RAIT Financial Trust

RAIT Financial Trust, whose name originated as an abbreviation of Resource Asset Investment Trust, was a United States real estate investment trust focused on commercial real estate finance and property ownership. The company was established in August 1997 by Resource America, Inc. and was initially led by Betsy Z. Cohen. It became a public company through an initial public offering in January 1998, giving it access to public capital markets for the expansion of its real estate lending and investment activities. RAIT operated across two related areas: it managed commercial real estate loans and held or managed real estate assets. Its activities included commercial mortgage exposure, ownership or control of property-related subsidiaries, and a residential mortgage portfolio that was later sold. In December 2006, RAIT expanded through a merger with Taberna Financial Realty Trust. The combination increased the scale and complexity of its real estate finance operations, but also left the business exposed to the vulnerabilities of structured and mortgage-related assets. The company was adversely affected during the subprime mortgage crisis. In August 2007, its exposure to American Home Mortgage contributed to significant financial pressure. RAIT subsequently reduced some of its residential mortgage exposure. In July 2009, it sold its residential mortgage portfolio to Angelo Gordon for $15.8 million and recorded a $62 million loss on the transaction. The sale represented a retrenchment from residential mortgage assets and a move toward dealing with distressed or less liquid parts of the portfolio. RAIT continued to own or manage property interests during the following decade. Urban Retail Properties became a subsidiary in March 2014, broadening the organization’s direct involvement in retail real estate. The company also made property-level decisions as it attempted to manage liquidity and its balance sheet. It sold UBS Plaza in May 2017 for $14 million and sold PlazAmericas in December 2018. RAIT’s financial difficulties ultimately culminated in a default on its bonds and a bankruptcy filing in August 2019. At that time, the company agreed to be acquired by Fortress Investment Group for $174.4 million. Magnetar Capital, a hedge fund, submitted a competing acquisition proposal, but a judge rejected that offer in December 2019. The bankruptcy and acquisition marked the end of RAIT as an independent publicly traded real estate investment trust. Its history illustrates the risks faced by highly leveraged real estate finance companies when mortgage assets deteriorate, property values weaken, and refinancing access becomes constrained.

RAIT Financial Trust was founded in August 1997 by Resource America, Inc. The name RAIT derived from Resource Asset Investment Trust. Betsy Z. Cohen led the company at its formation. RAIT was organized as a real estate investment trust with a focus on real estate-related finance and investments, particularly commercial real estate loans and properties. The company entered the public markets in January 1998 through an initial public offering. Its public-company structure supported the raising and deployment of capital into mortgage assets and real estate investments. Over time, RAIT developed a business that combined lending exposure with ownership or management of real estate, rather than operating solely as a conventional property landlord. In December 2006, RAIT merged with Taberna Financial Realty Trust. The transaction expanded the company’s real estate finance platform shortly before the broader mortgage and credit markets entered a period of severe stress. During the subprime mortgage crisis, RAIT was harmed by exposure to American Home Mortgage. The pressure reflected the vulnerability of real estate finance companies to defaults, declining asset values, and disruption in credit markets. RAIT responded by disposing of selected assets. In July 2009, it sold its residential mortgage portfolio to Angelo Gordon for $15.8 million and recognized a $62 million loss. This transaction reduced the company’s residential mortgage exposure but also demonstrated the losses that could result when mortgage assets had to be sold in a distressed environment. The company later maintained a broader property investment presence. In March 2014, Urban Retail Properties became a subsidiary of RAIT. This added a retail-property component to an organization already involved in real estate lending and investment. In November 2015, RAIT signed a lease associated with moving its offices from the Cira Centre, reflecting a change in its corporate premises. RAIT continued to sell individual properties as it managed its portfolio and financial position. UBS Plaza was sold in May 2017 for $14 million. PlazAmericas was sold in December 2018. These transactions occurred during the final period of the company’s independent operations. In August 2019, RAIT defaulted on its bonds and filed for bankruptcy. It agreed to be acquired by Fortress Investment Group for $174.4 million. Magnetar Capital, a hedge fund, submitted a competing offer, but a judge rejected that proposal in December 2019. The Fortress transaction and bankruptcy proceedings ended RAIT’s existence as an independent public real estate investment trust. RAIT’s trajectory—from public-market formation and expansion, through mortgage-market stress and property disposals, to bankruptcy and acquisition—illustrates the balance-sheet and liquidity risks associated with real estate finance businesses.

• 2019

  Bankruptcy and Fortress acquisition agreement

  [1]RAIT Financial Trusten.wikipedia.org

  Following a bond default, RAIT filed for bankruptcy and agreed to be acquired by Fortress Investment Group.

• 2018

  Sale of PlazAmericas

  [1]RAIT Financial Trusten.wikipedia.org

  RAIT sold PlazAmericas in December 2018.

• 2017

  Sale of UBS Plaza

  [1]RAIT Financial Trusten.wikipedia.org

  RAIT sold UBS Plaza in May 2017.

• 2014

  Urban Retail Properties becomes a subsidiary

  [1]RAIT Financial Trusten.wikipedia.org

  Urban Retail Properties became a subsidiary of RAIT in March 2014.

• 2009

  Residential mortgage portfolio sale

  [1]RAIT Financial Trusten.wikipedia.org

  RAIT sold its residential mortgage portfolio to Angelo Gordon and recorded a loss on the transaction.

• 2007

  Impact from the subprime mortgage crisis

  [1]RAIT Financial Trusten.wikipedia.org

  RAIT suffered during the subprime mortgage crisis because of exposure to American Home Mortgage.

• 2006

  Merger with Taberna Financial Realty Trust

  [1]RAIT Financial Trusten.wikipedia.org

  RAIT merged with Taberna Financial Realty Trust in December 2006.

• 1998

  Initial public offering

  [1]RAIT Financial Trusten.wikipedia.org

  RAIT became a public company through an initial public offering in January 1998.

• 1997

  RAIT is founded

  [1]RAIT Financial Trusten.wikipedia.org

  Resource America, Inc. founded RAIT Financial Trust in August 1997, with Betsy Z. Cohen as its initial leader.

A publicly traded real estate investment trust combining commercial real estate finance with ownership and management of property assets.

• Real estate finance

  Commercial real estate loans

  Commercial real estate lending was a central part of RAIT’s business. The company managed loans and other finance-related interests tied to commercial properties, exposing it to the performance of borrowers, property values, and credit markets.

• Real estate investment

  Commercial real estate properties

  RAIT owned or managed commercial real estate assets and property-related interests. Its portfolio included retail-related holdings and individual properties that were later sold as the company managed its assets and financial position.

• Mortgage assets

  Residential mortgage portfolio

  RAIT maintained a residential mortgage portfolio before selling it to Angelo Gordon in July 2009. The sale reduced RAIT’s residential mortgage exposure but resulted in a reported loss of $62 million.

• Retail real estate · 2014

  Urban Retail Properties

  Urban Retail Properties became a RAIT subsidiary in March 2014, giving the trust a more direct subsidiary-level interest in retail real estate operations and assets.

• 2019

  Bankruptcy filing and Fortress acquisition agreementOther

  Background

  RAIT defaulted on its bonds after years of pressure on its real estate finance and property businesses.

  Action taken

  In August 2019, RAIT filed for bankruptcy and agreed to be acquired by Fortress Investment Group.

  Aftermath

  The agreed transaction was valued at $174.4 million. Magnetar Capital made a competing offer, but a judge rejected it in December 2019.

  Agreed acquisition value. $174.4 million (August 2019)

  • Magnetar Capital — Magnetar Capital submitted a competing offer to acquire RAIT, but the offer was rejected by a judge in December 2019.

  Source

• 2017

  Sale of UBS PlazaStrategy

  Background

  RAIT was managing a portfolio of real estate assets while operating under financial and market pressures.

  Action taken

  RAIT sold UBS Plaza in May 2017.

  Aftermath

  The property was sold for $14 million.

  Property sale price. $14 million (May 2017)

  Source

• 2009

  Exit from the residential mortgage portfolioStrategy

  Background

  RAIT faced pressure from mortgage-market deterioration following the financial crisis and had exposure to residential mortgage assets.

  Action taken

  The company sold its residential mortgage portfolio to Angelo Gordon in July 2009.

  Aftermath

  The sale generated $15.8 million in proceeds and resulted in a reported $62 million loss, while reducing RAIT’s residential mortgage exposure.

  Sale proceeds and loss on sale. $15.8 million sale proceeds; $62 million loss (July 2009)

  Source

1. 1RAIT Financial Trusten.wikipedia.org