Investment in Unconsolidated Ventures

9 Months Ended

Jun. 30, 2011

Investment in Unconsolidated Ventures

Investment in Unconsolidated Ventures

Note 7 — Investment in Unconsolidated Ventures

On June 2, 2011, a wholly owned subsidiary of the Trust ( the “BRT member”) entered into a joint venture with Torchlight.  The joint venture has the right, but not the obligation, to acquire all whole loans originated by the Trust.  The BRT member is the managing member of the joint venture.  The joint venture may be capitalized with up to $100 million of which 20% will be funded by the BRT member and 80% will be funded by Torchlight as and when loans are acquired.

The Trust will service the loans acquired by the joint venture and is to receive, on a quarterly basis, in arrears, a servicing fee of 0.5% (annualized) and 1% (annualized) of the weighted average outstanding principal amount of performing loans and non-performing loans, respectively.  The BRT member will pay the joint venture the prepaid interest (whether denominated as “points” or otherwise) on these loans and the BRT member and REIT Management Corp. (the Trust’s advisor), will each retain an origination fee of 0.25% of the principal amount of such loans.  REIT Management is wholly owned by the Chairman of the Board of Trustees of the Trust.

Generally, the joint venture will distribute net cash available for distribution in the following order of priority until the applicable performance threshold is achieved. The threshold is achieved when Torchlight has obtained an annual return, non-compounded, equal to the performance threshold percentage on the average weighted amount of its outstanding capital contribution as shown in the chart below:

	Performance Threshold		Torchlight		BRT Member		REIT Management
First Tier	8	%	80	%	20	%	—
Second Tier	11		70		29		1	%
Third Tier	13		60		38		2
Fourth Tier	more than 13		50		47		3

The BRT member is required to deposit from the promote income (i.e., the amount payable collectively to the BRT member and REIT Management in excess of 20% in each of the second through fourth tiers)  loan workout reserves equal to the greater of $250,000 and one percent of the maximum outstanding balances of the loans owned by the joint venture.  In addition, the BRT member must also deposit from its promote income an amount equal to the outstanding balance of all non- performing loans owned by the joint venture.  Annually and upon liquidation the BRT member is required to recalculate the distributions and return any promote income in excess of the promote income to which the BRT member and REIT Management are entitled (calculated on a cumulative basis from the inception of the joint venture).

The Trust is also a partner in two other unconsolidated ventures, each of which owns and operates one property.   The Trust’s share of the ventures’ earnings was $60,000 and $33,000 for the three months ended June 30, 2011 and 2010 and $195,000 and $143,000 for the nine months ended June 30, 2011 and 2010, respectively.  The Trust’s investment in these unconsolidated ventures totaled $830,000 and $775,000 at June 30, 2011 and September 30, 2010, respectively.