial substance; and (v) it is probable that we will collect substantially all of the consideration to which we are entitled. 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 months ended March 31, 2019 and 2018, we received $59 and $162, respectively, of earned 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 March 31,
Revenue from Contracts with customers	2019		2018
Property Management Fee income	$	—	$	766
Parking		—		202
Leasing Commission income		—		320
Other miscellaneous		70		248
Total	$	70	$	1,536

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 unsecured REIT note receivables, commercial mortgage-backed securities, or CMBS, receivables and certain financial instruments classified as 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. Generally, assets and liabilities carried at fair value and included in this category are subordinated debentures, and historically included trust preferred obligations and CDO notes payable, where observable market inputs do not exist.

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 valuation models that include discounted cash flow analyses. These internal valuation models include discounted cash flow analyses 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. 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 March 31, 2019 and December 31, 2018. The accumulated amortization for our intangible assets was $5,876 and $5,703 as of March 31, 2019 and December 31, 2018, respectively. We recorded amortization expense of $193, and $427 for the three months ended March 31, 2019 and 2018, respectively. Based on the intangible assets identified above, we expect to record amortization expense of intangible assets of $513 for 2019, $434 for 2020, $249 for 2021, $145 for 2022, $72 for 2023 and $131 thereafter. As of March 31, 2019, we have determined that no triggering events occurred that would indicate an impairment to our intangible assets.

o. Derivative Instruments

We have historically entered into interest rate derivative contracts to hedge all or a portion of the interest rate risk associated with certain of our borrowings and/or our fixed rate assets. The principal objective of these 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.

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 in hedging relationships, we determine at inception whether the hedge agreement is highly effective in offsetting the related risk by using regression analysis.  For derivatives not designated as hedges, the changes in fair value of the derivative instrument are recorded 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 March 31, 2019, we had no derivative instruments outstanding.

p. Income Taxes

RAIT and Taberna Realty Finance Trust, or TRFT, 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. Accordingly, we generally will not be subject to U.S. federal income tax to the extent of any 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. Management believes that all of the criteria to maintain RAIT’s and TRFT’s 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.  

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 the prior year, our TRS entities generated taxable revenue primarily from property management fees for services provided to RAIT properties and third-party properties.  In the current year, our TRS entities have not generated any significant taxable revenue. 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.

q. Recent Accounting Pronouncements

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 have adopted the new standard effective January 1, 2019 and have used the effective date as our date of initial application. The new standard provides a number of optional practical expedients in transition. We have elected 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 have elected the practical expedient to not separate lease and non-lease components for all of our leases. The adoption of FASB ASC Topic 842 resulted in the recognition of a lease liability of $3,008 and a ROU asset of $2,416 as of the adoption date for one of our operating leases for which we are the lessee. The standard did not have an impact on any of our real estate leases for which we are the lessor.

Not Yet Adopted Within These Financial Statements

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. During 2019, the FASB issued an amendment to this accounting standard which provides further clarification to this accounting standard. This standard and its amendment are 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 August 2018, the FASB issued an accounting standard classified under FASB ASC Topic 820, “Fair Value Measurement”. The amendments in this standard eliminate, add and modify certain disclosure requirements for fair value measurements. For example, entities will no longer have to disclose the amount of and reasons for transfers between Level 1 and Level 2 of the fair value hierarchy, but public companies will be required to disclose the range and weighted average used to develop significant unobservable inputs for Level 3 fair value measurements. The amendments in this accounting standard are effective for fiscal years beginning after December 15, 2019. Management is currently evaluating the impact that this standard will have on our consolidated financial statements.

XML

Document and Entity Information - shares	3 Months Ended
	Mar. 31, 2019	Nov. 01, 2019
Document And Entity Information [Abstract]
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Mar. 31, 2019
Document Fiscal Year Focus	2019
Document Fiscal Period Focus	Q1
Trading Symbol	RAS
Entity Registrant Name	RAIT FINANCIAL TRUST
Entity Central Index Key	0001045425
Current Fiscal Year End Date	--12-31
Entity Filer Category	Non-accelerated Filer
Entity Small Business	true
Entity Emerging Growth Company	false
Entity Shell Company	false
Entity Current Reporting Status	No
Entity Common Stock, Shares Outstanding		1,849,252
Entity File Number	1-14760
Entity Tax Identification Number	232919819
Entity Address, Address Line One	Two Logan Square, 100 N. 18th Street
Entity Address, Address Line Two	23rd Floor
Entity Address, City or Town	Philadelphia
Entity Address, State or Province	PA
Entity Address, Postal Zip Code	19103
City Area Code	(215)
Local Phone Number	207-2100

XML

Annual Minimum Rent Due Pursuant to Leases Topic 842 (Detail) $ in Thousands	Mar. 31, 2019 USD ($)
Commitments And Contingencies Disclosure [Abstract]
2019	$ 322
2020	438
2021	447
2022	456
2023	465
Thereafter	4,626
Total undiscounted payments	6,754
Less imputed interest	(3,759)
Operating lease liabitity	$ 2,995

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Consolidated Statements of Comprehensive Income (Loss) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2019	Mar. 31, 2018
Statement Of Income And Comprehensive Income [Abstract]
Net income (loss)	$ (6,201)	$ (27,705)
Other comprehensive income (loss):
Unrealized gains (losses) from change in fair value based on instrument specific credit risk	580	1,266
Total other comprehensive income (loss)	580	1,266
Comprehensive income (loss)	$ (5,621)	$ (26,439)

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Fair Value of Financial Instruments - Additional Information (Detail) $ in Thousands	3 Months Ended
	Mar. 31, 2019 USD ($) Loan	Dec. 31, 2018
Non-Recurring Fair Value Measurements | Commercial Real Estate
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Number of Loans | Loan	5
Assets Fair Value Disclosure | $	$ 56,310
Non-Recurring Fair Value Measurements | Commercial Real Estate | Held For Sale
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Number of Loans | Loan	3
Assets Fair Value Disclosure | $	$ 5,131
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
Significant Unobservable Inputs (Level 3) | Junior Subordinated Notes, at Fair Value
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Discount rate	0.29	0.27

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Indebtedness - Defaults on Recourse Indebtedness - Additional Information (Detail)		3 Months Ended
	Aug. 20, 2019	Mar. 31, 2019
Subsequent Event
Debt Instrument [Line Items]
Time period to take remedy action to avoid default	60 days
Default stated interest rate	0.50%
7.125% Senior Notes
Debt Instrument [Line Items]
Default stated interest rate		7.125%
Default maturity date		Aug. 30, 2019
7.125% Senior Notes | Subsequent Event
Debt Instrument [Line Items]
Default stated interest rate	7.125%
7.625% Senior Notes | Subsequent Event
Debt Instrument [Line Items]
Default stated interest rate	7.625%

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Summary of Total Recourse and Non-Recourse Indebtedness (Parenthetical) (Detail) - Non Recourse Indebtedness - USD ($) $ in Thousands	Mar. 31, 2019	Dec. 31, 2018
CMBS securitizations
Debt Instrument [Line Items]
Underlying collateral	$ 355,699	$ 409,218
CDO notes payable, at amortized cost
Debt Instrument [Line Items]
Underlying collateral	150,845	170,124
Consolidation Eliminations
Debt Instrument [Line Items]
Underlying collateral	78,979	$ 94,191
Consolidation Eliminations | CMBS securitizations
Debt Instrument [Line Items]
Underlying collateral	$ 8,892

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Reconciliation of Basic and Diluted Earnings (Loss) Per Share (Detail) - USD ($) $ / shares in Units, $ in Thousands		3 Months Ended
		Mar. 31, 2019	Mar. 31, 2018
Earnings Per Share [Abstract]
Income (loss)		$ (6,201)	$ (27,705)
(Income) loss allocated to preferred shares		(5,063)	(6,389)
Net income (loss) allocable to common shares		$ (11,264)	$ (34,094)
Weighted-average shares outstanding-Basic	[1]	1,844,037	1,837,493
Weighted-average shares outstanding—Diluted	[1]	1,844,037	1,837,493
Earnings (loss) per share-Basic:
Earnings (loss) per share-Basic		$ (6.11)	$ (18.55)
Earnings (loss) per share-Diluted:
Earnings (loss) per share-Diluted		$ (6.11)	$ (18.55)

[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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Assets and Liabilities of Consolidated Variable Interest Entities (Detail) - USD ($) $ in Thousands	Mar. 31, 2019	Dec. 31, 2018	Mar. 31, 2018
Assets
Investments in real estate	$ 106,996	$ 107,824
Cash and cash equivalents	39,139	42,453	$ 84,483
Restricted cash	65,000	63,067	$ 152,962
Accrued interest receivable	17,399	18,044
Other assets	13,608	10,807
Total assets	673,782	733,764
Liabilities and Equity
Accrued interest payable	2,352	2,401
Accounts payable and accrued expenses	2,671	3,330
Total liabilities	610,839	665,258
Shareholders’ equity:
Total shareholders’ equity	62,943	68,506
Total liabilities and shareholders' equity	673,782	733,764
VIE
Assets
Investments in commercial mortgage loans, mezzanine loans and preferred equity interests	496,167	561,101
Investments in real estate	25,264	18,020
Cash and cash equivalents	273	209
Restricted cash	36,568	30,032
Accrued interest receivable	18,207	18,849
Other assets	3,976	4,007
Total assets	580,455	632,218
Liabilities and Equity
Indebtedness, net	596,671	638,011
Accrued interest payable	7,510	7,417
Accounts payable and accrued expenses	3,368	3,389
Deferred taxes, borrowers’ escrows and other liabilities	271	199
Total liabilities	607,820	649,016
Shareholders’ equity:
RAIT investment and Retained earnings (deficit)	(27,365)	(16,798)
Total shareholders’ equity	(27,365)	(16,798)
Total liabilities and shareholders' equity	580,455	632,218
VIE | RAIT Securitizations
Assets
Investments in commercial mortgage loans, mezzanine loans and preferred equity interests	496,167	561,101
Restricted cash	36,146	29,658
Accrued interest receivable	18,207	18,849
Other assets	115	153
Total assets	550,635	609,761
Liabilities and Equity
Indebtedness, net	568,318	618,516
Accrued interest payable	1,497	1,534
Accounts payable and accrued expenses	64	74
Deferred taxes, borrowers’ escrows and other liabilities		2
Total liabilities	569,879	620,126
Shareholders’ equity:
RAIT investment and Retained earnings (deficit)	(19,244)	(10,365)
Total shareholders’ equity	(19,244)	(10,365)
Total liabilities and shareholders' equity	550,635	609,761
VIE | RAIT VIE Properties
Assets
Investments in real estate	25,264	18,020
Cash and cash equivalents	273	209
Restricted cash	422	374
Other assets	3,861	3,854
Total assets	29,820	22,457
Liabilities and Equity
Indebtedness, net	28,353	19,495
Accrued interest payable	6,013	5,883
Accounts payable and accrued expenses	3,304	3,315
Deferred taxes, borrowers’ escrows and other liabilities	271	197
Total liabilities	37,941	28,890
Shareholders’ equity:
RAIT investment and Retained earnings (deficit)	(8,121)	(6,433)
Total shareholders’ equity	(8,121)	(6,433)
Total liabilities and shareholders' equity	$ 29,820	$ 22,457

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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
		Mar. 31, 2019	Mar. 31, 2018
Mortgage Loans On Real Estate [Line Items]
Beginning balance		$ 22,336	$ 14,883
Provision (benefit) for loan losses		(583)	8,032
Charge-offs, net of recoveries		(1,026)	(9,183)	[1]
Ending balance		20,727	13,732
Commercial Mortgage Loans
Mortgage Loans On Real Estate [Line Items]
Beginning balance		11,912	9,019
Provision (benefit) for loan losses		(485)	5,248
Charge-offs, net of recoveries		(1,026)	(6,008)	[1]
Ending balance		10,401	8,259
Mezzanine Loans
Mortgage Loans On Real Estate [Line Items]
Beginning balance		6,496	5,622
Provision (benefit) for loan losses			2,784
Charge-offs, net of recoveries	[1]		(3,175)
Ending balance		6,496	5,231
Preferred Equity Interests
Mortgage Loans On Real Estate [Line Items]
Beginning balance		3,928	242
Provision (benefit) for loan losses		(98)
Ending balance		$ 3,830	$ 242

[1] Includes $3,908 of charge-offs related to loans transferred to held for sale during the three months ended March 31, 2018.

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Summary of Investments in Real Estate (Detail) - USD ($) $ in Thousands	Mar. 31, 2019	Dec. 31, 2018
Real Estate Properties [Line Items]
Investments in real estate, Book Value	$ 116,738	$ 116,592
Less: Accumulated depreciation and amortization	(9,742)	(8,768)
Investments in real estate, net	106,996	107,824
Office real estate properties
Real Estate Properties [Line Items]
Investments in real estate, Book Value	48,886	48,760
Retail real estate properties
Real Estate Properties [Line Items]
Investments in real estate, Book Value	49,108	49,088
Parcels of land
Real Estate Properties [Line Items]
Investments in real estate, Book Value	$ 18,744	$ 18,744

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Summary of Total Recourse and Non-Recourse Indebtedness (Detail) - USD ($) $ in Thousands		3 Months Ended		12 Months Ended
		Mar. 31, 2019		Dec. 31, 2018
Debt Instrument [Line Items]
Unpaid Principal Balance		$ 591,296		$ 642,559
Unamortized Discount/Premium and Deferred Financing Costs		(16,033)		(16,643)
Indebtedness		$ 575,263		$ 625,916
Weighted-Average Interest Rate		4.80%		4.60%
Recourse Indebtedness
Debt Instrument [Line Items]
Unpaid Principal Balance		$ 165,451		$ 165,451
Unamortized Discount/Premium and Deferred Financing Costs		(14,562)		(14,144)
Indebtedness		$ 150,889		$ 151,307
Weighted-Average Interest Rate		7.00%		6.90%
Non Recourse Indebtedness
Debt Instrument [Line Items]
Unpaid Principal Balance		$ 425,845		$ 477,108
Unamortized Discount/Premium and Deferred Financing Costs		(1,471)		(2,499)
Indebtedness		$ 424,374		$ 474,609
Weighted-Average Interest Rate		4.00%		3.90%
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		(1,166)		(1,224)
Indebtedness		$ 55,158		$ 55,100
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		$ 65,356
Unamortized Discount/Premium and Deferred Financing Costs		(225)		(359)
Indebtedness		$ 65,131		$ 64,997
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	[1]	$ 18,671		$ 18,671
Unamortized Discount/Premium and Deferred Financing Costs	[1]	(13,171)		(12,561)
Indebtedness	[1]	$ 5,500		$ 6,110
Weighted-Average Interest Rate	[1]	6.80%		6.40%
Contractual Maturity, month and year	[1]	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		5.30%		5.00%
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		$ 102,918	[2],[3]	$ 116,102	[4],[5]
Indebtedness		$ 102,918	[2],[3]	$ 116,102	[4],[5]
Weighted-Average Interest Rate		3.20%	[2],[3]	3.10%	[4],[5]
Contractual Maturity, month and year		2046-11	[2],[3]	2046-11	[4],[5]
Loan Payable On Real Estate | Non Recourse Indebtedness
Debt Instrument [Line Items]
Unpaid Principal Balance		$ 40,534		$ 40,724
Unamortized Discount/Premium and Deferred Financing Costs		(204)		(225)
Indebtedness		$ 40,330		$ 40,499
Weighted-Average Interest Rate		4.70%		4.70%
Loan Payable On Real Estate | Non Recourse Indebtedness | Minimum
Debt Instrument [Line Items]
Contractual Maturity, month and year		2021-10		2021-10
Loan Payable On Real Estate | Non Recourse Indebtedness | Maximum
Debt Instrument [Line Items]
Contractual Maturity, month and year		2021-12		2021-12
CMBS securitizations | Non Recourse Indebtedness
Debt Instrument [Line Items]
Unpaid Principal Balance	[7]	$ 282,393	[6]	$ 320,282	[8]
Unamortized Discount/Premium and Deferred Financing Costs	[7]	(1,267)	[6]	(2,274)	[8]
Indebtedness	[7]	$ 281,126	[6]	$ 318,008	[8]
Weighted-Average Interest Rate	[7]	4.20%	[6]	4.00%	[8]
CMBS securitizations | Non Recourse Indebtedness | Minimum
Debt Instrument [Line Items]
Contractual Maturity, month and year	[7]	2037-06	[6]	2037-06	[8]
CMBS securitizations | Non Recourse Indebtedness | Maximum
Debt Instrument [Line Items]
Contractual Maturity, month and year	[7]	2037-12	[6]	2037-12	[8]

[1] Relates to liabilities which we elected to record at fair value under FASB ASC Topic 825.

[2] Collateralized by $150,845 principal amount of commercial mortgage loans, mezzanine loans, other loans and preferred equity interests, $78,979 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.

[3] Excludes CDO notes payable purchased by us which are eliminated in consolidation.

[4] Collateralized by $170,124 principal amount of commercial mortgage loans, mezzanine loans, other loans and preferred equity interests, $94,191 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.

[5] Excludes CDO notes payable purchased by us which are eliminated in consolidation.

[6] Collateralized by $355,699 principal amount of commercial mortgage loans and participation interests in commercial mortgage loans, $8,892 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 CMBS securitization notes purchased by us which are eliminated in consolidation.

[8] Collateralized by $409,218 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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VARIABLE INTEREST ENTITIES (Tables)

3 Months Ended

Mar. 31, 2019

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 March 31, 2019
	RAIT Securitizations			RAIT VIE Properties			Total
Assets
Investments in commercial mortgage loans, mezzanine loans and preferred equity interests	$	496,167		$	—		$	496,167
Investments in real estate		—			25,264			25,264
Cash and cash equivalents		—			273			273
Restricted cash		36,146			422			36,568
Accrued interest receivable		18,207			—			18,207
Other assets		115			3,861			3,976
Total assets	$	550,635		$	29,820		$	580,455
Liabilities and Equity
Indebtedness, net	$	568,318		$	28,353		$	596,671
Accrued interest payable		1,497			6,013			7,510
Accounts payable and accrued expenses		64			3,304			3,368
Deferred taxes, borrowers’ escrows and other liabilities		—			271			271
Total liabilities		569,879			37,941			607,820
Equity:
Shareholders’ equity:
RAIT investment and Retained earnings (deficit)		(19,244	)		(8,121	)		(27,365	)
Total shareholders’ equity		(19,244	)		(8,121	)		(27,365	)
Total liabilities and equity	$	550,635		$	29,820		$	580,455

	As of December 31, 2018
	RAIT Securitizations			RAIT VIE Properties			Total
Assets
Investments in commercial mortgage loans, mezzanine loans and preferred equity interests	$	561,101		$	—		$	561,101
Investments in real estate		—			18,020			18,020
Cash and cash equivalents		—			209			209
Restricted cash		29,658			374			30,032
Accrued interest receivable		18,849			—			18,849
Other assets		153			3,854			4,007
Total assets	$	609,761		$	22,457		$	632,218
Liabilities and Equity
Indebtedness, net	$	618,516		$	19,495		$	638,011
Accrued interest payable		1,534			5,883			7,417
Accounts payable and accrued expenses		74			3,315			3,389
Deferred taxes, borrowers’ escrows and other liabilities		2			197			199
Total liabilities		620,126			28,890			649,016
Equity:
Shareholders’ equity:
RAIT investment and Retained earnings (deficit)		(10,365	)		(6,433	)		(16,798	)
Total shareholders’ equity		(10,365	)		(6,433	)		(16,798	)
Total liabilities and equity	$	609,761		$	22,457		$	632,218

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INVESTMENTS IN COMMERCIAL MORTGAGE LOANS, MEZZANINE LOANS AND PREFERRED EQUITY INTERESTS (Tables)

3 Months Ended

Mar. 31, 2019

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 March 31, 2019:

	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	$	388,913		$	(64	)	$	388,849			30		6.9	%	Apr. 2019 to Jun. 2025
Mezzanine loans		21,114			164			21,278			3		13.3	%	Jun. 2020 to Mar. 2023
Preferred equity interests		28,515			(1	)		28,514			13		6.0	%	Mar. 2023 to Jun. 2029
Total CRE (2)		438,542			99			438,641			46		7.2	%
Deferred fees and costs, net (3)		(397	)		-			(397	)
Total	$	438,145		$	99		$	438,244

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

(2) Includes $53,128 of cash flow loans, of which $7,148 are commercial mortgage loans, $21,114 are mezzanine loans and $24,866 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 $1,703 of deferred fees, net of $1,306 of deferred costs.

The following table summarizes our investments in commercial mortgage loans, mezzanine loans and preferred equity interests as of December 31, 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	$	453,283		$	(66	)	$	453,217			35		6.9	%	Feb. 2019 to Jun. 2025
Mezzanine loans		21,114			164			21,278			3		13.3	%	Jun. 2020 to Mar. 2023
Preferred equity interests		28,577			(1	)		28,576			13		6.0	%	Mar. 2023 to Jun. 2029
Total CRE (2)		502,974			97			503,071			51		7.2	%
Deferred fees and costs, net (3)		(674	)		-			(674	)
Total	$	502,300		$	97		$	502,397

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

(2) Includes $54,621 of cash flow loans, of which $8,579 are commercial mortgage loans, $21,114 are mezzanine loans and $24,928 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 $2,558 of deferred fees, net of $1,884 of deferred costs.

Delinquency Statistics of Commercial Real Estate Loans

The following table summarizes the delinquency statistics of our commercial real estate loans as of March 31, 2019 and December 31, 2018:

	As of March 31, 2019
Delinquency Status	Current		30 to 59 days		60 to 89 days		90 days or more		Total		Non-accrual (1)
Commercial mortgage loans	$	351,906	$	—	$	—	$	37,007	$	388,913	$	65,952
Mezzanine loans		21,114		—		—		—		21,114		8,245
Preferred equity interests		28,515		—		—		—		28,515		7,770
Total	$	401,535	$	—	$	—	$	37,007	$	438,542	$	81,967

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

	As of December 31, 2018
Delinquency Status	Current		30 to 59 days		60 to 89 days		90 days or more		Total		Non-Accrual (1)
Commercial mortgage loans	$	414,735	$	—	$	—	$	47,440	$	453,283	$	46,793
Mezzanine loans		12,222		—		—		—		21,114		8,892
Preferred equity interests		28,577		—		—		—		28,577		37,308
Total	$	455,534	$	—	$	—	$	47,440	$	502,974	$	92,993

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

Investment in Loans by Credit Risk Category

We have classified our investment in loans by credit risk category as of March 31, 2019 and December 31, 2018 as follows:

	As of March 31, 2019
Credit Status	Commercial Mortgage Loans		Mezzanine Loans		Preferred Equity		Total
Satisfactory	$	257,796	$	—	$	5,063	$	262,859
Watchlist (1)		131,117		21,114		23,452		175,683
Total	$	388,913	$	21,114	$	28,515	$	438,542

(1) Includes $115,618 of loans that are considered to be impaired and $60,065 of loans that are not considered to be impaired.

	As of December 31, 2018
Credit Status	Commercial Mortgage Loans		Mezzanine Loans		Preferred Equity		Total
Satisfactory	$	314,104	$	—	$	5,063	$	319,167
Watchlist (1)		139,179		21,114		23,514		183,807
Total	$	453,283	$	21,114	$	28,577	$	502,974

(1) Includes $126,645 of loans that are considered to be impaired and $57,162 of loans that are not considered to be 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 for the three months ended March 31, 2019 and 2018:

	For the Three Months Ended March 31, 2019
	Commercial Mortgage Loans			Mezzanine Loans		Preferred Equity			Total
Beginning balance	$	11,912		$	6,496	$	3,928		$	22,336
Provision (benefit) for loan losses		(485	)		—		(98	)		(583	)
Charge-offs, net of recoveries		(1,026	)		—		—			(1,026	)
Ending balance	$	10,401		$	6,496	$	3,830		$	20,727

	For the Three Months Ended March 31, 2018
	Commercial Mortgage Loans			Mezzanine Loans			Preferred Equity		Total
Beginning balance	$	9,019		$	5,622		$	242	$	14,883
Provision (benefit) for loan losses		5,248			2,784			—		8,032
Charge-offs, net of recoveries (1)		(6,008	)		(3,175	)		—		(9,183	)
Ending balance	$	8,259		$	5,231		$	242	$	13,732

(1) Includes $3,908 of charge-offs related to loans transferred to held for sale during the three months ended March 31, 2018.

Loans Considered to be Impaired

Information on those loans considered to be impaired as of March 31, 2019 and December 31, 2018 was as follows:

	As of March 31, 2019
Impaired Loans	Commercial Mortgage Loans		Mezzanine Loans		Preferred Equity		Total
Impaired loans expecting full recovery	$	7,148	$	12,869	$	19,332	$	39,349
Impaired loans with reserves		63,904		8,245		4,120		76,269
Total Impaired Loans (1)		71,052		21,114		23,452		115,618
Allowance for loan losses	$	10,401	$	6,496	$	3,830	$	20,727

(1) As of March 31, 2019, there was no unpaid principal relating to previously identified TDRs that are on accrual status.

	As of December 31, 2018
Impaired Loans	Commercial Mortgage Loans		Mezzanine Loans		Preferred Equity		Total
Impaired loans expecting full recovery	$	8,579	$	12,869	$	19,334	$	40,782
Impaired loans with reserves		73,438		8,245		4,180		85,863
Total Impaired Loans (1)		82,017		21,114		23,514		126,645
Allowance for loan losses	$	11,912	$	6,496	$	3,928	$	22,336

(1) As of December 31, 2018, there was no unpaid principal relating to previously identified TDRs that are on accrual status.

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COMMITMENTS AND CONTINGENCIES

3 Months Ended

Mar. 31, 2019

Commitments And Contingencies Disclosure [Abstract]

COMMITMENTS AND CONTINGENCIES

NOTE 13: 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, discrimination claims, negligence claims, 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.

The Chapter 11 Cases

For a description of the Chapter 11 Cases, see Note 1: The Company, which is incorporated herein by reference.

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 the following defendants, or the Defendants, CWCapital Asset Management, LLC, or CWCapital, Wells Fargo Bank N.A., or Wells Fargo, and U.S. Bank N.A., or U.S. Bank, in the Supreme Court of the State of New York, County of New York, or the Court. 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 held 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.  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.  

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 parties have since concluded discovery, and Defendants filed a motion for summary judgment on March 18, 2019.  That motion was adjourned as a result of the Settlement Agreement and Agreement to Discontinue referenced below, and the litigation is scheduled to be discontinued with prejudice by Stipulation after TRFT receives payment under the Settlement Agreement.   

On December 17, 2018, RAIT II assigned its interest in note B to TRFT in connection with TRFT’s redemption of RAIT II described in the 2018 Annual Report, see Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Securitization Summary.”  On April 8, 2019, the Court granted RAIT II’s motion to substitute TRFT as the plaintiff in this litigation.

Effective May 8, 2019, TRFT, RAIT II, CWCapital and U.S. Bank entered into a Settlement Agreement and Mutual Release, or the Settlement Agreement.  The Settlement Agreement provides (a) that CWCapital and U.S. Bank shall pay, or cause to be paid by the related securitization trust, $9,000, or the Settlement Payment, to TRFT within ten calendar days, (b) that the parties will execute and, after that Settlement Payment is received by TRFT, TRFT will file a Stipulation of Discontinuance with Prejudice, or the Stipulation, with the Court dismissing this litigation, and (c) for mutual releases between TRFT and RAIT II, on the one hand, and the Defendants, on the other hand, of claims relating to this litigation. Also, effective May 8, 2019, TRFT, RAIT II and Wells Fargo entered into an Agreement to Discontinue and Dismiss Litigation with Prejudice, or the Agreement to Discontinue.  The Agreement to Discontinue also provides (a) that TRFT, RAIT II and Wells Fargo shall sign the Stipulation, (b) that, after the Settlement Payment is received by TRFT, TRFT will file the Stipulation and (c) for mutual releases between TRFT and RAIT II, on the one hand, and Wells Fargo, on the other hand, of claims relating to this litigation. TRFT received the payment contemplated by the Settlement Agreement in May 2019.

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 March 31, 2019, our total outstanding funding commitment was $3,190. As of April 30, 2019, we had no outstanding funding commitments.

Lease Obligation

We lease office space in Philadelphia for use in our operations. We account for this lease as an operating lease and recognize lease expense on a straight-line basis over the lease term. As of March 31, 2019, the lease had a remaining term of 13.1 years with an option to extend for an additional 5 years. As discussed in Note 2: Summary of Significant Accounting Policies, (q) Recent Accounting Pronouncements, we adopted the provisions of ASC Topic 842, “Leases” related to this lease on January 1, 2019. When establishing the value of our right-of-use asset and lease liability, we calculated the present value of future lease payments over the lease term. Since the discount rate implicit in the lease could not be determined, we used our incremental borrowing rate of 12.6%, which was based on information available as of the effective date.

As of March 31, 2019, the office lease liability and corresponding operating lease asset had carrying amounts of $2,995 and $2,399, respectively, and are included within other liabilities and other assets, respectively, in the accompanying consolidated balance sheet. For the three months ended March 31, 2019, our operating lease costs and variable lease costs associated with the office lease were $107 and $79, respectively, and are included within other general and administrative expenses in the accompanying consolidated statement of operations.

The annual minimum rent due pursuant to the office lease for each of the next five years and thereafter is estimated to be as follows as of March 31, 2019:

2019	$	322
2020		438
2021		447
2022		456
2023		465
Thereafter		4,626
Total undiscounted payments		6,754
Less imputed interest		(3,759	)
Total lease liability	$	2,995

The annual minimum rent due pursuant to the office lease for each of the next five years and thereafter is estimated to be as follows as of December 31, 2018:

2019	$	479
2020		438
2021		447
2022		456
2023		465
Thereafter		4,626
Total	$	6,911