10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

x Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended September 30, 2011

or

¨ Transition Report 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.)
2929 Arch Street, 17th Floor, Philadelphia, PA	19104
(Address of principal executive offices)	(Zip Code)

(215) 243-9000

(Registrant’s telephone number, including area code)

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.    x  Yes    ¨  No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    x  Yes    ¨  No

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

Large accelerated filer	¨	Accelerated filer	x
Non-accelerated filer	¨  (Do not check if a smaller reporting company)	Smaller reporting company	¨

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

A total of 40,077,148 common shares of beneficial interest, par value $0.03 per share, of the registrant were outstanding as of November 2, 2011.

RAIT FINANCIAL TRUST

TABLE OF CONTENTS

		Page
	PART I—FINANCIAL INFORMATION
Item 1.	Financial Statements (unaudited)
	Consolidated Balance Sheets as of September 30, 2011 and December 31, 2010		1
	Consolidated Statements of Operations for the Three-Month and Nine-Month Periods Ended September 30, 2011 and 2010		2
	Consolidated Statements of Comprehensive Income (Loss) for the Three-Month and Nine-Month Periods Ended September 30, 2011 and 2010		3
	Consolidated Statements of Cash Flows for the Nine-Month Periods Ended September 30, 2011 and 2010		4
	Notes to Consolidated Financial Statements		5
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		25
Item 3.	Quantitative and Qualitative Disclosures about Market Risk		44
Item 4.	Controls and Procedures		44
	PART II—OTHER INFORMATION
Item 1.	Legal Proceedings		45
Item 1A.	Risk Factors		45
Item 6.	Exhibits		46
	Signatures		47

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements

RAIT Financial Trust

Consolidated Balance Sheets

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

	As of September  30, 2011			As of December  31, 2010
Assets
Investments in mortgages and loans, at amortized cost:
Commercial mortgages, mezzanine loans, other loans and preferred equity interests	$	1,107,429		$	1,219,110
Allowance for losses		(56,126	)		(69,691	)
Total investments in mortgages and loans		1,051,303			1,149,419
Investments in real estate		849,232			839,192
Investments in securities and security-related receivables, at fair value		719,546			705,451
Cash and cash equivalents		29,693			27,230
Restricted cash		287,877			179,019
Accrued interest receivable		41,110			37,138
Other assets		43,851			32,840
Deferred financing costs, net of accumulated amortization of $11,010 and $9,943, respectively		22,791			19,954
Intangible assets, net of accumulated amortization of $2,197 and $1,777, respectively		2,769			3,189
Total assets	$	3,048,172		$	2,993,432
Liabilities and Equity
Indebtedness (including $114,440 and $152,494 at fair value, respectively)	$	1,793,250		$	1,838,177
Accrued interest payable		25,495			19,925
Accounts payable and accrued expenses		24,843			25,089
Derivative liabilities		194,224			184,878
Deferred taxes, borrowers’ escrows and other liabilities		91,499			6,833
Total liabilities		2,129,311			2,074,902
Equity:
Shareholders’ equity:
Preferred shares, $0.01 par value per share, 25,000,000 shares authorized;
7.75% Series A cumulative redeemable preferred shares, liquidation preference $25.00 per share, 2,760,000 shares issued and outstanding		28			28
8.375% Series B cumulative redeemable preferred shares, liquidation preference $25.00 per share, 2,258,300 shares issued and outstanding		23			23
8.875% Series C cumulative redeemable preferred shares, liquidation preference $25.00 per share, 1,600,000 shares issued and outstanding		16			16
Common shares, $0.03 par value per share, 200,000,000 shares authorized, 40,077,148 and 35,300,190 issued and outstanding		1,205			1,060
Additional paid in capital		1,730,373			1,691,681
Accumulated other comprehensive income (loss)		(126,081	)		(127,602	)
Retained earnings (deficit)		(690,542	)		(647,110	)
Total shareholders’ equity		915,022			918,096
Noncontrolling interests		3,839			434
Total equity		918,861			918,530
Total liabilities and equity	$	3,048,172		$	2,993,432

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-Month Periods Ended September 30						For the  Nine-Month Periods Ended September 30
	2011			2010			2011			2010
Revenue:
Interest income	$	33,549		$	37,252		$	101,590		$	117,755
Rental income		23,635			18,443			67,063			52,203
Fee and other income		2,905			3,204			8,578			15,555
Total revenue		60,089			58,899			177,231			185,513
Expenses:
Interest expense		22,689			24,038			68,384			74,170
Real estate operating expense		14,563			13,951			40,971			37,872
Compensation expense		6,898			6,766			19,179			21,704
General and administrative expense		4,042			4,331			13,441			14,588
Provision for losses		500			10,813			3,400			35,807
Depreciation and amortization expense		7,300			7,380			21,668			20,576
Total expenses		55,992			67,279			167,043			204,717
Operating Income		4,097			(8,380	)		10,188			(19,204	)
Interest and other income (expense)		145			42			295			401
Gains (losses) on sale of assets		1,455			0			3,434			11,616
Gains (losses) on extinguishment of debt		11,371			14,278			14,540			51,290
Change in fair value of financial instruments		(34,997	)		14,237			(55,113	)		35,120
Income (loss) before taxes and discontinued operations		(17,929	)		20,177			(26,656	)		79,223
Income tax benefit (provision)		158			627			468			484
Income (loss) from continuing operations		(17,771	)		20,804			(26,188	)		79,707
Income (loss) from discontinued operations		(50	)		(2,556	)		747			(1,630	)
Net income (loss)		(17,821	)		18,248			(25,441	)		78,077
(Income) loss allocated to preferred shares		(3,407	)		(3,406	)		(10,235	)		(10,227	)
(Income) loss allocated to noncontrolling interests		59			210			176			803
Net income (loss) allocable to common shares	$	(21,169	)	$	15,052		$	(35,500	)	$	68,653
Earnings (loss) per share—Basic:
Continuing operations	$	(0.55	)	$	0.58		$	(0.96	)	$	2.57
Discontinued operations		0.00			(0.08	)		0.02			(0.06	)
Total earnings (loss) per share—Basic	$	(0.55	)	$	0.50		$	(0.94	)	$	2.51
Weighted-average shares outstanding—Basic		38,771,022			30,330,259			37,822,750			27,384,451
Earnings (loss) per share—Diluted:
Continuing operations	$	(0.55	)	$	0.57		$	(0.96	)	$	2.53
Discontinued operations		0.00			(0.08	)		0.02			(0.06	)
Total earnings (loss) per share—Diluted	$	(0.55	)	$	0.49		$	(0.94	)	$	2.47
Weighted-average shares outstanding—Diluted		38,771,022			30,887,145			37,822,750			27,800,648
Distributions declared per common share	$	0.06		$	0.00		$	0.21		$	0.00

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-Month Periods Ended September 30						For the  Nine-Month Periods Ended September 30
	2011			2010			2011			2010
Net income (loss)	$	(17,821	)	$	18,248		$	(25,441	)	$	78,077
Other comprehensive income (loss):
Change in fair value of interest rate hedges		(18,332	)		(20,720	)		(31,526	)		(63,423	)
Reclassification adjustments associated with unrealized losses (gains) from interest rate hedges included in net income (loss)		0			(12	)		(8	)		(50	)
Realized (gains) losses on interest rate hedges reclassified to earnings		10,748			11,391			32,884			34,662
Change in fair value of available-for-sale securities		(12	)		901			171			(4,074	)
Total other comprehensive income (loss)		(7,596	)		(8,440	)		1,521			(32,885	)
Comprehensive income (loss) before allocation to noncontrolling interests		(25,417	)		9,808			(23,920	)		45,192
Allocation to noncontrolling interests		59			210			176			803
Comprehensive income (loss)	$	(25,358	)	$	10,018		$	(23,744	)	$	45,995

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

3

RAIT Financial Trust

Consolidated Statements of Cash Flows

(Unaudited and dollars in thousands)

	For the  Nine-Month Periods Ended September 30
	2011			2010
Operating activities:
Net income (loss)	$	(25,441	)	$	78,077
Adjustments to reconcile net income (loss) to cash flow from operating activities:
Provision for losses		3,400			35,807
Share-based compensation expense		395			2,277
Depreciation and amortization		21,668			22,432
Amortization of deferred financing costs and debt discounts		3,582			2,046
Accretion of discounts on investments		(1,940	)		(3,193	)
(Gains) losses on sales of assets		(3,434	)		(8,971	)
(Gains) losses on extinguishment of debt		(14,540	)		(51,290	)
Change in fair value of financial instruments		55,113			(35,120	)
Other items		(8	)		(145	)
Changes in assets and liabilities:
Accrued interest receivable		(4,300	)		573
Other assets		(5,828	)		443
Accrued interest payable		(28,814	)		(29,872	)
Accounts payable and accrued expenses		487			(1,499	)
Deferred taxes, borrowers’ escrows and other liabilities		(1,619	)		(6,098	)
Cash flow from operating activities		(1,279	)		5,467
Investing activities:
Proceeds from sales of other securities		12,793			18,040
Purchase and origination of loans for investment		(79,632	)		(19,346	)
Principal repayments on loans		128,709			82,710
Investments in real estate		(22,546	)		(13,752	)
Proceeds from dispositions of real estate		65,750			7,064
Acquisition of Independence Realty Trust, Inc. and associated entities		(2,578	)		0
Proceeds from sale of collateral management rights		0			14,105
(Increase) Decrease in restricted cash		(62,976	)		(45,783	)
Cash flow from investing activities		39,520			43,038
Financing activities:
Repayments on secured credit facilities and loans payable on real estate		(46,266	)		(14,062	)
Proceeds from loans payable on real estate		37,400			0
Repayments and repurchase of CDO notes payable		(28,758	)		(17,380	)
Proceeds from issuance of 7.0% convertible senior notes		115,000			0
Repayments and repurchase of 6.875% convertible senior notes		(119,320	)		(12,357	)
Issuance (acquisition) of noncontrolling interests		3,581			(47	)
Payments for deferred costs		(7,080	)		(170	)
Common share issuance, net of costs incurred		25,413			6,384
Distributions paid to preferred shareholders		(10,235	)		(10,227	)
Distributions paid to common shareholders		(5,513	)		0
Cash flow from financing activities		(35,778	)		(47,859	)
Net change in cash and cash equivalents		2,463			646
Cash and cash equivalents at the beginning of the period		27,230			25,034
Cash and cash equivalents at the end of the period	$	29,693		$	25,680
Supplemental cash flow information:
Cash paid for interest	$	24,771		$	31,471
Cash paid (refunds received) for taxes		63			(1,774	)
Non-cash increase in investments in real estate from the conversion of loans		78,300			91,287
Non-cash decrease in indebtedness from conversion to shares or debt extinguishments		(16,246	)		(32,934	)

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

4

RAIT Financial Trust

Notes to Consolidated Financial Statements

As of September 30, 2011

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

NOTE 1: THE COMPANY

RAIT Financial Trust invests in and manages a portfolio of real-estate related assets, including direct ownership of real estate properties, and provides a comprehensive set of debt financing options to the real estate industry. References to “RAIT”, “we”, “us”, and “our” refer to RAIT Financial Trust and its subsidiaries, unless the context otherwise requires. We conduct our business through our subsidiaries, RAIT Partnership, L.P. and Taberna Realty Finance Trust, or Taberna, as well as through their respective subsidiaries. RAIT is a self-managed and self-advised Maryland real estate investment trust, or REIT. Taberna is also a Maryland REIT.

We finance a substantial portion of our investments through borrowing and securitization strategies seeking to match the maturities and terms of our financings with the maturities and terms of those investments, and to mitigate interest rate risk through derivative instruments.

We are subject to significant competition in all aspects of our business. Existing industry participants and potential new entrants compete with us for the available supply of investments suitable for origination or acquisition, as well as for debt and equity capital. We compete with many third parties engaged in real estate finance and investment activities, including other REITs, specialty finance companies, savings and loan associations, banks, mortgage bankers, insurance companies, mutual funds, institutional investors, investment banking firms, lenders, governmental bodies and other entities.

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, 2010 included in our Annual Report on Form 10-K. In the opinion of management, all adjustments, consisting only of normal recurring adjustments, necessary to present fairly our consolidated financial position and consolidated results of operations and cash flows are included. The results of operations for the interim periods presented are not necessarily indicative of the results for the full year.

Certain prior period amounts have been reclassified to conform with the current period presentation. Previously, interest expense was included as part of net interest margin within total revenue. We have now classified interest expense as a component of expenses. Additionally, interest expense associated with third party financing provided on our owned real estate is included in interest expense whereas previously it was reflected within property operating expenses.

b. 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 interest 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 (FASB) Accounting Standards Codification (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 respective entity. For our commercial mortgages, 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 consolidated the VIEs when we are the primary beneficiary. See Note 9 for additional disclosures pertaining to VIEs.

5

RAIT Financial Trust

Notes to Consolidated Financial Statements

As of September 30, 2011

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

c. 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. Actual results could differ from those estimates.

d. Investments in Loans

We invest in commercial mortgages, mezzanine loans, debt securities and other loans. We account for our investments in commercial mortgages, mezzanine loans and other loans 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.

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

We maintain an allowance for losses on our investments in commercial mortgages, mezzanine loans and other loans. 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. Management reviews loans for impairment and establishes specific reserves when a loss is probable and reasonably estimable under the provisions of FASB ASC Topic 310, “Receivables.” 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. If any trends or characteristics indicate that it is probable that other loans, with similar characteristics to those of impaired loans, have incurred a loss, we consider whether an allowance for loss is needed pursuant to FASB ASC Topic 450, “Contingencies.” 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. Payments received for non-accrual or impaired loans are applied to principal until the loan is removed from non-accrual status or no longer impaired. Past due interest is recognized on non-accrual loans when they are removed from non-accrual status and are making current interest payments. The allowance for losses is increased by charges to operations and decreased by charge-offs (net of recoveries). Management charges off impaired loans when the investment is no longer realizable and legally discharged.

f. Investments in Real Estate

Investments in real estate are shown net of accumulated depreciation. We capitalize all costs related to the improvement of 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.

We acquire real estate assets either directly or through the conversion of our investments in loans into owned real estate. Acquisitions of real estate assets and any related intangible assets are recorded initially at fair value under FASB ASC Topic 805, “Business Combinations.” Fair value is determined by management based on market conditions and inputs at the time the asset is acquired. All expenses incurred to acquire a real estate asset are expensed as incurred.

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.

g. Investments in Securities

We account for our investments in securities under FASB ASC Topic 320, “Investments—Debt and Equity Securities”, and designate each investment security as a trading security, an available-for-sale security, or a held-to-maturity security based on our intent at the time of acquisition. Trading securities are recorded at their fair value each reporting period with fluctuations in fair value reported as a component of earnings. Available-for-sale securities are recorded at fair value with changes in fair value reported as a component of other comprehensive income (loss). We classify certain available-for-sale securities as trading securities when we elect to record them under the fair value option in accordance with FASB ASC Topic 825, “Financial Instruments.” See “i. Fair Value of Financial Instruments.” Upon the sale of an available-for-sale security, the realized gain or loss on the sale will be recorded as a component of earnings in the respective period. Held-to-maturity investments are carried at amortized cost at each reporting period.

6

RAIT Financial Trust

Notes to Consolidated Financial Statements

As of September 30, 2011

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

We account for investments in securities where the transfer meets the criteria as a financing under FASB ASC Topic 860, “Transfers and Servicing”, at amortized cost. Our investments in security-related receivables represent securities that were transferred to issuers of collateralized debt obligations, or CDOs, in which the transferors maintained some level of continuing involvement.

We use our judgment to determine whether an investment in securities has sustained an other-than-temporary decline in value. If management determines that an investment in securities has sustained an other-than-temporary decline in its value, the investment is written down to its fair value by a charge to earnings, and we establish a new cost basis for the investment. Our evaluation of an other-than-temporary decline is dependent on the specific facts and circumstances. Factors that we consider in determining whether an other-than-temporary decline in value has occurred include: the estimated fair value of the investment in relation to our cost basis; the financial condition of the related entity; and the intent and ability to retain the investment for a sufficient period of time to allow for recovery of the fair value of the investment.

h. Revenue Recognition

1) Interest income—We recognize interest income from investments in commercial mortgages, mezzanine loans, and other securities on a yield to maturity basis. Upon the acquisition of a loan at a discount, we assess the portions of the discount that constitute accretable yields and non-accretable differences. The accretable yield represents the excess of our expected cash flows from the loan over the amount we paid for the loan. That amount, the accretable yield, is accreted to interest income over the remaining life of the loan. Many of our commercial mortgages and mezzanine loans provide for the accrual of interest at specified rates which differ from current payment terms. Interest income is recognized on such loans at the accrual rate subject to management’s determination that accrued interest and outstanding principal are ultimately collectible.

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

We recognize interest income from interests in certain securitized financial assets on an estimated effective yield to maturity basis. Management estimates the current yield on the amortized cost of the investment based on estimated cash flows after considering prepayment and credit loss experience.

2) Rental income—We generate rental income from tenant rent and other tenant-related activities at our consolidated real estate properties. For multi-family real estate properties, rental 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, rental 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. Leases also typically provide for tenant reimbursement of a portion of common area maintenance and other operating expenses to the extent that a tenant’s pro rata share of expenses exceeds a base year level set in the lease.

3) Fee and other income—We generate fee and other income through our various subsidiaries by (a) providing ongoing asset management services to investment portfolios under cancelable management agreements, (b) providing or arranging to provide financing to our borrowers, (c) providing property management services to third parties, and (d) providing fixed income trading and advisory services to our customers. We recognize revenue for these activities when the fees are fixed or determinable, are evidenced by an arrangement, collection is reasonably assured and the services under the arrangement have been provided. While we may receive asset management fees when they are earned, we eliminate earned asset management fee income from CDOs while such CDOs are consolidated.

During the three-month periods ended September 30, 2011 and 2010, we received $1,308 and $1,343, respectively, of earned asset management fees associated with CDOs, of which we eliminated $919 and $983, respectively, of management fee income with consolidated CDOs.

During the nine-month periods ended September 30, 2011 and 2010, we received $3,908 and $6,447, respectively, of earned asset management fees associated with CDOs, of which we eliminated $2,802 and $2,965, respectively, of management fee income with consolidated CDOs.

i. 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

7

RAIT Financial Trust

Notes to Consolidated Financial Statements

As of September 30, 2011

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

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. Generally, assets and liabilities carried at fair value and included in this category are trust preferred securities, or TruPS, and subordinated debentures, 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 we and others are willing to pay for an asset. Ask prices represent the lowest price that we and others are willing to accept for an asset. For financial instruments whose inputs are based on bid-ask prices, we do not require that fair value always be a predetermined point in the bid-ask range. Our policy is to allow for mid-market pricing and adjusting to the point within the bid-ask range that results in our best estimate of fair value.

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

8

RAIT Financial Trust

Notes to Consolidated Financial Statements

As of September 30, 2011

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

j. Income Taxes

RAIT and Taberna 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 our distributions to shareholders and as long as certain asset, income and share ownership tests are met. If we were to fail to meet these requirements, we would be subject to U.S. federal income tax, which could have a material adverse impact on our results of operations and amounts available for distributions to our shareholders. Management believes that all of the criteria to maintain RAIT’s and Taberna’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 estimate of deferred tax asset realizability, if any, are included in income tax expense on the consolidated statements of operations.

From time to time, our TRSs generate taxable income from intercompany transactions. The TRS entities generate taxable revenue from fees for services provided to CDO entities. Some of these fees paid to the TRS entities are capitalized as deferred financing costs by the CDO entities. Certain CDO entities may be consolidated in our financial statements pursuant to FASB ASC Topic 810, “Consolidation.” In consolidation, these fees are eliminated when the CDO entity is included in the consolidated group. Nonetheless, all income taxes are accrued by the TRSs in the year in which the taxable revenue is received. These income taxes are not eliminated when the related revenue is eliminated in consolidation.

Certain TRS entities are domiciled in the Cayman Islands and, accordingly, taxable income generated by these entities may not be subject to local income taxation, but generally will be included in our taxable income on a current basis, whether or not distributed. Upon distribution of any previously included income, no incremental U.S. federal, state, or local income taxes would be payable by us.

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.

k. Recent Accounting Pronouncements

On January 1, 2010, we adopted Accounting Standards Update (ASU) No. 2010-06, “Fair Value Measurements and Disclosures (Topic 820): Improving Disclosures about Fair Value Measurements.” This accounting standard requires new disclosures for significant transfers in and out of Level 1 and 2 fair value measurements and a description of the reasons for the transfer. This accounting standard also updates existing disclosures by providing fair value measurement disclosures for each class of assets and liabilities and provides disclosures about the valuation techniques and inputs used to measure fair value for both recurring and nonrecurring fair value measurements. For Level 3 fair value measurements, new disclosures will require entities to present information separately for purchases, sales, issuances, and settlements. These disclosures are effective for fiscal years beginning after December 15, 2010, and for interim periods within those fiscal years. The adoption of this standard did not have a material effect on our consolidated financial statements.

On January 1, 2011, we adopted ASU No. 2010-29, “Disclosure of Supplementary Pro Forma Information for Business Combinations.” This accounting standard requires that if a public entity presents comparative financial statements, the entity should disclose revenue and earnings of the combined entity as though the business combination(s) that occurred during the current year had occurred as of the beginning of the comparable prior annual reporting period only. This accounting standard also expands the supplemental pro forma disclosures under FASB ASU Topic 805, “Business Combinations” to include a description of the nature and amount of material, nonrecurring pro forma adjustments directly attributable to the business combination included in the reported pro forma revenue and earnings. The adoption of this standard did not have a material effect on our consolidated financial statements.

9

RAIT Financial Trust

Notes to Consolidated Financial Statements

As of September 30, 2011

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

In April 2011, the FASB issued accounting standards classified under FASB ASC Topic 310, “Receivables”. This accounting standard amends existing guidance to provide additional guidance on the determination of whether a creditor has granted a concession and whether a debtor is experiencing financial difficulties for purposes of determining whether a restructuring constitutes a troubled debt restructuring. This standard is effective for the first interim or annual period beginning on or after June 15, 2011, and should be applied retrospectively to the beginning of the annual period of adoption. The adoption of this standard did not have a material effect on our consolidated financial statements.

NOTE 3: INVESTMENTS IN LOANS

Investments in Commercial Mortgages, Mezzanine Loans, Other Loans and Preferred Equity Interests

The following table summarizes our investments in commercial mortgages, mezzanine loans, other loans and preferred equity interests as of September 30, 2011:

	Unpaid Principal Balance			Unamortized (Discounts) Premiums			Carrying Amount			Number of Loans		Weighted- Average Coupon (1)			Range of Maturity Dates
Commercial Real Estate (CRE) Loans
Commercial mortgages	$	658,446		$	(3,949	)	$	654,497			39		6.7	%	Nov. 2011 to May 2021
Mezzanine loans		344,870			(5,027	)		339,843			93		8.9	%	Nov. 2011 to Nov. 2038
Preferred equity interests		61,200			(1,130	)		60,070			21		10.5	%	Nov. 2011 to Aug. 2025
Total CRE Loans		1,064,516			(10,106	)		1,054,410			153		7.6	%
Other loans		54,842			(616	)		54,226			4		6.4	%	Nov. 2011 to Oct. 2016
Total Loans	$	1,119,358		$	(10,722	)	$	1,108,636			157		7.6	%
Deferred fees		(1,207	)		0			(1,207	)
Total investments in loans	$	1,118,151		$	(10,722	)	$	1,107,429

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

During the nine-month periods ended September 30, 2011 and 2010, we completed the conversion of three and seven commercial real estate loans with a carrying value of $85,114 and $110,528 to real estate owned properties. During the nine-month periods ended September 30, 2011 and 2010, we charged off $6,814 and $19,241, respectively, related to the conversion of commercial real estate loans to owned properties. See Note 5.

The following table summarizes the delinquency statistics of our commercial real estate loans as of September 30, 2011 and December 31, 2010:

Delinquency Status	As of September  30, 2011		As of December  31, 2010
30 to 59 days	$	1,230	$	27,978
60 to 89 days		7,400		0
90 days or more		31,855		55,450
In foreclosure or bankruptcy proceedings		39,800		46,578
Total	$	80,285	$	130,006

As of September 30, 2011 and December 31, 2010, approximately $91,833 and $122,306, respectively, of our commercial real estate loans were on non-accrual status and had a weighted-average interest rate of 9.6% and 8.8%, respectively. As of September 30, 2011 and December 31, 2010, approximately $19,501 and $20,908 of one other loan was on non-accrual status and had a weighted-average interest rate of 7.2%.

10

RAIT Financial Trust

Notes to Consolidated Financial Statements

As of September 30, 2011

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

Allowance For Losses And Impaired Loans

The following table provides a roll-forward of our allowance for losses for our commercial mortgages, mezzanine loans, and other loans for the three-month periods ended September 30, 2011 and 2010:

	For the  Three-Month Period Ended September 30, 2011			For the  Three-Month Period Ended September 30, 2010
Beginning balance	$	57,866		$	78,672
Provision		500			10,813
Charge-offs, net of recoveries		(2,240	)		(8,497	)
Ending balance	$	56,126		$	80,988

The following table provides a roll-forward of our allowance for losses for our commercial mortgages, mezzanine loans, and other loans for the nine-month periods ended September 30, 2011 and 2010:

	For the  Nine-Month Period Ended September 30, 2011			For the  Nine-Month Period Ended September 30, 2010
Beginning balance	$	69,691		$	86,609
Provision		3,400			35,807
Charge-offs, net of recoveries		(16,965	)		(41,428	)
Ending balance	$	56,126		$	80,988

As of September 30, 2011 and December 31, 2010, we identified 19 and 27 commercial mortgages, mezzanine loans and other loans with unpaid principal balances of $120,470 and $157,746 as impaired.

The average unpaid principal balance of total impaired loans was $118,164 and $181,301 during the three-month periods ended September 30, 2011 and 2010 and $134,585 and $181,169 during the nine-month periods ended September 30, 2011 and 2010. We recorded interest income from impaired loans of $2 and $141 for the three-month periods ended September 30, 2011 and 2010 and $526 and $2,633 for the nine-month periods ended September 30, 2011 and 2010.

NOTE 4: INVESTMENTS IN SECURITIES

Our investments in securities and security-related receivables are accounted for at fair value. The following table summarizes our investments in securities as of September 30, 2011:

Investment Description	Amortized Cost		Net Fair Value Adjustments			Estimated Fair  Value		Weighted Average Coupon (1)			Weighted Average Years to Maturity
Trading securities
TruPS	$	637,376	$	(156,769	)	$	480,607		4.6	%		22.8
Other securities		11,020		(11,020	)		0		4.8	%		41.1
Total trading securities		648,396		(167,789	)		480,607		4.6	%		23.1
Available-for-sale securities		3,600		(3,598	)		2		2.1	%		31.1
Security-related receivables
TruPS receivables		111,199		(27,037	)		84,162		6.9	%		11.2
Unsecured REIT note receivables		61,000		2,477			63,477		6.6	%		6.2
CMBS receivables (2)		153,868		(83,159	)		70,709		5.7	%		32.6
Other securities		73,585		(52,996	)		20,589		3.3	%		30.9
Total security-related receivables		399,652		(160,715	)		238,937		5.7	%		22.3
Total investments in securities	$	1,051,648	$	(332,102	)	$	719,546		5.0	%		22.9

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

(2) CMBS receivables include securities with a fair value totaling $21,101 that are rated between “AAA” and “A-” by Standard & Poor’s, securities with a fair value totaling $39,989 that are rated “BBB+” and “B-” by Standard & Poor’s, securities with a fair value totaling $7,560 that are rated “CCC” by Standard & Poor’s and securities with a fair value totaling $2,059 that are rated “D” by Standard & Poor’s.

11

RAIT Financial Trust

Notes to Consolidated Financial Statements

As of September 30, 2011

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

A substantial portion of our gross unrealized losses is greater than 12 months.

TruPS included above as trading securities include (a) investments in TruPS issued by VIEs of which we are not the primary beneficiary and which we do not consolidate and (b) transfers of investments in TruPS securities to us that were accounted for as a sale pursuant to FASB ASC Topic 860, “Transfers and Servicing.”

The following table summarizes the non-accrual status of our investments in securities:

	As of September 30, 2011							As of December 31, 2010
	Principal /Par Amount  on Non-accrual		Weighted Average  Coupon			Fair Value		Principal /Par Amount  on Non-accrual		Weighted Average  Coupon			Fair Value
TruPS and TruPS receivables	$	75,557		1.0	%	$	2,944	$	133,682		4.1	%	$	5,581
Other securities		34,035		3.3	%		2		42,754		2.8	%		976
CMBS receivables		37,204		5.9	%		2,489		29,204		5.9	%		975

The assets of our consolidated CDOs collateralize the debt of such entities and are not available to our creditors. As of September 30, 2011 and December 31, 2010, investment in securities of $748,575 and $806,700, respectively, in principal amount of TruPS and subordinated debentures, and $212,921 and $219,868, respectively, in principal amount of unsecured REIT note receivables and CMBS receivables, collateralized the consolidated CDO notes payable of such entities.

NOTE 5: INVESTMENTS IN REAL ESTATE

The table below summarizes our investments in real estate:

	As of September 30, 2011					As of December 31, 2010
	Book Value			Number  of Properties		Book Value			Number  of Properties
Multi-family real estate properties	$	591,341			33	$	602,183			33
Office real estate properties		249,212			10		219,567			9
Retail real estate properties		48,979			2		41,838			2
Parcels of land		22,208			3		22,208			3
Subtotal		911,740			48		885,796			47
Less: Accumulated depreciation and amortization		(62,508	)				(46,604	)
Investments in real estate	$	849,232				$	839,192

As of September 30, 2011, our investments in real estate of $849,232 are financed through $91,953 of mortgages held by third parties and $791,804 of mortgages held by our consolidated securitizations. Together, along with commercial real estate loans held by these securitizations, these mortgages serve as collateral for the CDO notes payable issued by our consolidated securitizations. All intercompany balances and interest charges are eliminated in consolidation.

Acquisitions:

During the nine-month period ended September 30, 2011, we converted three loans with a carrying value of $85,388, relating to one office property and two multi-family properties, to owned real estate. Upon conversion, we recorded the investment in real estate acquired including any related working capital at fair value of $78,167.

The following table summarizes the aggregate estimated fair value of the assets and liabilities associated with the three properties acquired during the nine-month period ended September 30, 2011, on the respective date of each conversion, for the real estate accounted for under FASB ASC Topic 805.

Description	Estimated Fair  Value
Assets acquired:
Investments in real estate	$	78,300
Cash and cash equivalents		402
Restricted cash		582
Other assets		137
Total assets acquired		79,421

12

RAIT Financial Trust

Notes to Consolidated Financial Statements

As of September 30, 2011

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

Description	Estimated Fair  Value
Liabilities assumed:
Accounts payable and accrued expenses		775
Other liabilities		479
Total liabilities assumed		1,254
Estimated fair value of net assets acquired	$	78,167

The following table summarizes the consideration transferred to acquire the real estate properties and the amounts of identified assets acquired and liabilities assumed at the respective conversion date:

Description	Estimated Fair  Value
Fair value of consideration transferred:
Commercial real estate loans	$	78,300
Other considerations		(133	)
Total fair value of consideration transferred	$	78,167

During the nine-month period ended September 30, 2011, these investments contributed revenue of $3,803 and a net income allocable to common shares of $1,176. During the nine-month period ended September 30, 2011, we did not incur any third-party acquisition-related costs.

Our consolidated unaudited pro forma information, after including the acquisition of real estate properties, is presented below as if the acquisition occurred on January 1, 2010. These pro forma results are not necessarily indicative of the results which actually would have occurred if the acquisition had occurred on the first day of the periods presented, nor does the pro forma financial information purport to represent the results of operations for future periods:

Description	For the Nine-Month Period Ended September 30, 2011			For the Nine-Month Period Ended September 30, 2010
Total revenue, as reported	$	177,231		$	185,513
Pro forma revenue		180,011			192,034
Net income (loss) allocable to common shares, as reported		(35,500	)		68,653
Pro forma net income (loss) allocable to common shares		(34,705	)		70,282

These amounts have been calculated after adjusting the results of the acquired businesses to reflect the additional depreciation that would have been charged assuming the fair value adjustments to our investments in real estate had been applied from January 1, 2010 together with the consequential tax effects.

We have not yet completed the process of estimating the fair value of assets acquired and liabilities assumed. Accordingly, our preliminary estimates and the allocation of the purchase price to the assets acquired and liabilities assumed may change as we complete the process. In accordance with FASB ASC Topic 805, changes, if any, to the preliminary estimates and allocation will be reported in our financial statements retrospectively.

Dispositions:

During the nine-month period ended September 30, 2011, we sold two multi-family properties for a total purchase price of $67,550. We recorded losses on the sale of these assets of $218.

13

RAIT Financial Trust

Notes to Consolidated Financial Statements

As of September 30, 2011

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

NOTE 6: INDEBTEDNESS

We maintain various forms of short-term and long-term financing arrangements. Generally, these financing agreements are collateralized by assets within securitizations. The following table summarizes our total recourse and non-recourse indebtedness as of September 30, 2011:

Description	Unpaid Principal Balance		Carrying Amount		Weighted- Average Interest Rate			Contractual Maturity
Recourse indebtedness:
7.0% convertible senior notes (1)	$	115,000	$	107,466		7.0	%	Apr. 2031
6.875% convertible senior notes (2)		38,813		38,950		6.9	%	Apr. 2027
Secured credit facilities		10,554		10,554		3.0	%	Dec. 2016
Senior secured notes (7)		43,000		43,000		12.5	%	Apr. 2014
Junior subordinated notes, at fair value (3)		38,052		22,450		5.2	%	Oct. 2015 to Mar. 2035
Junior subordinated notes, at amortized cost		25,100		25,100		7.7	%	Apr. 2037
Total recourse indebtedness		270,519		247,520		7.5	%
Non-recourse indebtedness:
CDO notes payable, at amortized cost (4)(5)		1,323,046		1,323,046		0.6	%	2045 to 2046
CDO notes payable, at fair value (3)(4)(6)		1,122,495		130,694		0.9	%	2037 to 2038
Loans payable on real estate		91,990		91,990		5.9	%	Sept. 2015 to May 2021
Total non-recourse indebtedness		2,537,531		1,545,730		0.9	%
Total indebtedness	$	2,808,050	$	1,793,250		1.6	%

(1) Our 7.0% convertible senior notes are redeemable, at par at the option of the holder, in April 2016, April 2021, and April 2026.

(2) Our 6.875% convertible senior notes are redeemable, at par at the option of the holder, in April 2012, April 2017, and April 2022. During October 2011, we repurchased and retired $34,231 in aggregate principal amount of our 6.875% convertible senior notes, leaving $4,582 outstanding.

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

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

(5) Collateralized by $1,744,031 principal amount of commercial mortgages, mezzanine loans, other loans and preferred equity interests. These obligations were issued by separate legal entities and consequently the assets of the special purpose entities that collateralize these obligations are not available to our creditors.

(6) Collateralized by $1,223,158 principal amount of investments in securities and security-related receivables and loans, before fair value adjustments. The fair value of these investments as of September 30, 2011 was $879,380. 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) In October 2011, we prepaid, in full, our $43,000 12.5% Senior Secured Notes due to mature in April 2014.

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

The current status or activity in our financing arrangements occurring as of or during the nine-month period ended September 30, 2011 is as follows:

Recourse Indebtedness

6.875% convertible senior notes. During the nine-month period ended September 30, 2011, we repurchased $104,800 in aggregate principal amount of our 6.875% Convertible Senior Notes due 2027, or the 6.875% convertible senior notes, for an aggregate purchase price of $103,213. As a result of these transactions, we recorded losses on extinguishment of debt of $120, net of deferred financing costs and unamortized discounts that were written off.

Our 6.875% convertible senior notes are redeemable, at the option of the holder, in April 2012. We expect to acquire, redeem, refinance or otherwise enter into transactions to satisfy our 6.875% convertible senior notes which may include any combination of payments of cash, issuances of our debt and/or equity securities, sales or exchanges of our assets or other methods.

14

RAIT Financial Trust

Notes to Consolidated Financial Statements

As of September 30, 2011

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

7.0% convertible senior notes. On March 21, 2011, we issued and sold in a public offering $115,000 aggregate principal amount of our 7.0% Convertible Senior Notes due 2031, or the 7.0% convertible senior notes. After deducting the underwriting discount and the estimated offering costs, we received approximately $109,000 of net proceeds. Interest on the 7.0% convertible senior notes is paid semi-annually and the 7.0% convertible senior notes mature on April 1, 2031.

Prior to April 5, 2016, the 7.0% convertible senior notes are not redeemable at RAIT’s option, except to preserve RAIT’s status as a REIT. On or after April 5, 2016, RAIT may redeem all or a portion of the 7.0% convertible senior notes at a redemption price equal to the principal amount plus accrued and unpaid interest. Holders of 7.0% convertible senior notes may require RAIT to repurchase all or a portion of the 7.0% convertible senior notes at a purchase price equal to the principal amount plus accrued and unpaid interest on April 1, 2016, April 1, 2021, and April 1, 2026, or upon the occurrence of certain defined fundamental changes.

The 7.0% convertible senior notes are convertible at the option of the holder at a current conversion rate of 131.3268 common shares per $1,000 principal amount of 7.0% convertible senior notes (equivalent to a current conversion price of $7.61 per common share). Upon conversion of 7.0% convertible senior notes by a holder, the holder will receive cash, our common shares or a combination of cash and our common shares, at our election. We include the 7.0% convertible senior notes in earnings per share using the treasury stock method if the conversion value in excess of the par amount is considered in the money during the respective periods.

According to FASB ASC Topic 470, “Debt”, we recorded a discount on our issued and outstanding 7.0% convertible senior notes of $8,228. This discount reflects the fair value of the embedded conversion option within the 7.0% convertible senior notes and was recorded as an increase to additional paid in capital. The fair value was calculated by discounting the cash flows required in the indenture relating to the 7.0% convertible senior notes agreement by a discount rate that represents management’s estimate of our senior, unsecured, non-convertible debt borrowing rate at the time when the 7.0% convertible senior notes were issued. The discount will be amortized to interest expense through April 1, 2016, the date at which holders of our 7.0% convertible senior notes could require repayment.

Secured credit facilities. During the nine-month period ending September 30, 2011, we repaid, in full, a $16,160 secured credit facility due to mature in October 2011.

As of September 30, 2011, we have $10,554 outstanding under our remaining secured credit facility. During the three-month period ended September 30, 2011, we renewed our remaining secured credit facility by repaying $8,993 of the $19,547 outstanding principal amount and amending the terms of the remaining $10,554 balance to extend the maturity date from December 2011 to December 2016 and provide for the full amortization of that balance over that five year period. In addition, the interest rate on our secured credit facility was amended to be a floating interest rate of LIBOR plus 275 basis points.

Senior secured notes. During the nine-month period ended September 30, 2011, the holder of the 10.0% senior secured convertible note, or the 10.0% senior note, converted $5,250 principal amount of the 10.0% senior note into 1,500,000 common shares. On April 26, 2011, we prepaid the remaining $15,700 principal amount of the 10.0% senior note.

Loans payable on real estate. During the nine-month period ended September 30, 2011 we refinanced recourse financing consisting of a first mortgage of $12,500 principal amount with a fixed rate of 5.8%, due in April 2012, that was associated with one of our owned real estate properties with non-recourse financing provided by a consolidated securitization. In addition, we refinanced recourse financing consisting of a first mortgage of $7,113 principal amount with a fixed rate of 5.0% due in September 2013, that was associated with one of our owned real estate properties with non-recourse financing provided by a consolidated securitization.

Non-Recourse Indebtedness

CDO notes payable, at amortized cost. CDO notes payable at amortized cost represent notes issued by consolidated CDO entities which are used to finance the acquisition of unsecured REIT notes, CMBS securities, commercial mortgages, mezzanine loans, and other loans in our commercial real estate portfolio. Generally, CDO notes payable are comprised of various classes of notes payable, with each class bearing interest at variable or fixed rates. Both of our CRE CDOs are meeting all of their overcollateralization, or OC, and interest coverage, or IC, trigger tests as of September 30, 2011.

During the nine-month period ended September 30, 2011, we repurchased, from the market, a total of $6,700 in aggregate principal amount of CDO notes payable issued by our RAIT I CDO securitization. The aggregate purchase price was $2,499 and we recorded a gain on extinguishment of debt of $4,202.

15

RAIT Financial Trust

Notes to Consolidated Financial Statements

As of September 30, 2011

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

During the nine-month period ended September 30, 2011, we repurchased, from the market, a total of $15,000 in aggregate principal amount of CDO notes payable issued by our RAIT II CDO securitization. The aggregate purchase price was $4,542 and we recorded a gain on extinguishment of debt of $10,458.

CDO notes payable, at fair value. Both of our Taberna consolidated CDOs are failing OC trigger tests which cause a change to the priority of payments to the debt and equity holders of the respective securitizations. Upon the failure of an OC test, the indenture of each CDO requires cash flows that would otherwise have been distributed to us as equity distributions, or in some cases interest payments on our retained CDO notes payable, be used to pay down sequentially the outstanding principal balance of the most senior note holders. The OC tests failures are due to defaulted collateral assets and credit risk securities. During the nine-month period ended September 30, 2011, $24,618 of cash flows were re-directed from our retained interests in these CDOs and were used to repay the most senior holders of our CDO notes payable.

Loans payable on real estate. During the nine-month period ended September 30, 2011, we obtained a first mortgage on an investment in real estate from the Federal National Mortgage Association that has a principal balance of $13,400, 7 year term, and a 5.12% interest rate and a first mortgage on an investment in real estate from Bank of America that has a principal balance of $24,000, 10 year term, and a 6.09% interest rate.

NOTE 7: DERIVATIVE FINANCIAL INSTRUMENTS

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

Cash Flow Hedges

We have entered into various interest rate swap contracts to hedge interest rate exposure on floating rate indebtedness. We designate interest rate hedge agreements at inception and determine whether or not the interest rate hedge agreement is highly effective in offsetting interest rate fluctuations associated with the identified indebtedness. At designation, certain of these interest rate swaps had a fair value not equal to zero. However, we concluded, at designation, that these hedging arrangements were highly effective during their term using regression analysis and determined that the hypothetical derivative method would be used in measuring any ineffectiveness. At each reporting period, we update our regression analysis and, as of September 30, 2011, we concluded that these hedging arrangements were highly effective during their remaining term and used the hypothetical derivative method in measuring the ineffective portions of these hedging arrangements.

The following table summarizes the aggregate notional amount and estimated net fair value of our derivative instruments as of September 30, 2011 and December 31, 2010:

	As of September 30, 2011					As of December 31, 2010
	Notional		Fair Value			Notional		Fair Value
Cash flow hedges:
Interest rate swaps	$	1,677,900	$	(194,224	)	$	1,786,698	$	(184,878	)
Interest rate caps		36,000		1,308			36,000		1,496
Net fair value	$	1,713,900	$	(192,916	)	$	1,822,698	$	(183,382	)

In November 2011, an interest rate swap agreement, that had a notional amount of $107,113 and strike rate of 5.25%, as of September 30, 2011, will terminate in accordance with its terms.

For interest rate swaps that are considered effective hedges, we reclassified realized losses of $10,748 and $11,391 to earnings for the three-month periods ended September 30, 2011 and 2010 and $32,884 and $34,662 for the nine-month periods ended September 30, 2011 and 2010. For interest rate swaps that are considered ineffective hedges, we reclassified unrealized gains of $12 to earnings for the three-month period ended September 30, 2010 and $50 for the nine-month period ended September 30, 2010.

On January 1, 2008, we adopted the fair value option, which has been classified under FASB ASC Topic 825, “Financial Instruments”, for certain of our CDO notes payable. Upon the adoption of this standard, hedge accounting for any previously designated cash flow hedges associated with these CDO notes payable was discontinued and all changes in fair value of these cash flow hedges are recorded in earnings. As of September 30, 2011, the notional value associated with these cash flow hedges where hedge accounting was discontinued was $967,276 and had a liability balance with a fair value of $99,012. See Note 8: “Fair Value of Financial Instruments” for the changes in value of these hedges during the three-month and nine-month periods ended September 30, 2011 and 2010. The change in value of these hedges was recorded as a component of the change in fair value of financial instruments in our consolidated statement of operations.

16

RAIT Financial Trust

Notes to Consolidated Financial Statements

As of September 30, 2011

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

Amounts reclassified to earnings associated with effective cash flow hedges are reported in interest expense and the fair value of these hedge agreements is included in other assets or derivative liabilities.

NOTE 8: 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 mortgages and loans, investments in securities, CDO notes payable, convertible senior notes, junior subordinated notes and derivative assets and liabilities is based on significant observable and unobservable inputs. The fair value of cash and cash equivalents, restricted cash, secured credit facilities, senior secured notes, loans payable on real estate and other indebtedness approximates cost due to the nature of these instruments.

The following table summarizes the carrying amount and the fair value of our financial instruments as of September 30, 2011:

Financial Instrument	Carrying Amount		Estimated Fair  Value
Assets
Commercial mortgages, mezzanine loans and other loans	$	1,107,429	$	1,055,886
Investments in securities and security-related receivables		719,546		719,546
Cash and cash equivalents		29,693		29,693
Restricted cash		287,877		287,877
Derivative assets		1,308		1,308
Liabilities
Recourse indebtedness:
7.0% convertible senior notes		107,466		78,775
6.875% convertible senior notes		38,950		38,413
Secured credit facilities		10,554		10,554
Senior secured notes		43,000		43,000
Junior subordinated notes, at fair value		22,450		22,450
Junior subordinated notes, at amortized cost		25,100		14,809
Non-recourse indebtedness:
CDO notes payable, at amortized cost		1,323,046		722,012
CDO notes payable, at fair value		130,694		130,694
Loans payable on real estate		91,990		91,990
Derivative liabilities		194,224		194,224

Fair Value Measurements

The following tables summarize information about our assets and liabilities measured at fair value on a recurring basis as of September 30, 2011, and indicate the fair value hierarchy of the valuation techniques utilized to determine such fair value:

Assets:	Quoted Prices in Active  Markets for Identical Assets (Level 1) (a)		Significant Other Observable  Inputs (Level 2) (a)		Significant Unobservable  Inputs (Level 3) ) (a)		Balance as of September  30, 2011
Trading securities
TruPS	$	0	$	0	$	480,607	$	480,607
Other securities		0		0		0		0
Available-for-sale securities		0		2		0		2
Security-related receivables
TruPS receivables		0		0		84,162		84,162
Unsecured REIT note receivables		0		63,477		0		63,477
CMBS receivables		0		70,709		0		70,709
Other securities		0		20,589		0		20,589
Derivative assets		0		1,308		0		1,308
Total assets	$	0	$	156,085	$	564,769	$	720,854

17

RAIT Financial Trust

Notes to Consolidated Financial Statements

As of September 30, 2011

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

Liabilities:	Quoted Prices in Active  Markets for Identical Assets (Level 1) (a)		Significant Other Observable  Inputs (Level 2) (a)		Significant Unobservable  Inputs (Level 3) ) (a)		Balance as of September  30, 2011
Junior subordinated notes, at fair value	$	0	$	0	$	22,450	$	22,450
CDO notes payable, at fair value		0		0		130,694		130,694
Derivative liabilities		0		93,904		100,320		194,224
Total liabilities	$	0	$	93,904	$	253,464	$	347,368

(a) During the nine-month period ended September 30, 2011, there were no transfers between Level 1 and Level 2, as well as, there were no transfers into and out of Level 3.

The following tables summarize additional information about assets and liabilities that are measured at fair value on a recurring basis for which we have utilized level 3 inputs to determine fair value for the nine-month period ended September 30, 2011:

Assets	Trading Securities—TruPS and Subordinated Debentures			Security-Related Receivables—TruPS and Subordinated Debenture Receivables		Total Level 3 Assets
Balance, as of December 31, 2010	$	454,473		$	83,087	$	537,560
Change in fair value of financial instruments		84,259			1,075		85,334
Purchases		0			0		0
Sales		(58,125	)		0		(58,125	)
Balance, as of September 30, 2011	$	480,607		$	84,162	$	564,769

Liabilities	Derivative Liabilities		CDO Notes Payable,  at Fair Value			Junior Subordinated Notes, at Fair Value		Total Level 3 Liabilities
Balance, as of December 31, 2010	$	87,632	$	148,072		$	4,422	$	240,126
Change in fair value of financial instruments		12,688		7,239			18,028		37,955
Purchases		0		0			0		0
Sales		0		0			0		0
Principal repayments		0		(24,617	)		0		(24,617	)
Balance, as of September 30, 2011	$	100,320	$	130,694		$	22,450	$	253,464

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” as reported in change in fair value of financial instruments in the accompanying consolidated statements of operations:

	For the  Three-Month Periods Ended September 30						For the  Nine-Month Periods Ended September 30
Description	2011			2010			2011			2010
Change in fair value of trading securities and security-related receivables	$	2,924		$	26,004		$	21,559		$	109,003
Change in fair value of CDO notes payable, trust preferred obligations and other liabilities		(11,406	)		7,555			(25,268	)		(891	)
Change in fair value of derivatives		(26,515	)		(19,322	)		(51,404	)		(72,992	)
Change in fair value of financial instruments	$	(34,997	)	$	14,237		$	(55,113	)	$	35,120

The changes in the fair value for the investment in securities, CDO notes payable and other liabilities for which the fair value option was elected for the three-month and nine-month periods ended September 30, 2011 and 2010 was primarily attributable to changes in instrument specific credit risks. The changes in the fair value of derivatives for which the fair value option was elected for the three-month and nine-month periods ended September 30, 2011 and 2010 was mainly due to changes in interest rates.

18

RAIT Financial Trust

Notes to Consolidated Financial Statements

As of September 30, 2011

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

NOTE 9: VARIABLE INTEREST ENTITIES

The following table presents the assets and liabilities of our consolidated VIEs as of each respective date. As of September 30, 2011 our consolidated VIEs were: Taberna Preferred Funding VIII, Ltd., Taberna Preferred Funding IX, Ltd, RAIT CRE CDO I, Ltd., RAIT Preferred Funding II, Ltd., Willow Grove and Cherry Hill.

	As of September 30, 2011			As of December 31, 2010
Assets
Investments in mortgages and loans, at amortized cost:
Commercial mortgages, mezzanine loans, other loans and preferred equity interests	$	1,869,713		$	1,913,089
Allowance for losses		(13,083	)		(15,526	)
Total investments in mortgages and loans		1,856,630			1,897,563
Investments in real estate		21,046			21,054
Investments in securities and security-related receivables, at fair value		719,555			705,455
Cash and cash equivalents		327			73
Restricted cash		149,972			151,045
Accrued interest receivable		56,894			55,105
Other assets		27,421			0
Deferred financing costs, net of accumulated amortization of $10,359 and $8,608, respectively		16,021			17,999
Total assets	$	2,847,866		$	2,848,294
Liabilities and Equity
Indebtedness (including $130,694 and $148,072 at fair value, respectively)	$	1,691,049		$	1,707,352
Accrued interest payable		45,144			34,745
Accounts payable and accrued expenses		1,450			1,450
Derivative liabilities		194,224			184,878
Deferred taxes, borrowers’ escrows and other liabilities		0			3,814
Total liabilities		1,931,867			1,932,239
Equity:
Shareholders’ equity:
Accumulated other comprehensive income (loss)		(121,966	)		(123,316	)
RAIT Investment		55,700			103,862
Retained earnings		982,265			935,509
Total shareholders’ equity		915,999			916,055
Total liabilities and equity	$	2,847,866		$	2,848,294

The assets of the VIEs can only be used to settle obligations of the VIEs and are not available to our creditors. Certain amounts included in the table above are eliminated upon consolidation with other RAIT subsidiaries that maintain investments in the debt or equity securities issued by these entities.

RAIT does not have any contractual obligation to provide the VIEs listed above with any financial support. RAIT has not provided and does not intend to provide financial support to these VIEs that we were not previously contractually required to provide.

NOTE 10: EQUITY

Preferred Shares

On January 25, 2011, our board of trustees declared a first quarter 2011 cash dividend of $0.484375 per share on our 7.75% Series A Preferred Shares, $0.5234375 per share on our 8.375% Series B Preferred Shares and $0.5546875 per share on our 8.875% Series C Preferred Shares. The dividends were paid on March 31, 2011 to holders of record on March 1, 2011 and totaled $3,414.

On May 17, 2011, our board of trustees declared a second quarter 2011 cash dividend of $0.484375 per share on our 7.75% Series A Preferred Shares, $0.5234375 per share on our 8.375% Series B Preferred Shares and $0.5546875 per share on our 8.875% Series C Preferred Shares. The dividends were paid on June 30, 2011 to holders of record on June 1, 2011 and totaled $3,414.

On July 26, 2011, our board of trustees declared a third quarter 2011 cash dividend of $0.484375 per share on our 7.75% Series A Preferred Shares, $0.5234375 per share on our 8.375% Series B Preferred Shares and $0.5546875 per share on our 8.875% Series C Preferred Shares. The dividends were paid on September 30, 2011 to holders of record on September 1, 2011 and totaled $3,407.

19

RAIT Financial Trust

Notes to Consolidated Financial Statements

As of September 30, 2011

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

On October 25, 2011, our board of trustees declared a fourth quarter 2011 cash dividend of $0.484375 per share on our 7.75% Series A Preferred Shares, $0.5234375 per share on our 8.375% Series B Preferred Shares and $0.5546875 per share on our 8.875% Series C Preferred Shares. The dividends will be paid on January 3, 2012 to holders of record on December 1, 2011.

Common Shares

Dividends:

On January 10, 2011, the board of trustees declared a $0.09 dividend on our common shares to holders of record as of January 21, 2011. The dividend was paid on January 31, 2011 and totaled $3,204.

On May 17, 2011, the board of trustees declared a $0.06 dividend on our common shares to holders of record as of July 8, 2011. The dividend was paid on July 29, 2011 and totaled $2,293.

On September 12, 2011, the board of trustees declared a $0.06 dividend on our common shares to holders of record as of October 7, 2011. The dividend was paid on October 31, 2011 and totaled $2,405 and is included in other liabilities in the accompanying consolidated balance sheet.

Reverse Stock Split:

On May 17, 2011, the board of trustees authorized a 1-for-3 reverse stock split of our common shares of beneficial interest that became effective on June 30, 2011, or the effective time. At the effective time, every three common shares issued and outstanding were automatically combined into one issued and outstanding new common share. The par value of new common shares changed to $0.03 per share after the reverse stock split from the par value of common shares prior to the reverse stock split of $0.01 per share. The reverse stock split reduced the number of common shares outstanding but did not change the number of authorized common shares. The reverse stock split did not affect our preferred shares of beneficial interest. All references in the accompanying financial statements to the number of common shares and earnings per share data for all periods presented have been adjusted to reflect the reverse stock split.

Share Repurchases:

On January 25, 2011, the compensation committee of our board of trustees approved a cash payment to the board’s eight non-management trustees intended to constitute a portion of their respective 2011 annual non-management trustee compensation. The cash payment was subject to terms and conditions set forth in a letter agreement, or the letter agreement, between each of the non-management trustees and RAIT. The terms and conditions included a requirement that each trustee use a portion of the cash payment to purchase RAIT’s common shares in purchases that, individually and in the aggregate with all purchases made by all the other non-management trustees pursuant to their respective letter agreements, complied with Rule 10b-18 promulgated under the Securities Exchange Act of 1934, as amended. The aggregate amount required to be used by all of the non-management trustees to purchase common shares was $210 and was used to purchase 18,898 common shares, in the aggregate, in February 2011.

Equity Compensation:

During the nine-months ended September 30, 2011, 340,649 phantom unit awards were redeemed for common shares, a portion of which was withheld in order to satisfy the applicable withholding taxes. These phantom units were fully vested at the time of redemption.

Dividend Reinvestment and Share Purchase Plan (DRSPP):

We implemented an amended and restated dividend reinvestment and share purchase plan, or DRSPP, effective as of March 13, 2008, pursuant to which we registered and reserved for issuance 6,262,545 common shares. During the nine-month period ended September 30, 2011, we issued a total of 1,158,292 common shares pursuant to the DRSPP at a weighted-average price of $3.74 per share and we received $4,257 of net proceeds. As of September 30, 2011, 2,740,920 common shares, in aggregate, remain available for issuance under the DRSPP. Effective October 28, 2011, we registered and reserved for issuance an additional 7,759,080 common shares for issuance under the DRSPP so that the aggregate number of common shares available for issuance under the DRSPP was 10,500,000 common shares.

Capital on Demand™ Sales Agreement:

On August 6, 2010, we entered into a Capital on Demand™ Sales Agreement, or the COD sales agreement, with JonesTrading Institutional Services LLC, or JonesTrading, pursuant to which we may issue and sell up to 5,833,333 of our common shares from time to time through JonesTrading acting as agent and/or principal, subject to the terms and conditions of the COD sales agreement. For the nine-month period ended September 30, 2011, 2,815,528 common shares were issued pursuant to this arrangement at a

20

RAIT Financial Trust

Notes to Consolidated Financial Statements

As of September 30, 2011

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

weighted average price of $8.77 and we received $22,934 of proceeds. As of September 30, 2011, there are no common shares that remain available for issuance under the COD sales agreement.

NOTE 11: EARNINGS (LOSS) PER SHARE

The following table presents a reconciliation of basic and diluted earnings (loss) per share for the three-month and nine-month periods ended September 30, 2011 and 2010:

	For the  Three-Month Periods Ended September 30						For the  Nine-Month Periods Ended September 30
	2011			2010			2011			2010
Income (loss) from continuing operations	$	(17,771	)	$	20,804		$	(26,188	)	$	79,707
(Income) loss allocated to preferred shares		(3,407	)		(3,406	)		(10,235	)		(10,227	)
(Income) loss allocated to noncontrolling interests		59			210			176			803
Income (loss) from continuing operations allocable to common shares		(21,119	)		17,608			(36,247	)		70,283
Income (loss) from discontinued operations		(50	)		(2,556	)		747			(1,630	)
Net income (loss) allocable to common shares	$	(21,169	)	$	15,052		$	(35,500	)	$	68,653
Weighted-average shares outstanding—Basic		38,771,022			30,330,259			37,822,750			27,384,451
Dilutive securities under the treasury stock method		0			556,886			0			416,197
Weighted-average shares outstanding—Diluted		38,771,022			30,887,145			37,822,750			27,800,648
Earnings (loss) per share—Basic:
Continuing operations	$	(0.55	)	$	0.58		$	(0.96	)	$	2.57
Discontinued operations		0.00			(0.08	)		0.02			(0.06	)
Total earnings (loss) per share—Basic	$	(0.55	)	$	0.50		$	(0.94	)	$	2.51
Earnings (loss) per share—Diluted:
Continuing operations	$	(0.55	)	$	0.57		$	(0.96	)	$	2.53
Discontinued operations		0.00			(0.08	)		0.02			(0.06	)
Total earnings (loss) per share—Diluted	$	(0.55	)	$	0.49		$	(0.94	)	$	2.47

For the three-month and nine-month periods ended September 30, 2011, securities convertible into 1,275,244 common shares, respectively, were excluded from the earnings (loss) per share computations because their effect would have been anti-dilutive. For the three-month and nine-month periods ended September 30, 2010, securities convertible into 3,698,272 common shares, respectively, were excluded from the earnings (loss) per share computations because their effect would have been anti-dilutive.

NOTE 12: RELATED PARTY TRANSACTIONS

In the ordinary course of our business operations, we have ongoing relationships and have engaged in transactions with several 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 on an arm’s-length basis from an unaffiliated third party or otherwise not creating a conflict of interest.

Scott F. Schaeffer is our Chairman, Chief Executive Officer and President, and is a Trustee. Mr. Schaeffer’s spouse is a director of The Bancorp, Inc., or Bancorp, and she and Mr. Schaeffer own, in the aggregate, less than 1% of Bancorp’s outstanding common shares. Each transaction with Bancorp is described below:

a). Cash and Restricted Cash—We maintain checking and demand deposit accounts at Bancorp. As of September 30, 2011 and December 31, 2010, we had $7,848 and $72, respectively, of cash and cash equivalents and $577 and $985, respectively, of restricted cash on deposit at Bancorp. We did not receive any interest income from the Bancorp during the three-month and nine-month periods ended September 30, 2011 and 2010. Restricted cash held at Bancorp relates to borrowers’ escrows for taxes, insurance and capital reserves. Any interest earned on these deposits enures to the benefit of the specific borrower and not to us.

b). Office Leases—We sublease a portion of our downtown Philadelphia office space from Bancorp under a lease agreement extending through August 2014 at an annual rental expense based upon the amount of square footage occupied. We have a sublease agreement with a third party for the remaining term of our sublease. Rent paid to Bancorp was $78 and

21

RAIT Financial Trust

Notes to Consolidated Financial Statements

As of September 30, 2011

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

$79 for the three-month periods ended September 30, 2011 and 2010, respectively and $240 and $226 for the nine-month periods ended September 30, 2011 and 2010. Rent received for our sublease was $42 for the three-month periods ended September 30, 2011 and 2010 and was $127 and $124 for the nine-month periods ended September 30, 2011 and 2010.

NOTE 13: DISCONTINUED OPERATIONS

For the three-month and nine-month periods ended September 30, 2011, income (loss) from discontinued operations relates to one real estate property sold since January 1, 2011. For the three-month and nine-month periods ended September 30, 2010, income (loss) from discontinued operations relates to three real estate properties designated as held for sale and four real estate properties that we sold or deconsolidated since January 1, 2010. The following table summarizes revenue and expense information for real estate properties classified as discontinued operations:

	For the  Three-Month Periods Ended September 30						For the  Nine-Month Periods Ended September 30
	2011			2010			2011			2010
Revenue:
Rental income	$	0		$	2,397		$	2,072		$	7,495
Expenses:
Real estate operating expense		(3	)		1,411			1,205			4,626
General and administrative expense		0			0			1			0
Depreciation expense		0			631			0			1,856
Total expenses		(3	)		2,042			1,206			6,482
Income (loss) before interest and other income		3			355			866			1,013
Interest and other income		0			0			0			2
Income (loss) from discontinued operations		3			355			866			1,015
Gain (loss) on sale of assets		(53	)		(2,911	)		(119	)		(2,645	)
Total income (loss) from discontinued operations	$	(50	)	$	(2,556	)	$	747		$	(1,630	)

Discontinued operations have not been segregated in the consolidated statements of cash flows. Therefore, amounts for certain captions will not agree with respective data in the consolidated statements of operations.

NOTE 14: COMMITMENTS AND CONTINGENCIES

Routine Litigation

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

NOTE 15: ACQUISITIONS

On January 20, 2011, we acquired a development stage, non-traded public REIT and subsequently changed its name to Independence Realty Trust, Inc., or Independence. We paid approximately $2.5 million for Independence and certain of its affiliated entities including the entity that serves as Independence’s external advisor and its dealer manager. Independence is currently a subsidiary of RAIT.

We are the external manager of Independence and expect Independence to raise capital for investing in multi-family commercial real estate assets through a public offering of its common stock. The registration statement relating to Independence’s public offering of its common stock was declared effective by the SEC on June 10, 2011. We are the sponsor of Independence’s offering and we incurred expenses on Independence’s behalf in connection with this offering. Our ability to be reimbursed for these expenses will depend on the terms and success of the offering. Any disclosure concerning Independence is neither an offer nor a solicitation to purchase securities issued by Independence.

22

RAIT Financial Trust

Notes to Consolidated Financial Statements

As of September 30, 2011

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

NOTE 16: SUBSEQUENT EVENTS

On October 5, 2011, we entered into an exchange agreement with Taberna VIII pursuant to which we issued four senior secured notes, or the senior notes, with an aggregate principal amount equal to $100 million to Taberna VIII in exchange for a portfolio of real estate related debt securities, or the exchanged securities, held by Taberna VIII. Taberna VIII is a subsidiary of ours and, as a result, the senior secured notes will be eliminated in consolidation. The senior notes and the exchanged securities were determined to have approximately equivalent fair market value at the time of the exchange.

The senior notes were issued pursuant to an indenture agreement dated October 5, 2011 and contains customary events of default, including those relating to nonpayment of principal or interest when due and defaults based upon events of bankruptcy and insolvency. The four senior notes have the following terms:

Note Number	Principal Amount		Fixed Interest Rate			Maturity Date
1	$	25,000		6.75	%	April 30, 2017
2	$	25,000		6.85	%	October 30, 2017
3	$	25,000		7.15	%	October 30, 2018
4	$	25,000		7.25	%	April 30, 2019

Interest accrues from October 5, 2011 and will be payable quarterly in arrears on October 30, January 30, April 30 and July 30 of each year, beginning October 30, 2011. The senior notes are secured and are not convertible into equity securities of RAIT.

In October 2011, we sold four commercial real estate mortgages with an unpaid principal balance of $60,869 for gross proceeds of $63,991. As of September 30, 2011, we were holding $64,152 in restricted cash that was pending the completion of our sale of four loans in October 2011.

During October 2011, we repurchased $34,231 in aggregate principal amount of our 6.875% Convertible Senior Notes due 2027, which are redeemable at the option of the holder in April 2012, for an aggregate purchase price of $34,347. As a result of these transactions we recorded a loss on the extinguishment of debt of $777.

Subsequent to September 30, 2011, we prepaid, in full, our $43,000 12.5% Senior Secured Notes due to mature in April 2014.

On October 27, 2011, we entered into a two year repurchase agreement, or the CMBS facility, pursuant to which we may sell, and later repurchase, performing whole mortgage loans or senior interests in whole mortgage loans secured by first liens on stabilized commercial properties which meet current standards for inclusion in commercial mortgage-backed securities, or CMBS, transactions. The aggregate principal amount of the CMBS facility is $100,000 and incurs interest at LIBOR plus 250 basis points. The CMBS facility contains standard margin call provisions and financial covenants.

Subsequent to September 30, 2011, we completed the conversion of one commercial real estate loan with a carrying value of $22,797 to real estate owned properties. We are completing the process of estimating the fair value of the assets acquired.

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Board of Trustees and Shareholders of RAIT Financial Trust

We have reviewed the accompanying consolidated balance sheet of RAIT Financial Trust and subsidiaries as of September 30, 2011 and the related consolidated statements of operations, other comprehensive income (loss) and cash flows for the three and nine month periods ended September 30, 2011 and 2010. These interim financial statements are the responsibility of the Company’s management.

We conducted our review in accordance with the standards of the Public Company Accounting Oversight Board (United States). A review of interim financial information consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with the standards of the Public Company Accounting Oversight Board (United States), the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.

Based on our review, we are not aware of any material modifications that should be made to the accompanying financial statements for them to be in conformity with accounting principles generally accepted in the United States of America.

The Company adopted the new accounting standards classified under FASB ASC Topic 810, “Consolidation” for variable interest entities on January 1, 2010.

We have previously audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheet as of December 31, 2010, and the related consolidated statements of operations, other comprehensive income (loss), shareholders’ equity and cash flows for the year then ended (not presented herein), and in our report dated February 25, 2011, we expressed an unqualified opinion on those consolidated financial statements.

/s/ Grant Thornton LLP

Philadelphia, Pennsylvania

November 4, 2011

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Forward-Looking Statements

In addition to historical information, this discussion and analysis contains forward-looking statements. These statements can be identified by the use of forward-looking terminology including “may,” “believe,” “will,” “expect,” “anticipate,” “estimate,” “continue” or similar words. These forward-looking statements are subject to risks and uncertainties, as more particularly set forth in our filings with the Securities and Exchange Commission, including those described in the “Forward Looking Statements” and “Risk Factors” sections of our Annual Report on Form 10-K for the year ended December 31, 2010, that could cause actual results to differ materially from those projected in the forward-looking statements. Readers are cautioned not to place undue reliance on these forward-looking statements, which reflect management’s analysis only as of the date hereof. We undertake no obligation to publicly revise or update these forward-looking statements to reflect events or circumstances that arise after the date of this report, except as may be required by applicable law.

Overview

We are a vertically integrated commercial real estate company capable of originating, investing in, managing, servicing, trading and advising on commercial real estate-related assets. We continue to progress in adapting RAIT to the current market environment. We are positioning RAIT for future growth in the area of its historical core competency, commercial real estate lending, while diversifying the revenue generated from our commercial real estate loans and properties and reducing or removing other non-core assets and activities.

In order to take advantage of market opportunities in the future, and to maximize shareholder value over time, we will continue to focus on:

• expanding RAIT’s commercial real estate revenue by investing in commercial real estate-related assets, managing and servicing investments for our own account or for others, providing property management services and providing our broker-dealer activities;

• creating value through investing in our commercial real estate properties and implementing cost savings programs to help maximize property value over time;

• reducing our leverage while developing new financing sources;

• accessing capital through the independent broker-dealer networks;

• managing our investment portfolios to reposition non-performing assets, increase our cash flows and ultimately recover the value of our assets over time; and

• managing the size and cost structure of our business to match our operating environment.

We generated net loss allocable to common shares of $35.5 million, or $0.94 per common share-diluted, during the nine-month period ended September 30, 2011. The primary items affecting our performance were the following:

• Change in fair value of financial instruments. For the nine-month period ended September 30, 2011, the net change in fair value of financial instruments decreased net income by $55.1 million. The primary driver of this decrease was our interest rate hedges and CDO Notes payable that we record at fair value under FASB ASC Topic 825, “Financial Instruments”. During the nine-months ended September 30, 2011, we experienced a general decline in interest rates across the interest rate curve which caused declines in the value of our interest rate hedges.

• Gains (losses) on debt extinguishments. During the nine-month period ended September 30, 2011, we repurchased $104.8 million of our 6.875% convertible senior notes for an aggregate purchase price of $103.2 million. These transactions generated a loss on debt extinguishment of $0.1 million, including the write-off of unamortized deferred financing costs. During the nine-month period ended September 30, 2011, we repurchased, from the market, a total of $21,700 in aggregate principal amount of CDO notes payable issued by our RAIT I CDO and RAIT II CDO securitizations. The aggregate purchase price was $7,041 and we recorded a gain on extinguishment of debt of $14,659. See “Liquidity and Capital Resources-Capitalization” below for more information regarding these transactions.

We expect to continue to focus our efforts on enhancing our commercial real estate loan portfolio and our investments in real estate, which are our primary investment portfolios. Although economic conditions are improving, some of our borrowers within our commercial real estate loan portfolio are under financial stress. Where it is likely to enhance our ultimate returns, we will consider restructuring loans or foreclosing on the underlying property. During the nine-month period ended September 30, 2011, we converted two loans into direct ownership. We expect to engage in ongoing workout activity with respect to our commercial real estate loans that may result in the conversion of the property into owned real estate. We may take a non-cash charge to earnings at the time of any loan conversion to the extent the amount of our loan, reduced by any allowance for losses and certain other expenses, exceeds the fair value of the property at the time of the conversion.

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We are expanding our ability to benefit from positive developments in the commercial mortgage-backed securities, or CMBS, markets. We believe there is growing demand from unaffiliated commercial mortgage-backed securitizations for commercial real estate loans which meet market standards for inclusion in securitizations. We completed the sale of $61.0 million of CMBS eligible loans into an unaffiliated CMBS securitization in October 2011 and recently entered into a $100.0 million CMBS facility, which will be used to fund CMBS eligible loans we originate for sale into future CMBS securitizations.

We continue to explore opportunities arising from sponsoring non-traded REITs and similar vehicles due to our capacity to originate and manage commercial real estate-related assets. We believe non-traded REITs and similar vehicles offer new funding sources to raise equity capital through independent broker-dealer networks. We expect to benefit from non-traded REITs we form from compensation we would receive in its offering, managing its operations and any distributions on, or appreciation of, equity or other securities we may retain in them. To-date, we have sponsored Independence Realty Trust, Inc. that we acquired in January 2011.

Key Statistics

Set forth below are key statistics relating to our business through September 30, 2011 (dollars in thousands, except per share data):

	As of or For the Three-Month Periods Ended
	September 30, 2011			June 30, 2011			March 31, 2011			December 31, 2010			September 30, 2010
Financial Statistics:
Recourse debt maturing within 1-year (a)	$	1,833		$	19,745		$	20,040		$	41,489		$	7,919
Assets under management	$	3,633,133		$	3,763,184		$	3,822,534		$	3,837,526		$	3,901,342
Debt to equity		2.3	x		2.2	x		2.1	x		2.3	x		2.6	x
Total revenue	$	60,089		$	58,863		$	58,279		$	59,057		$	58,899
Earnings per share, diluted	$	(0.55	)	$	(0.53	)	$	0.16		$	0.86		$	0.49
Common dividend declared	$	0.06		$	0.06		$	0.09	(b)	$	0.00	(b)	$	0.00	(b)
Commercial Real Estate (“CRE”) Loan Portfolio (c):
Reported CRE Loans—unpaid principal	$	1,064,946		$	1,122,898		$	1,149,169		$	1,173,141		$	1,216,875
Non-accrual loans—unpaid principal	$	91,833		$	94,117		$	121,054		$	122,306		$	143,212
Non-accrual loans as a % of reported loans		8.6	%		8.4	%		10.5	%		10.4	%		11.8	%
Reserve for losses	$	50,609		$	49,906		$	58,809		$	61,731		$	73,029
Reserves as a % of non-accrual loans		55.1	%		53.0	%		48.6	%		50.5	%		51.0	%
Provision for losses	$	500		$	950		$	1,950		$	2,500		$	10,813
CRE Property Portfolio:
Reported investments in real estate	$	849,232		$	851,916		$	859,983		$	839,192		$	818,184
Number of properties owned		48			48			48			47			47
Multifamily units owned		8,014			8,014			8,311			8,311			8,231
Office square feet owned		1,786,860			1,786,908			1,786,908			1,632,978			1,634,997
Retail square feet owned		1,114,250			1,116,171			1,116,063			1,116,112			1,069,588
Average physical occupancy data:
Multifamily properties		89.8	%		88.6	%		88.0	%		85.5	%		84.6	%
Office properties		68.5	%		68.8	%		70.7	%		67.8	%		52.5	%
Retail properties		68.9	%		62.0	%		56.3	%		58.8	%		57.7	%
Total		84.5	%		83.1	%		82.4	%		79.2	%		74.8	%

(a) Excludes our 6.875% convertible senior notes that have a final maturity in April 2027 but are redeemable in full in April 2012. Includes any principal amortization on recourse debt that is required prior to the stated maturity.

(b) On January 10, 2011, we declared a 2010 annual cash dividend on our common shares of $0.09 per common share, split adjusted. The dividends were paid on January 31, 2011 to holders of record on January 21, 2011.

(c) CRE Loan Portfolio includes commercial mortgages, mezzanine loans, and preferred equity interests only and does not include other loans. See Note 3-”Investments in Loans” in the Notes to Consolidated Financial Statements for information relating to all loans held by RAIT.

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Investors should read Management’s Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the fiscal year ended December 31, 2010, or the Annual Report, for a detailed discussion of the following items:

• Credit, capital markets and liquidity risk.

• Interest rate environment.

• Prepayment rates.

• Commercial real estate lack of liquidity and reduced performance.

Our Investment Portfolio

Our consolidated investment portfolio is currently comprised of the following asset classes:

Commercial mortgages, mezzanine loans, other loans and preferred equity interests. We own and originate senior long-term mortgage loans, short-term bridge loans, subordinated, or “mezzanine,” financing and preferred equity interests. 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. We may from time to time acquire existing commercial real estate loans from third parties who have originated such loans, including banks, other institutional lenders or third-party investors. Where possible, we seek to maintain direct lending relationships with borrowers, as opposed to investing in loans controlled by third party lenders.

The tables below describe certain characteristics of our commercial mortgages, mezzanine loans, other loans and preferred equity interests as of September 30, 2011 (dollars in thousands):

	Book Value		Weighted- Average Coupon			Range of Maturities	Number of Loans
Commercial Real Estate (CRE) Loans
Commercial mortgages	$	654,497		6.7	%	Nov. 2011 to May 2021		39
Mezzanine loans		339,843		8.9	%	Nov. 2011 to Nov. 2038		93
Preferred equity interests		60,070		10.5	%	Nov. 2011 to Aug. 2025		21
Total CRE Loans		1,054,410		7.6	%			153
Other loans		54,226		6.4	%	Nov. 2011 to Oct. 2016		4
Total investments in loans	$	1,108,636		7.6	%			157

We currently have limited capacity to originate new investments. However, we are focusing on this asset class as economic conditions improve and our lending capacity increases. For the nine month period ended September 30, 2011, we originated $79.6 million in commercial mortgages.

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The charts below describe the property types and the geographic breakdown of our commercial mortgages, mezzanine loans, other loans, and preferred equity interests as of September 30, 2011:

(a) Based on book value.

Investments in real estate. We generate a return on our real estate investments through rental income and other sources of income from the operations of our real estate investments. By owning real estate, we also participate in any increase in the value of the real estate in addition to current income. We finance our real estate holdings through a combination of secured mortgage financing provided by financial institutions and existing financing provided by our two CRE loan securitizations. During the nine-month period ended September 30, 2011, we acquired $78.3 million of real estate investments upon conversion of $85.4 million of commercial real estate loans, typically retaining the existing financing provided by our two CRE loan securitizations.

The table below describes certain characteristics of our investments in real estate as of September 30, 2011 (dollars in thousands, except average effective rent):

	Investments in Real  Estate (a)		Average Physical Occupancy			Units/ Square Feet/ Acres		Number  of Properties		Average Effective Rent (a)
Multi-family real estate properties (b)	$	555,916		89.8	%		8,014		33	$	688
Office real estate properties (c)		224,981		68.5	%		1,786,860		10		18.93
Retail real estate properties (c)		46,127		68.9	%		1,114,250		2		8.65
Parcels of land		22,208		0	%		7.3		3		N/A
Total	$	849,232		84.5	%				48

(a) Based on operating performance for the nine-month period ended September 30, 2011.

(b) Average effective rent is rent per unit per month.

(c) Average effective rent is rent per square foot per year.

We expect this asset category to increase in size as we may find it desirable to protect or enhance our risk-adjusted returns by taking control of properties underlying our commercial real estate loans when restructuring or otherwise exercising our remedies regarding underperforming loans.

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The charts below describe the property types and the geographic breakdown of our investments in real estate as of September 30, 2011:

(a) Based on book value.

Investment in debt securities—TruPS and Subordinated Debentures. Historically, we provided REITs and real estate operating companies the ability to raise subordinated debt capital through TruPS and subordinated debentures. TruPS are long-term instruments, with maturities ranging from 5 to 30 years, which are priced based on short-term variable rates, such as the three-month London Inter-Bank Offered Rate, or LIBOR. TruPS are unsecured and generally contain minimal financial and operating covenants. We financed most of our debt securities portfolio in a series of non-recourse securitizations which provided long-dated, interest-only, match funded financing to the TruPS and subordinated debenture investments. As of September 30, 2011, we retained a controlling interest in two such securitizations—Taberna VIII and Taberna IX, which are consolidated entities. All of the collateral assets for the debt securities and the related non-recourse securitization financing obligations are presented at fair value in our consolidated financial statements. During 2011, due to the non-recourse nature of these entities and the recent credit performance of the underlying collateral, we received only our senior collateral management fees from these two securitizations.

The table below describes our investment in TruPS and subordinated debentures as included in our consolidated financial statements as of September 30, 2011 (dollars in thousands):

						Issuer Statistics
Industry Sector	Estimated Fair  Value		Weighted- Average Coupon			Weighted Average Ratio of Debt to Total Capitalization			Weighted Average Interest Coverage Ratio
Commercial Mortgage	$	103,249		2.8	%		68.9	%		2.4x
Office		139,940		7.8	%		61.7	%		1.8x
Residential Mortgage		45,173		2.5	%		79.7	%		2.1x
Specialty Finance		86,239		5.0	%		84.2	%		(0.7	)x
Homebuilders		60,814		7.8	%		62.6	%		1.0x
Retail		74,510		3.9	%		60.6	%		1.6x
Hospitality		29,568		6.3	%		88.2	%		2.4x
Storage		25,276		8.0	%		58.8	%		4.5x
Total	$	564,769		5.0	%		69.1	%		1.6x

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The chart below describes the equity capitalization of our investment in TruPS and subordinated debentures as included in our consolidated financial statements as of September 30, 2011:

(a) Based on the most recent information available to management as provided by our TruPS issuers or through public filings.

(b) Based on estimated fair value.

Investment in debt securities—Other Real Estate Related Debt Securities. We have invested, and expect to continue to invest, in CMBS, unsecured REIT notes and other real estate-related debt securities.

Unsecured REIT notes are publicly traded debentures issued by large public reporting REITs and other real estate companies. These debentures generally pay interest semi-annually. These companies are generally rated investment grade by one or more nationally recognized rating agencies.

CMBS generally are multi-class debt or pass-through certificates secured or backed by single loans or pools of mortgage loans on commercial real estate properties. Our CMBS investments may include loans and securities that are rated investment grade by one or more nationally-recognized rating agencies, as well as both unrated and non-investment grade loans and securities.

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The table and the chart below describe certain characteristics of our real estate-related debt securities as of September 30, 2011 (dollars in thousands):

Investment Description	Estimated Fair  Value		Weighted- Average Coupon			Weighted- Average Years to Maturity		Book Value
Unsecured REIT note receivables	$	63,477		6.6	%		6.2	$	61,000
CMBS receivables		70,709		5.7	%		32.6		153,868
Other securities		20,591		3.2	%		32.0		88,205
Total	$	154,777		5.1	%		27.3	$	303,073

(a) S&P Ratings as of September 30, 2011.

Independence Realty Trust, Inc.

On January 20, 2011, we acquired a development stage, non-traded public REIT and subsequently changed its name to Independence Realty Trust, Inc. We paid approximately $2.5 million for Independence and certain of its affiliated entities. Independence is currently a subsidiary of RAIT.

We expect Independence to raise capital for investing in multi-family commercial real estate assets and sponsored its public offering of its common stock. Independence plans to offer a minimum of $2,500,000 and a maximum of $1,095,000,000 in shares of its common stock in its offering. These shares are being offered on a best efforts basis and we cannot assure you whether Independence will be able to raise capital in its offering and, if so, when and how much. No amounts have been raised in Independence’s offering as of the date of this filing. Any disclosure concerning Independence is neither an offer nor a solicitation to purchase securities issued by Independence. We incurred expenses on Independence’s behalf in connection with this offering. Our ability to be reimbursed for these expenses will depend on the terms and success of the offering.

Our subsidiaries serve as the dealer-manager, external advisor and property manager of Independence. We have contributed six multifamily properties with an aggregate purchase price of $103.8 million to Independence in exchange for the assumption by Independence of indebtedness associated with those properties of $64.6 million and $39.2 million of limited partner interests in Independence’s operating partnership. We may contribute additional properties to Independence.

Securitization Summary

Overview. We have used securitizations, mainly through CDOs, to match fund the interest rates and maturities of our assets with the interest rates and maturities of the related financing. This strategy has helped us reduce interest rate and funding risks on our portfolios for the long-term. To finance our investments in the foreseeable future, management will seek to structure match funded financing through reinvesting asset repayments in our existing securitizations, loan participations, bank lines of credit, joint-venture opportunities and other methods that preserve our capital while making investments that generate an attractive return.

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CDO Performance. Our CDOs contain interest coverage and overcollateralization triggers, or OC Triggers, that must be met in order for us to receive our subordinated management fees and our lower-rated debt or residual equity returns. If the interest coverage or OC Triggers are not met in a given period, then the cash flows are redirected from lower rated tranches and used to repay the principal amounts to the senior tranches of CDO notes payable. These conditions and the re-direction of cash flow continue until the triggers are met by curing the underlying payment defaults, paying down the CDO notes payable or other actions permitted under the relevant CDO indenture.

As of the most recent payment information, the Taberna I, Taberna VIII and Taberna IX CDO securitizations that we manage were not passing all of their required interest coverage or OC Triggers and we received only senior asset management fees. While events of default do not currently exist in the CDO securitizations that we manage, we are unable to predict with certainty which CDOs, in the future, will experience events of default or which, if any, remedies the appropriate note holders may seek to exercise in the future. All applicable interest coverage and OC Triggers continue to be met for our two commercial real estate CDOs, RAIT I and RAIT II, and we continue to receive all of our management fees, interest and residual returns from these CDOs.

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

• RAIT I—RAIT I has $1.0 billion of total collateral, of which $63.4 million is defaulted. The current overcollateralization (O/C) test is passing at 123.7% with an O/C trigger of 116.2%. We currently own $243.7 million of the securities issued by this CDO. 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. In October 2011, we pledged $43.7 million of these securities we own as collateral for a senior secured note we issued.

• RAIT II—RAIT II has $822.7 million of total collateral, of which $4.2 million is defaulted. The current O/C test is passing at 119.1% with an O/C trigger of 111.7%. We currently own $244.7 million of the securities issued by this CDO. 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. In October 2011, we pledged $104.0 million of these securities we own as collateral for a senior secured note we issued.

• Taberna VIII—Taberna VIII has $590.0 million of total collateral, of which $90.7 million is defaulted. The current O/C test is failing at 82.7% with an O/C trigger of 103.5%. We currently own $133.0 million of the securities issued by this CDO. We do not expect to receive any distributions from this securitization other than our senior management fees for the foreseeable future.

• Taberna IX—Taberna IX has $618.7 million of total collateral, of which $134.5 million is defaulted. The current O/C test is failing at 75.4% with an O/C trigger of 105.4%. We currently own $186.5 million of the securities issued by this CDO. We do not expect to receive any distributions from this securitization other than our senior management fees for the foreseeable future.

Generally, our investments in the subordinated notes and equity securities in our consolidated CDOs are subordinate in right of payment and in liquidation to the senior notes issued by the CDOs. We may also own common shares, or the non-economic residual interest, in certain of the entities above.

Non-GAAP Financial Measures

Funds from Operations and Adjusted Funds from Operations

We believe that funds from operations, or FFO, and adjusted funds from operations, or AFFO, each of which are non-GAAP measures, are additional appropriate measures of the operating performance of a REIT and us in particular. We compute FFO in accordance with the standards established by the National Association of Real Estate Investment Trusts, or NAREIT, as net income or loss allocated to common shares (computed in accordance with GAAP), excluding real estate-related depreciation and amortization expense, gains or losses on sales of real estate and the cumulative effect of changes in accounting principles.

AFFO is a computation made by analysts and investors to measure a real estate company’s cash flow generated by operations. We calculate AFFO by adding to or subtracting from FFO: change in fair value of financial instruments; gains or losses on debt extinguishment; capital expenditures, net of any direct financing associated with those capital expenditures; straight-line rental effects; amortization of various deferred items and intangible assets; and share-based compensation.

Our calculation of AFFO differs from the methodology used for calculating AFFO by certain other REITs and, accordingly, our AFFO may not be comparable to AFFO reported by other REITs. Our management utilizes FFO and AFFO as measures of our operating performance, and believes they are also useful to investors, because they facilitate an understanding of our operating performance after adjustment for certain non-cash items, such as real estate depreciation, share-based compensation and various other items required by GAAP that may not necessarily be indicative of current operating performance and that may not accurately compare our operating performance between periods. Furthermore, although FFO, AFFO and other supplemental performance measures are

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defined in various ways throughout the REIT industry, we also believe that FFO and AFFO may provide us and our investors with an additional useful measure to compare our financial performance to certain other REITs.

Neither FFO nor AFFO is equivalent to net income or cash generated from operating activities determined in accordance with U.S. GAAP. Furthermore, FFO and AFFO do not represent amounts available for management’s discretionary use because of needed capital replacement or expansion, debt service obligations or other commitments or uncertainties. Neither FFO nor AFFO should be considered as an alternative to net income as an indicator of our operating performance or as an alternative to cash flow from operating activities as a measure of our liquidity.

Set forth below is a reconciliation of FFO and AFFO to net income (loss) allocable to common shares for the three-month and nine-month periods ended September 30, 2011 and 2010 (in thousands, except share information):

	For the  Three-Month Periods Ended September 30						For the  Nine-Month Periods Ended September 30
	2011			2010			2011			2010
Funds From Operations:
Net income (loss) allocable to common shares	$	(21,169	)	$	15,052		$	(35,500	)	$	68,653
Adjustments:
Real estate depreciation and amortization		7,024			7,702			20,817			21,151
(Gains) losses on the sale of real estate		50			2,911			218			2,645
Funds From Operations	$	(14,095	)	$	25,665		$	(14,465	)	$	92,449
Weighted-average shares—diluted		38,771,022			30,887,145			37,822,750			27,800,648
Adjusted Funds From Operations:
Funds From Operations	$	(14,095	)	$	25,665		$	(14,465	)	$	92,449
Adjustments:
Change in fair value of financial instruments		34,997			(14,237	)		55,113			(35,120	)
(Gains) losses on debt extinguishment		(11,371	)		(14,278	)		(14,540	)		(51,290	)
Capital expenditures, net of direct financing		(671	)		(568	)		(1,446	)		(1,136	)
Straight-line rental adjustments		(1,096	)		75			(2,783	)		40
Amortization of deferred items and intangible assets		1,046			371			2,482			(475	)
Share-based compensation		79			583			396			2,877
Adjusted Funds From Operations	$	8,889		$	(2,389	)	$	24,757		$	7,345
Weighted-average shares—diluted		38,771,022			30,887,145			37,822,750			27,800,648

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Assets Under Management

Assets under management, or AUM, represent the total assets that we own or are managing for third parties. While not all AUM generates fee income, it is an important operating measure to gauge our asset growth, volume of originations, size and scale of our operations and our performance. AUM includes our total investment portfolio and assets associated with unconsolidated CDOs for which we derive asset management fees.

The table below summarizes our AUM as of September 30, 2011 and December 31, 2010 (dollars in thousands):

	AUM as of September 30, 2011		AUM as of December 31, 2010
Commercial real estate portfolio (1)	$	1,902,399	$	1,976,815
U.S. TruPS portfolio (2)		1,730,734		1,860,711
Total	$	3,633,133	$	3,837,526

(1) As of September 30, 2011 and December 31, 2010, our commercial real estate portfolio was comprised of $1.0 billion and $1.1 billion of assets collateralizing RAIT I and RAIT II, $849.2 million and $839.2 million, respectively, of investments in real estate and $25.2 million and $30.4 million, respectively, of commercial mortgages, mezzanine loans and preferred equity interests that were not securitized.

(2) Our U.S. TruPS portfolio is comprised of assets collateralizing Taberna I, Taberna VIII, and Taberna IX, and includes TruPS and subordinated debentures, unsecured REIT note receivables, CMBS receivables, other securities, commercial mortgages and mezzanine loans.

Results of Operations

Three-Month Period Ended September 30, 2011 Compared to the Three-Month Period Ended September 30, 2010

Interest income. Interest income decreased $3.8 million, or 10.2%, to $33.5 million for the three-month period ended September 30, 2011 from $37.3 million for the three-month period ended September 30, 2010. Generally, our interest income has declined, when compared to the three-month period ended September 30, 2010, as a result of a decrease in our average investments in loans and securities. Our average investments in loans and securities declined from $2.1 billion for the three months ended September 30, 2010 to $1.9 billion during the three months ended September 30, 2011. This decline was primarily caused by:

• principal repayments of $175.1 million on our investments in loans and $10.1 million from our investments in securities since September 30, 2010

• conversion of $88.5 million of loans to owned real estate since September 30, 2010,

• net of production of new investments totaling $85.2 million since September 30, 2010.

The weighted-average interest rates on our investments in loans decreased from 7.65% as of September 30, 2010 to 7.57% as of September 30, 2011.

Rental income. Rental income increased $5.2 million to $23.6 million for the three-month period ended September 30, 2011 from $18.4 million for the three-month period ended September 30, 2010. Five properties acquired or consolidated since September 30, 2010 contributed $2.7 million to the increase while an additional $0.4 million is attributable to two properties acquired in July 2010 which were present for a full quarter of operations in the third quarter in 2011. The remaining $2.1 million increase in rental income is due to improved occupancy and rental rates at properties we acquired prior to July 1, 2010.

Fee and other income. Fee and other income decreased $0.3 million, or 9.4%, to $2.9 million for the three-month period ended September 30, 2011 from $3.2 million for the three-month period ended September 30, 2010. This reduction is attributable to a decrease of $0.5 million in riskless trade and brokerage fee income and a $0.3 million decline in property reimbursement income due to lower expenses at managed properties. These were partially offset by $0.5 million of consulting fee income.

Expenses

Interest expense. Interest expense decreased $1.3 million, or 5.4%, to $22.7 million for the three-month period ended September 30, 2011 from $24.0 million for the three-month period ended September 30, 2010. The decrease is primarily attributable to repurchases of $104.8 million of our 6.875% convertible senior notes, $50.2 million of our CDO notes payable, and repayment of our $21 million senior secured convertible note, offset by additional interest and discount amortization expenses incurred for the issuance of new debt instruments since September 30, 2010. Our interest expense also decreased due to the effect on our floating rate indebtedness from the reduction in short-term LIBOR of approximately 10 basis points during the three-month period ended September 30, 2011 compared to the three-month period ended September 30, 2010.

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Real estate operating expense. Real estate operating expense increased $0.6 million to $14.6 million for the three-month period ended September 30, 2011 from $14.0 million for the three-month period ended September 30, 2010. The increase is attributable to $1.4 million of operating expenses from five new properties acquired or consolidated since September 30, 2010 and $0.1 million from two properties acquired during the three months ended September 30, 2010 which were present for a full quarter of operations in the third quarter in 2011. These increases were offset by $0.9 million of decreased expenses at our owned properties acquired prior to July 1, 2010.

Compensation expense. Compensation expense increased $0.1 million, or 1.5%, to $6.9 million for the three-month period ended September 30, 2011 from $6.8 million for the three-month period ended September 30, 2010. This increase was due to $1.2 million in severance paid during the quarter which was partially offset by a decrease in salary and related expenses of $0.6 million. Additionally, there was a reduction in stock-based compensation expense of $0.5 million as several awards were fully vested in 2010 and no corresponding awards were made in 2011.

General and administrative expense. General and administrative expense decreased $0.3 million, or 7.0%, to $4.0 million for the three-month period ended September 30, 2011 from $4.3 million for the three-month period ended September 30, 2010 due to a decline in expenses for professional fees related to legal, tax, and audit services.

Provision for losses. The provision for losses relates to our investments in our commercial mortgage loan portfolios. The provision for losses decreased by $10.3 million for the three-month period ended September 30, 2011 to $0.5 million as compared to $10.8 million for the three-month period ended September 30, 2010. The decrease is attributable to the improved performance of our investment in loans portfolio during 2011 as compared to 2010. At September 30, 2011 we had $111.3 million of investment in loans on non-accrual, down from $164.1 million of investment in loans on non-accrual as of September 30, 2010. While we believe we have properly reserved for the probable losses in our portfolio, we continually monitor our portfolio for evidence of loss and accrue additional provisions for loan losses as circumstances or conditions change.

Depreciation and amortization expense. Depreciation expense decreased $0.1 million to $7.3 million for the three-month period ended September 30, 2011 from $7.4 million for the three-month period ended September 30, 2010. The decrease is primarily attributable to a $0.9 million decrease in depreciation expense due to the full amortization of certain corporate fixed assets as well as those at properties acquired or consolidated prior to July 1, 2010. This reduction was offset by an increase of $0.7 million at five new properties, acquired or consolidated since September 30, 2010 and $0.1 from two properties acquired during the three months ended September 30, 2010 present for a full quarter during the three months ended September 30, 2011.

Interest and other income (expense)

Gains (Losses) on sale of assets. Gains on sale of assets were $1.5 million during the three-month period ended September 30, 2011 as a result of the sale of investments in securities.

Gains on extinguishment of debt. Gains on extinguishment of debt during the three-month period ended September 30, 2011 decreased $2.9 million to $11.4 million from $14.3 million for the three-month period ended September 30, 2010. These gains are attributable to the repurchase of $15.0 million principal amount of RAIT CRE CDO II debt notes from the market for $4.5 million of cash, resulting in gains on extinguishment of debt of $10.5 million.

Change in fair value of financial instruments. The change in fair value of financial instruments pertains to the majority of our assets within our investments in securities and any related CDO notes payable and derivative instruments used to finance such assets. During the three-month periods ended September 30, 2011 and 2010, the fair value adjustments we recorded were as follows (dollars in thousands):

Description	For the Three-Month Period Ended September 30, 2011			For the Three-Month Period Ended September 30, 2010
Change in fair value of trading securities and security-related receivables	$	2,924		$	26,004
Change in fair value of CDO notes payable, trust preferred obligations and other liabilities		(11,406	)		7,555
Change in fair value of derivatives		(26,515	)		(19,322	)
Change in fair value of financial instruments	$	(34,997	)	$	14,237

Discontinued operations. We recorded a $0.1 million loss from discontinued operations for the three-month period ended September 30, 2011 compared to a $2.6 million loss for the three-month period ended September 30, 2010. The decrease is attributable to the timing of properties acquired, sold, or deconsolidated during the respective periods.

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Nine-Month Period Ended September 30, 2011 Compared to the Nine-Month Period Ended September 30, 2010

Revenue

Interest income. Interest income decreased $16.2 million, or 13.8%, to $101.6 million for the nine-month period ended September 30, 2011 from $117.8 million for the nine-month period ended September 30, 2010. Generally, our interest income has declined, when compared to the nine-month period ended September 30, 2010, as a result of a decrease in our average investments in loans and securities. Our average investments in loans and securities declined from $2.3 billion for the nine months ended September 30, 2010 to $2.0 billion during the nine months ended September 30, 2011. This decline was primarily caused by:

• principal repayments of $175.1 million on our investments in loans and $10.1 million from our investments in securities since September 30, 2010

• conversion of $88.5 million of loans to owned real estate since September 30, 2010,

• net of production of new investments totaling $85.2 million since September 30, 2010.

The weighted-average interest rates on our investments in loans decreased from 7.65% as of September 30, 2010 to 7.57% as of September 30, 2011.

Rental income. Rental income increased $14.9 million to $67.1 million for the nine-month period ended September 30, 2011 from $52.2 million for the nine-month period ended September 30, 2010. Five properties acquired or consolidated since September 30, 2010 contributed $6.2 million to the increase, while $4.5 million is attributable to nine properties acquired or consolidated during the nine months ended September 30, 2010 which were present for all of the first three quarters of 2011. The remaining $4.2 million increase resulted from improved occupancy and rental rates at our owned properties acquired prior to January 1, 2010.

Fee and other income. Fee and other income decreased $7.0 million, or 44.9%, to $8.6 million for the nine-month period ended September 30, 2011 from $15.6 million for the nine-month period ended September 30, 2010. Collateral management and restructuring fee income decreased $2.4 million and $2.1 million, respectively, due to the sale or delegation of our collateral management rights on eight Taberna securitizations during April 2010. Additionally, riskless trade and brokerage fee income decreased $1.3 million and property reimbursement income decreased $1.1 million due to lower expenses at managed properties.

Expenses

Interest expense. Interest expense decreased $5.8 million, or 7.8%, to $68.4 million for the nine-month period ended September 30, 2011 from $74.2 million for the nine-month period ended September 30, 2010. The decrease is primarily attributable to repurchases of $104.8 million of our 6.875% convertible senior notes, $50.2 million of our CDO notes payable, and the repayment of a $21 million senior secured convertible note, offset by additional interest cost and discount amortization expense incurred for the issuance of new debt instruments since September 30, 2010. Additionally, the company repaid $25.9 million of our secured credit facilities, restructured a subordinated note, and our floating rate indebtedness was impacted by an approximate 10 basis point decline in short term LIBOR rates.

Real estate operating expense. Real estate operating expense increased $3.1 million to $41.0 million for the nine-month period ended September 30, 2011 from $37.9 million for the nine-month period ended September 30, 2010. The increase is attributable to $3.3 million of operating expenses from five new properties acquired or consolidated since September 30, 2010 and $1.3 million from nine properties acquired during the nine months ended September 30, 2010 which were present for all of the first three quarters of 2011. These increases were offset by $1.5 million of decreased expenses at our owned properties acquired prior to January 1, 2010.

Compensation expense. Compensation expense decreased $2.5 million, or 11.5%, to $19.2 million for the nine-month period ended September 30, 2011 from $21.7 million for the nine-month period ended September 30, 2010. Severance expense increased during the nine-month period ended September 30, 2011 by $1.2 million as compared to the nine-month period ended September 30, 2010 but was offset by reductions to salary and related expenses. Stock based compensation expense declined $2.5 million as several awards were fully vested in 2010 and no corresponding awards were made in 2011.

General and administrative expense. General and administrative expense decreased $1.2 million, or 8.2%, to $13.4 million for the nine-month period ended September 30, 2011 from $14.6 million for the nine-month period ended September 30, 2010. Expenses for professional fees related to legal, tax, and audit services declined $1.4 million, insurance expenses decreased by $0.3 million, and other G&A expenses including IT services, rent, and travel and entertainment decreased by $0.3 million. These decreases were offset by $0.8 million of acquisition expenses related to the acquisition and development of our non-traded public REIT, Independence Realty Trust, Inc.

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Provision for losses. The provision for losses relates to our investments in our commercial mortgage loan portfolios. The provision for losses decreased by $32.4 million for the nine-month period ended September 30, 2011 to $3.4 million as compared to $35.8 million for the nine-month period ended September 30, 2010. The decrease is attributable to the improved performance of our investment in loans portfolio during 2011 as compared to 2010. At September 30, 2011 we had $111.3 million of investment in loans on non-accrual, down from $164.1 million of investment in loans on non-accrual as of September 30, 2010. While we believe we have properly reserved for the probable losses in our portfolio, we continually monitor our portfolio for evidence of loss and accrue additional provisions for loan losses as circumstances or conditions change.

Depreciation and amortization expense. Depreciation expense increased $1.1 million to $21.7 million for the nine-month period ended September 30, 2011 from $20.6 million for the nine-month period ended September 30, 2010. This increase was primarily attributable to $1.2 million from five new properties, acquired or consolidated since September 30, 2010 and $0.8 million from nine properties acquired or consolidated during the nine-months ended September 30, 2010 present for a full three quarters of operations. These increases were offset by a $0.9 million decrease due to the full amortization of certain corporate fixed assets as well as those at properties acquired or consolidated prior to January 1, 2010.

Interest and other income (expense)

Gains (Losses) on sale of assets. Gains on sale of assets were $3.4 million during the nine-month period ended September 30, 2011. The gains principally relate to the sale of certain bonds held in our consolidated Taberna securitizations, Taberna Preferred Funding VIII, Ltd. and Taberna Preferred Funding IX, Ltd for which we recorded gains of $3.7 million as well as $1.5 million from the sale of investment securities. These gains were partially offset by $2.0 million of losses incurred from the disposition of four loans from our consolidated CRE securitizations.

Gains on extinguishment of debt. Gains on extinguishment of debt during the nine-month period ended September 30, 2011 are attributable to the repurchase of $6.7 million principal amount of RAIT CRE CDO I and $15.0 million principal amount of RAIT CRE CDO II debt notes from the market for $7.0 million of cash. As a result of these repurchases we recorded gains on extinguishment of debt of $14.7 million. These gains were partially offset by repurchases of $104.8 million in aggregate principal amount of our 6.875% convertible senior notes due April 2027. The notes were repurchased for $103.2 million of cash. As a result of these repurchases, we recorded losses on extinguishment of debt of $1.0 million, including the write-off of associated deferred financing costs and debt discounts.

Change in fair value of financial instruments. The change in fair value of financial instruments pertains to the majority of our assets within our investments in securities and any related CDO notes payable and derivative instruments used to finance such assets. During the nine-month periods ended September 30, 2011 and 2010, the fair value adjustments we recorded were as follows (dollars in thousands):

Description	For the Nine-Month Period Ended September 30, 2011			For the Nine-Month Period Ended September 30, 2010
Change in fair value of trading securities and security-related receivables	$	21,559		$	109,003
Change in fair value of CDO notes payable, trust preferred obligations and other liabilities		(25,268	)		(891	)
Change in fair value of derivatives		(51,404	)		(72,992	)
Change in fair value of financial instruments	$	(55,113	)	$	35,120

Discontinued operations. Income from discontinued operations increased $2.3 million to $0.7 million for the nine-month period ended September 30, 2011 compared to a loss of $1.6 million for the nine-month period ended September 30, 2010. The decrease is attributable to the timing of properties acquired, sold, or deconsolidated during the respective periods. Included in discontinued operations for the nine-months ended September 30, 2011 is $0.8 million net income from a sold property.

Liquidity and Capital Resources

Liquidity is a measure of our ability to meet potential cash requirements, including ongoing commitments to repay borrowings, fund and maintain investments, pay distributions and other general business needs. Due to current market conditions, the cash flow to us from a number of the securitizations we sponsored has been reduced or eliminated. We are seeking to expand our use of short term financing and secured lines of credit while developing other financing resources that will permit us to originate or acquire new investments to generate attractive returns while preserving our capital, such as loan participations and joint venture financing arrangements.

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RAIT I and RAIT II, our consolidated securitizations collateralized by U.S. commercial real estate loans, continue to perform and make distributions on our retained interests and pay us management fees. In addition, the restricted cash in these securitizations from repayment of underlying loans and other sources can be used to make new investments held by those securitizations, including future funding commitments of existing investments. As we continue to recycle capital obtained from loan sales and loan repayments in these securitizations, we expect to reinvest the proceeds to fund commercial real estate loans. Distributions on our retained interests in RAIT I and RAIT II are our primary source of cash from our operations. We continue to explore strategies to generate liquidity from our investments in real estate and our investments in debt securities as we seek to focus on our commercial real estate lending platform.

We believe our available cash and restricted cash balances, other financing arrangements, and cash flows from operations will be sufficient to fund our liquidity requirements for the next 12 months. Should our liquidity needs exceed our available sources of liquidity, we believe that we could sell assets to raise additional cash. We may not be able to obtain additional financing when we desire to do so, or may not be able to obtain desired financing on terms and conditions acceptable to us. If we fail to obtain additional financing, our ability to maintain or grow our business will be constrained.

Our primary cash requirements are as follows:

• to make investments and fund the associated costs;

• to repay our indebtedness, including repurchasing or retiring our debt before it becomes due;

• to pay our expenses, including compensation to our employees;

• to pay U.S. federal, state, and local taxes of our TRSs; 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 our cash and cash equivalent balances of $29.7 million as of September 30, 2011;

• cash generated from operating activities, including net investment income from our investment portfolio, and fee income generated by our commercial real estate platform;

• proceeds from the sales of assets;

• proceeds from future borrowings; and

• proceeds from future offerings of our common and preferred shares, SEDA and DRSPP Plan.

Our two commercial real estate securitized financing arrangements, RAIT I and RAIT II, include a revolving credit option that allows us to repay the AAA rated debt tranches totaling $475.0 million as loan repayments occur, and then draw up to the available committed amounts through the fifth anniversary of each financing in November 2011 and June 2012, respectively. At September 30, 2011, these revolvers were fully utilized and had no additional capacity.

Our restricted cash balance was $287.9 million as of September 30, 2011. We have $69.6 million of restricted cash in RAIT I and RAIT II available to invest in qualifying commercial loans as of September 30, 2011, subject to $39.1 million of future funding commitments, leaving $30.5 million available to lend. This $69.6 million of restricted cash is not available to RAIT’s creditors or for other general trust purposes. As of September 30, 2011, $81.7 million of restricted cash was held by Taberna VIII and Taberna IX. This restricted cash reflects early prepayments of principal that cannot be used for any other general trust purposes. As of September 30, 2011, $64.2 million of restricted cash related to a cash deposit we received pending the completion of our sale of four loans in October 2011. Additionally, as of September 30, 2011, $27.4 million of our restricted cash related to principal repayments on our investments in loans we received in late September 2011 and remitted to RAIT I or RAIT II in early October 2011. The remaining balance of our restricted cash relates to escrows associated with loans to our borrowers for real estate taxes and insurance.

During 2011, we have been focused on reducing our leverage and restructuring the terms of our debt. To date, we have completed the following transactions with respect to our outstanding indebtedness:

• We issued $115.0 million aggregate principal amount of 7.0% Convertible Senior Notes Due 2031, or the 7.0% convertible senior notes, in an underwritten public offering which included the full exercise of the overallotment option;

• We repaid, in full, our $15.7 million 10.0% senior secured note;

• We repaid, in full, a $16.2 million secured credit facility that was maturing in October 2011;

• We repaid, in full, our $43.0 million 12.5% senior secured note;

• We repurchased and retired $139.0 million of our 6.875% convertible senior notes, leaving $4.6 million outstanding as of October 31, 2011;

• We repurchased $21.7 million of our CDO Notes Payable issued by RAIT CRE CDO I and RAIT CRE CDO II securitizations;

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• We amended our remaining secured credit facility repaying $9.0 million of the $19.5 million outstanding principal amount and amending the terms of the remaining $10.6 million balance to extend the maturity date from December 2011 to December 2016 and provide for the full amortization of that balance over that five year period. The amendment also reduced the interest rate to LIBOR plus 275 basis points;

• We refinanced $7.1 million of recourse first mortgage debt on owned real estate with non-recourse financing provided by our consolidated securitizations; and

• In October 2011, we issued $100.0 million of senior secured notes to Taberna VIII, a consolidated securitization, and received real estate related securities of equivalent value in exchange. The notes have a weighted-average coupon of 7.0% and a weighted-average maturity of 6.5 years.

We expect to continue to de-leverage in the future as capital availability and transaction terms provide attractive risk-adjusted returns.

Cash Flows

As of September 30, 2011 and 2010, we maintained cash and cash equivalents of approximately $29.7 million and $25.7 million, respectively. Our cash and cash equivalents were generated from the following activities (dollars in thousands):

	For the Nine-Month  Periods Ended September 30
	2011			2010
Cash flow from operating activities	$	(1,279	)	$	5,467
Cash flow from investing activities		39,520			43,038
Cash flow from financing activities		(35,778	)		(47,859	)
Net change in cash and cash equivalents		2,463			646
Cash and cash equivalents at beginning of period		27,230			25,034
Cash and cash equivalents at end of period	$	29,693		$	25,680

Our principal source of net cash inflow historically has been our investing activities as loan repayments outpaced new investments in loans or real estate properties. The key driver of lower cash inflows from our investing activities was that our outflows for new investments were significantly higher at $104.8 million for the nine-months ended September 30, 2011 as compared to $33.1 million for the same period in 2010. In the event the commercial real estate market improves, we expect that our new investments will outpace any proceeds received from loan repayments or asset sales. These increased outflows for new investments were offset by proceeds from loan repayments and proceeds from asset sales totaling $207.3 million for the nine-month period ended September 30, 2011 as compared to $107.8 million for the same period in 2010. Cash flows from our investing activities may vary in the future as we continue to execute on our investment strategies.

Cash flow from operating activities for the nine-months ended September 30, 2011, as compared to the same period in 2010, has decreased primarily due to an increase in other assets, including prepaid expenses for insurance and real estate taxes, as the size of our portfolio of real estate properties has grown.

The cash outflow from our financing activities during the nine-month period ended September 30, 2011 as compared to the cash outflow during the nine-month period ended September 30, 2010 is substantially due to the issuance of $115.0 million of 7.0% convertible senior notes, the repurchase of $104.8 million principal amount 6.875% convertible senior notes and the prepayment of the remaining $15.7 million principal amount of our 10.0% senior note. Other events that impacted our cash flows from financing activities were the repayment of our $16.2 million secured credit facility that was maturing in October 2011 and the $9.0 million payment on our secured credit facility that matures in December 2016, an increase in the proceeds received of $37.4 million from non-recourse loans payable on real estate, increased principal repayments on our CDO notes payable, an increase in the dividends paid in 2011 on our common shares, as we did not pay dividends on our common shares in 2010, and increased common share issuance during the nine-month period ended September 30, 2011 as compared to the nine-month period ended September 30, 2010.

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Capitalization

We maintain various forms of short-term and long-term financing arrangements. Generally, these financing agreements are collateralized by assets within securitizations. The following table summarizes our total recourse and non-recourse indebtedness as of September 30, 2011:

Description	Unpaid Principal Balance		Carrying Amount		Weighted- Average Interest Rate			Contractual Maturity
Recourse indebtedness:
7.0% convertible senior notes (1)	$	115,000	$	107,466		7.0	%	Apr. 2031
6.875% convertible senior notes (2)		38,813		38,950		6.9	%	Apr. 2027
Secured credit facilities		10,554		10,554		3.0	%	Dec. 2016
Senior secured notes (7)		43,000		43,000		12.5	%	Apr. 2014
Junior subordinated notes, at fair value (3)		38,052		22,450		5.2	%	Oct. 2015 to Mar. 2035
Junior subordinated notes, at amortized cost		25,100		25,100		7.7	%	Apr. 2037
Total recourse indebtedness		270,519		247,520		7.5	%
Non-recourse indebtedness:
CDO notes payable, at amortized cost (4)(5)		1,323,046		1,323,046		0.6	%	2045 to 2046
CDO notes payable, at fair value (3)(4)(6)		1,122,495		130,694		0.9	%	2037 to 2038
Loans payable on real estate		91,990		91,990		5.9	%	Sept. 2015 to May 2021
Total non-recourse indebtedness		2,537,531		1,545,730		0.9	%
Total indebtedness	$	2,808,050	$	1,793,250		1.6	%

(1) Our 7.0% convertible senior notes are redeemable, at par at the option of the holder, in April 2016, April 2021, and April 2026.

(2) Our 6.875% convertible senior notes are redeemable, at par at the option of the holder, in April 2012, April 2017, and April 2022. During October 2011, we repurchased and retired $34.2 million in aggregate principal amount of our 6.875% convertible senior notes, leaving $4.6 million outstanding.

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

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

(5) Collateralized by $1.7 billion principal amount of commercial mortgages, mezzanine loans, other loans and preferred equity interests. These obligations were issued by separate legal entities and consequently the assets of the special purpose entities that collateralize these obligations are not available to our creditors.

(6) Collateralized by $1.2 billion principal amount of investments in securities and security-related receivables and loans, before fair value adjustments. The fair value of these investments as of September 30, 2011 was $879.4 million. 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) In October 2011, we prepaid, in full, our $43.0 million 12.5% Senior Secured Notes due to mature in April 2014.

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

The current status or activity in our financing arrangements occurring as of or during the nine-month period ended September 30, 2011 is as follows:

Recourse Indebtedness

6.875% convertible senior notes. During the nine-month period ended September 30, 2011, we repurchased $104.8 million in aggregate principal amount of our 6.875% Convertible Senior Notes due 2027, or the 6.875% convertible senior notes, for an aggregate purchase price of $103.2 million. As a result of these transactions, we recorded losses on extinguishment of debt of $0.1 million, net of deferred financing costs and unamortized discounts that were written off. Subsequent to September 30, 2011, we repurchased $34.2 million in aggregate principal amount of our 6.875% convertible senior notes for an aggregate purchase price of $34.3 million. As a result of these transactions we recorded a loss on the extinguishment of debt of $0.1 million.

Our 6.875% convertible senior notes are redeemable, at the option of the holder, in April 2012. We expect to acquire, redeem, refinance or otherwise enter into transactions to satisfy our 6.875% convertible senior notes which may include any combination of payments of cash, issuances of our debt and/or equity securities, sales or exchanges of our assets or other methods.

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7.0% convertible senior notes. On March 21, 2011, we issued and sold in a public offering $115.0 million aggregate principal amount of our 7.0% Convertible Senior Notes due 2031, or the 7.0% convertible senior notes. After deducting the underwriting discount and the estimated offering costs, we received approximately $109.0 million of net proceeds. Interest on the 7.0% convertible senior notes is paid semi-annually and the 7.0% convertible senior notes mature on April 1, 2031.

Prior to April 5, 2016, the 7.0% convertible senior notes are not redeemable at RAIT’s option, except to preserve RAIT’s status as a REIT. On or after April 5, 2016, RAIT may redeem all or a portion of the 7.0% convertible senior notes at a redemption price equal to the principal amount plus accrued and unpaid interest. Holders of 7.0% convertible senior notes may require RAIT to repurchase all or a portion of the 7.0% convertible senior notes at a purchase price equal to the principal amount plus accrued and unpaid interest on April 1, 2016, April 1, 2021, and April 1, 2026, or upon the occurrence of certain defined fundamental changes.

The 7.0% convertible senior notes are convertible at the option of the holder at a current conversion rate of 131.3268 common shares per $1,000 principal amount of 7.0% convertible senior notes (equivalent to a current conversion price of $7.61 per common share). Upon conversion of 7.0% convertible senior notes by a holder, the holder will receive cash, our common shares or a combination of cash and our common shares, at our election. We include the 7.0% convertible senior notes in earnings per share using the treasury stock method if the conversion value in excess of the par amount is considered in the money during the respective periods.

According to FASB ASC Topic 470, “Debt”, we recorded a discount on our issued and outstanding 7.0% convertible senior notes of $8.2 million. This discount reflects the fair value of the embedded conversion option within the 7.0% convertible senior notes and was recorded as an increase to additional paid in capital. The fair value was calculated by discounting the cash flows required in the indenture relating to the 7.0% convertible senior notes agreement by a discount rate that represents management’s estimate of our senior, unsecured, non-convertible debt borrowing rate at the time when the 7.0% convertible senior notes were issued. The discount will be amortized to interest expense through April 1, 2016, the date at which holders of our 7.0% convertible senior notes could require repayment.

Secured credit facilities. During the nine-month period ending September 30, 2011, we repaid, in full, a $16.2 million secured credit facility due to mature in October 2011.

As of September 30, 2011, we have $10.6 million outstanding under our remaining secured credit facility. During the three-month period ended September 30, 2011, we renewed our remaining secured credit facility by repaying $9.0 million of the $19.5 million outstanding principal amount and amending the terms of the remaining $10.6 million balance to extend the maturity date from December 2011 to December 2016 and provide for the full amortization of that balance over that five year period. In addition, the interest rate on our secured credit facility was amended to be a floating interest rate of LIBOR plus 275 basis points. Subsequent to September 30, 2011, we prepaid, in full, our $43.0 million 12.5% Senior Secured Notes due to mature in April 2014.

Senior secured notes. During the nine-month period ended September 30, 2011, the holder of the 10.0% senior secured convertible note, or the 10.0% senior note, converted $5.3 million principal amount of the 10.0% senior note into 1.5 million common shares. On April 26, 2011, we prepaid the remaining $15.7 million principal amount of the 10.0% senior note.

On October 5, 2011, we entered into an exchange agreement with Taberna VIII pursuant to which we issued four senior secured notes, or the senior notes, with an aggregate principal amount equal to $100 million to Taberna VIII in exchange for a portfolio of real estate related debt securities, or the exchanged securities, held by Taberna VIII. Taberna VIII is a subsidiary of ours and, as a result, the senior secured notes will be eliminated in consolidation. The senior notes and the exchanged securities were determined to have approximately equivalent fair market value at the time of the exchange.

The senior notes were issued pursuant to an indenture agreement dated October 5, 2011 and contains customary events of default, including those relating to nonpayment of principal or interest when due and defaults based upon events of bankruptcy and insolvency. The four senior notes are each $25.0 million principal amount with a weighted average interest rate of 7.0% and have maturity dates ranging from April 2017 to April 2019.

Interest is at a fixed rate and accrues from October 5, 2011 and will be payable quarterly in arrears on October 30, January 30, April 30 and July 30 of each year, beginning October 30, 2011. The senior notes are secured and are not convertible into equity securities of RAIT.

Loans payable on real estate. During the nine-month period ended September 30, 2011 we refinanced recourse financing consisting of a first mortgage of $12.5 million principal amount with a fixed rate of 5.8%, due in April 2012, that was associated with one of our owned real estate properties with non-recourse financing provided by a consolidated securitization. In addition, we refinanced

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recourse financing consisting of a first mortgage of $7.1 million principal amount with a fixed rate of 5.0%, due in September 2013, that was associated with one of our owned real estate properties with non-recourse financing provided by a consolidated securitization.

CMBS Facility. On October 27, 2011, we entered into a two year CMBS facility, pursuant to which we may sell, and later repurchase, performing whole mortgage loans or senior interests in whole mortgage loans secured by first liens on stabilized commercial properties which meet current standards for inclusion in CMBS transactions. The aggregate principal amount of the CMBS facility is $100 million and incurs interest at LIBOR plus 250 basis points. The CMBS facility contains standard margin call provisions and financial covenants.

Non-Recourse Indebtedness

CDO notes payable, at amortized cost. CDO notes payable at amortized cost represent notes issued by consolidated CDO entities which are used to finance the acquisition of unsecured REIT notes, CMBS securities, commercial mortgages, mezzanine loans, and other loans in our commercial real estate portfolio. Generally, CDO notes payable are comprised of various classes of notes payable, with each class bearing interest at variable or fixed rates. Both of our CRE CDOs are meeting all of their overcollateralization, or OC, and interest coverage, or IC, trigger tests as of September 30, 2011.

During the nine-month period ended September 30, 2011, we repurchased, from the market, a total of $6.7 million in aggregate principal amount of CDO notes payable issued by our RAIT I CDO securitization. The aggregate purchase price was $2.5 million and we recorded a gain on extinguishment of debt of $4.2 million.

During the nine-month period ended September 30, 2011, we repurchased, from the market, a total of $15.0 million in aggregate principal amount of CDO notes payable issued by our RAIT II CDO securitization. The aggregate purchase price was $4.5 million and we recorded a gain on extinguishment of debt of $10.5 million.

CDO notes payable, at fair value. Both of our Taberna consolidated CDOs are failing OC trigger tests which cause a change to the priority of payments to the debt and equity holders of the respective securitizations. Upon the failure of an OC test, the indenture of each CDO requires cash flows that would otherwise have been distributed to us as equity distributions, or in some cases interest payments on our retained CDO notes payable, be used to pay down sequentially the outstanding principal balance of the most senior note holders. The OC tests failures are due to defaulted collateral assets and credit risk securities. During the nine-month period ended September 30, 2011, $24.6 million of cash flows were re-directed from our retained interests in these CDOs and were used to repay the most senior holders of our CDO notes payable.

Loans payable on real estate. During the nine-month period ended September 30, 2011, we obtained a first mortgage on an investment in real estate from the Federal National Mortgage Association that has a principal balance of $13.4 million, 7 year term, and a 5.12% interest rate and a first mortgage on an investment in real estate from Bank of America that has a principal balance of $24.0 million, 10 year term, and a 6.09% interest rate.

Preferred Shares

On January 25, 2011, our board of trustees declared a first quarter 2011 cash dividend of $0.484375 per share on our 7.75% Series A Preferred Shares, $0.5234375 per share on our 8.375% Series B Preferred Shares and $0.5546875 per share on our 8.875% Series C Preferred Shares. The dividends were paid on March 31, 2011 to holders of record on March 1, 2011 and totaled $3.4 million.

On May 17, 2011, our board of trustees declared a second quarter 2011 cash dividend of $0.484375 per share on our 7.75% Series A Preferred Shares, $0.5234375 per share on our 8.375% Series B Preferred Shares and $0.5546875 per share on our 8.875% Series C Preferred Shares. The dividends were paid on June 30, 2011 to holders of record on June 1, 2011 and totaled $3.4 million.

On July 26, 2011, our board of trustees declared a third quarter 2011 cash dividend of $0.484375 per share on our 7.75% Series A Preferred Shares, $0.5234375 per share on our 8.375% Series B Preferred Shares and $0.5546875 per share on our 8.875% Series C Preferred Shares. The dividends were paid on September 30, 2011 to holders of record on September 1, 2011 and totaled $3.4 million.

On October 25, 2011, our board of trustees declared a fourth quarter 2011 cash dividend of $0.484375 per share on our 7.75% Series A Preferred Shares, $0.5234375 per share on our 8.375% Series B Preferred Shares and $0.5546875 per share on our 8.875% Series C Preferred Shares. The dividends will be paid on January 3, 2012 to holders of record on December 1, 2011.

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Common Shares

Dividends:

On January 10, 2011, the board of trustees declared a $0.09 dividend on our common shares to holders of record as of January 21, 2011. The dividend was paid on January 31, 2011 and totaled $3.2 million.

On May 17, 2011, the board of trustees declared a $0.06 dividend on our common shares to holders of record as of July 8, 2011. The dividend was paid on July 29, 2011 and totaled $2.3 million.

On September 12, 2011, the board of trustees declared a $0.06 dividend on our common shares to holders of record as of October 7, 2011. The dividend was paid on October 31, 2011 and totaled $2.4 million and is included in other liabilities in the accompanying consolidated balance sheet.

Reverse Stock Split:

On May 17, 2011, the board of trustees authorized a 1-for-3 reverse stock split of our common shares of beneficial interest that became effective on June 30, 2011, or the effective time. At the effective time, every three common shares issued and outstanding were automatically combined into one issued and outstanding new common share. The par value of new common shares changed to $0.03 per share after the reverse stock split from the par value of common shares prior to the reverse stock split of $0.01 per share. The reverse stock split reduced the number of common shares outstanding but did not change the number of authorized common shares. The reverse stock split did not affect our preferred shares of beneficial interest. All references in the accompanying financial statements to the number of common shares and earnings per share data for all periods presented have been adjusted to reflect the reverse stock split.

Share Repurchases:

On January 25, 2011, the compensation committee of our board of trustees approved a cash payment to the board’s eight non-management trustees intended to constitute a portion of their respective 2011 annual non-management trustee compensation. The cash payment was subject to terms and conditions set forth in a letter agreement, or the letter agreement, between each of the non-management trustees and RAIT. The terms and conditions included a requirement that each trustee use a portion of the cash payment to purchase RAIT’s common shares in purchases that, individually and in the aggregate with all purchases made by all the other non-management trustees pursuant to their respective letter agreements, complied with Rule 10b-18 promulgated under the Securities Exchange Act of 1934, as amended. The aggregate amount required to be used by all of the non-management trustees to purchase common shares was $0.2 million and was used to purchase 18,898 common shares, in the aggregate, in February 2011.

Equity Compensation:

During the nine-months ended September 30, 2011, 340,649 phantom unit awards were redeemed for common shares, a portion of which was withheld in order to satisfy the applicable withholding taxes. These phantom units were fully vested at the time of redemption.

Dividend Reinvestment and Share Purchase Plan (DRSPP):

We implemented an amended and restated dividend reinvestment and share purchase plan, or DRSPP, effective as of March 13, 2008, pursuant to which we registered and reserved for issuance 6,262,545 common shares. During the nine-month period ended September 30, 2011, we issued a total of 1,158,292 common shares pursuant to the DRSPP at a weighted-average price of $3.74 per share and we received $4.3 million of net proceeds. As of September 30, 2011, 2,740,920 common shares, in aggregate, remain available for issuance under the DRSPP. Effective October 28, 2011, we registered and reserved for issuance an additional 7,759,080 common shares for issuance under the DRSPP so that the aggregate number of common shares available for issuance under the DRSPP was 10,500,000 common shares.

Capital on Demand™ Sales Agreement:

On August 6, 2010, we entered into a Capital on Demand™ Sales Agreement, or the COD sales agreement, with JonesTrading Institutional Services LLC, or JonesTrading, pursuant to which we may issue and sell up to 5,833,333 of our common shares from time to time through JonesTrading acting as agent and/or principal, subject to the terms and conditions of the COD sales agreement. For the nine-month period ended September 30, 2011, 2,815,528 common shares were issued pursuant to this arrangement at a weighted average price of $8.77 and we received $22.9 million of proceeds. As of September 30, 2011, there are no common shares that remain available for issuance under the COD sales agreement.

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Off-Balance Sheet Arrangements and Commitments

Not applicable.

Critical Accounting Estimates and Policies

Our Annual Report on Form 10-K for the year ended December 31, 2010 contains a discussion of our critical accounting policies. On January 1, 2011 we adopted several new accounting pronouncements and revised our accounting policies as described below. See Note 2 in our unaudited consolidated financial statements as set forth herein. Management discusses our critical accounting policies and management’s judgments and estimates with the audit committee of our board of trustees.

Recent Accounting Pronouncements

On January 1, 2010, we adopted Accounting Standards Update (ASU) No. 2010-06, “Fair Value Measurements and Disclosures (Topic 820): Improving Disclosures about Fair Value Measurements.” This accounting standard requires new disclosures for significant transfers in and out of Level 1 and 2 fair value measurements and a description of the reasons for the transfer. This accounting standard also updates existing disclosures by providing fair value measurement disclosures for each class of assets and liabilities and provides disclosures about the valuation techniques and inputs used to measure fair value for both recurring and nonrecurring fair value measurements. For Level 3 fair value measurements, new disclosures will require entities to present information separately for purchases, sales, issuances, and settlements. These disclosures are effective for fiscal years beginning after December 15, 2010, and for interim periods within those fiscal years. The adoption of this standard did not have a material effect on our consolidated financial statements.

On January 1, 2011, we adopted ASU No. 2010-29, “Disclosure of Supplementary Pro Forma Information for Business Combinations.” This accounting standard requires that if a public entity presents comparative financial statements, the entity should disclose revenue and earnings of the combined entity as though the business combination(s) that occurred during the current year had occurred as of the beginning of the comparable prior annual reporting period only. This accounting standard also expands the supplemental pro forma disclosures under FASB ASU Topic 805, “Business Combinations” to include a description of the nature and amount of material, nonrecurring pro forma adjustments directly attributable to the business combination included in the reported pro forma revenue and earnings. The adoption of this standard did not have a material effect on our consolidated financial statements.

In April 2011, the FASB issued accounting standards classified under FASB ASC Topic 310, “Receivables”. This accounting standard amends existing guidance to provide additional guidance on the determination of whether a creditor has granted a concession and whether a debtor is experiencing financial difficulties for purposes of determining whether a restructuring constitutes a troubled debt restructuring. This standard is effective for the first interim or annual period beginning on or after June 15, 2011, and should be applied retrospectively to the beginning of the annual period of adoption. The adoption of this standard did not have a material effect on our consolidated financial statements.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

Market risk is the exposure to loss resulting from changes in interest rates, commodity prices and equity prices. In pursuing our business plan, the primary market risks to which we are exposed are interest rate risk and credit risk. Changes in the general level of interest rates prevailing in the financial markets may affect the spread between our yield on invested assets and cost of funds and, in turn, our ability to make distributions or payments to our shareholders. In the event of a significant rising interest rate environment, defaults could increase and result in losses to us which adversely affect our operating results and liquidity. In the current global recession, defaults have increased and resulted in losses to us which have adversely affected, and we expect will continue to adversely affect, our operating results and liquidity.

There have been no material changes in quantitative and qualitative market risks during the nine months ended September 30, 2011 from the disclosures included in our Annual Report on Form 10-K for the year ended December 31, 2010. Reference is made to Item 7A included in our Annual Report on Form 10-K for the year ended December 31, 2010.

Item 4. Controls and Procedures

Disclosure Controls and Procedures

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports under the Securities Exchange Act of 1934, as amended, or the Exchange Act, is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our chief executive officer and our chief financial officer, as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, our management recognized that

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any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and our management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

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

Changes in Internal Control Over Financial Reporting

There has been no change in our internal control over financial reporting that occurred during the three-month period ended September 30, 2011 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Part II. OTHER INFORMATION

Item 1. Legal Proceedings

Routine Litigation

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

Item 1A. Risk Factors

The following risk factors should be read together with our risk factors previously disclosed in Item 1A— “Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2010.

A decline in the market value of our assets we finance pursuant to repurchase agreements or warehouse facilities may result in margin calls that may force us to sell assets under adverse market conditions.

Our current repurchase agreement allows, and we expect any warehouse facilities and repurchase agreements we enter into in the future to allow, our lender to make margin calls that would require us to make cash payments or deliver additional assets to our lender in the event that there is a decline in the market value of the assets that collateralize our repurchase agreements, warehouse facilities or similar debt or for other reasons. As a result, a decline in the market value of assets collateralizing any such debt may result in our lenders initiating margin calls and requiring a pledge of additional collateral or cash. Posting additional collateral or cash to support our borrowings would reduce our liquidity and limit our ability to leverage our assets, which could adversely affect our business. As a result, we could be forced to sell some of our assets in order to maintain liquidity. Forced sales typically result in lower sales prices than do market sales made in the normal course of business. If our investments were liquidated at prices below the amortized cost basis of such investments, we would incur losses, which could result in a rapid deterioration of our financial condition.

We are exposed to loss if lenders under our repurchase agreements, warehouse facilities or other short-term lenders liquidate our portfolio. Moreover, assets acquired by us pursuant to our repurchase agreements, warehouse facilities or other short-term debt may not be suitable for refinancing though future securitization transactions, which may require us to seek more costly financing for these assets or to liquidate assets.

We have entered into a repurchase agreement, and may in the future enter into other repurchase agreements, warehouse facilities or other debt with similar terms. Our lenders have the right under the our current repurchase agreement, and may have the right under such other debt, to liquidate assets acquired thereunder upon the occurrence of certain events, such as an event of default. We are exposed to loss if the proceeds received by the lender in the event of any such liquidation are insufficient to satisfy our obligation to the lender. We were also subject to the risk that the assets subject to such repurchase agreements, warehouse facilities or other debt with similar terms might not be suitable for refinancing though future securitization transactions. If we were unable to refinance these assets though future securitization transactions, we might be required to seek more costly financing for theses assets or to liquidate assets.

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We will lose money on our repurchase transactions if the counterparty to the transaction defaults on its obligation to resell the underlying security back to us at the end of the transaction term, or if the value of the underlying security has declined as of the end of the term or if we default on our obligations under the repurchase agreement.

When we engage in a repurchase transaction, we generally sell securities to the transaction counterparty and receive cash from the counterparty. The counterparty must resell the securities back to us at the end of the term of the transaction. Because the cash we receive from the counterparty when we initially sell the securities to the counterparty is less than the market value of those securities, if the counterparty defaults on its obligation to resell the securities back to us we will incur a loss on the transaction. We will also incur a loss if the value of the underlying securities has declined as of the end of the transaction term, as we will have to repurchase the securities for their initial value but would receive securities worth less than that amount. Any losses we incur on our repurchase transactions could reduce our earnings, and thus our cash available for distribution to our shareholders.

Our financing of our REIT qualifying assets with repurchase agreements and warehouse facilities could adversely affect our ability to qualify as a REIT.

We have entered into and intend to enter into, sale and repurchase agreements under which we nominally sell certain REIT qualifying assets to a counterparty and simultaneously enter into an agreement to repurchase the sold assets. We believe that we will be treated for U.S. federal income tax purposes as the owners of the assets that are the subject of any such agreement notwithstanding that we may transfer record ownership of the assets to the counterparty during the term of the agreement. It is possible, however, that the IRS could assert that we did not own the assets during the term of the sale and repurchase agreement, in which case our ability to qualify as a REIT would be adversely affected. If any of our REIT qualifying assets are subject to a repurchase agreement and are sold by the counterparty in connection with a margin call, the loss of those assets could impair our ability to qualify as a REIT. Accordingly, unlike other REITs, we may be subject to additional risk regarding our ability to qualify and maintain our qualification as a REIT.

Item 6. Exhibits

(a) Exhibits

The exhibits filed as part of this quarterly report on Form 10-Q are identified in the exhibit index immediately following the signature page of this Report. Such Exhibit Index is incorporated herein by reference.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	RAIT FINANCIAL TRUST (Registrant)
Date: November 4, 2011	By:	/s/ Scott F. Schaeffer
		Scott F. Schaeffer, Chairman of the Board, Chief Executive Officer and President
		(On behalf of the registrant and as its Principal Executive Officer)
Date: November 4, 2011	By:	/s/ Jack E. Salmon
		Jack E. Salmon, Chief Financial Officer and Treasurer
		(On behalf of the registrant and as its Principal Financial Officer)
Date: November 4, 2011	By:	/s/ James J. Sebra
		James J. Sebra, Senior Vice President and Chief Accounting Officer
		(On behalf of the registrant and as its Principal Accounting Officer)

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EXHIBIT INDEX

Exhibit Number	Description of Documents
3.1	Amended and Restated Declaration of Trust. (1)
3.1.1	Articles of Amendment to Amended and Restated Declaration of Trust. (2)
3.1.2	Articles of Amendment to Amended and Restated Declaration of Trust. (3)
3.1.3	Certificate of Correction to the Amended and Restated Declaration of Trust. (4)
3.1.4	Articles of Amendment to Amended and Restated Declaration of Trust. (5)
3.1.5	Articles of Amendment to Amended and Restated Declaration of Trust. (6)
3.1.6	Articles Supplementary relating to the 7.75% Series A Cumulative Redeemable Preferred Shares of Beneficial Interest (the “Series A Articles Supplementary”). (7)
3.1.7	Certificate of Correction to the Series A Articles Supplementary. (7)
3.1.8	Articles Supplementary relating to the 8.375% Series B Cumulative Redeemable Preferred Shares of Beneficial Interest. (8)
3.1.9	Articles Supplementary relating to the 8.875% Series C Cumulative Redeemable Preferred Shares of Beneficial Interest. (9)
3.2	By-laws. (10)
4.1	Form of Certificate for Common Shares of Beneficial Interest. (6)
4.2	Form of Certificate for 7.75% Series A Cumulative Redeemable Preferred Shares of Beneficial Interest. (11)
4.3	Form of Certificate for 8.375% Series B Cumulative Redeemable Preferred Shares of Beneficial Interest. (8)
4.4	Form of Certificate for 8.875% Series C Cumulative Redeemable Preferred Shares of Beneficial Interest. (9)
4.5	Indenture dated as of April 18, 2007 among RAIT Financial Trust, as issuer, or RAIT, RAIT Partnership, L.P. and RAIT Asset Holdings, LLC, as guarantors, and Wells Fargo Bank, N.A., as trustee. (12)
4.6	Registration Rights Agreement dated as of April 18, 2007 between RAIT and Bear, Stearns & Co. Inc. (12)
4.7	Base Indenture dated as of March 21, 2011 between RAIT Financial Trust, as issuer, and Wells Fargo Bank, National Association., as trustee. (13)
4.8	Supplemental Indenture dated as of March 21, 2011 between RAIT Financial Trust, as issuer, and Wells Fargo Bank, National Association., as trustee. (13)
4.9	Indenture dated as of October 5, 2011 between RAIT and Wilmington Trust, National Association, as trustee.
10.1	Form of Letter Agreement between RAIT and each of its Non-Management Trustees dated as of January 25, 2011. (14)
10.2	Separation Agreement dated as of July 15, 2011 between RAIT Financial Trust and Plamen Mitrikov. (15)
10.3	Third Amended and Restated Employment Agreement dated as of August 4, 2011 between RAIT and Scott F. Schaeffer. (15)
10.4	First Amended and Restated Employment Agreement dated as of August 4, 2011 between RAIT and Ken R. Frappier. (15)
10.5	Exchange Agreement dated as of October 5, 2011 by and among RAIT and Taberna Preferred Funding VIII, Ltd.
10.6	6.75% Senior Secured Note No. 1 due 2017 dated as of October 5, 2011 made by RAIT, as payor, to Hare & Co., as nominee payee.
10.7	6.85% Senior Secured Note No. 2 due 2017 dated as of October 5, 2011 made by RAIT, as payor, to Hare & Co., as nominee payee.
10.8	7.15% Senior Secured Note No. 3 due 2018 dated as of October 5, 2011 made by RAIT, as payor, to Hare & Co., as nominee payee.

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Exhibit Number	Description of Documents
10.9	7.25% Senior Secured Note No. 4 due 2019 dated as of October 5, 2011 made by RAIT, as payor, to Hare & Co., as nominee payee.
10.10	Master Repurchase Agreement dated as of October 27, 2011, by and among RAIT CMBS Conduit I, LLC and Citibank, N.A.
10.11	Guaranty dated October 27, 2011 by RAIT, as guarantor, for the benefit of Citibank, N.A.
15.1	Awareness Letter from Independent Accountants.
31.1	Certification Pursuant to 13a-14 (a) under the Securities Exchange Act of 1934.
31.2	Certification Pursuant to 13a-14 (a) under the Securities Exchange Act of 1934.
32.1	Certification Pursuant to 18 U.S.C. Section 1350.
32.2	Certification Pursuant to 18 U.S.C. Section 1350.
101	Pursuant to Rule 405 of Regulation S-T, the following financial information from RAIT’s Quarterly Report on Form 10-Q for the period ended September 30, 2011 is formatted in XBRL interactive data files: (i) Consolidated Statements of Operations for the three-month and nine-month periods ended September 30, 2011 and 2010; (ii) Consolidated Balance Sheets as of September 30, 2011 and December 31, 2010; (iii) Consolidated Statements of Comprehensive Income (Loss) for the three-month and nine-month periods ended September 30, 2011 and 2010; (iv) Consolidated Statements of Cash Flows for the nine-month periods ended September 30, 2011 and 2010; and (v) Notes to Unaudited Consolidated Financial Statements. The information in this exhibit shall not be deemed “filed” for purposes of Section 18 of the Securities and Exchange Act of 1934, as amended, or otherwise subject to liability of that section and shall not be incorporated by reference into any filing or other document pursuant to the Securities Act of 1933, as amended, except as shall be expressly set forth by specific reference in such filing or document.

(1) Incorporated by reference to RAIT’s Registration Statement on Form S-11 (Registration No. 333-35077).

(2) Incorporated by reference to RAIT’s Registration Statement on Form S-11 (Registration No. 333-53067).

(3) Incorporated by reference to RAIT’s Registration Statement on Form S-2 (Registration No. 333-55518).

(4) Incorporated by reference to RAIT’s Form 10-Q for the quarterly period ended March 31, 2002 (File No. 1-14760).

(5) Incorporated by reference to RAIT’s Form 8-K as filed with the SEC on December 15, 2006 (File No. 1-14760).

(6) Incorporated by reference to RAIT’s Form 8-K as filed with the SEC on July, 1 2011 (File No. 1-14760).

(7) Incorporated by reference to RAIT’s Form 8-K as filed with the SEC on March 8, 2004 (File No. 1-14760).

(8) Incorporated by reference to RAIT’s Form 8-K as filed with the SEC on October 1, 2004 (File No. 1-14760).

(9) Incorporated by reference to RAIT’s Form 8-A as filed with the SEC on June 29, 2007 (File No. 1-14760).

(10) Incorporated by reference to RAIT’s Form 8-K as filed with the SEC on October 19, 2009 (File No. 1-14760).

(11) Incorporated by reference to RAIT’s Form 8-K as filed with the SEC on March 22, 2004 (File No. 1-14760).

(12) Incorporated by reference to RAIT’s Form 8-K as filed with the SEC on April 18, 2007 (File No. 1-14760).

(13) Incorporated by reference to RAIT’s Form 8-K as filed with the SEC on March 22, 2011 (File No. 1-14760).

(14) Incorporated by reference to RAIT’s Form 8-K as filed with the SEC on January 28, 2011 (File No. 1-14760).

(15) Incorporated by reference to RAIT’s Form 10-Q for the quarterly period ended June 30, 2011 (File No. 1-14760).

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EX-4.9

Exhibit 4.9

INDENTURE

between

RAIT FINANCIAL TRUST

and

WILMINGTON TRUST, NATIONAL ASSOCIATION

as Trustee

Dated as of October 5, 2011

TABLE OF CONTENTS

		PAGE
ARTICLE I DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION			6
Section 1.1	Definitions		6
Section 1.2	Compliance Certificate and Opinions		13
Section 1.3	Forms of Documents Delivered to Trustee		14
Section 1.4	Acts of Holders		15
Section 1.5	Notices, Etc. to Trustee and Company		17
Section 1.6	Notice to Holders; Waiver		17
Section 1.7	Effect of Headings and Table of Contents		17
Section 1.8	Successors and Assigns		17
Section 1.9	Separability		18
Section 1.10	Benefits of Indenture		18
Section 1.11	Governing Law		18
Section 1.12	Submission to Jurisdiction		18
Section 1.13	Non-Business Days		18
ARTICLE II SECURITY FORMS			19
Section 2.1	Form of Security		19
Section 2.2	Restrictive Legend		22
Section 2.3	Form of Trustee’s Certificate of Authentication		24
Section 2.4	Temporary Securities		24
Section 2.5	Definitive Securities		25
ARTICLE III THE SECURITIES			25
Section 3.1	Payment of Principal and Interest		25
Section 3.2	Denominations		27
Section 3.3	Execution, Authentication, Delivery and Dating		27
Section 3.4	Global Securities		28
Section 3.5	Registration, Transfer and Exchange Generally		29
Section 3.6	Mutilated, Destroyed, Lost and Stolen Securities		31
Section 3.7	Persons Deemed Owners		32
Section 3.8	Cancellation		32

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Section 3.9	Reserved	32
Section 3.10	Agreed Tax Treatment	32
Section 3.11	Reserved	32
ARTICLE IV SATISFACTION AND DISCHARGE		32
Section 4.1	Satisfaction and Discharge of Indenture	32
Section 4.2	Application of Trust Money	34
ARTICLE V REMEDIES		34
Section 5.1	Events of Default	34
Section 5.2	Acceleration of Maturity; Rescission and Annulment	35
Section 5.3	Collection of Indebtedness and Suits for Enforcement by Trustee	36
Section 5.4	Trustee May File Proofs of Claim	37
Section 5.5	Trustee May Enforce Claim Without Possession of Securities	37
Section 5.6	Application of Money Collected	37
Section 5.7	Limitation on Suits	38
Section 5.8	Unconditional Right of Holders to Receive Principal and Interest	38
Section 5.9	Restoration of Rights and Remedies	38
Section 5.10	Rights and Remedies Cumulative	39
Section 5.11	Delay or Omission Not Waiver	39
Section 5.12	Control by Holders	39
Section 5.13	Waiver of Past Defaults	39
Section 5.14	Undertaking for Costs	40
Section 5.15	Waiver of Usury, Stay or Extension Laws	40
ARTICLE VI THE TRUSTEE		40
Section 6.1	Corporate Trustee Required	40
Section 6.2	Certain Duties and Responsibilities	41
Section 6.3	Notice of Defaults	42
Section 6.4	Certain Rights of Trustee	42
Section 6.5	May Hold Securities	44
Section 6.6	Compensation; Reimbursement; Indemnity	44
Section 6.7	Resignation and Removal; Appointment of Successor	45
Section 6.8	Acceptance of Appointment by Successor	46
Section 6.9	Merger, Conversion, Consolidation or Succession to Business	46
Section 6.10	Not Responsible for Recitals or Issuance of Securities	47

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Section 6.11	Appointment of Authenticating Agent	47
Section 6.12	Execution of Additional Documents	48
ARTICLE VII HOLDER’S LISTS AND REPORTS BY COMPANY		49
Section 7.1	Company to Furnish Trustee Names and Addresses of Holders	49
Section 7.2	Preservation of Information, Communications to Holders	49
Section 7.3	Reports by Company	49
ARTICLE VIII CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER OR LEASE		50
Section 8.1	Company May Consolidate, Etc., Only on Certain Terms	50
Section 8.2	Successor Company Substituted	51
ARTICLE IX SUPPLEMENTAL INDENTURES		52
Section 9.1	Supplemental Indentures without Consent of Holders	52
Section 9.2	Supplemental Indentures with Consent of Holders	52
Section 9.3	Execution of Supplemental Indentures	53
Section 9.4	Effect of Supplemental Indentures	54
Section 9.5	Reference in Securities to Supplemental Indentures	54
ARTICLE X COVENANTS		54
Section 10.1	Payment of Principal and Interest	54
Section 10.2	Money for Security Payments to be Held in Trust	54
Section 10.3	Statement as to Compliance	55
Section 10.4	Reserved	55
Section 10.5	Certain Additional Representations, Covenants and Agreements Regarding Pledged Collateral	55
Section 10.6	Additional Covenants	57
Section 10.7	Waiver of Covenants	57
Section 10.8	Treatment of Securities	58
Section 10.9	Inspection Rights	58
ARTICLE XI REDEMPTION OF SECURITIES		58
Section 11.1	Optional Redemption	58
Section 11.2	Reserved	58
Section 11.3	Election to Redeem; Notice to Trustee	58
Section 11.4	Reserved	59
Section 11.5	Notice of Redemption	59

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Section 11.6	Deposit of Redemption Price	59
Section 11.7	Payment of Securities Called for Redemption	60
ARTICLE XII FUNDAMENTAL CHANGE IN COMPANY		60
Section 12.1	Repurchase at Option of Holders of the Securities Upon a Fundamental Change	60
Section 12.2	Withdrawal of Repurchase Notice or Fundamental Change Repurchase Notice	63
Section 12.3	Deposit of Fundamental Change Repurchase Price	63
Section 12.4	Covenant to Comply with Applicable Laws Upon Repurchase of Notes	64
ARTICLE XIII MISCELLANEOUS		65
Section 13.1	Indenture and Securities Solely Corporate Obligations	65

SCHEDULE AND EXHIBIT
Exhibit A	Form of Officer’s Financial Certificate
Exhibit B	Form of Fundamental Change Repurchase Notice
Exhibit C	Form of Withdrawal of Fundamental Change Repurchase Notice

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INDENTURE

This INDENTURE (this “Indenture”), dated as of October 5, 2011, is between RAIT FINANCIAL TRUST, a Maryland real estate investment trust (the “Company”), and WILMINGTON TRUST, NATIONAL ASSOCIATION, a national banking association as trustee (in such capacity, the “Trustee”).

RECITALS OF THE COMPANY

WHEREAS, the Company has duly authorized the execution and delivery of this Indenture to provide for the issuance of senior secured notes (each, individually, a “Security” and collectively, the “Securities”), and to provide the terms and conditions upon which the Securities are to be authenticated, issued and delivered; and

WHEREAS, all things necessary to make this Indenture a valid agreement of the Company, in accordance with its terms, have been done.

NOW, THEREFORE, THIS INDENTURE WITNESSETH:

For and in consideration of the premises and the acquisition of the Securities by the Holders thereof, it is mutually covenanted and agreed, for the equal and proportionate benefit of all Holders of the Securities, as follows:

ARTICLE I

DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION

Section 1.1 Definitions.

For all purposes of this Indenture, except as otherwise expressly provided or unless the context otherwise requires:

(a) the terms defined in this Article I have the meanings assigned to them in this Article I;

(b) the words “include,” “includes” and “including” shall be deemed to be followed by the phrase “without limitation”;

(c) all accounting terms used but not otherwise defined herein have the meanings assigned to them in accordance with GAAP;

(d) unless the context otherwise requires, any reference to an “Article,” a “Section,” a “Schedule” or an “Exhibit” refers to an Article, a Section, a Schedule or an Exhibit, as the case may be, of or to this Indenture;

(e) the words “hereby,” “herein,” “hereof” and “hereunder” and other words of similar import refer to this Indenture as a whole and not to any particular Article, Section or other subdivision;

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(f) a reference to the singular includes the plural and vice versa; and

(g) the masculine, feminine or neuter genders used herein shall include the masculine, feminine and neuter genders.

“Account Control Agreement” means that certain Securities Account Control Agreement, dated as of October 5, 2011, among the Company, the Trustee and Wilmington Trust, National Association, as securities intermediary.

“Act” when used with respect to any Holder, has the meaning specified in Section 1.4(a).

“Additional Interest” means the interest, if any, that shall accrue on any amounts payable on the Securities, the payment of which has not been made on the applicable Interest Payment Date and which shall accrue at the rate per annum specified or determined as specified in such Security, in each case to the extent legally enforceable.

“Affiliate” of any specified Person means any other Person directly or indirectly Controlling or Controlled by or under direct or indirect common Control with such specified Person.

“Applicable Depositary Procedures” means, with respect to any transfer or transaction involving a Global Security or beneficial interest therein, the rules and procedures of the Depositary for such Security, in each case to the extent applicable to such transaction and as in effect from time to time.

“Authenticating Agent” means any Person authorized by the Trustee pursuant to Section 6.11 to act on behalf of the Trustee to authenticate the Securities.

“Board of Trustees” means the board of trustees of the Company or any duly authorized committee of that board.

“Board Resolution” means a copy of a resolution certified by the Secretary or an Assistant Secretary of the Company to have been duly adopted by the Board of Trustees and to be in full force and effect on the date of such certification.

“Business Day” means any day other than (i) a Saturday or Sunday, (ii) a day on which banking institutions in the City of New York are authorized or required by law or executive order to remain closed or (iii) a day on which the Corporate Trust Office of the Trustee is closed for business.

“Code” means the Internal Revenue Code of 1986 or any successor statute thereto, in each case as amended from time to time.

“Commission” has the meaning specified in Section 7.3(c).

“Common Equity” of any Person means capital stock of such Person that is generally entitled (a) to vote in the election of directors of such Person or (b) if such Person is not a

7

corporation, to vote or otherwise participate in the selection of the governing body, partners, managers or others that will control the management or policies of such Person.

“Common Shares” mean the common shares of beneficial interest of the Company, par value $0.01 per share, at the date of this Indenture.

“Company” means the Person named as the “Company” in the first paragraph of this Indenture until a successor Person shall have become such pursuant to the applicable provisions of this Indenture, and thereafter “Company” shall mean such successor Person.

“Company Request” and “Company Order” mean, respectively, the written request or order signed in the name of the Company by (i) its Chairman of the Board of Trustees, its Chief Executive Officer, President, Chief Operating Officer, an Executive Vice President, Senior Vice President or a Vice President, and (ii) its Chief Financial Officer, its Treasurer, Chief Accounting Officer, its Secretary or an Assistant Secretary, and delivered to the Trustee. Notwithstanding the foregoing, a Company Order for the purposes of authentication and delivery of the Securities pursuant to Section 3.3(a) shall require the signature of only one of the above-referenced officers of the Company.

“Continuing Trustee” means a trustee who either was a member of the Board of Trustees on the date hereof or who becomes a member of the Board of Trustees subsequent to that date and whose election, appointment or nomination for election by the shareholders of the Company is duly approved by a majority of the continuing trustees on the Board of Trustees at the time of such approval, either by a specific vote or by approval of the proxy statement issued by the Company on behalf of the entire Board of Trustees in which such individual is named as nominee for trustee.

“Control” when used with respect to any specified Person, means the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise, and the terms “controlling” and “controlled” have meanings correlative to the foregoing.

“Corporate Trust Office” means the office of the Trustee at which at any particular time its corporate trust business with respect to this Indenture shall be administered, which office at the date of this Indenture is located at Rodney Square North, 1100 N. Market St., Wilmington, DE 19890.

“Defaulted Interest” has the meaning specified in Section 3.1(c).

“Depositary” means an organization registered as a clearing agency under the Exchange Act that is designated as Depositary by the Company or any successor thereto.

“Depositary Participant” means a broker, dealer, bank, other financial institution or other Person for whom from time to time a Depositary effects book-entry transfers and pledges of securities deposited with the Depositary.

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“Designated Officer” means a Chairman of the Board of Trustees, Chief Executive Officer, President, Chief Operating Officer, an Executive Vice President, Chief Financial Officer, Treasurer or Chief Accounting Officer.

“Dollar” or “$” means the currency of the United States of America that, as at the time of payment, is legal tender for the payment of public and private debts.

“EDGAR” has the meaning specified in Section 7.3(c).

“ERISA” means the Employee Retirement Income Security Act of 1974 or any successor statute thereto, in each case as amended from time to time.

“Event of Default” has the meaning specified in Section 5.1.

“Exchange Act” means the Securities Exchange Act of 1934 or any successor statute thereto, in each case as amended from time to time.

“Exchange Agreement” means that certain Exchange Agreement executed and delivered contemporaneously with this Indenture by and among the Company and the parties named therein.

“Expiration Date” has the meaning specified in Section 1.4(h).

“Fundamental Change” shall be deemed to have occurred at the time after the Securities are originally issued if any of the following occurs:

(a) a “person” or “group” within the meaning of Section 13(d) of the Exchange Act, other than the Company, its Subsidiaries and the employee benefit plans of the Company and its Subsidiaries, has become the direct or indirect “beneficial owner,” as defined in Rule 13d-3 under the Exchange Act, of the Company’s Common Equity representing more than 50% of the voting power of the Company’s Common Equity;

(b) the consummation of (A) any recapitalization, reclassification or change of the Common Shares (other than changes resulting from a subdivision or combination or merger) as a result of which the Common Shares would be converted into, or exchanged for, stock, other securities, other property or assets; (B) any share exchange, consolidation or merger of the Company pursuant to which the Common Shares shall be converted into cash, securities or other property; or (C) any sale, lease or other transfer in one transaction or a series of transactions of all or substantially all of the consolidated assets of the Company and its Subsidiaries, taken as a whole, to any Person other than one of the Company’s Subsidiaries; provided, however, that a transaction described in clause (B) in which the holders of all classes of the Company’s Common Equity immediately prior to such transaction own, directly or indirectly, more than 50% of all classes of Common Equity of the continuing or surviving corporation or transferee or the parent thereof immediately after such transaction shall not be a Fundamental Change pursuant to this clause (b);

(c) Continuing Trustees cease to constitute at least a majority of the Board of Trustees;

9

(d) the shareholders of the Company approve any plan or proposal for the liquidation or dissolution of the Company; or

(e) the Common Shares (or other common stock underlying the Notes) cease to be listed or quoted on any of The New York Stock Exchange, The NASDAQ Global Select Market or The NASDAQ Global Market (or any of their respective successors).

“Fundamental Change Company Notice” has the meaning ascribed to such term in Section 12.1(b) hereof.

“Fundamental Change Repurchase Date” has the meaning ascribed to such term in Section 12.1(a) hereof.

“Fundamental Change Repurchase Notice” has the meaning ascribed to such term in Section 12.1(c)(i) hereof.

“Fundamental Change Repurchase Price” has the meaning ascribed to such term in Section 12.1(a) hereof.

“GAAP” means United States generally accepted accounting principles, consistently applied, from time to time in effect.

“Global Security” means a Security that evidences all or part of the Securities, the ownership and transfers of which shall be made through book entries by a Depositary.

“Government Obligation” means (a) any security that is (i) a direct obligation of the United States of America of which the full faith and credit of the United States of America is pledged or (ii) an obligation of a Person controlled or supervised by and acting as an agency or instrumentality of the United States of America or the payment of which is unconditionally guaranteed as a full faith and credit obligation by the United States of America, which, in either case of clause (i) or (ii), is not callable or redeemable at the option of the issuer thereof, and (b) any depositary receipt issued by a “bank” (as defined in Section 3(a)(2) of the Securities Act) as custodian with respect to any Government Obligation that is specified in clause (a) above and held by such bank for the account of the holder of such depositary receipt, or with respect to any specific payment of principal of or interest on any Government Obligation that is so specified and held, provided that (except as required by law) such custodian is not authorized to make any deduction from the amount payable to the holder of such depositary receipt from any amount received by the custodian in respect of the Government Obligation or the specific payment of principal or interest evidenced by such depositary receipt.

“Holder” means a Person in whose name a Security is registered in the Securities Register.

“Indenture” means this Indenture as originally executed or as it may from time to time be amended or supplemented by one or more amendments or indentures supplemental hereto entered into pursuant to the applicable provisions hereof.

10

“Interest Payment Date” means October 30, January 30, April 30, and July 30 of each year, commencing on October 30, 2011, during the term of this Indenture.

“Interest Period” means the period commencing on an Interest Payment Date and continuing through and including the day prior to the next succeeding Interest Payment Date.

“Investment Company Act” means the Investment Company Act of 1940 or any successor statute thereto, in each case as amended from time to time.

“Maturity” means, when used with respect to any Security, the date on which the principal of such Security or any installment of principal becomes due and payable as therein or herein provided, whether at the Stated Maturity or by declaration of acceleration, call for redemption or otherwise.

“Notice of Default” means a written notice of the kind specified in Section 5.1(c).

“Officers’ Certificate” means a certificate signed by a Designated Officer, of the Company and delivered to the Trustee.

“Opinion of Counsel” means a written opinion of counsel, who may be an employee of the Company or any Affiliate of the Company.

“Optional Redemption Price” has the meaning set forth in Section 11.1.

“Original Issue Date” means the date of original issuance of each Security.

“Outstanding” means, when used in reference to any Securities, as of the date of determination, all Securities theretofore authenticated and delivered under this Indenture, except:

(i) Securities theretofore canceled by the Trustee or delivered to the Trustee for cancellation;

(ii) Securities for whose payment or redemption money in the necessary amount has been theretofore deposited with the Trustee or any Paying Agent in trust for the Holders of such Securities; provided, that, if such Securities are to be redeemed, notice of such redemption has been duly given pursuant to this Indenture or provision therefor satisfactory to the Trustee has been made; and

(iii) Securities that have been paid or in substitution for or in lieu of which other Securities have been authenticated and delivered pursuant to the provisions of this Indenture, unless proof satisfactory to the Trustee is presented that any such Securities are held by Holders in whose hands such Securities are valid, binding and legal obligations of the Company;

provided, that in determining whether the Holders of the requisite principal amount of Outstanding Securities have given any request, demand, authorization, direction, notice, consent or waiver hereunder, Securities owned by the Company, if any, or any other obligor upon the Securities, if any, or any Affiliate of the Company or such other obligor (other than in all cases

11

Taberna Preferred Funding VIII, Ltd.) shall be disregarded and deemed not to be Outstanding unless the Company shall hold all Outstanding Securities, except that, in determining whether the Trustee shall be protected in relying upon any such request, demand, authorization, direction, notice, consent or waiver, only Securities that a Responsible Officer of the Trustee actually knows to be so owned shall be so disregarded. Securities so owned that have been pledged in good faith may be regarded as Outstanding if the pledgee establishes to the satisfaction of the Trustee the pledgee’s right so to act with respect to such Securities and that the pledgee is not the Company or any other obligor upon the Securities or any Affiliate of the Company or such other obligor.

“Paying Agent” means the Trustee or any Person authorized by the Company to pay the principal of or interest on, or other amounts in respect of, any Securities on behalf of the Company.

“Person” means a legal person, including any individual, corporation, estate, partnership (general or limited), joint venture, association, joint stock company, company, limited liability company, trust, unincorporated association, government or any agency or political subdivision thereof, or any other entity of whatever nature.

“Place of Payment” means, with respect to the Securities, the Corporate Trust Office of the Trustee.

“Pledge and Security Agreement” means that certain Pledge and Security Agreement, dated as of October 5, 2011, in favor of the Trustee for the benefit of itself and the Holders, executed by the Company and the Trustee.

“Pledged Collateral” has the meaning set forth in the Pledge and Security Agreement.

“Pledged Collateral Notice” has the meaning specified in Section 10.5(b).

“Predecessor Security” of any particular Security means every previous Security evidencing all or a portion of the same debt as that evidenced by such particular Security. For the purposes of this definition, any security authenticated and delivered under Section 3.6 in lieu of a mutilated, destroyed, lost or stolen Security shall be deemed to evidence the same debt as the mutilated , destroyed, lost or stolen Security.

“Redemption Date” means, when used with respect to any Security to be redeemed, the date fixed for such redemption by or pursuant to this Indenture.

“Redemption Price” means, when used with respect to any Security to be redeemed, in whole or in part, the Optional Redemption Price at which such Security or portion thereof is to be redeemed as fixed by or pursuant to this Indenture.

“Regular Record Date” for the interest payable on any Interest Payment Date with respect to the Securities means the date that is fifteen (15) days preceding such Interest Payment Date (whether or not a Business Day).

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“Responsible Officer” means, when used with respect to the Trustee, any officer of the Trustee duly authorized by the Trustee having direct responsibility for the administration of this Indenture, and also means with respect to a particular corporate trust matter, any other officer to whom such matter is referred because of his knowledge and familiarity with the particular matter.

“Securities” or “Security” means the senior secured notes referenced in the Recitals and any other debt securities or debt security, as the case may be, authenticated and delivered under this Indenture.

“Securities Act” means the Securities Act of 1933 or any successor statute thereto, in each case as amended from time to time.

“Securities Register” and “Securities Registrar” have the respective meanings specified in Section 3.5(a).

“Significant Subsidiary” means, as of any date of determination, a Subsidiary of the Company that would constitute a “significant subsidiary” of the Company as such term is defined under Rule 1-02(w) of Regulation S-X of the Exchange Act as in effect on the date of this Indenture; provided that it shall not include (a) any entity consolidated by the Company where the Company holds 50% or less of the voting power of such entity or (b) any bankruptcy remote, special purpose entity, used to securitize assets and consolidated by the Company, whose indebtedness is without recourse to the Company.

“Special Record Date” for the payment of any Defaulted Interest means a date fixed by the Company pursuant to Section 3.1(c).

“Stated Maturity” means the maturity date expressly set forth in each Security.

“Subsidiary” has the meaning set forth in Regulations S-X under the Exchange Act. Unless otherwise expressly provided, all references herein to a “Subsidiary” shall mean a Subsidiary of the Company.

“Taberna Capital Management, LLC” means Taberna Capital Management, LLC and its successors and/or assigns as collateral manager of one or more Holders, as applicable.

“Trustee” means the Person named as the “Trustee” in the first paragraph of this Indenture, solely in its capacity as such and not in its individual capacity, until a successor Trustee shall have become such pursuant to the applicable provisions of this Indenture, and, thereafter, “Trustee” shall mean or include each Person who is then a Trustee hereunder.

“Trust Indenture Act” means the Trust Indenture Act of 1939 or any successor statute thereto, in each case as amended from time to time.

Section 1.2 Compliance Certificate and Opinions.

(a) Upon any application or request by the Company to the Trustee to take any action under any provision of this Indenture, the Company shall, if requested by the Trustee, furnish to

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the Trustee an Officers’ Certificate stating that all conditions precedent (including covenants compliance with which constitutes a condition precedent), if any, provided for in this Indenture relating to the proposed action have been complied with and an Opinion of Counsel stating that in the opinion of such counsel all such conditions precedent (including covenants compliance with which constitutes a condition precedent), if any, have been complied with.

(b) Every certificate or opinion with respect to compliance with a condition or covenant provided for in this Indenture (other than the certificate provided pursuant to Section 10.3) shall include:

(i) a statement by each individual signing such certificate or opinion that such individual has read such condition or covenant and the definitions herein relating thereto;

(ii) a brief statement as to the nature and scope of the examination or investigation upon which the statements or opinions of such individual contained in such certificate or opinion are based;

(iii) a statement that, in the opinion of such individual, he or she has made such examination or investigation as is necessary to enable him or her to express an informed opinion as to whether or not such condition or covenant has been complied with; and

(iv) a statement as to whether, in the opinion of such individual, such condition or covenant has been complied with.

Section 1.3 Forms of Documents Delivered to Trustee.

(a) In any case where several matters are required to be certified by, or covered by an opinion of, any specified Person, it is not necessary that all such matters be certified by, or covered by the opinion of, only one such Person, or that they be so certified or covered by only one document, but one such Person may certify or give an opinion with respect to some matters and one or more other such Persons as to other matters, and any such Person may certify or give an opinion as to such matters in one or several documents.

(b) Any certificate or opinion of an officer of the Company may be based, insofar as it relates to legal matters, upon a certificate or opinion of, or representations by, counsel, unless such officer knows, or after reasonable inquiry should know, that the certificate or opinion or representations with respect to matters upon which his or her certificate or opinion is based are erroneous. Any such certificate or Opinion of Counsel may be based, insofar as it relates to factual matters, upon a certificate or opinion of, or representations by, an officer or officers of the Company stating that the information with respect to such factual matters is in the possession of the Company, unless such counsel knows, or after reasonable inquiry should know, that the certificate or opinion or representations with respect to such matters are erroneous.

(c) Where any Person is required to make, give or execute two or more applications, requests, consents, certificates, statements, opinions or other instruments under this Indenture, they may, but need not, be consolidated and form one instrument.

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(d) Whenever, subsequent to the receipt by the Trustee of any Board Resolution, Officers’ Certificate, Opinion of Counsel or other document or instrument, a clerical, typographical or other inadvertent or unintentional error or omission shall be discovered therein, a new document or instrument may be substituted therefor in corrected form with the same force and effect as if originally received in the corrected form and, irrespective of the date or dates of the actual execution and/or delivery thereof, such substitute document or instrument shall be deemed to have been executed and/or delivered as of the date or dates required with respect to the document or instrument for which it is substituted. Without limiting the generality of the foregoing, any Securities issued under the authority of such defective document or instrument shall nevertheless be the valid obligations of the Company entitled to the benefits of this Indenture equally and ratably with all other Outstanding Securities.

Section 1.4 Acts of Holders.

(a) Any request, demand, authorization, direction, notice, consent, waiver or other action provided by this Indenture to be given to or taken by Holders may be embodied in and evidenced by one or more instruments of substantially similar tenor signed by such Holders in person or by an agent thereof duly appointed in writing and, except as herein otherwise expressly provided, such action shall become effective when such instrument or instruments (including any appointment of an agent) is or are delivered to the Trustee and, where it is hereby expressly required, to the Company. Such instrument or instruments (and the action embodied therein and evidenced thereby) are herein sometimes referred to as the “Act” of the Holders signing such instrument or instruments. Proof of execution of any such instrument or of a writing appointing any such agent shall be sufficient for any purpose of this Indenture and conclusive in favor of the Trustee and the Company, if made in the manner provided in this Section 1.4.

(b) The fact and date of the execution by any Person of any such instrument or writing may be proved by the affidavit of a witness of such execution or by the certificate of any notary public or other officer authorized by law to take acknowledgments of deeds, certifying that the individual signing such instrument or writing acknowledged to him or her the execution thereof. Where such execution is by a Person acting in other than his or her individual capacity, such certificate or affidavit shall also constitute sufficient proof of his or her authority. The fact and date of the execution by any Person of any such instrument or writing, or the authority of the Person executing the same, may also be proved in any other manner that the Trustee deems sufficient and in accordance with such reasonable rules as the Trustee may determine.

(c) The ownership of Securities shall be proved by the Securities Register.

(d) Any request, demand, authorization, direction, notice, consent, waiver or other action by the Holder of any Security shall bind every future Holder of the same Security and the Holder of every Security issued upon the registration of transfer thereof or in exchange therefor or in lieu thereof in respect of anything done or suffered to be done by the Trustee or the Company in reliance thereon, whether or not notation of such action is made upon such Security.

(e) Without limiting the foregoing, a Holder entitled to take any action hereunder with regard to any particular Security may do so with regard to all or any part of the principal

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amount of such Security or by one or more duly appointed agents each of which may do so pursuant to such appointment with regard to all or any part of such principal amount.

(f) Except as set forth in paragraph (g) of this Section 1.4, the Company may set any day as a record date for the purpose of determining the Holders of Outstanding Securities entitled to give, make or take any request, demand, authorization, direction, notice, consent, waiver or other action provided or permitted by this Indenture to be given, made or taken by Holders of Securities. If any record date is set pursuant to this paragraph, the Holders of Outstanding Securities on such record date, and no other Holders, shall be entitled to take the relevant action, whether or not such Holders remain Holders after such record date; provided, that no such action shall be effective hereunder unless taken on or prior to the applicable Expiration Date by Holders of the requisite principal amount of Outstanding Securities on such record date. Nothing in this paragraph shall be construed to prevent the Company from setting a new record date for any action for which a record date has previously been set pursuant to this paragraph (whereupon the record date previously set shall automatically and with no action by any Person be canceled and of no effect). Promptly after any record date is set pursuant to this paragraph, the Company, at its own expense, shall cause notice of such record date, the proposed action by Holders and the applicable Expiration Date to be given to the Trustee in writing and to each Holder of Securities in the manner set forth in Section 1.6.

(g) The Trustee may set any day as a record date for the purpose of determining the Holders of Outstanding Securities entitled to join in the giving or making of (i) any Notice of Default, (ii) any declaration of acceleration or rescission or annulment thereof referred to in Section 5.2, (iii) any request to institute proceedings referred to in Section 5.7(b) or (iv) any direction referred to in Section 5.12. If any record date is set pursuant to this paragraph, the Holders of Outstanding Securities on such record date, and no other Holders, shall be entitled to join in such notice, declaration, request or direction, whether or not such Holders remain Holders after such record date; provided, that no such action shall be effective hereunder unless taken on or prior to the applicable Expiration Date by Holders of the requisite principal amount of Outstanding Securities on such record date. Nothing in this paragraph shall be construed to prevent the Trustee from setting a new record date for any action for which a record date has previously been set pursuant to this paragraph (whereupon the record date previously set shall automatically and with no action by any Person be canceled and of no effect). Promptly after any record date is set pursuant to this paragraph, the Trustee, at the Company’s expense, shall cause notice of such record date, the proposed action by Holders and the applicable Expiration Date to be given to the Company in writing and to each Holder of Securities in the manner set forth in Section 1.6.

(h) With respect to any record date set pursuant to paragraph (f) or (g) of this Section 1.4, the party hereto that sets such record date may designate any day as the “Expiration Date” and from time to time may change the Expiration Date to any earlier or later day; provided, that no such change shall be effective unless notice of the proposed new Expiration Date is given to the other party hereto in writing, and to each Holder of Securities in the manner set forth in Section 1.6, on or prior to the existing Expiration Date. If an Expiration Date is not designated with respect to any record date set pursuant to this Section 1.4, the party hereto that set such record date shall be deemed to have initially designated the ninetieth (90th) day after such record date as the Expiration Date with respect thereto, subject to its right to change the Expiration Date

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as provided in this paragraph. Notwithstanding the foregoing, no Expiration Date shall be later than the one hundred eightieth (180th) day after the applicable record date.

Section 1.5 Notices, Etc. to Trustee and Company.

Any request, demand, authorization, direction, notice, consent, waiver, Act of Holders, or other document provided or permitted by this Indenture to be made upon, given or furnished to, or filed with:

(a) the Trustee by any Holder or the Company shall be sufficient for every purpose hereunder if made, given, furnished or filed in writing to or with and received by the Trustee at its Corporate Trust Office with a copy to Wilmington Trust, National Association, Corporate Capital Markets, 50 South Sixth Street, Suite 1290, Minneapolis, MN 55402; or

(b) the Company by the Trustee or any Holder shall be sufficient for every purpose hereunder if in writing and mailed, first class, postage prepaid, to the Company addressed to it at 2929 Arch Street, 17^th Floor, Philadelphia, PA 19104, Attention Chief Financial Officer, facsimile: 215-243-9039 or at any other address previously furnished in writing to the Trustee by the Company.

Section 1.6 Notice to Holders; Waiver.

Where this Indenture provides for notice to Holders of any event, such notice shall be sufficiently given (unless otherwise herein expressly provided) if in writing and mailed, first class, postage prepaid, to each Holder affected by such event to the address of such Holder as it appears in the Securities Register, not later than the latest date (if any), and not earlier than the earliest date (if any), prescribed for the giving of such notice. If, by reason of the suspension of or irregularities in regular mail service or for any other reason, it shall be impossible or impracticable to mail notice of any event to Holders when said notice is required to be given pursuant to any provision of this Indenture, then any manner of giving such notice as shall be satisfactory to the Trustee shall be deemed to be a sufficient giving of such notice. In any case where notice to Holders is given by mail, neither the failure to mail such notice, nor any defect in any notice so mailed, to any particular Holder shall affect the sufficiency of such notice with respect to other Holders. Where this Indenture provides for notice in any manner, such notice may be waived in writing by the Person entitled to receive such notice, either before or after the event, and such waiver shall be the equivalent of such notice. Waivers of notice by Holders shall be filed with the Trustee, but such filing shall not be a condition precedent to the validity of any action taken in reliance upon such waiver.

Section 1.7 Effect of Headings and Table of Contents.

The Article and Section headings herein and the Table of Contents are for convenience only and shall not affect the construction of this Indenture.

Section 1.8 Successors and Assigns.

This Indenture shall be binding upon and shall inure to the benefit of any successor to the Company and the Trustee, including any successor by operation of law. Except in connection

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with a transaction involving the Company that is permitted under Article VIII and pursuant to which the assignee agrees in writing to perform the Company’s obligations hereunder, the Company shall not assign its obligations hereunder.

Section 1.9 Separability.

If any provision in this Indenture or in the Securities shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby, and there shall be deemed substituted for the provision at issue a valid, legal and enforceable provision as similar as possible to the provision at issue.

Section 1.10 Benefits of Indenture.

Nothing in this Indenture or in the Securities, express or implied, shall give to any Person, other than the parties hereto and their successors and assigns and the Holders of the Securities, any benefit or any legal or equitable right, remedy or claim under this Indenture.

Section 1.11 Governing Law.

This Indenture and the rights and obligations of each of the Holders, the Company and the Trustee shall be construed and enforced in accordance with and governed by the laws of the State of New York without reference to its conflict of laws provisions (other than Section 5-1401 of the General Obligations Law).

Section 1.12 Submission to Jurisdiction.

ANY LEGAL ACTION OR PROCEEDING BY OR AGAINST ANY PARTY HERETO OR WITH RESPECT TO OR ARISING OUT OF THIS INDENTURE MAY BE BROUGHT IN OR REMOVED TO THE COURTS OF THE STATE OF NEW YORK, IN AND FOR THE COUNTY OF NEW YORK, OR OF THE UNITED STATES OF AMERICA FOR THE SOUTHERN DISTRICT OF NEW YORK (IN EACH CASE SITTING IN THE BOROUGH OF MANHATTAN). BY EXECUTION AND DELIVERY OF THIS INDENTURE, EACH PARTY ACCEPTS, FOR ITSELF AND IN RESPECT OF ITS PROPERTY, GENERALLY AND UNCONDITIONALLY, THE JURISDICTION OF THE AFORESAID COURTS (AND COURTS OF APPEALS THEREFROM) FOR LEGAL PROCEEDINGS ARISING OUT OF OR IN CONNECTION WITH THIS INDENTURE.

Section 1.13 Non-Business Days.

If any Interest Payment Date, Redemption Date or Stated Maturity of any Security shall not be a Business Day, then (notwithstanding any other provision of this Indenture or the Securities) payment of interest or principal or other amounts in respect of such Security shall not be made on such date, but shall be made on the next succeeding Business Day (and no interest shall accrue in respect of the amounts whose payment is so delayed for the period from and after such Interest Payment Date, Redemption Date or Stated Maturity, as the case may be, until such next succeeding Business Day) except that, if such Business Day falls in the next succeeding calendar year, such payment shall be made on the immediately preceding Business Day, in each

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case with the same force and effect as if made on the Interest Payment Date or Redemption Date or at the Stated Maturity.

ARTICLE II

SECURITY FORMS

Section 2.1 Form of Security.

Any Security issued hereunder shall be in substantially the following form:

RAIT FINANCIAL TRUST

_________ % Senior Secured Note due [            ]

No. [to be inserted] $ ________________

RAIT Financial Trust, a real estate investment trust organized and existing under the laws of Maryland (hereinafter called the “Company,” which term includes any successor Person under the Indenture hereinafter referred to), for value received, hereby promises to pay to Hare & Co., or registered assigns, the principal sum of [            ] Dollars ($[            ]) on [            ]. The Company further promises to pay interest on said principal sum from October 5, 2011, or from the most recent Interest Payment Date to which interest has been paid or duly provided for, quarterly in arrears on October 30, January 30, April 30, and July 30 of each year, commencing on October 30, 2011, or if any such day is not a Business Day, on the next succeeding Business Day (and no interest shall accrue in respect of the amounts whose payment is so delayed for the period from and after such Interest Payment Date until such next succeeding Business Day), except that, if such Business Day falls in the next succeeding calendar year, such payment shall be made on the immediately preceding Business Day, in each case, with the same force and effect as if made on the Interest Payment Date, at a fixed rate equal to [            ]% per annum until the principal hereof is paid or duly provided for or made available for payment; provided, that any overdue principal and any overdue installment of interest in excess of thirty (30) days shall bear Additional Interest at a fixed rate equal to [Interest Rate plus 2%] per annum (to the extent that the payment of such interest shall be legally enforceable), compounded quarterly, from the dates such amounts are due until they are paid or made available for payment, and such interest shall be payable on demand.

The amount of interest payable for any Interest Period will be computed on the basis of a three hundred sixty (360)-day year of twelve thirty (30)-day months. The interest so payable, and punctually paid or duly provided for, on any Interest Payment Date shall, as provided in the Indenture, be paid to the Person in whose name this Security (or one or more Predecessor Securities) is registered at the close of business on the Regular Record Date for such interest installment. Any such interest not so punctually paid or duly provided for shall forthwith cease to be payable to the Holder on such Regular Record Date and may either be paid to the Person in whose name this Security (or one or more Predecessor Securities) is registered at the close of business on a Special Record Date for the payment of such Defaulted Interest to be fixed by the Company, notice whereof shall be given to Holders of Securities and the Trustee not less than ten (10) days prior to such Special Record Date, or be paid at any time in any other lawful

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manner not inconsistent with the requirements of any securities exchange or automated quotation system on which the Securities may be listed, traded or quoted and upon such notice as may be required by such exchange or automated quotation system, all as more fully provided in the Indenture.

Payment of principal of and interest on this Security shall be made in such coin or currency of the United States of America as at the time of payment is legal tender for payment of public and private debts. Payments of principal and interest due at the Maturity of this Security shall be made upon surrender of such Securities to the Paying Agent at the Place of Payment, and payments of interest shall be made, subject to such surrender where applicable, by wire transfer at such place and to such account at a banking institution in the United States as may be designated in writing to the Paying Agent at least ten (10) Business Days prior to the date for payment by the Person entitled thereto unless proper written transfer instructions have not been received by the relevant record date, in which case such payments shall be made by check mailed to the address of such Person as such address shall appear in the Security Register.

Unless the certificate of authentication hereon has been executed by the Trustee by manual signature, this Security shall not be entitled to any benefit under the Indenture or be valid or obligatory for any purpose.

[FORM OF REVERSE OF SECURITY]

This Security is one of a duly authorized issue of securities of the Company (the “Securities”) issued under the Indenture, dated as of October 5, 2011 (the “Indenture”), between the Company and Wilmington Trust, National Association, as Trustee (in such capacity, the “Trustee,” which term includes any successor trustee under the Indenture), to which Indenture and all indentures supplemental thereto reference is hereby made for a statement of the respective rights, limitations of rights, duties and immunities thereunder of the Company, the Trustee and the Holders of the Securities, and of the terms upon which the Securities are, and are to be, authenticated and delivered.

All terms used in this Security that are defined in the Indenture shall have the meanings assigned to them in the Indenture.

The Company may at its option, upon not less than fifteen (15) days’ nor more than seventy-five (75) days’ written notice to the Holders of the Securities and subject to the terms and conditions of Article XI of the Indenture, redeem this Security in whole at any time or in part from time to time at a Redemption Price equal to one hundred percent (100%) of the principal amount hereof, together, in the case of any such redemption, with accrued interest, including any Additional Interest, to but excluding the date fixed as the Redemption Date.

In the event of redemption of this Security in part only, a new Security or Securities for the unredeemed portion hereof will be issued in the name of the Holder hereof upon the cancellation hereof. If less than all the Securities are to be redeemed, the particular Securities to be redeemed shall be selected not more than seventy-five (75) days prior to the Redemption Date by the Company from the Outstanding Securities not previously called for redemption.

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The Indenture permits, with certain exceptions as therein provided, the Company and the Trustee at any time to enter into a supplemental indenture or indentures for the purpose of modifying in any manner the rights and obligations of the Company and of the Holders of the Securities, with the consent of the Holders of not less than a majority in principal amount of the Outstanding Securities. The Indenture also contains provisions permitting Holders of specified percentages in principal amount of the Securities, on behalf of the Holders of all Securities, to waive compliance by the Company with certain provisions of the Indenture and certain past defaults under the Indenture and their consequences. Any such consent or waiver by the Holder of this Security shall be conclusive and binding upon such Holder and upon all future Holders of this Security and of any Security issued upon the registration of transfer hereof or in exchange herefor or in lieu hereof, whether or not notation of such consent or waiver is made upon this Security.

No reference herein to the Indenture and no provision of this Security or of the Indenture shall alter or impair the obligation of the Company, which is absolute and unconditional, to pay the principal of and interest, including any Additional Interest (to the extent legally enforceable), on this Security at the times, place and rate, and in the coin or currency, herein prescribed.

As provided in the Indenture and subject to certain limitations therein set forth, the transfer of this Security is restricted and is registrable in the Securities Register, upon surrender of this Security for registration of transfer at the office or agency of the Company maintained for such purpose, duly endorsed by, or accompanied by a written instrument of transfer in form satisfactory to the Company and the Securities Registrar and duly executed by, the Holder hereof or such Holder’s attorney duly authorized in writing, and thereupon one or more new Securities, of like tenor, of authorized denominations and for the same aggregate principal amount, will be issued to the designated transferee or transferees.

The Securities are issuable only in registered form without coupons in minimum denominations of $100,000 and any integral multiple of $1,000 in excess thereof. As provided in the Indenture and subject to certain limitations therein set forth, Securities are exchangeable for a like aggregate principal amount of Securities and of like tenor of a different authorized denomination, as requested by the Holder surrendering the same.

No service charge shall be made for any such registration of transfer or exchange, but the Company may require payment of a sum sufficient to cover any tax or other governmental charge payable in connection therewith.

The Company, the Trustee and any agent of the Company or the Trustee may treat the Person in whose name this Security is registered as the owner hereof for all purposes, whether or not this Security be overdue, and neither the Company, the Trustee nor any such agent shall be affected by notice to the contrary.

The Company and, by its acceptance of this Security or a beneficial interest herein, the Holder of, and any Person that acquires a beneficial interest in, this Security agree that, for United States federal, state and local tax purposes, it is intended that this Security constitute indebtedness.

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This Security shall be construed and enforced in accordance with and governed by the laws of the State of New York without reference to its conflict of laws provisions (other than Section 5-1401 of the General Obligations Law).

IN WITNESS WHEREOF, the Company has caused this instrument to be duly executed on this [DAY] day of [MONTH], [YEAR].

RAIT FINANCIAL TRUST

By:

Name:

Title:

Section 2.2 Restrictive Legend.

(a) Any Security issued hereunder shall bear a legend in substantially the following form:

“[IF THIS SECURITY IS A GLOBAL SECURITY INSERT: “THIS SECURITY IS A GLOBAL SECURITY WITHIN THE MEANING OF THE INDENTURE HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF THE DEPOSITORY TRUST COMPANY (“DTC”) OR A NOMINEE OF DTC. THIS SECURITY IS EXCHANGEABLE FOR SECURITIES REGISTERED IN THE NAME OF A PERSON OTHER THAN DTC OR ITS NOMINEE ONLY IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE INDENTURE, AND NO TRANSFER OF THIS SECURITY (OTHER THAN A TRANSFER OF THIS SECURITY AS A WHOLE BY DTC TO A NOMINEE OF DTC OR BY A NOMINEE OF DTC TO DTC OR ANOTHER NOMINEE OF DTC) MAY BE REGISTERED EXCEPT IN LIMITED CIRCUMSTANCES.

UNLESS THIS SECURITY IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF DTC TO THE ISSUER OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY SECURITY ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT HEREON IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.]

THE SECURITIES REPRESENTED BY THIS CERTIFICATE WERE ORIGINALLY ISSUED IN A TRANSACTION EXEMPT FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND SUCH SECURITIES, AND ANY INTEREST THEREIN, MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM. EACH PURCHASER OF ANY SECURITIES

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IS HEREBY NOTIFIED THAT THE SELLER OF THE SECURITIES MAY BE RELYING ON THE EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF THE SECURITIES ACT PROVIDED BY RULE 144A UNDER THE SECURITIES ACT.

THE HOLDER OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE AGREES FOR THE BENEFIT OF THE COMPANY THAT (A) SUCH SECURITIES MAY BE OFFERED, RESOLD OR OTHERWISE TRANSFERRED ONLY (I) TO THE COMPANY, (II) TO A PERSON WHOM THE SELLER REASONABLY BELIEVES IS (a) A “QUALIFIED INSTITUTIONAL BUYER” (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT AND (b) A “QUALIFIED PURCHASER” (AS DEFINED IN SECTION 2(a)(51) OF THE INVESTMENT COMPANY ACT OF 1940, AS AMENDED) OR (III) TO A PERSON WHO THE SELLER REASONABLY BELIEVES IS (a) AN “ACCREDITED INVESTOR” WITHIN THE MEANING OF SUBPARAGRAPH (a)(1), (2), (3) OR (7) OF RULE 501 UNDER THE SECURITIES ACT AND IS ACQUIRING THE SECURITIES FOR THEIR OWN ACCOUNT FOR INVESTMENT PURPOSES AND (b) A “QUALIFIED PURCHASER” (AS DEFINED IN SECTION 2(a)(51) OF THE INVESTMENT COMPANY ACT OF 1940, AS AMENDED) AND (B) THE HOLDER WILL NOTIFY ANY PURCHASER OF ANY SECURITIES FROM IT OF THE RESALE RESTRICTIONS REFERRED TO IN (A) ABOVE.

THE SECURITIES WILL BE ISSUED AND MAY BE TRANSFERRED ONLY IN BLOCKS HAVING AN AGGREGATE PRINCIPAL AMOUNT OF NOT LESS THAN $100,000 AND MULTIPLES OF $1,000 IN EXCESS THEREOF. TO THE FULLEST EXTENT PERMITTED BY LAW, ANY ATTEMPTED TRANSFER OF SECURITIES, OR ANY INTEREST THEREIN, IN A BLOCK CONTRARY TO SUCH REQUIREMENT SHALL BE DEEMED TO BE VOID AND OF NO LEGAL EFFECT WHATSOEVER. TO THE FULLEST EXTENT PERMITTED BY LAW, ANY SUCH PURPORTED TRANSFEREE SHALL BE DEEMED NOT TO BE THE HOLDER OF SUCH SECURITIES FOR ANY PURPOSE, INCLUDING, BUT NOT LIMITED TO, THE RECEIPT OF PRINCIPAL OF OR INTEREST ON SUCH SECURITIES, OR ANY INTEREST THEREIN, AND SUCH PURPORTED TRANSFEREE SHALL BE DEEMED TO HAVE NO INTEREST WHATSOEVER IN SUCH SECURITIES.

THE HOLDER OF THIS SECURITY, OR ANY INTEREST THEREIN, BY ITS ACCEPTANCE HEREOF OR THEREOF ALSO AGREES, REPRESENTS AND WARRANTS THAT IT IS NOT AN EMPLOYEE BENEFIT PLAN, INDIVIDUAL RETIREMENT ACCOUNT OR OTHER PLAN OR ARRANGEMENT SUBJECT TO TITLE I OF THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED (“ERISA”), OR SECTION 4975 OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE “CODE”), OR SIMILAR LAW (EACH A “PLAN”), OR AN ENTITY WHOSE UNDERLYING ASSETS INCLUDE “PLAN ASSETS” BY REASON OF ANY PLAN’S INVESTMENT IN THE ENTITY, AND NO PERSON INVESTING “PLAN ASSETS” OF ANY PLAN MAY ACQUIRE OR HOLD THIS SECURITY OR ANY INTEREST THEREIN. ANY PURCHASER OR HOLDER OF THE SECURITIES OR ANY INTEREST THEREIN WILL BE DEEMED TO HAVE REPRESENTED BY ITS PURCHASE AND HOLDING THEREOF THAT IT IS NOT AN EMPLOYEE BENEFIT PLAN WITHIN THE MEANING OF SECTION 3(3) OF ERISA, OR A PLAN TO WHICH SECTION 4975 OF

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THE CODE IS APPLICABLE, A TRUSTEE OR OTHER PERSON ACTING ON BEHALF OF AN EMPLOYEE BENEFIT PLAN OR PLAN, OR ANY OTHER PERSON OR ENTITY USING THE ASSETS OF ANY EMPLOYEE BENEFIT PLAN OR PLAN TO FINANCE SUCH PURCHASE.”

(b) The above legends shall not be removed from any Security unless there is delivered to the Company satisfactory evidence, which may include an Opinion of Counsel, as may be reasonably required to ensure that any future transfers thereof may be made without restriction under or violation of the provisions of the Securities Act and other applicable law. Upon provision of such satisfactory evidence, the Company shall execute and deliver to the Trustee, and the Trustee shall authenticate and deliver, upon receipt of a Company Order directing it to do so, a Security that does not bear the legend.

Section 2.3 Form of Trustee’s Certificate of Authentication.

The Trustee’s certificate of authentication shall be in substantially the following form:

This is one of the Securities referred to in the within-mentioned Indenture.

Dated:

WILMINGTON TRUST, NATIONAL ASSOCIATION, not in its individual capacity, but solely as Trustee
By:
	Name:
	Title:

Section 2.4 Temporary Securities.

(a) Pending the preparation of definitive Securities, the Company may execute, and upon Company Order the Trustee shall authenticate and deliver, temporary Securities that are printed, lithographed, typewritten, mimeographed or otherwise produced, in any denomination, substantially of the tenor of the definitive Securities in lieu of which they are issued and with such appropriate insertions, omissions, substitutions and other variations as the officers executing such Securities may determine, as evidenced by their execution of such Securities.

(b) If temporary Securities are issued, the Company will cause definitive Securities to be prepared without unreasonable delay. After the preparation of definitive Securities, the temporary Securities shall be exchangeable for definitive Securities upon surrender of the temporary Securities at the office or agency of the Company designated for that purpose without charge to the Holder. Upon surrender for cancellation of any one or more temporary Securities, the Company shall execute and, upon receipt of a Company Order, the Trustee shall authenticate and deliver in exchange therefor one or more definitive Securities of any authorized denominations having the same Original Issue Date and Stated Maturity and having the same terms as such temporary Securities. Until so exchanged, the temporary Securities shall in all respects be entitled to the same benefits under this Indenture as definitive Securities.

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Section 2.5 Definitive Securities.

The Securities issued on the Original Issue Date shall be in definitive form. The definitive Securities shall be printed, lithographed or engraved, or produced by any combination of these methods, if required by any securities exchange on which the Securities may be listed, on a steel engraved border or steel engraved borders or may be produced in any other manner permitted by the rules of any securities exchange on which the Securities may be listed, all as determined by the officers executing such Securities, as evidenced by their execution of such Securities.

ARTICLE III

THE SECURITIES

Section 3.1 Payment of Principal and Interest.

(a) The unpaid principal amount of the Securities shall bear interest at a fixed rate as set forth in each Security until paid or duly provided for, such interest to accrue from and including the Original Issue Date or from and including the most recent Interest Payment Date to which interest has been paid or duly provided for, and any overdue principal and any overdue installment of interest in excess of thirty (30) days shall bear Additional Interest at a fixed rate as set forth in each Security compounded quarterly from and including the dates such amounts are due to but excluding the dates such amounts are paid or funds for the payment thereof are made available for payment.

(b) Interest and Additional Interest on any Security that is payable, and is punctually paid or duly provided for, on any Interest Payment Date shall be paid to the Person in whose name that Security (or one or more Predecessor Securities) is registered at the close of business on the Regular Record Date for such interest, except that interest and any Additional Interest payable on the Stated Maturity (or any date of principal repayment upon early maturity) of the principal of a Security or on a Redemption Date shall be paid to the Person to whom principal is paid. The initial payment of interest on any Security that is issued between a Regular Record Date and the related Interest Payment Date shall be payable as provided in such Security.

(c) Any interest on any Security that is due and payable, but is not timely paid or duly provided for, on any Interest Payment Date for Securities (herein called “Defaulted Interest”) shall forthwith cease to be payable to the registered Holder on the relevant Regular Record Date by virtue of having been such Holder, and such Defaulted Interest may be paid by the Company, at its election in each case, as provided in paragraph (i) or (ii) below:

(i) The Company may elect to make payment of any Defaulted Interest to the Persons in whose names the Securities (or their respective Predecessor Securities) are registered at the close of business on a special record date for the payment of such Defaulted Interest (a “Special Record Date”), which shall be fixed in the following manner. At least thirty (30) days prior to the date of the proposed payment, the Company shall notify the Trustee in writing of the amount of Defaulted Interest proposed to be paid on each Security and the date of the proposed payment, and at the same time the

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Company shall deposit with the Trustee an amount of money equal to the aggregate amount proposed to be paid in respect of such Defaulted Interest or shall make arrangements satisfactory to the Trustee for such deposit prior to the date of the proposed payment, such money when deposited to be held in trust for the benefit of the Persons entitled to such Defaulted Interest. Thereupon the Company shall fix a Special Record Date for the payment of such Defaulted Interest, which shall be not more than fifteen (15) days and not less than ten (10) days prior to the date of the proposed payment and not less than ten (10) days after the receipt by the Trustee of the notice of the proposed payment. The Company shall promptly notify the Trustee of such Special Record Date and, in the name and at the expense of the Company, Trustee shall cause notice of the proposed payment of such Defaulted Interest and the Special Record Date therefor to be mailed, first class, postage prepaid, to each Holder of a Security at the address of such Holder as it appears in the Securities Register not less than ten (10) days prior to such Special Record Date. Notice of the proposed payment of such Defaulted Interest and the Special Record Date therefor having been so mailed, such Defaulted Interest shall be paid to the Persons in whose names the Securities (or their respective Predecessor Securities) are registered on such Special Record Date; or

(ii) The Company may make payment of any Defaulted Interest in any other lawful manner not inconsistent with the requirements of any securities exchange or automated quotation system on which the Securities may be listed, traded or quoted and, upon such notice as may be required by such exchange or automated quotation system (or by the Trustee if the Securities are not listed), if, after notice given by the Company to the Trustee of the proposed payment pursuant to this clause, such payment shall be deemed practicable by the Trustee.

(d) Payments of interest on the Securities shall include interest accrued to but excluding the respective Interest Payment Dates. The amount of interest payable for any Interest Period will be computed on the basis of a three hundred sixty (360)-day year of twelve thirty (30)-day months.

(e) Payment of principal of and interest on the Securities shall be made in such coin or currency of the United States of America as at the time of payment is legal tender for payment of public and private debts. Payments of principal and interest due at the Maturity of such Securities shall be made at the Place of Payment upon surrender of such Securities to the Paying Agent and payments of interest shall be made, subject to such surrender where applicable, by wire transfer at such place and to such account at a banking institution in the United States as may be designated in writing to the Paying Agent at least ten (10) Business Days prior to the date for payment by the Person entitled thereto unless proper written transfer instructions have not been received by the relevant record date, in which case such payments shall be made by check mailed to the address of such Person as such address shall appear in the Security Register.

(f) Subject to the foregoing provisions of this Section 3.1, each Security delivered under this Indenture upon transfer of or in exchange for or in lieu of any other Security shall carry the rights to interest accrued and unpaid, and to accrue, that were carried by such other Security.

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Section 3.2 Denominations.

The Securities shall be in registered form without coupons and shall be issuable in minimum denominations of One Hundred Thousand Dollars ($100,000) and any integral multiple of One Thousand Dollars ($1,000) in excess thereof.

Section 3.3 Execution, Authentication, Delivery and Dating.

(a) At any time and from time to time after the execution and delivery of this Indenture, the Company may deliver Securities in an aggregate principal amount (including all then Outstanding Securities) not in excess of One Hundred Million and No/100 Dollars ($100,000,000) executed by the Company to the Trustee for authentication, together with a Company Order for the authentication and delivery of such Securities, and the Trustee in accordance with the Company Order shall authenticate and deliver such Securities. In authenticating such Securities, and accepting the additional responsibilities under this Indenture in relation to such Securities, the Trustee shall be entitled to receive, and shall be fully protected in relying upon:

(i) a copy of any Board Resolution relating thereto; and

(ii) an Opinion of Counsel stating that: (1) such Securities, when authenticated and delivered by the Trustee and issued by the Company in the manner and subject to any conditions specified in such Opinion of Counsel, will constitute, and the Indenture constitutes, valid and legally binding obligations of the Company, each enforceable in accordance with its terms, subject to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws of general applicability relating to or affecting creditors’ rights and to general equity principles; (2) the Securities have been duly authorized and executed by the Company and have been delivered to the Trustee for authentication in accordance with this Indenture; (3) the Securities are not required to be registered under the Securities Act; and (4) the Indenture is not required to be qualified under the Trust Indenture Act.

(b) The Securities shall be executed on behalf of the Company by a Designated Officer. The signature of any of these officers on the Securities may be manual or facsimile. Securities bearing the manual or facsimile signatures of individuals who were at any time the proper officers of the Company shall bind the Company, notwithstanding that such individuals or any of them have ceased to hold such offices prior to the authentication and delivery of such Securities or did not hold such offices at the date of such Securities.

(c) No Security shall be entitled to any benefit under this Indenture or be valid or obligatory for any purpose, unless there appears on such Security a certificate of authentication substantially in the form provided for herein executed by the Trustee by the manual signature of one of its authorized signatories, and such certificate upon any Security shall be conclusive evidence, and the only evidence, that such Security has been duly authenticated and delivered hereunder.

(d) Each Security shall be dated the date of its authentication.

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Section 3.4 Global Securities.

(a) Upon the election of the Holder after the Original Issue Date, which election shall be in writing to the Company and Trustee, the Company shall cause the Securities owned by such Holder to be transferred pursuant to Section 3.5 and issued in the form of one or more Global Securities registered in the name of the Depositary or its nominee. Each Global Security issued under this Indenture shall be registered in the name of the Depositary designated by the Company for such Global Security or a nominee thereof and delivered to such Depositary or a nominee thereof or custodian therefor, and each such Global Security shall constitute a single Security for all purposes of this Indenture.

(b) Notwithstanding any other provision in this Indenture, no Global Security may be exchanged in whole or in part for registered Securities, and no transfer of a Global Security in whole or in part may be registered, in the name of any Person other than the Depositary for such Global Security or a nominee thereof unless (i) such Depositary advises the Trustee and the Company in writing that such Depositary is no longer willing or able to properly discharge its responsibilities as Depositary with respect to such Global Security, and no qualified successor is appointed by the Company within ninety (90) days of receipt by the Company of such notice, (ii) such Depositary ceases to be a clearing agency registered under the Exchange Act and no successor is appointed by the Company within ninety (90) days after obtaining knowledge of such event, (iii) the Company executes and delivers to the Trustee a Company Order stating that the Company elects to terminate the book-entry system through the Depositary or (iv) an Event of Default shall have occurred and be continuing. Upon the occurrence of any event specified in clause (i), (ii), (iii) or (iv) above in this Section 3.4(b), the Trustee shall notify the Depositary and instruct the Depositary to notify all owners of beneficial interests in such Global Security of the occurrence of such event and of the availability of Securities to such owners of beneficial interests requesting the same. The Trustee may conclusively rely, and be protected in relying, upon the written identification of the owners of beneficial interests furnished by the Depositary, and shall not be liable for any delay resulting from a delay by the Depositary.

(c) If any Global Security is to be exchanged for other Securities or canceled in part, or if another Security is to be exchanged in whole or in part for a beneficial interest in any Global Security, then either (i) such Global Security shall be so surrendered for exchange or cancellation as provided in this Article III or (ii) the principal amount thereof shall be reduced or increased by an amount equal to (x) the portion thereof to be so exchanged or canceled or (y) the principal amount of such other Security to be so exchanged for a beneficial interest therein, as the case may be, by means of an appropriate adjustment made on the records of the Securities Registrar, whereupon the Trustee, in accordance with the Applicable Depositary Procedures, shall instruct the Depositary or its authorized representative to make a corresponding adjustment to its records. Upon any such surrender or adjustment of a Global Security by the Depositary, accompanied by registration instructions, the Company shall execute and, upon receipt of a Company Order, the Trustee shall authenticate and deliver any Securities issuable in exchange for such Global Security (or any portion thereof) in accordance with the instructions of the Depositary. The Trustee shall not be liable for any delay in delivery of such instructions and may conclusively rely on, and shall be fully protected in relying on, such instructions.

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(d) Every Security authenticated and delivered upon registration of transfer of, or in exchange for or in lieu of, a Global Security or any portion thereof shall be authenticated and delivered in the form of, and shall be, a Global Security, unless such Security is registered in the name of a Person other than the Depositary for such Global Security or a nominee thereof.

(e) Reserved.

(f) The Depositary or its nominee, as the registered owner of a Global Security, shall be the Holder of such Global Security for all purposes under this Indenture and the Securities, and owners of beneficial interests in a Global Security shall hold such interests pursuant to the Applicable Depositary Procedures. Accordingly, any such owner’s beneficial interest in a Global Security shall be shown only on, and the transfer of such interest shall be effected only through, records maintained by the Depositary or its nominee or its Depositary Participants. The Securities Registrar and the Trustee shall be entitled to deal with the Depositary for all purposes of this Indenture relating to a Global Security (including the payment of principal and interest thereon and the giving of instructions or directions by owners of beneficial interests therein and the giving of notices) as the sole Holder of the Security and shall have no obligations to the owners of beneficial interests therein. Neither the Trustee nor the Securities Registrar shall have any liability in respect of any transfers effected by the Depositary.

(g) The rights of owners of beneficial interests in a Global Security shall be exercised only through the Depositary and shall be limited to those established by law and agreements between such owners and the Depositary and/or its Depositary Participants.

(h) No holder of any beneficial interest in any Global Security held on its behalf by a Depositary shall have any rights under this Indenture with respect to such Global Security, and such Depositary may be treated by the Company, the Trustee and any agent of the Company or the Trustee as the owner of such Global Security for all purposes whatsoever. None of the Company, the Trustee nor any agent of the Company or the Trustee will have any responsibility or liability for any aspect of the records relating to or payments made on account of beneficial ownership interests of a Global Security or maintaining, supervising or reviewing any records relating to such beneficial ownership interests. Notwithstanding the foregoing, nothing herein shall prevent the Company, the Trustee or any agent of the Company or the Trustee from giving effect to any written certification, proxy or other authorization furnished by a Depositary or impair, as between a Depositary and such holders of beneficial interests, the operation of customary practices governing the exercise of the rights of the Depositary (or its nominee) as Holder of any Security.

Section 3.5 Registration, Transfer and Exchange Generally.

(a) The Company shall cause, by appointment of Trustee as provided herein, to be kept a register (the “Securities Register”) in which the registrar and transfer agent with respect to the Securities (the “Securities Registrar”), subject to such reasonable regulations as it may prescribe, shall provide for the registration of Securities and of transfers and exchanges of Securities. The Trustee shall at all times also be the Securities Registrar. The provisions of Article VI shall apply to the Trustee in its role as Securities Registrar.

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(b) Subject to compliance with Section 2.2(b), upon surrender for registration or transfer of any Security at the offices or agencies of the Company designated for that purpose the Company shall execute, and the Trustee, upon receipt of a Company Order, shall authenticate and deliver, in the name of the designated transferee or transferees, one or more new Securities of any authorized denominations of like tenor and aggregate principal amount.

(c) At the option of the Holder, Securities may be exchanged for other Securities of any authorized denominations, of like tenor and aggregate principal amount, upon surrender of the Securities to be exchanged at such office or agency. Whenever any Securities are so surrendered for exchange, the Company shall execute, and the Trustee shall, upon receipt of a Company Order, authenticate and deliver, the Securities that the Holder making the exchange is entitled to receive.

(d) All Securities issued upon any transfer or exchange of Securities shall be the valid obligations of the Company, evidencing the same debt, and entitled to the same benefits under this Indenture, as the Securities surrendered upon such transfer or exchange.

(e) Every Security presented or surrendered for transfer or exchange shall (if so required by the Company or the Trustee) be duly endorsed, or be accompanied by a written instrument of transfer in form satisfactory to the Company and the Securities Registrar, duly executed by the Holder thereof or such Holder’s attorney duly authorized in writing.

(f) No service charge shall be made to a Holder for any transfer or exchange of Securities, but the Company may require payment of a sum sufficient to cover any expense, tax or other governmental charge that may be imposed in connection with any transfer or exchange of Securities.

(g) Neither the Company nor the Trustee shall be required pursuant to the provisions of this Section 3.5: (i) to issue, register the transfer of or exchange any Security during a period beginning at the opening of business fifteen (15) days before the day of selection for redemption of Securities pursuant to Article XI and ending at the close of business on the day of mailing of the notice of redemption or (ii) to register the transfer of or exchange any Security so selected for redemption in whole or in part, except, in the case of any such Security to be redeemed in part, any portion thereof not to be redeemed.

(h) The Company shall designate an office or offices or agency or agencies where Securities may be surrendered for registration or transfer or exchange. The Company initially designates the Corporate Trust Office as its office and agency for such purposes. The Company shall give prompt written notice to the Trustee and to the Holders of any change in the location of any such office or agency.

(i) The Securities may only be transferred to (A) the Company, (B) a person whom the seller reasonably believes is (i) a “Qualified Institution Buyer (as defined in Rule 144A under the Securities Act) and (ii) a “Qualified Purchaser” (as defined in Section 2(a)(51) of the Investment Company Act) or (C) a person whom the seller reasonably believes is (i) an “Accredited Investor” within the meaning of subparagraph (a)(1), (2), (3) or (7) of Rule 501 under the Securities Act and is acquiring the Securities for their own account for investment

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purposes and (ii) a “Qualified Purchaser” (as defined in Section 2(a)(51) of the Investment Company Act).

(j) Neither the Trustee nor the Securities Registrar shall be responsible for ascertaining whether any transfer hereunder complies with the registration provisions of or any exemptions from the Securities Act, applicable state securities laws or the applicable laws of any other jurisdiction, ERISA, the Code or the Investment Company Act; provided, that if a certificate is specifically required by the express terms of this Section 3.5 to be delivered to the Trustee or the Securities Registrar by a Holder or transferee of a Security, the Trustee and the Securities Registrar shall be under a duty to receive and examine the same to determine whether or not the certificate substantially conforms on its face to the requirements of this Indenture and shall promptly notify the party delivering the same if such certificate does not comply with such terms.

Section 3.6 Mutilated, Destroyed, Lost and Stolen Securities.

(a) If any mutilated Security is surrendered to the Trustee together with such security or indemnity as may be required by the Company or the Trustee to save each of the Company and the Trustee harmless, the Company shall execute and the Trustee shall, upon receipt of a Company Order, authenticate and deliver in exchange therefor a new Security of like tenor and aggregate principal amount and bearing a number not contemporaneously outstanding.

(b) If there shall be delivered to the Company and the Trustee (i) evidence to its satisfaction of the destruction, loss or theft of any Security and (ii) such security or indemnity as may be required by it to save each of the Company and the Trustee harmless, then, in the absence of notice to the Company or the Trustee that such Security has been acquired by a bona fide purchaser, the Company shall execute and, upon receipt of a Company Order, the Trustee shall authenticate and deliver, in lieu of any such destroyed, lost or stolen Security, a new Security of like tenor and aggregate principal amount as such destroyed, lost or stolen Security, and bearing a number not contemporaneously outstanding.

(c) If any such mutilated, destroyed, lost or stolen Security has become or is about to become due and payable, the Company in its discretion may, instead of issuing a new Security, pay such Security.

(d) Upon the issuance of any new Security under this Section 3.6, the Company may require the payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in relation thereto and any other expenses (including the fees and expenses of the Trustee) connected therewith.

(e) Every new Security issued pursuant to this Section 3.6 in lieu of any mutilated, destroyed, lost or stolen Security shall constitute an original additional contractual obligation of the Company, whether or not the mutilated, destroyed, lost or stolen Security shall be at any time enforceable by anyone, and shall be entitled to all the benefits of this Indenture equally and proportionately with any and all other Securities duly issued hereunder.

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(f) The provisions of this Section 3.6 are exclusive and shall preclude (to the extent lawful) all other rights and remedies with respect to the replacement or payment of mutilated, destroyed, lost or stolen Securities.

Section 3.7 Persons Deemed Owners.

The Company, the Trustee and any agent of the Company or the Trustee shall treat the Person in whose name any Security is registered as the owner of such Security for the purpose of receiving payment of principal of and any interest on such Security and for all other purposes whatsoever, and neither the Company, the Trustee nor any agent of the Company or the Trustee shall be affected by notice to the contrary.

Section 3.8 Cancellation.

All Securities surrendered for payment, redemption, transfer or exchange shall, if surrendered to any Person other than the Trustee, be delivered to the Trustee, and any such Securities and Securities surrendered directly to the Trustee for any such purpose shall be promptly canceled by it. The Company may at any time deliver to the Trustee for cancellation any Securities previously authenticated and delivered hereunder that the Company may have acquired in any manner whatsoever, and all Securities so delivered shall be promptly canceled by the Trustee. No Securities shall be authenticated in lieu of or in exchange for any Securities canceled as provided in this Section 3.8, except as expressly permitted by this Indenture. All canceled Securities shall be retained or disposed of by the Trustee in accordance with its customary practices and the Trustee shall deliver to the Company a certificate of such disposition.

Section 3.9 Reserved.

Section 3.10 Agreed Tax Treatment.

Each Security issued hereunder shall provide that the Company and, by its acceptance or acquisition of a Security or a beneficial interest therein, the Holder of, and any Person that acquires a direct or indirect beneficial interest in, such Security, intend and agree to treat such Security as indebtedness of the Company for United States federal, state and local tax purposes. The provisions of this Indenture shall be interpreted to further this intention and agreement of the parties.

Section 3.11 Reserved.

ARTICLE IV

SATISFACTION AND DISCHARGE

Section 4.1 Satisfaction and Discharge of Indenture.

This Indenture shall, upon Company Request, cease to be of further effect (except as to any surviving rights of registration of transfer or exchange of Securities herein expressly provided for and as otherwise provided in this Section 4.1) and the Trustee, on written demand of

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and at the expense of the Company, shall execute such instruments reasonably requested by the Company acknowledging satisfaction and discharge of this Indenture, when

(a) either

(i) all Securities theretofore authenticated and delivered (other than (A) Securities that have been mutilated, destroyed, lost or stolen and that have been replaced or paid as provided in Section 3.6 and (B) Securities for whose payment money has theretofore been deposited in trust or segregated and held in trust by the Company and thereafter repaid to the Company or discharged from such trust as provided in Section 10.2) have been delivered to the Trustee for cancellation; or

(ii) all such Securities not theretofore delivered to the Trustee for cancellation

(A) have become due and payable; or

(B) will become due and payable at their Stated Maturity within one (1) year of the date of deposit; or

(C) are to be called for redemption within one (1) year under arrangements satisfactory to the Trustee for the giving of notice of redemption by the Trustee in the name, and at the expense, of the Company;

and the Company, in the case of subclause (ii)(A), (B) or (C) above, has deposited or caused to be deposited with the Trustee as trust funds in trust for such purpose (x) an amount in the currency or currencies in which the Securities are payable, (y) Government Obligations which through the scheduled payment of principal and interest in respect thereof in accordance with their terms will provide, not later than the due date of any payment, money in an amount or (z) a combination thereof, in each case sufficient, in the opinion of a nationally recognized firm of independent public accountants or a nationally recognized rating agency expressed in a written certification thereof delivered to the Trustee, to pay and discharge the entire indebtedness on such Securities not theretofore delivered to the Trustee for cancellation, for principal and interest (including any Additional Interest) to the date of such deposit (in the case of Securities that have become due and payable) or to the Stated Maturity (or any date of principal repayment upon early maturity) or Redemption Date, as the case may be;

(b) the Company has paid or caused to be paid all other sums payable hereunder by the Company; and

(c) the Company has delivered to the Trustee an Officers’ Certificate and an Opinion of Counsel each stating that all conditions precedent herein provided for relating to the satisfaction and discharge of this Indenture have been complied with.

Notwithstanding the satisfaction and discharge of this Indenture, the obligations of the Company to the Trustee under Section 6.6, the obligations of the Company to any Authenticating Agent under Section 6.11 and, if money shall have been deposited with the Trustee pursuant to

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subclause (a)(ii) of this Section 4.1, the obligations of the Trustee under Section 4.2 and Section 10.2(e) and the rights and protections of the Trustee under Article VI hereof shall survive.

Section 4.2 Application of Trust Money.

Subject to the provisions of Sections 5.6 and 10.2(e), all money deposited with the Trustee pursuant to Section 4.1 shall be held in trust and applied by the Trustee, in accordance with the provisions of the Securities and this Indenture, to the payment in accordance with Section 3.1, either directly or through any Paying Agent as the Trustee may determine, to the Persons entitled thereto, of the principal and interest (including any Additional Interest) for the payment of which such money or obligations have been deposited with or received by the Trustee.

ARTICLE V

REMEDIES

Section 5.1 Events of Default.

“Event of Default” means, wherever used herein with respect to the Securities, any one of the following events (whatever the reason for such Event of Default and whether it shall be voluntary or involuntary or be effected by operation of law or pursuant to any judgment, decree or order of any court or any order, rule or regulation of any administrative or governmental body):

(a) default in the payment of any interest upon any Security, including any Additional Interest in respect thereof, when it becomes due and payable, and continuance of such default for a period of thirty (30) days; or

(b) default in the payment of the principal of any Security at its Maturity; or

(c) default in the performance, or breach, of any covenant or warranty of the Company in this Indenture, the Exchange Agreement, the Account Control Agreement or the Pledge and Security Agreement and continuance of such default or breach for a period of thirty (30) days after there has been given, by registered or certified mail, to the Company, by the Trustee or to the Company and the Trustee by the Holders of at least twenty-five percent (25%) in aggregate principal amount of the Outstanding Securities a written notice specifying such default or breach and requiring it to be remedied and stating that such notice is a “Notice of Default” hereunder (a “Notice of Default”), provided that such period will be extended by an additional sixty (60) days so long as the Company delivers an Officer’s Certificate to the Trustee during the foregoing thirty (30) day period certifying that it is attempting to cure such default; or

(d) the entry by a court having jurisdiction in the premises of a decree or order adjudging the Company a bankrupt or insolvent, or approving as properly filed a petition seeking reorganization, arrangement, adjustment or composition of or in respect of the Company under any applicable federal or state bankruptcy, insolvency, reorganization or other similar law, or appointing a custodian, receiver, liquidator, assignee, trustee, sequestrator or other similar official of the Company or of any substantial part of its property, or ordering the winding up or

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liquidation of its affairs, and the continuance of any such decree or order for relief or any such other decree or order unstayed and in effect for a period of sixty (60) consecutive days; or

(e) the institution by the Company of proceedings to be adjudicated a bankrupt or insolvent, or the consent by the Company to the institution of bankruptcy or insolvency proceedings against it, or the filing by the Company of a petition or answer or consent seeking reorganization or relief under any applicable federal or state bankruptcy, insolvency, reorganization or other similar law, or the consent by it to the filing of such petition or to the appointment of or taking possession by a custodian, receiver, liquidator, assignee, trustee, sequestrator or other similar official of the Company or of any substantial part of its property, or the making by it of an assignment for the benefit of creditors, or the admission by it in writing of its inability to pay its debts generally as they become due and its willingness to be adjudicated a bankrupt or insolvent, or the taking of corporate action by the Company in furtherance of any such action; or

(f) default in the payment of principal when due on, or resulting in acceleration of, other indebtedness of the Company or any Significant Subsidiary of the Company for borrowed money where the aggregate principal amount with respect to which the default or acceleration has occurred exceeds $25,000,000 and such indebtedness has not been discharged, or such default in payment or acceleration has not been cured or rescinded, prior to written notice of acceleration of the Securities pursuant to Section 5.2 hereof; or

(g) failure by the Company or any of its Significant Subsidiaries to pay final judgments entered by a court or courts of competent jurisdiction aggregating in excess of $25,000,000, which judgments are not paid, discharged or stayed for a period of thirty (30) calendar days after such judgments become final and non-appealable;

(h) this Indenture, the Securities, the Account Control Agreement or the Pledge and Security Agreement are no longer in full force and effect, unless terminated pursuant to the terms hereof or thereof; or

(i) Other than pursuant to Article VIII, the Company voluntarily dissolves or is dissolved, terminates or is terminated.

Section 5.2 Acceleration of Maturity; Rescission and Annulment.

(a) If an Event of Default occurs and is continuing, then and in every such case the Trustee or the Holders of not less than twenty-five percent (25%) in aggregate principal amount of the Outstanding Securities may declare the principal amount of all the Securities to be immediately due and payable, by a notice in writing to the Company (and to the Trustee if given by Holders) and upon any such declaration the principal amount of and the accrued interest (including any Additional Interest) on all the Securities shall become immediately due and payable.

(b) At any time after such a declaration of acceleration with respect to Securities has been made and before a judgment or decree for payment of the money due has been obtained by the Trustee as hereinafter provided in this Article V, the Holders of a majority in aggregate

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principal amount of the Outstanding Securities, by written notice to the Trustee, may rescind and annul such declaration and its consequences if:

(i) the Company has paid or deposited with the Trustee a sum sufficient to pay:

(A) all overdue installments of interest on all Securities;

(B) any accrued Additional Interest on all Securities;

(C) the principal of any Securities that have become due otherwise than by such declaration of acceleration and interest (including any Additional Interest) thereon at the rate borne by the Securities; and

(D) all sums paid or advanced by the Trustee hereunder and the reasonable compensation, expenses, disbursements and advances of the Trustee and its agents and counsel; and

(ii) all Events of Default with respect to Securities, other than the non-payment of the principal of Securities that has become due solely by such acceleration, have been cured or waived as provided in Section 5.13;

No such rescission shall affect any subsequent default or impair any right consequent thereon.

Section 5.3 Collection of Indebtedness and Suits for Enforcement by Trustee.

(a) The Company covenants that if:

(i) default is made in the payment of any installment of interest (including any Additional Interest) on any Security when such interest becomes due and payable and such default continues for a period of thirty (30) days; or

(ii) default is made in the payment of the principal of any Security at the Maturity thereof;

the Company will, upon demand of the Trustee, pay to the Trustee, for the benefit of the Holders of such Securities, the whole amount then due and payable on such Securities for principal and interest (including any Additional Interest) and, in addition thereto, all amounts owing the Trustee under Section 6.6.

(b) If the Company fails to pay such amounts forthwith upon such demand, the Trustee, in its own name and as trustee of an express trust, may institute a judicial proceeding for the collection of the sums so due and unpaid, and may prosecute such proceeding to judgment or final decree, and may enforce the same against the Company or any other obligor upon such Securities and collect the moneys adjudged or decreed to be payable in the manner provided by law out of the property of the Company or any other obligor upon the Securities, wherever situated.

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(c) If an Event of Default with respect to Securities occurs and is continuing, the Trustee may in its discretion proceed to protect and enforce its rights and the rights of the Holders of Securities by such appropriate judicial proceedings as the Trustee shall deem most effectual to protect and enforce any such rights, whether for the specific enforcement of any covenant or agreement in this Indenture or in aid of the exercise of any power granted herein, or to enforce any other proper remedy.

Section 5.4 Trustee May File Proofs of Claim.

In case of any receivership, insolvency, liquidation, bankruptcy, reorganization, arrangement, adjustment, composition or similar judicial proceeding relative to the Company (or any other obligor upon the Securities), its property or its creditors, the Trustee shall be entitled and empowered, by intervention in such proceeding or otherwise, to take any and all actions authorized hereunder in order to have claims of the Holders and the Trustee allowed in any such proceeding. In particular, the Trustee shall be authorized to collect and receive any moneys or other property payable or deliverable on any such claims and to distribute the same; and any custodian, receiver, assignee, trustee, liquidator, sequestrator or other similar official in any such judicial proceeding is hereby authorized by each Holder to make such payments to the Trustee and, in the event that the Trustee shall consent to the making of such payments directly to the Holders, to first pay to the Trustee any amount due it for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, and any other amounts owing the Trustee, any predecessor Trustee and other Persons under Section 6.6.

Section 5.5 Trustee May Enforce Claim Without Possession of Securities.

All rights of action and claims under this Indenture or the Securities may be prosecuted and enforced by the Trustee without the possession of any of the Securities or the production thereof in any proceeding relating thereto, and any such proceeding instituted by the Trustee shall be brought in its own name as trustee of an express trust, and any recovery of judgment shall, after provision for the payment of all the amounts owing the Trustee, any predecessor Trustee and other Persons under Section 6.6, be for the ratable benefit of the Holders of the Securities in respect of which such judgment has been recovered.

Section 5.6 Application of Money Collected.

Any money or property collected or to be applied by the Trustee with respect to the Securities pursuant to this Article V shall be applied in the following order, at the date or dates fixed by the Trustee and, in case of the distribution of such money or property on account of principal or interest (including any Additional Interest), upon presentation of the Securities and the notation thereon of the payment if only partially paid and upon surrender thereof if fully paid:

FIRST: To the payment of all amounts due the Trustee, any predecessor Trustee and other Persons under Section 6.6;

SECOND: To the payment of the amounts then due and unpaid upon the Securities for principal and interest (including any Additional Interest) in respect of which or for the benefit of which such money has been collected, ratably, without preference or priority of any kind,

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according to the amounts due and payable on the Securities for principal and interest (including any Additional Interest), respectively; and

THIRD: The balance, if any, to the Person or Persons entitled thereto.

Section 5.7 Limitation on Suits.

Subject to Section 5.8, no Holder of any Securities shall have any right to institute any proceeding, judicial or otherwise, with respect to this Indenture or for the appointment of a custodian, receiver, assignee, trustee, liquidator, sequestrator (or other similar official) or for any other remedy hereunder, unless:

(a) such Holder has previously given written notice to the Trustee of a continuing Event of Default with respect to the Securities;

(b) the Holders of not less than a majority in aggregate principal amount of the Outstanding Securities shall have made written request to the Trustee to institute proceedings in respect of such Event of Default in its own name as Trustee hereunder;

(c) such Holder or Holders have offered to the Trustee reasonable indemnity against the costs, expenses and liabilities to be incurred in compliance with such request;

(d) the Trustee after its receipt of such notice, request and offer of indemnity has failed to institute any such proceeding for sixty (60) days; and

(e) no direction inconsistent with such written request has been given to the Trustee during such sixty (60)-day period by the Holders of a majority in aggregate principal amount of the Outstanding Securities;

it being understood and intended that no one or more of such Holders shall have any right in any manner whatever by virtue of, or by availing itself of, any provision of this Indenture to affect, disturb or prejudice the rights of any other Holders of Securities, or to obtain or to seek to obtain priority or preference over any other of such Holders or to enforce any right under this Indenture, except in the manner herein provided and for the equal and ratable benefit of all such Holders.

Section 5.8 Unconditional Right of Holders to Receive Principal and Interest.

Notwithstanding any other provision in this Indenture, the Holder of any Security shall have the right, which is absolute and unconditional, to receive payment of the principal of such Security at its Maturity and payment of interest (including any Additional Interest) on such Security when due and payable and to institute suit for the enforcement of any such payment, and such right shall not be impaired without the consent of such Holder.

Section 5.9 Restoration of Rights and Remedies.

If the Trustee or any Holder has instituted any proceeding to enforce any right or remedy under this Indenture and such proceeding has been discontinued or abandoned for any reason, or has been determined adversely to the Trustee or such Holder, then and in every such case the

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Company, the Trustee and such Holders shall, subject to any determination in such proceeding, be restored severally and respectively to their former positions hereunder, and thereafter all rights and remedies of the Trustee and such Holder shall continue as though no such proceeding had been instituted.

Section 5.10 Rights and Remedies Cumulative.

Except as otherwise provided in Section 3.6(f), no right or remedy herein conferred upon or reserved to the Trustee or the Holders is intended to be exclusive of any other right or remedy, and every right and remedy shall, to the extent permitted by law, be cumulative and in addition to every other right and remedy given hereunder or now or hereafter existing at law or in equity or otherwise. The assertion or employment of any right or remedy hereunder, or otherwise, shall not prevent the concurrent assertion or employment of any other appropriate right or remedy.

Section 5.11 Delay or Omission Not Waiver.

No delay or omission of the Trustee or any Holder of any Securities to exercise any right or remedy accruing upon any Event of Default shall impair any such right or remedy or constitute a waiver of any such Event of Default or an acquiescence therein. Every right and remedy given by this Article V or by law to the Trustee or to the Holders may be exercised from time to time, and as often as may be deemed expedient, by the Trustee or the Holders, as the case may be.

Section 5.12 Control by Holders.

The Holders of not less than a majority in aggregate principal amount of the Outstanding Securities shall have the right 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; provided, that:

(a) such direction shall not be in conflict with any rule of law or with this Indenture;

(b) the Trustee may take any other action deemed proper by the Trustee that is not inconsistent with such direction; and

(c) subject to the provisions of Section 6.2, the Trustee shall have the right to decline to follow such direction if a Responsible Officer or Officers of the Trustee shall, in good faith, reasonably determine that the proceeding so directed would be unjustly prejudicial to the Holders not joining in any such direction or would involve the Trustee in personal liability.

Section 5.13 Waiver of Past Defaults.

(a) The Holders of not less than a majority in aggregate principal amount of the Outstanding Securities may waive any past Event of Default hereunder and its consequences except an Event of Default:

(i) in the payment of the principal of or interest (including any Additional Interest) on any Outstanding Security (unless such Event of Default has been cured and

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the Company has paid to or deposited with the Trustee a sum sufficient to pay all installments of interest (including any Additional Interest) due and past due and all principal of all Outstanding Securities due otherwise than by acceleration); or

(ii) in respect of a covenant or provision hereof that under Article IX cannot be modified or amended without the consent of each Holder of any Outstanding Security.

(b) Any such waiver shall be deemed to be on behalf of the Holders of all the Outstanding Securities.

(c) Upon any such waiver, such Event of Default shall cease to exist and any Event of Default arising therefrom shall be deemed to have been cured for every purpose of this Indenture; but no such waiver shall extend to any subsequent or other Event of Default or impair any right consequent thereon.

Section 5.14 Undertaking for Costs.

All parties to this Indenture agree, and each Holder of any Security by his or her acceptance thereof shall be deemed to have agreed, that any court may in its discretion require, in any suit for the enforcement of any right or remedy under this Indenture, or in any suit against the Trustee for any action taken or omitted by it as Trustee, the filing by any party litigant in such suit of an undertaking to pay the costs of such suit, and that such court may in its discretion assess reasonable costs, including reasonable attorneys’ fees and expenses, against any party litigant in such suit, having due regard to the merits and good faith of the claims or defenses made by such party litigant; provided, however, the provisions of this Section 5.14 shall not apply to any suit instituted by the Trustee, to any suit instituted by any Holder, or group of Holders, holding in the aggregate more than ten percent (10%) in aggregate principal amount of the Outstanding Securities, or to any suit instituted by any Holder for the enforcement of the payment of the principal of the Security after the Stated Maturity or any interest (including any Additional Interest) on any Security after it is due and payable.

Section 5.15 Waiver of Usury, Stay or Extension Laws.

The Company covenants (to the extent that it may lawfully do so) that it will not at any time insist upon, or plead, or in any manner whatsoever claim or take the benefit or advantage of, any usury, stay or extension law wherever enacted, now or at any time hereafter in force, which may affect the covenants or the performance of this Indenture; and the Company (to the extent that it may lawfully do so) hereby expressly waives all benefit or advantage of any such law, and covenants that it will not hinder, delay or impede the execution of any power herein granted to the Trustee, but will suffer and permit the execution of every such power as though no such law had been enacted.

ARTICLE VI

THE TRUSTEE

Section 6.1 Corporate Trustee Required.

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There shall at all times be a Trustee hereunder with respect to the Securities. The Trustee shall be a corporation or national banking association organized and doing business under the laws of the United States or of any state thereof, authorized to exercise corporate trust powers, having (or having a parent that has) a combined capital and surplus of at least Fifty Million Dollars ($50,000,000), subject to supervision or examination by federal or state authority and having an office within the United States. If such entity publishes reports of condition at least annually, pursuant to law or to the requirements of such supervising or examining authority, then, for the purposes of this Section 6.1, the combined capital and surplus of such entity shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. If at any time the Trustee shall cease to be eligible in accordance with the provisions of this Section 6.1, it shall resign immediately in the manner and with the effect hereinafter specified in this Article VI.

Section 6.2 Certain Duties and Responsibilities.

Except during the continuance of an Event of Default:

(i) the Trustee undertakes to perform such duties and only such duties as are specifically set forth in this Indenture, and no implied covenants or obligations shall be read into this Indenture against the Trustee; and

(ii) in the absence of bad faith on its part, the Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon certificates or opinions furnished to the Trustee and conforming to the requirements of this Indenture; provided, that in the case of any such certificates or opinions that by any provision hereof are specifically required to be furnished to the Trustee, the Trustee shall be under a duty to examine the same to determine whether or not they substantially conform on their face to the requirements of this Indenture.

(b) If the Trustee has actual knowledge that an Event of Default has occurred and is continuing, the Trustee shall exercise such of the rights and powers vested in it by this Indenture, and use the same degree of care and skill in its exercise, as a prudent person would exercise or use under the circumstances in the conduct of such person’s own affairs until such time as the Trustee is in receipt of directions, if any, from the Holders of at least a majority in aggregate principal amount of the Outstanding Securities.

(c) Notwithstanding the foregoing, no provision of this Indenture shall require the Trustee to expend or risk its own funds or otherwise incur any financial liability in the performance of any of its duties hereunder, or in the exercise of any of its rights or powers, if it shall have reasonable grounds for believing that repayment of such funds or adequate indemnity against such risk or liability is not reasonably assured to it. Whether or not therein expressly so provided, every provision of this Indenture relating to the conduct or affecting the liability of or affording protection to the Trustee shall be subject to the provisions of this Section 6.2. To the extent that, at law or in equity, the Trustee has duties and liabilities relating to the Holders, the Trustee shall not be liable to any Holder for the Trustee’s good faith reliance on the provisions of this Indenture. The provisions of this Indenture, to the extent that they restrict the duties and

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liabilities of the Trustee otherwise existing at law or in equity, are agreed by the Company and the Holders to replace such other duties and liabilities of the Trustee.

(d) No provisions of this Indenture shall be construed to relieve the Trustee from liability with respect to matters that are within the authority of the Trustee under this Indenture for its own negligent action, negligent failure to act or willful misconduct, except that:

(i) the Trustee shall not be liable for any error or judgment made in good faith by an authorized officer of the Trustee, unless it shall be proved that the Trustee was negligent in ascertaining the pertinent facts;

(ii) the Trustee shall not be liable with respect to any action taken or omitted to be taken by it in good faith in accordance with the direction of the Holders of at least a majority in aggregate principal amount of the Outstanding Securities; and

(iii) the Trustee shall be under no liability for interest on any money received by it hereunder except as otherwise agreed in writing with the Company and money held by the Trustee in trust hereunder need not be segregated from other funds except to the extent required by law.

Section 6.3 Notice of Defaults.

Within thirty (30) days after the occurrence of any default actually known to a Responsible Officer of the Trustee, the Trustee shall give the Holders notice of such default unless such default shall have been cured or waived; provided, that except in the case of a default in the payment of the principal of or interest on any Securities, the Trustee shall be fully protected in withholding the notice if and so long as the board of directors, the executive committee or a trust committee of directors and/or Responsible Officers of the Trustee in good faith determines that withholding the notice is in the interest of Holders of Securities; and provided, further, that in the case of any default of the character specified in Section 5.1(c), no such notice to Holders shall be given until at least thirty (30) days after the occurrence thereof, and in such case, such notice shall be given no later than sixty (60) days after the occurrence thereof. For the purpose of this Section 6.3, the term “default” means any event which is, or after notice or lapse of time or both would become, an Event of Default.

Section 6.4 Certain Rights of Trustee.

Subject to the provisions of Section 6.2:

(a) the Trustee may conclusively rely and shall be fully protected in acting or refraining from acting in good faith and in accordance with the terms hereof upon any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture, note or other paper or document believed by it to be genuine and to have been signed or presented by the proper party or parties;

(b) if (i) in performing its duties under this Indenture the Trustee is required to decide between alternative courses of action, (ii) in construing any of the provisions of this Indenture the Trustee finds ambiguous or inconsistent with any other provisions contained herein or (iii)

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the Trustee is unsure of the application of any provision of this Indenture, then, except during an Event of Default, the Trustee shall deliver a notice to the Company requesting the Company’s written instruction as to the course of action to be taken and the Trustee shall take such action, or refrain from taking such action, as the Trustee shall be instructed in writing to take, or to refrain from taking, by the Company; provided, that if the Trustee does not receive such instructions from the Company within ten (10) Business Days after it has delivered such notice or such reasonably shorter period of time set forth in such notice the Trustee may, but shall be under no duty to, take such action, or refrain from taking such action, as the Trustee shall deem advisable and in the interests of the Holders, in which event the Trustee shall have no liability except for its own negligence, bad faith or willful misconduct;

(c) any request or direction of the Company shall be sufficiently evidenced by a Company Request or Company Order and any resolution of the Board of Trustees may be sufficiently evidenced by a Board Resolution;

(d) the Trustee may consult with counsel (which counsel may be counsel to the Trustee, the Company or any of its Affiliates, and may include any of its employees) and the advice of such counsel or any Opinion of Counsel shall be full and complete authorization and protection in respect of any action taken, suffered or omitted by it hereunder in good faith and in reliance thereon;

(e) the Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Indenture at the request or direction of any of the Holders pursuant to this Indenture, unless such Holders shall have offered to the Trustee security or indemnity reasonably satisfactory to it against the costs, expenses (including reasonable attorneys’ fees and expenses) and liabilities that might be incurred by it in compliance with such request or direction, including reasonable advances as may be requested by the Trustee;

(f) the Trustee shall not be bound to make any investigation into the facts or matters stated in any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, indenture, note or other paper or document, but the Trustee in its discretion may make such inquiry or investigation into such facts or matters as it may see fit, and, upon an Event of Default, if the Trustee shall determine to make such inquiry or investigation, it shall be entitled to examine the books, records and premises of the Company, personally or by agent or attorney;

(g) the Trustee may execute any of the trusts or powers hereunder or perform any duties hereunder either directly or by or through agents, attorneys, custodians or nominees and the Trustee shall not be responsible for any misconduct or negligence on the part of any such agent, attorney, custodian or nominee appointed with due care by it hereunder;

(h) whenever in the administration of this Indenture the Trustee shall deem it desirable to receive instructions with respect to enforcing any remedy or right or taking any other action with respect to enforcing any remedy or right hereunder, the Trustee (i) may request instructions from the Holders (which instructions may only be given by the Holders of the same aggregate principal amount of Outstanding Securities as would be entitled to direct the Trustee under this Indenture in respect of such remedy, right or action), (ii) may refrain from enforcing

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such remedy or right or taking such action until such instructions are received and (iii) shall be protected in acting in accordance with such instructions;

(i) except as otherwise expressly provided by this Indenture, the Trustee shall not be under any obligation to take any action that is discretionary under the provisions of this Indenture;

(j) without prejudice to any other rights available to the Trustee under applicable law, when the Trustee incurs expenses or renders services in connection with any bankruptcy, insolvency or other proceeding referred to in clauses (d) or (e) of the definition of Event of Default specified in Section 5.1, such expenses (including legal fees and expenses of its agents and counsel) and the compensation for such services are intended to constitute expenses of administration under any bankruptcy laws or law relating to creditors rights generally;

(k) whenever in the administration of this Indenture the Trustee shall deem it desirable that a matter be proved or established prior to taking, suffering or omitting any action hereunder, the Trustee (unless other evidence be herein specifically prescribed) may, in the absence of bad faith on its part, conclusively rely upon an Officers’ Certificate addressing such matter, which, upon receipt of such request, shall be promptly delivered by the Company;

(l) the Trustee shall not be charged with knowledge of any Event of Default unless either (i) a Responsible Officer of the Trustee shall have actual knowledge or (ii) the Trustee shall have received written notice thereof from the Company or a Holder, which notice shall reference this Indenture; and

(m) the rights and protections afforded to the Trustee pursuant to this Article VI shall also be afforded such Paying Agent, Authenticating Agent or Securities Registrar.

Section 6.5 May Hold Securities.

The Trustee, any Authenticating Agent, any Paying Agent, any Securities Registrar or any other agent of the Company, in its individual or any other capacity, may become the owner or pledgee of Securities and may otherwise deal with the Company with the same rights it would have if it were not Trustee, Authenticating Agent, Paying Agent, Securities Registrar or such other agent.

Section 6.6 Compensation; Reimbursement; Indemnity.

(a) The Company agrees:

(i) to pay to the Trustee from time to time reasonable compensation for all services rendered by it hereunder in such amounts as the Company and the Trustee shall agree from time to time pursuant to a separate fee agreement (which compensation shall not be limited by any provision of law in regard to the compensation of a trustee of an express trust);

(ii) to reimburse the Trustee upon its request for all reasonable expenses, disbursements and advances incurred or made by the Trustee in accordance with any

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provision of this Indenture (including the reasonable compensation and the expenses and disbursements of its agents and counsel), except any such expense, disbursement or advance as may be attributable to its gross negligence, bad faith or willful misconduct; and

(iii) to the fullest extent permitted by applicable law, to indemnify the Trustee and its Affiliates, and their officers, directors, shareholders, agents, representatives and employees for, and to hold them harmless against, any loss, damage, liability, tax (other than income, franchise or other taxes imposed on amounts paid pursuant to clause (i) or (ii) of this Section 6.6(a)), penalty, expense or claim of any kind or nature whatsoever incurred without negligence, bad faith or willful misconduct on its part arising out of or in connection with the acceptance or administration of this trust or the performance of the Trustee’s duties hereunder, including the costs and expenses of defending itself against any claim or liability in connection with the exercise or performance of any of its powers or duties hereunder.

(b) To secure the Company’s payment obligations in this Section 6.6, the Company hereby grants and pledges to the Trustee and the Trustee shall have a lien prior to the Securities on all money or property held or collected by the Trustee, other than money or property held in trust to pay principal and interest on particular Securities. Such lien shall survive the satisfaction and discharge of this Indenture or the resignation or removal of the Trustee.

(c) The obligations of the Company under this Section 6.6 shall survive the satisfaction and discharge of this Indenture and the earlier resignation or removal of the Trustee.

(d) In no event shall the Trustee be liable for any indirect, special, punitive or consequential loss or damage of any kind whatsoever, including, but not limited to, lost profits, even if the Trustee has been advised of the likelihood of such loss or damage and regardless of the form of action.

(e) In no event shall the Trustee be liable for any failure or delay in the performance of its obligations hereunder because of circumstances beyond its control, including, but not limited to, acts of God, flood, war (whether declared or undeclared), terrorism, fire, riot, embargo, government action, including any laws, ordinances, regulations, governmental action or the like which delay, restrict or prohibit the providing of the services contemplated by this Indenture.

Section 6.7 Resignation and Removal; Appointment of Successor.

(a) No resignation or removal of the Trustee and no appointment of a successor Trustee pursuant to this Article VI shall become effective until the acceptance of appointment by the successor Trustee under Section 6.8.

(b) The Trustee may resign at any time by giving written notice thereof to the Company.

(c) Unless an Event of Default shall have occurred and be continuing, the Trustee may be removed at any time by the Company by a Board Resolution. If an Event of Default

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shall have occurred and be continuing, the Trustee may be removed by Act of the Holders of a majority in aggregate principal amount of the Outstanding Securities, delivered to the Trustee and to the Company.

(d) If the Trustee shall resign, be removed or become incapable of acting, or if a vacancy shall occur in the office of Trustee for any reason, at a time when no Event of Default shall have occurred and be continuing, the Company, by a Board Resolution, shall promptly appoint a successor Trustee, and such successor Trustee and the retiring Trustee shall comply with the applicable requirements of Section 6.8. If the Trustee shall resign, be removed or become incapable of acting, or if a vacancy shall occur in the office of Trustee for any reason, at a time when an Event of Default shall have occurred and be continuing, the Holders, by Act of the Holders of a majority in aggregate principal amount of the Outstanding Securities, shall promptly appoint a successor Trustee, and such successor Trustee and the retiring Trustee shall comply with the applicable requirements of Section 6.8. If no successor Trustee shall have been so appointed by the Company or the Holders and accepted appointment within sixty (60) days after the giving of a notice of resignation by the Trustee or the removal of the Trustee in the manner required by Section 6.8, any Holder who has been a bona fide Holder of a Security for at least six (6) months may, on behalf of such Holder and all others similarly situated, and any resigning Trustee may, at the expense of the Company, petition any court of competent jurisdiction for the appointment of a successor Trustee.

(e) The Company shall give notice to all Holders in the manner provided in Section 1.6 of each resignation and each removal of the Trustee and each appointment of a successor Trustee. Each notice shall include the name of the successor Trustee and the address of its Corporate Trust Office.

Section 6.8 Acceptance of Appointment by Successor.

(a) In case of the appointment hereunder of a successor Trustee, each successor Trustee so appointed shall execute, acknowledge and deliver to the Company and to the retiring Trustee an instrument accepting such appointment, and thereupon the resignation or removal of the retiring Trustee shall become effective and such successor Trustee, without any further act, deed or conveyance, shall become vested with all the rights, powers, trusts and duties of the retiring Trustee; provided, that on the request of the Company or the successor Trustee, such retiring Trustee shall, upon payment of its charges, execute and deliver an instrument transferring to such successor Trustee all the rights, powers and trusts of the retiring Trustee and shall duly assign, transfer and deliver to such successor Trustee all property and money held by such retiring Trustee hereunder.

(b) Upon request of any such successor Trustee, the Company shall execute any and all instruments for more fully and certainly vesting in and confirming to such successor Trustee all rights, powers and trusts referred to in paragraph (a) of this Section 6.8.

(c) No successor Trustee shall accept its appointment unless at the time of such acceptance such successor Trustee shall be qualified and eligible under this Article VI.

Section 6.9 Merger, Conversion, Consolidation or Succession to Business.

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Any Person into which the Trustee may be merged or converted or with which it may be consolidated, or any Person resulting from any merger, conversion or consolidation to which the Trustee shall be a party, or any Person succeeding to all or substantially all of the corporate trust business of the Trustee, shall be the successor of the Trustee hereunder, without the execution or filing of any paper or any further act on the part of any of the parties hereto; provided, that such Person shall be otherwise qualified and eligible under this Article VI. In case any Securities shall have been authenticated, but not delivered, by the Trustee then in office, any successor by merger, conversion or consolidation or as otherwise provided above in this Section 6.9 to such authenticating Trustee may adopt such authentication and deliver the Securities so authenticated, and in case any Securities shall not have been authenticated, any successor to the Trustee may authenticate such Securities either in the name of any predecessor Trustee or in the name of such successor Trustee, and in all cases the certificate of authentication shall have the full force which it is provided anywhere in the Securities or in this Indenture that the certificate of the Trustee shall have.

Section 6.10 Not Responsible for Recitals or Issuance of Securities.

The recitals contained herein and in the Securities, except the Trustee’s certificates of authentication, shall be taken as the statements of the Company, and neither the Trustee nor any Authenticating Agent assumes any responsibility for their correctness. The Trustee makes no representations as to the validity or sufficiency of this Indenture or of the Securities. Neither the Trustee nor any Authenticating Agent shall be accountable for the use or application by the Company of the Securities or the proceeds thereof.

Section 6.11 Appointment of Authenticating Agent.

(a) The Trustee may appoint an Authenticating Agent or Agents with respect to the Securities, which shall be authorized to act on behalf of the Trustee to authenticate Securities issued upon original issue and upon exchange, registration of transfer or partial redemption thereof or pursuant to Section 3.6, and Securities so authenticated shall be entitled to the benefits of this Indenture and shall be valid and obligatory for all purposes as if authenticated by the Trustee hereunder. Wherever reference is made in this Indenture to the authentication and delivery of Securities by the Trustee or the Trustee’s certificate of authentication, such reference shall be deemed to include authentication and delivery on behalf of the Trustee by an Authenticating Agent. Each Authenticating Agent shall be acceptable to the Company and shall at all times be an entity organized and doing business under the laws of the United States of America, or of any State or Territory thereof or the District of Columbia, authorized under such laws to act as Authenticating Agent, having a combined capital and surplus of not less than Fifty Million Dollars ($50,000,000) and subject to supervision or examination by federal or state authority. If such Authenticating Agent publishes reports of condition at least annually pursuant to law or to the requirements of said supervising or examining authority, then for the purposes of this Section 6.11 the combined capital and surplus of such Authenticating Agent shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. If at any time an Authenticating Agent shall cease to be eligible in accordance with the provisions of this Section 6.11, such Authenticating Agent shall resign immediately in the manner and with the effect specified in this Section 6.11.

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(b) Any Person into which an Authenticating Agent may be merged or converted or with which it may be consolidated, or any Person resulting from any merger, conversion or consolidation to which such Authenticating Agent shall be a party, or any Person succeeding to all or substantially all of the corporate trust business of an Authenticating Agent shall be the successor Authenticating Agent hereunder; provided, that such Person shall be otherwise eligible under this Section 6.11, without the execution or filing of any paper or any further act on the part of the Trustee or the Authenticating Agent.

(c) An Authenticating Agent may resign at any time by giving written notice thereof to the Trustee and to the Company. The Trustee may at any time terminate the agency of an Authenticating Agent by giving written notice thereof to such Authenticating Agent and to the Company. Upon receiving such a notice of resignation or upon such a termination, or in case at any time such Authenticating Agent shall cease to be eligible in accordance with the provisions of this Section 6.11, the Trustee may appoint a successor Authenticating Agent eligible under the provisions of this Section 6.11, which shall be acceptable to the Company, and shall give notice of such appointment to all Holders. Any successor Authenticating Agent upon acceptance of its appointment hereunder shall become vested with all the rights, powers and duties of its predecessor hereunder, with like effect as if originally named as an Authenticating Agent.

(d) The Company agrees to pay to each Authenticating Agent from time to time reasonable compensation for its services under this Section 6.11 in such amounts as the Company and the Authenticating Agent shall agree from time to time.

(e) If an appointment of an Authenticating Agent is made pursuant to this Section 6.11, the Securities may have endorsed thereon, in addition to the Trustee’s certificate of authentication, an alternative certificate of authentication in the following form:

This is one of the Securities referred to in the within mentioned Indenture.

Dated:

WILMINGTON TRUST, NATIONAL ASSOCIATION, not in its individual capacity, but solely as Trustee
By:
	Authenticating Agent

By:
	Authorized Signatory

Section 6.12 Execution of Additional Documents. The Indenture Trustee is hereby authorized to execute the Pledge and Security Agreement and Account Control Agreement. To the extent the Trustee is authorized or directed to execute any additional agreements or documents in its capacity as Trustee hereunder, the Trustee shall be entitled to the same rights and protections afforded to it under this Article VI when acting under such other agreements or documents.

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ARTICLE VII

HOLDER’S LISTS AND REPORTS BY COMPANY

Section 7.1 Company to Furnish Trustee Names and Addresses of Holders.

At the written request of the Trustee, the Company will furnish or cause to be furnished to the Trustee:

(a) semiannually, on or before June 30 and December 31 of each year, a list, in such form as the Trustee may reasonably require, of the names and addresses of the Holders as of a date not more than fifteen (15) days prior to the delivery thereof; and

(b) at such other times as the Trustee may request in writing, within thirty (30) days after the receipt by the Company of any such request, a list of similar form and content as of a date not more than fifteen (15) days prior to the time such list is furnished;

in each case to the extent such information is in the possession or control of the Company and has not otherwise been received by the Trustee in its capacity as Securities Registrar.

Section 7.2 Preservation of Information, Communications to Holders.

(a) The Trustee shall preserve, in as current a form as is reasonably practicable, the names and addresses of Holders contained in the most recent list furnished to the Trustee as provided in Section 7.1 and the names and addresses of Holders received by the Trustee in its capacity as Securities Registrar. The Trustee may destroy any list furnished to it as provided in Section 7.1 upon receipt of a new list so furnished.

(b) The rights of Holders to communicate with other Holders with respect to their rights under this Indenture or under the Securities, and the corresponding rights and privileges of the Trustee, shall be as provided in the Trust Indenture Act.

(c) Every Holder of Securities, by receiving and holding the same, agrees with the Company and the Trustee that neither the Company nor the Trustee nor any agent of either of them shall be held accountable by reason of the disclosure of information as to the names and addresses of the Holders made pursuant to the Trust Indenture Act.

Section 7.3 Reports by Company.

(a) The Company shall furnish to the Holders and to prospective purchasers of Securities, upon their request, the information required to be furnished pursuant to Rule 144A(d)(4) under the Securities Act. The delivery requirement set forth in the preceding sentence may be satisfied by compliance with Section 7.3(b) hereof.

(b) The Company shall furnish to each of (i) the Trustee, (ii) the Holders and to subsequent holders of Securities, (iii) Taberna Capital Management, LLC, 2929 Arch Street, Philadelphia, Pennsylvania 19104, Attn: Ken Frappier (or such other address as designated by Taberna Capital Management, LLC) and (iv) any beneficial owner of the Securities reasonably

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identified to the Company (which identification may be made by such beneficial owner), a duly completed and executed certificate substantially and substantively in the form attached hereto as Exhibit A, including the financial statements referenced in such Exhibit, which certificate and financial statements shall be so furnished by the Company not later than forty-five (45) days after the end of each of the first three (3) fiscal quarters of each fiscal year of the Company and not later than ninety (90) days after the end of each fiscal year of the Company, commencing with the last quarter of 2011.

(c) If the Company intends to file its annual and quarterly information with the Securities and Exchange Commission (the “Commission”) in electronic form pursuant to Regulation S-T of the Commission using the Commission’s Electronic Data Gathering, Analysis and Retrieval (“EDGAR”) system, the Company shall notify the Trustee in the manner prescribed herein of each such annual and quarterly filing. The Trustee is hereby authorized and directed to access the EDGAR system for purposes of retrieving the financial information so filed. Compliance with the foregoing shall constitute delivery by the Company of its financial statements to the Trustee in compliance with the provisions of Section 314(a) of the Trust Indenture Act, if applicable and permitted by the Trust Indenture Act. The Trustee shall have no duty to search for or obtain any electronic or other filings that the Company makes with the Commission, regardless of whether such filings are periodic, supplemental or otherwise. Delivery of reports, information and documents to the Trustee pursuant to this Sections 7.3(c) and 7.3(b) as to the following sentence shall be solely for purposes of compliance with this Section 7.3(c) and, if applicable, with Section 314(a) of the Trust Indenture Act to the extent permitted by the Trust Indenture Act. The Trustee’s receipt of such reports, information and documents shall not constitute notice to it of the content thereof or any matter determinable from the content thereof, including the Company’s compliance with any of its covenants hereunder, as to which the Trustee is entitled to rely upon Officers’ Certificates.

ARTICLE VIII

CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER OR LEASE

Section 8.1 Company May Consolidate, Etc., Only on Certain Terms.

The Company shall not consolidate with or merge into any other Person or convey, transfer or lease its properties and assets substantially as an entirety to any Person, and no Person shall consolidate with or merge into the Company, unless:

(a) if the Company shall consolidate with or merge into another Person or convey, transfer or lease its properties and assets substantially as an entirety to any Person, the entity formed by such consolidation or into which the Company is merged or the Person that acquires by conveyance or transfer, or that leases, the properties and assets of the Company substantially as an entirety shall expressly assume, by an indenture supplemental hereto, executed and delivered to the Trustee, the due and punctual payment of the principal of and interest (including any Additional Interest) on all the Securities and the performance of every covenant of this Indenture on the part of the Company to be performed or observed and such entity shall be organized and existing under the laws of the United States of America or any State or Territory thereof or the District of Columbia unless it has (1) agreed to make all payments due in respect

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of the Securities without withholding or deduction for, or on account of, any taxes, duties, assessments or other governmental charges under the laws or regulations of the jurisdiction of organization or residence (for tax purposes) of such entity or any political subdivision or taxing authority thereof or therein unless required by applicable law, in which case such entity shall have agreed to pay such additional amounts as shall be required so that the net amounts received and retained by the Holders of such Securities after payment of all taxes (including withholding taxes), duties, assessments or other governmental charges, will be equal to the amounts that such Holders would have received and retained had no such taxes (including withholding taxes), duties, assessments or other governmental charges been imposed; (2) irrevocably and unconditionally consented and submitted to the jurisdiction of any United States federal court or New York state court, in each case located in the Borough of Manhattan, The City of New York, in respect of any action, suit or proceeding against it arising out of or in connection with this Indenture or the Securities and irrevocably and unconditionally waived, to the fullest extent permitted by law, any objection to the laying of venue in any such court or that any such action, suit or proceeding has been brought in an inconvenient forum; and (3) irrevocably appointed an agent in The City of New York for service of process in any action, suit or proceeding referred to in clause (2) above;

(b) immediately after giving effect to such transaction, no Event of Default, and no event that, after notice or lapse of time, or both, would constitute an Event of Default, shall have happened and be continuing; and

(c) the Company has delivered to the Trustee an Officers’ Certificate and an Opinion of Counsel, each stating that such consolidation, merger, conveyance, transfer or lease and, if a supplemental indenture is required in connection with such transaction, any such supplemental indenture complies with this Article VIII and that all conditions precedent herein provided for relating to such transaction have been complied with; and the Trustee may rely upon such Officers’ Certificate and Opinion of Counsel as conclusive evidence that such transaction complies with this Section 8.1.

Section 8.2 Successor Company Substituted.

(a) Upon any consolidation or merger by the Company with or into any other Person, or any conveyance, transfer or lease by the Company of its properties and assets substantially as an entirety to any Person in accordance with Section 8.1 and the execution and delivery to the Trustee of the supplemental indenture described in Section 8.1(a), the successor entity formed by such consolidation or into which the Company is merged or to which such conveyance, transfer or lease is made shall succeed to, and be substituted for, and may exercise every right and power of, the Company under this Indenture with the same effect as if such successor Person had been named as the Company herein; and in the event of any such conveyance or transfer, following the execution and delivery of such supplemental indenture, the Company shall be discharged from all obligations and covenants under the Indenture and the Securities.

(b) Such successor Person to the Company may cause to be executed, and may issue either in its own name or in the name of the Company, any or all of the Securities issuable hereunder that theretofore shall not have been signed by the Company and delivered to the Trustee; and, upon the order of such successor Person instead of the Company and subject to all

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the terms, conditions and limitations in this Indenture prescribed, the Trustee shall authenticate and shall deliver any Securities that previously shall have been signed and delivered by the officers of the Company to the Trustee for authentication, and any Securities that such successor Person thereafter shall cause to be executed and delivered to the Trustee on its behalf. All the Securities so issued shall in all respects have the same legal rank and benefit under this Indenture as the Securities theretofore or thereafter issued in accordance with the terms of this Indenture.

(c) In case of any such consolidation, merger, sale, conveyance or lease, such changes in phraseology and form may be made in the Securities thereafter to be issued as may be appropriate to reflect such occurrence.

ARTICLE IX

SUPPLEMENTAL INDENTURES

Section 9.1 Supplemental Indentures without Consent of Holders.

Without the consent of any Holders, the Company, when authorized by a Board Resolution, and the Trustee, at any time and from time to time, may enter into one or more indentures supplemental hereto, for any of the following purposes:

(a) to evidence the succession of another Person to the Company, and the assumption by any such successor of the covenants of the Company herein and in the Securities; or

(b) to evidence and provide for the acceptance of appointment hereunder by a successor trustee; or

(c) to cure any ambiguity, to correct or supplement any provision herein that may be defective or inconsistent with any other provision herein, or to make or amend any other provisions with respect to matters or questions arising under this Indenture, which shall not be inconsistent with the other provisions of this Indenture; provided, that such action pursuant to this clause (c) shall not adversely affect in any material respect the interests of any Holders; or

(d) to comply with the rules and regulations of any securities exchange or automated quotation system on which any of the Securities may be listed, traded or quoted; or

(e) to add to the covenants, restrictions or obligations of the Company or to add to the Events of Default; provided, that such action pursuant to this clause (e) shall not adversely affect in any material respect the interests of any Holders; or

(f) to modify, eliminate or add to any provisions of the Indenture or the Securities to such extent as shall be necessary to ensure that the Securities are treated as indebtedness of the Company for United States federal income tax purposes; provided, that such action pursuant to this clause (f) shall not adversely affect in any material respect the interests of any Holders.

Section 9.2 Supplemental Indentures with Consent of Holders.

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(a) Subject to Section 9.1, with the consent of the Holders of not less than a majority in aggregate principal amount of the Outstanding Securities, by Act of said Holders delivered to the Company and the Trustee, the Company, when authorized by a Board Resolution, and the Trustee may enter into an indenture or indentures supplemental hereto for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions of this Indenture or of modifying in any manner the rights of the Holders of Securities under this Indenture; provided, that no such supplemental indenture shall, without the consent of the Holder of each Outstanding Security:

(i) change the Stated Maturity of the principal of any Security or change the date of payment of any installment of interest (including any Additional Interest) on any Security, or reduce the principal amount thereof or the rate of interest thereon payable upon the redemption thereof or change the place of payment where, or the coin or currency in which, any Security or interest thereon is payable, or restrict or impair the right to institute suit for the enforcement of any such payment on or after such date; or

(ii) reduce the percentage in aggregate principal amount of the Outstanding Securities, the consent of whose Holders is required for any such supplemental indenture, or the consent of whose Holders is required for any waiver of compliance with any provision of this Indenture or of defaults hereunder and their consequences provided for in this Indenture; or

(iii) modify any of the provisions of this Section 9.2, Section 5.13 or Section 10.7, except to increase any percentage in aggregate principal amount of the Outstanding Securities, the consent of whose Holders is required for any reason, or to provide that certain other provisions of this Indenture cannot be modified or waived without the consent of the Holder of each Security.

(b) It shall not be necessary for any Act of Holders under this Section 9.2 to approve the particular form of any proposed supplemental indenture, but it shall be sufficient if such Act shall approve the substance thereof.

Section 9.3 Execution of Supplemental Indentures.

In executing or accepting the additional trusts created by any supplemental indenture permitted by this Article IX or the modifications thereby of the trusts created by this Indenture, the Trustee shall be entitled to receive, and shall be fully protected in conclusively relying upon, an Officers’ Certificate and an Opinion of Counsel stating that the execution of such supplemental indenture is authorized or permitted by this Indenture, that all conditions precedent herein provided for relating to such action have been complied with and that this Indenture is valid, binding and enforceable against the Company in accordance with the terms of this Indenture. The Trustee may, but shall not be obligated to, enter into any such supplemental indenture that affects the Trustee’s own rights, duties, liabilities, indemnities or immunities under this Indenture or otherwise. Copies of the final form of each supplemental indenture shall be delivered by the Trustee at the expense of the Company to each Holder, promptly after the execution thereof.

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Section 9.4 Effect of Supplemental Indentures.

Upon the execution of any supplemental indenture under this Article IX, this Indenture shall be modified in accordance therewith, and such supplemental indenture shall form a part of this Indenture for all purposes; and every Holder of Securities theretofore or thereafter authenticated and delivered hereunder shall be bound thereby.

Section 9.5 Reference in Securities to Supplemental Indentures.

Securities authenticated and delivered after the execution of any supplemental indenture pursuant to this Article IX may, and shall if required by the Company, bear a notation in form approved by the Company as to any matter provided for in such supplemental indenture. If the Company shall so determine, new Securities so modified as to conform, in the opinion of the Company, to any such supplemental indenture may be prepared and executed by the Company and authenticated and delivered by the Trustee in exchange for Outstanding Securities.

ARTICLE X

COVENANTS

Section 10.1 Payment of Principal and Interest.

The Company covenants and agrees for the benefit of the Holders of the Securities that it will duly and punctually pay the principal of and interest (including any Additional Interest) on the Securities in accordance with the terms of the Securities and this Indenture.

Section 10.2 Money for Security Payments to be Held in Trust.

(a) If the Company shall at any time act as its own Paying Agent with respect to the Securities, it will, on or before each due date of the principal of or interest (including any Additional Interest) on the Securities, segregate and hold in trust for the benefit of the Persons entitled thereto a sum sufficient to pay the principal or interest (including Additional Interest) so becoming due until such sums shall be paid to such Persons or otherwise disposed of as herein provided, and will promptly notify the Trustee in writing of its failure so to act.

(b) Whenever the Company shall have one or more Paying Agents, it will, prior to 10:00 A.M., New York City time, on each due date of the principal of or interest (including any Additional Interest) on any Securities, deposit with a Paying Agent a sum sufficient to pay such amount, such sum to be held as provided in the Trust Indenture Act and (unless such Paying Agent is the Trustee) the Company will promptly notify the Trustee of its failure so to act.

(c) The Company will cause each Paying Agent for the Securities other than the Trustee to execute and deliver to the Trustee an instrument in which such Paying Agent shall agree with the Trustee, subject to the provisions of this Section 10.2, that such Paying Agent will (i) comply with the provisions of this Indenture and the Trust Indenture Act applicable to it as a Paying Agent and (ii) during the continuance of any default by the Company (or any other obligor upon the Securities) in the making of any payment in respect of the Securities, upon the

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written request of the Trustee, forthwith pay to the Trustee all sums held in trust by such Paying Agent for payment in respect of the Securities.

(d) The Company may at any time, for the purpose of obtaining the satisfaction and discharge of this Indenture or for any other purpose, pay, or by Company Order direct any Paying Agent to pay, to the Trustee all sums held in trust by the Company or such Paying Agent, such sums to be held by the Trustee upon the same trusts as those upon which such sums were held by the Company or such Paying Agent; and, upon such payment by any Paying Agent to the Trustee, such Paying Agent shall be released from all further liability with respect to such money.

(e) Any money deposited with the Trustee or any Paying Agent, or then held by the Company in trust for the payment of the principal of or interest (including any Additional Interest) on any Security and remaining unclaimed for two (2) years after such principal or interest has become due and payable shall (unless otherwise required by mandatory provision of applicable escheat or abandoned or unclaimed property law) be paid on Company Request to the Company, or (if then held by the Company) shall (unless otherwise required by mandatory provision of applicable escheat or abandoned or unclaimed property law) be discharged from such trust; and the Holder of such Security shall thereafter, as an unsecured general creditor, look only to the Company for payment thereof, and all liability of the Trustee or such Paying Agent with respect to such trust money, and all liability of the Company as trustee thereof, shall thereupon cease; provided, that the Trustee or such Paying Agent, before being required to make any such repayment, may at the expense of the Company cause to be published once, in a newspaper published in the English language, customarily published on each Business Day and of general circulation in the Borough of Manhattan, The City of New York, notice that such money remains unclaimed and that, after a date specified therein, which shall not be less than thirty (30) days from the date of such publication, any unclaimed balance of such money then remaining will be repaid to the Company.

Section 10.3 Statement as to Compliance.

The Company shall deliver to the Trustee, (i) not later than forty-five (45) days after the end of each quarter of each fiscal year of the Company and (ii) not later than ninety (90) days after the end of each fiscal year of the Company ending after the date hereof, an Officers’ Certificate covering the preceding calendar year, stating whether or not to the knowledge of the signers thereof the Company is in default in the performance or observance of any of the terms, provisions and conditions of this Indenture (without regard to any period of grace or requirement of notice provided hereunder), and if the Company shall be in default, specifying all such defaults and the nature and status thereof of which they may have knowledge.

Section 10.4 Reserved.

Section 10.5 Certain Additional Representations, Covenants and Agreements Regarding Pledged Collateral.

(a) Pledge of Collateral. The Company shall deliver to the Trustee a fully executed (i) Pledge and Security Agreement in favor of the Trustee for the benefit of the Holders and (ii)

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Account Control Agreement. The Pledged Collateral shall be security for all payments due or to become due with respect to the Outstanding Securities as more fully set forth in the Account Control Agreement and the Pledge and Security Agreement. The Company represents, warrants and covenants that the Trustee at all times continues to have, a first priority perfected security interest in the Pledged Collateral. The Trustee is authorized to execute and, subject to Section 6.2(c) as applicable, is authorized (but not obligated to) file (as directed by the Company or the Holders) any agreements or instruments in the form delivered to it by the Company or the Holders in order to effectuate the perfection of the security interest in the Pledged Collateral, including, without limitation, the Pledge and Security Agreement in the form delivered to it by the Company or the Holders, the Account Control Agreement in the form delivered to it by the Company or the Holders and UCC-1 financing statements in the form delivered to it by the Company or the Holders relating to all or any portion the Pledged Collateral. The Company shall maintain, or cause to be maintained, at all times the Pledged Collateral in accordance with the terms of this Indenture, the Account Control Agreement and the Pledge and Security Agreement. The Trustee shall incur no liability to any Person as a result of taking any action with respect to the Pledged Collateral directed by the Holders of majority in aggregate principal amount of the Outstanding Securities.

(b) Trustee’s Responsibilities Regarding Pledged Collateral.

(i) The Company hereby acknowledges and agrees that notwithstanding anything to the contrary contained in this Indenture or any documents executed in connection herewith or therewith, the Pledged Collateral is collateral solely for the payment and performance by the Company to each of the Holders of the Outstanding Securities and no other Person shall have any right, title or interest in the Pledged Collateral, except as otherwise expressly set forth in the Account Control Agreement and the Pledge and Security Agreement. Subject to Section 6.2(c), he Trustee shall, notwithstanding any contrary requirement or direction arising or given hereunder or under any documents executed in connection herewith, follow the written directions (each, a “Pledged Collateral Notice”) delivered by Holders of a majority in aggregate principal amount of the Outstanding Securities pursuant to the terms of this Indenture and in accordance with the terms and provisions set forth in the Account Control Agreement and the Pledge and Security Agreement with respect to any action regarding all or any portion of the Pledged Collateral or any proceeds thereof, including, without limitation, during the continuance of an Event of Default directing the Trustee to exercise all rights and take all actions permitted to be taken by Trustee pursuant to the terms of Pledge and Security Agreement and/or the Account Control Agreement, and the Trustee shall not have any duty, obligation or right to determine when and if any such action shall be taken.

(ii) A Pledged Collateral Notice shall be provided to the Trustee by Holders of a majority in aggregate principal amount of the Outstanding Securities only in connection with an Event of Default which is continuing. Notwithstanding anything to the contrary contained herein, the Company shall not have any right to sell, release or otherwise dispose of the Pledged Collateral, except as expressly set forth in the Account Control Agreement or the Pledge and Security Agreement.

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(c) Pledged Collateral. Notwithstanding anything to the contrary contained herein, the Company covenants and agrees that so long as any of the Pledged Collateral is held pursuant to this Indenture, the Account Control Agreement and the Pledge and Security Agreement, upon the occurrence of an Event of Default which is continuing, the Trustee shall be permitted to take any action set forth in one or more Pledged Collateral Notices (including the disbursement of any proceeds).

Section 10.6 Additional Covenants.

(a) The Company agrees to use its reasonable efforts to continue to qualify as a real estate investment trust under the Code.

(b) The Company shall not enter into, or be a party to, any transaction with an Affiliate of the Company except in the ordinary course of business and on terms which are no less favorable to the Company or such Affiliate than would be obtained in a comparable arm’s length transaction with an unrelated third party.

(c) The Company shall, upon reasonably request of Trustee, execute and deliver such further instruments and do such further acts as may reasonably be necessary or proper to carry out more effectually the purposes of this Indenture.

(d) In addition to all other notices required hereunder, the Company shall promptly, after obtaining knowledge thereof, notify the Holders in writing of the occurrence of any of the following: (i) a fire or other casualty causing damage in excess of $25,000,000 with respect to any assets of the Company or any Significant Subsidiary and (ii) commencement of any material litigation affecting the Company which will have a material adverse change in the condition (financial or other), earnings, business or assets of the Company, taken as a whole, whether or not arising from transactions occurring in the ordinary course of business.

(e) (i) During any period when an Event of Default is continuing, the Company shall not pay any dividends; provided that, in any fiscal year in which the Company is qualified as a REIT, the Company may pay dividends in an amount, as determined on an aggregate annual basis as of the end of any such fiscal year, not to exceed 100% of the Company’s REIT taxable income for such fiscal year calculated prior to deducting dividends paid or payable by the Company.

(ii) During any period when an Event of Default is continuing, the Company shall not make any prepayments, repurchases or redemptions of unsecured indebtedness (including any unsecured indebtedness convertible into capital stock of the Company) of the Company that is subordinated by its terms to the Securities except to the extent funded with or exchanged for equity issued by the Company or the proceeds thereof.

(f) The Company shall comply with all applicable material laws, rules, regulations, orders, writs, judgments, injunctions, decrees and determinations (including, without limitation, any fiscal and accounting rules and regulations and any foreign or domestic law, rule or regulation), including, in connection with the issuance of the Securities.

Section 10.7 Waiver of Covenants.

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The Company may omit in any particular instance to comply with any covenant or condition contained in Section 10.5 and Section 10.6 if, before or after the time for such compliance, the Holders of at least a majority in aggregate principal amount of the Outstanding Securities shall, by Act of such Holders, either waive such compliance in such instance or generally waive compliance with such covenant or condition, but no such waiver shall extend to or affect such covenant or condition except to the extent so expressly waived, and, until such waiver shall become effective, the obligations of the Company in respect of any such covenant or condition shall remain in full force and effect.

Section 10.8 Treatment of Securities.

The Company will treat the Securities as indebtedness, and the amounts, other than payments of principal, payable in respect of the principal amount of such Securities as interest, for all U.S. federal income tax purposes. All payments in respect of the Securities will be made free and clear of U.S. withholding tax to any beneficial owner thereof that has provided an Internal Revenue Service Form W-9 or W-8BEN (or any substitute or successor form) establishing its U.S. or non-U.S. status for U.S. federal income tax purposes, or any other applicable form establishing a complete exemption from U.S. withholding tax.

Section 10.9 Inspection Rights. If an Event of Default occurs and is continuing, upon at least five (5) Business Days prior written notice from the Trustee, the Company shall permit representatives appointed by the Trustee to examine the books and records of account of the Company (and to make copies thereof and extracts therefrom), all at such reasonable times and intervals during normal business hours as the Trustee may reasonably request. Except to the extent (i) required by law, (ii) required by any court order, or any directive of a Governmental Authority, or (iii) that any such information is available or accessible in the public domain, the Trustee shall maintain all information disclosed and/or copied in the course of any such inspection confidential in all respects, except that it may share such information with any collateral manager for the Holders, any other Holder and any of their respective counsel provided that such Person agrees to maintain the confidentially of such information.

ARTICLE XI

REDEMPTION OF SECURITIES

Section 11.1 Optional Redemption.

The Company may, at its option redeem the Securities in whole at any time or in part from time to time, at a Redemption Price equal to one hundred percent (100%) of the principal amount thereof (or of the redeemed portion thereof, as applicable), together, in the case of any such redemption, with accrued and unpaid interest, including any Additional Interest, through but excluding the date fixed as the Redemption Date (the “Optional Redemption Price”).

Section 11.2 Reserved.

Section 11.3 Election to Redeem; Notice to Trustee.

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The election of the Company to redeem any Securities, in whole or in part, shall be evidenced by or pursuant to a Board Resolution. In case of any redemption at the election of the Company, the Company shall, not less than fifteen (15) days and not more than seventy-five (75) days prior to the Redemption Date, notify the Trustee in writing of such date and of the principal amount of the Securities to be redeemed and provide the additional information required to be included in the notice or notices contemplated by Section 11.5.

Section 11.4 Reserved.

Section 11.5 Notice of Redemption.

(a) Notice of redemption shall be given not later than the fifteenth (15th) day, and not earlier than the seventy-fifth (75th) day, prior to the Redemption Date to the Trustee and each Holder of Securities to be redeemed, in whole or in part.

(b) With respect to Securities to be redeemed, in whole or in part, each notice of redemption shall state:

(i) the Redemption Date;

(ii) the Redemption Price;

(iii) if less than all Outstanding Securities are to be redeemed, the identification (and, in the case of partial redemption, the respective principal amounts) of the amount of and particular Securities to be redeemed;

(iv) that on the Redemption Date, the Redemption Price will become due and payable upon each such Security or portion thereof, and that any interest (including any Additional Interest) on such Security or such portion, as the case may be, shall cease to accrue on and after said date; and

(v) the place or places where such Securities are to be surrendered for payment of the Redemption Price.

(c) Notice of redemption of Securities to be redeemed, in whole or in part, at the election of the Company shall be given by the Company or, at the Company’s request and upon ten (10) days prior notice thereof to Trustee, by the Trustee, in the name and at the expense of the Company and shall be irrevocable. The notice if mailed in the manner provided above shall be conclusively presumed to have been duly given, whether or not the Holder receives such notice. In any case, a failure to give such notice by mail or any defect in the notice to the Holder of any Security designated for redemption as a whole or in part shall not affect the validity of the proceedings for the redemption of any other Security.

Section 11.6 Deposit of Redemption Price.

Prior to 10:00 A.M., New York City time, on the Redemption Date specified in the notice of redemption given as provided in Section 11.5, the Company will deposit with the Trustee or with one or more Paying Agents (or if the Company is acting as its own Paying Agent, the

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Company will segregate and hold in trust as provided in Section 10.2) an amount of money sufficient to pay the Redemption Price of, and any accrued interest (including any Additional Interest) on, all the Securities (or portions thereof) that are to be redeemed on that date.

Section 11.7 Payment of Securities Called for Redemption.

(a) If any notice of redemption has been given as provided in Section 11.5, the Securities or portion of Securities with respect to which such notice has been given shall become due and payable on the date and at the place or places stated in such notice at the applicable Redemption Price (including any Additional Interest) to the Redemption Date. On presentation and surrender of such Securities at a Place of Payment specified in such notice, the Securities or the specified portions thereof shall be paid and redeemed by the Company at the applicable Redemption Price (including any Additional Interest) to the Redemption Date.

(b) Upon presentation of any Security redeemed in part only, the Company shall execute and the Trustee, upon receipt of a Company Order, shall authenticate and deliver to the Holder thereof, at the expense of the Company, a new Security or Securities, of authorized denominations, in aggregate principal amount equal to the unredeemed portion of the Security so presented and having the same Original Issue Date, Stated Maturity and terms.

(c) If any Security called for redemption shall not be so paid upon surrender thereof for redemption, the principal of such Security shall, until paid, bear interest from and including the Redemption Date at the rate prescribed therefor in the Security.

ARTICLE XII

FUNDAMENTAL CHANGE IN COMPANY

Section 12.1 Repurchase at Option of Holders of the Securities Upon a Fundamental Change.

(a) If a Fundamental Change occurs at any time, each Holder of the Securities shall have the right, at such Holder’s option, to require the Company to repurchase for cash all of such Holder’s Notes, or any portion thereof that is equal to $100,000 principal amount or an integral multiple of $1,000 in excess thereof, on the date (the “Fundamental Change Repurchase Date”) specified by the Company that is not less than twenty (20) calendar days or more than thirty-five (35) calendar days following the date of the Fundamental Change Company Notice at a repurchase price equal to 100% of the principal amount of the Securities to be repurchased, together with accrued and unpaid interest to, but excluding, the Fundamental Change Repurchase Date (the “Fundamental Change Repurchase Price”); provided that if the Fundamental Change Repurchase Date falls after a Regular Record Date but on or prior to the Interest Payment Date to which such Regular Record Date relates, then any such accrued and unpaid interest shall be paid not to the Holders of the Securities submitting the Securities for repurchase on the Fundamental Change Repurchase Date but instead to the Holders of such Securities at the close of business on the Regular Record Date, and the Fundamental Change Repurchase Price

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shall be equal to 100% of the principal amount of Securities to be repurchased pursuant to this Article 12.

(b) On or before the twentieth (20th) calendar day after the occurrence of the effective date of a Fundamental Change, the Company shall provide to all Holders of the Securities and the Trustee and the Paying Agent (in the case of a Paying Agent other than the Trustee) a notice (the “Fundamental Change Company Notice”) of the occurrence of the effective date of the Fundamental Change and of the repurchase right at the option of the Holders of the Securities arising as a result thereof. Each Fundamental Change Company Notice shall specify:

(i) the designation of the Securities;

(ii) the events causing the Fundamental Change;

(iii) the date of the Fundamental Change;

(iv) the last date on which a Holder of the Securities may exercise the repurchase right pursuant to this Article 12;

(v) the Fundamental Change Repurchase Price;

(vi) the Fundamental Change Repurchase Date;

(vii) the name and address of the Paying Agent; amd

(viii) the procedures that Holders of the Securities must follow to require the Company to repurchase their Notes.

Upon receipt by Trustee of a Fundamental Change Company Notice, the Trustee shall promptly forward such notice to all Holders of the Securities at the Company’s expense.

Such notice shall be by first class mail to the Trustee, to the Paying Agent and to each Holder of the Securities at its address shown in the Security Register (and to beneficial owners as required by applicable law) or, in the case of Global Securities, in accordance with the applicable procedures of the Depositary. Simultaneously with providing such notice, the Company shall publish a notice containing the information set forth in the Fundamental Change Company Notice in a newspaper of general circulation in The City of New York or publish such information on the Company’s website or through such other public medium as the Company may use at that time.

No failure of the Company to give the foregoing notices and no defect therein shall limit the repurchase rights of the Holders of the Securities or affect the validity of the proceedings for the repurchase of the Notes pursuant to this Section 12.1.

(c) Repurchases of Securities under this Section 12.1 shall be made, at the option of the Holder of the Securities thereof, upon:

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(i) delivery to the Securities Registrar by a Holder of the Securities of a duly completed notice (the “Fundamental Change Repurchase Notice”) in the form attached hereto as Exhibit B, if the Securities are physical Securities, or in compliance with the Depositary’s procedures for surrendering interests in Global Securities, if the Securities are Global Securities, in each case on or before the close of business on the Business Day immediately preceding the Fundamental Change Repurchase Date; and

(ii) delivery of the Securities, if the Securities are physical Securities, to the Securities Registrar at any time after delivery of the Fundamental Change Repurchase Notice (together with all necessary endorsements for transfer) at the Corporate Trust Office of the Securities Registrar, or book-entry transfer of the Securities, if the Securities are Global Securities, in compliance with the procedures of the Depositary, in each case such delivery being a condition to receipt by the Holder of the Securities of the Fundamental Change Repurchase Price therefor.

(d) As set forth in Exhibit B, the Fundamental Change Repurchase Notice in respect of any Securities to be repurchased shall state:

(i) in the case of physical Securities, the certificate numbers of the Securities to be delivered for repurchase;

(ii) the portion of the principal amount of the Securities to be repurchased, which must be $100,000 or an integral multiple thereof; and

(iii) that the Securities are to be repurchased by the Company pursuant to the applicable provisions of the Securities and the Indenture;

provided, however, that if the Securities are Global Securities, the Fundamental Change Repurchase Notice must comply with appropriate Depositary procedures.

Notwithstanding anything herein to the contrary, any Holder of the Securities delivering to the Paying Agent the Fundamental Change Repurchase Notice contemplated by this Section 12.1 shall have the right to withdraw, in whole or in part, such Fundamental Change Repurchase Notice at any time prior to the close of business on the Business Day immediately preceding the Fundamental Change Repurchase Date by delivery of a written notice of withdrawal to the Securities Registrar in accordance with Section 12.2.

The Securities Registrar shall promptly forward to the Company any Fundamental Change Repurchase Notices or written notices of withdrawal thereof upon receipt thereof.

(e) Notwithstanding the foregoing, no Securities may be repurchased by the Company on any date at the option of the Holders of the Securities upon a Fundamental Change if the principal amount of the Securities has been accelerated, and such acceleration has not been rescinded, on or prior to such date (except in the case of an acceleration resulting from a Default by the Company in the payment of the Fundamental Change Repurchase Price with respect to such Notes). The Securities Registrar will promptly return to the respective Holders of the Securities thereof any physical Securities held by it during the acceleration of the Securities (except in the case of an acceleration resulting from a default by the Company in the payment of

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the Fundamental Change Repurchase Price with respect to such Securities), or any instructions for book-entry transfer of the Securities in compliance with the procedures of the Depositary shall be deemed to have been canceled, and, upon such return or cancellation, as the case may be, the Fundamental Change Repurchase Notice with respect thereto shall be deemed to have been withdrawn.

Section 12.2 Withdrawal of Repurchase Notice or Fundamental Change Repurchase Notice.

A Fundamental Change Repurchase Notice may be withdrawn (in whole or in part) by means of a written notice of withdrawal in the form of Exhibit C delivered to the Corporate Trust Office of the Securities Registrar in accordance with this Section 12.2 at any time prior to the close of business on the Business Day immediately preceding the Repurchase Date or prior to the close of business on the Business Day immediately preceding the Fundamental Change Repurchase Date, as the case may be, specifying:

(a) the principal amount of the Securities with respect to which such notice of withdrawal is being submitted;

(b) if physical Securities have been issued, the certificate number of the Securities in respect of which such notice of withdrawal is being submitted; and

(c) the principal amount, if any, of such Securities that remains subject to the original Fundamental Change Repurchase Notice which portion must be in principal amounts of $100,000 or an integral multiple of $1,000 in excess thereof;

provided, however, that if the Securities are Global Securities, the Company shall ensure and advise the Trustee that the notice complies with appropriate procedures of the Depositary.

Section 12.3 Deposit of Fundamental Change Repurchase Price.

(a) The Company shall deposit with the Trustee (or other Paying Agent) on or prior to 11:00 a.m., New York City time, on the Fundamental Change Repurchase Date, an amount of money sufficient to repurchase all of the Securities to be repurchased at the appropriate Fundamental Change Repurchase Price. Subject to receipt of funds and/or Securities by the Trustee (or other Paying Agent), payment for Securities surrendered for repurchase (and not withdrawn prior to the close of business on the Business Day immediately preceding the Fundamental Change Repurchase Date) will be made on the later of (i) the Fundamental Change Repurchase Date with respect to such Securities (provided the Holder of the Securities has satisfied the conditions in Section 12.1) and (ii) the time of book-entry transfer or the delivery of such Securities to the Trustee (or other Paying Agent appointed by the Company) by the Holder thereof in the manner required by Section 12.1 and in accordance with Section 3.1(e) hereof for the amount payable to the Holders of such Securities entitled thereto as they shall appear in the Security Register; provided, however, that payments to the Depositary shall be made by wire transfer of immediately available funds to the account of the Depositary or its nominee. The Trustee shall, promptly after such payment and upon written demand by the Company, return to the Company any funds in excess of the Fundamental Change Repurchase Price.

63

(b) If by 11:00 a.m. New York City time, on the Fundamental Change Repurchase Date, as the case may be, the Trustee (or other Paying Agent appointed by the Company) holds money sufficient to make payment on all the Securities or portions thereof that are to be repurchased on such Fundamental Change Repurchase Date, as the case may be, then such Securities will cease to be Outstanding, interest will cease to accrue on such Securities (whether or not book-entry transfer of the Securities has been made or the Securities have been delivered to the Trustee or Paying Agent) and all other rights of the Holders of such Securities will terminate (other than the right to receive the Fundamental Change Repurchase Price).

(c) Upon surrender of a Security that is to be repurchased in part pursuant to Section 12.1, the Company shall execute and the Trustee upon receipt of a Company Order shall authenticate and deliver to the Holder a new Security in an authorized denomination equal in principal amount to the unrepurchased portion of the Securities surrendered.

Section 12.4 Covenant to Comply with Applicable Laws Upon Repurchase of Notes.

In connection with any repurchase offer, the Company shall, if required:

(a) comply with the provisions of Rule 13e-4, Rule 14e-1 and any other tender offer rules under the Exchange Act;

(b) file a Schedule TO or any successor or similar schedule; and

(c) otherwise comply with all federal and state securities laws in connection with any offer by the Company to repurchase the Securities;

(d) in each case, so as to permit the rights and obligations under this Article 12 to be exercised in the time and in the manner specified in this Article 12.

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ARTICLE XIII

MISCELLANEOUS

Section 13.1 Indenture and Securities Solely Corporate Obligations.

No recourse for the payment of the principal of or interest on any Security, or for any claim based thereon or otherwise in respect thereof, and no recourse under or upon any obligation, covenant or agreement of the Company in this Indenture or in any supplemental indenture, or in any such Security, or because of the creation of any indebtedness represented thereby, shall be had against any incorporator, stockholder, officer, director, employee or agent, as such, past, present or future, of the Company or any incorporator, stockholder, officer, director, employee or agent of any affiliate, predecessor or successor to the Company, whether by virtue of any constitution, statute or rule of law, or by the enforcement of any assessment or penalty or otherwise; it being expressly understood that all such liability is hereby expressly waived and released as a condition of, and as a consideration for, the execution of this Indenture and the issue of the Securities.

****

This instrument may be executed in any number of counterparts, each of which so executed shall be deemed to be an original, but all such counterparts shall together constitute but one and the same instrument.

****

[signature page follows]

65

IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be duly executed as of the day and year first above written.

RAIT FINANCIAL TRUST
By:	/s/ James J. Sebra
Name: James J. Sebra
Title: SVP & CAO

<Signatures Continue on Following Page>

SIGNATURE PAGE TO INDENTURE

WILMINGTON TRUST, NATIONAL ASSOCIATION, as Trustee
By:	/s/ Timothy P. Mowdy
Name: Timothy P. Mowdy
Title: Vice President

SIGNATURE PAGE TO INDENTURE

Exhibit A

Form of Officer’s Financial Certificate

The undersigned, the Chief Financial Officer and Treasurer of RAIT Financial Trust (the “Company”) hereby certifies, pursuant to Section 7.3(b) of the Indenture, dated as of October 5, 2011 (the “Indenture”), between the Company and Wilmington Trust, National Association, as trustee, that, as of [                    ], that:

[FOR YEAR END: Attached hereto are the audited consolidated financial statements (including the balance sheet, income statement and statement of cash flows, and notes thereto, together with the report of the independent accountants thereon) of the Company for the three years ended [                    ] (the “Financial Statements”).

[FOR QUARTER END: Attached hereto are the unaudited consolidated and consolidating financial statements (including the balance sheet and income statement) of the Company and its consolidated subsidiaries for the quarter ended [date], 20    ] (the “Financial Statements”).

The Financial Statements fairly present in all material respects, in accordance with U.S. generally accepted accounting principles (“GAAP”), the financial position of the Company and its consolidated subsidiaries and the results of operations and changes in financial condition as of the date, and for the [quarter][year] ended [                    ] and such financial statements have been prepared in accordance with GAAP consistently applied throughout the period involved (expect as otherwise noted therein).

There has been no default in the payment of principal, interest, premium or similar items with respect to any indebtedness owed by the Company and/or their respective subsidiaries (as such term is defined in Rule1-02(w) of Regulation S-X under the Exchange Act) (other than those defaults cured within thirty (30) days of the occurrence of the same.

The representations and warranties set forth in Section 4(c), 4(p) and 4(t)(i) of the Exchange Agreement (as defined in the Indenture) are true and correct as of the date hereof.

[signature page follows]

Exhibit A

IN WITNESS WHEREOF, the undersigned has executed this Officer’s Financial Certificate as of this [    ] day of [                    ], [            ].

RAIT FINANCIAL TRUST

By:

Name: Jack Salmon

Title: Chief Financial Officer and Treasurer

Exhibit B

[FORM OF FUNDAMENTAL CHANGE REPURCHASE NOTICE]

To: RAIT Financial Trust

Wilmington Trust, National Association

Rodney Square North

1100 N. Market St.

Wilmington, DE 19890

Attn: Corporate Trust Services—Administrator for RAIT Financial Trust

cc: Wilmington Trust, National Association

50 South Sixth Street

Minneapolis, MN 55402

Attn: Corporate Capital Markets

The undersigned registered owner of this Security hereby acknowledges receipt of a notice from RAIT Financial Trust (the “Company”) as to the occurrence of a Fundamental Change with respect to the Company and specifying the Fundamental Change Repurchase Date and requests and instructs the Company to pay to the registered holder hereof in accordance with the applicable provisions of the Indenture referred to in this Securities (1) the entire principal amount of this Security, or the portion thereof (that is $100,000 principal amount or an integral multiple of $1,000 in excess thereof) below designated, and (2) if such Fundamental Change Repurchase Date does not fall during the period after a Regular Record Date and on or prior to the corresponding Interest Payment Date, accrued and unpaid interest, if any, thereon to, but excluding, such Fundamental Change Repurchase Date.

In the case of physical Securities, the certificate numbers of the Securities to be repurchased are as set forth below:

Dated:                                 

Signature(s)

Social Security or Other Taxpayer
Identification Number

Principal amount to be repaid (if less than all): $            ,000

NOTICE: The above signature(s) of the Holder(s) hereof must correspond with the name as written upon the face of the Securities in every particular without alteration or enlargement or any change whatever.

Exhibit C

[FORM OF WITHDRAWAL OF FUNDAMENTAL CHANGE REPURCHASE NOTICE]

To: RAIT Financial Trust

Wilmington Trust, National Association

Rodney Square North

1100 N. Market St.

Wilmington, DE 19890

Attn: Corporate Trust Services—Administrator for RAIT Financial Trust

cc: Wilmington Trust, National Association

50 South Sixth Street

Minneapolis, MN 55402

Attn: Corporate Capital Markets

The undersigned registered owner of this Security hereby withdraws its Fundamental Change Repurchase Notice, dated as of [                    ] to RAIT Financial Trust (the “Company”) with respect to the entire principal amount of this Securities, or the portion thereof (that is $100,000 principal amount or an integral multiple of $1,000 in excess thereof) below designated and agrees that the portion thereof (that is $100,000 principal amount or an integral multiple of $1,000 in excess thereof) below designated shall remain subject to the original Fundamental Change Repurchase Notice.

In the case of physical Securities, the certificate numbers of the Securities to be repurchased are as set forth below:

Dated:                                     

Signature(s)

Social Security or Other Taxpayer
Identification Number

Principal amount to be withdrawn (if less than all): $            ,000

Principal amount to be repaid (if less than all): $            ,000

Exhibit C

NOTICE: The above signature(s) of the Holder(s) hereof must correspond with the name as written upon the face of the Securities in every particular without alteration or enlargement or any change whatever.

EX-10.5

Exhibit 10.5

EXCHANGE AGREEMENT

among

RAIT FINANCIAL TRUST

and

TABERNA PREFERRED FUNDING VIII, LTD.

Dated as of October 5, 2011

EXCHANGE AGREEMENT

This Exchange Agreement (this “Agreement”) is made and entered into as of this 5th day of October, 2011 by and among RAIT FINANCIAL TRUST, a Maryland real estate investment trust (the “Company”) and TABERNA PREFERRED FUNDING VIII, LTD. (“Taberna”).

RECITALS

A. Taberna is the holder of those certain securities described on Exhibit A attached hereto (collectively the “Exchanged Securities”).

B. The Company and Wilmington Trust, National Association (the “Indenture Trustee”) have entered into that certain Indenture (the “New Indenture”) pursuant to which the Company proposes to issue One Hundred Million Dollars ($100,000,000) in aggregate principal amount of Senior Secured Notes, which notes shall be issued to the Taberna as follows (collectively, the “Senior Secured Notes”):

(i) Senior Secured Note No. 1 due April 30, 2017 in the original principal amount of $25,000,000 issued by the Company, a copy of which is attached hereto as Exhibit B-1 (“Note 1”);

(ii) Senior Secured Note No. 2 due October 30, 2017 in the original principal amount of $25,000,000 issued by the Company, a copy of which is attached hereto as Exhibit B-2 (“Note 2”);

(iii) Senior Secured Note No. 3 due October 30, 2018 in the original principal amount of $25,000,000 issued by the Company, a copy of which is attached hereto as Exhibit B-3 (“Note 3”); and

(iv) Senior Secured Note No. 4 due April 30, 2019 in the original principal amount of $25,000,000 issued by the Company, a copy of which is attached hereto as Exhibit B-4 (“Note 4”);

C. On the Closing Date and on the terms and subject to the conditions set forth in this Agreement, the Company has requested and Taberna has agreed to exchange the Senior Secured Notes for the Exchanged Securities.

NOW, THEREFORE, in consideration of the mutual agreements and subject to the terms and conditions herein set forth, the parties hereto agree as follows:

1. Recitals; Definitions.

(a) Recitals. All of the recitals are hereby incorporated by reference as if fully set forth herein.

(b) Definitions. This Agreement, the New Indenture and the Senior Secured Notes and all documents executed and delivered in connection with the foregoing are collectively referred to herein as the “Operative Documents.” All other capitalized terms used

but not defined in this Agreement shall have the respective meanings ascribed thereto in the New Indenture. “Actual Knowledge” means the actual knowledge of the applicable person or entity without due inquiry or investigation whatsoever.

“Bankruptcy Code” means the United States Bankruptcy Code, 11 U.S.C. §§101 et seq., as amended.

“Benefit Plan” means an “employee benefit plan” (as defined in ERISA) that is subject to Title I of ERISA, a “plan” as defined in Section 4975 of the Code or any entity whose assets include (for purposes of U.S. Department of Labor Regulations Section 2510.3-101 or otherwise for purposes of Title I of ERISA or Section 4975 of the Code) the assets of any such “employee benefit plan” or “plan.”

“CDO Trustee” has the meaning set forth in Section 2(c)(i).

“Code” means the Internal Revenue Code of 1986, as amended, and the rules and regulations promulgated under it.

“Closing Date” has the meaning set forth in Section 2(c).

“Closing Room” has the meaning set forth in Section 2(c).

“Collateral Manager” has the meaning set forth in Section 2(c)(i).

“Company” has the meaning set forth in the introductory paragraph hereof.

“Commission” has the meaning set forth in Section 4(v).

“Designated Officer” has the meaning set forth in Section 3(b).

“Eligible Pledgee” has the meaning set forth in Section 5(d).

“Equity Interests” means with respect to any Person (a) if such a Person is a partnership, the partnership interests (general or limited) in a partnership, (b) if such Person is a limited liability company, the membership interests in a limited liability company and (c) if such Person is a corporation, the shares or stock interests (both common stock and preferred stock) in a corporation.

“ERISA” means the Employee Retirement Income Security Act of 1974, as amended, and the rules and regulations promulgated under it.

“Exchange” has the meaning set forth in Section 2(c).

“Exchange Act” has the meaning set forth in Section 4(j).

“Exchanged Securities” has the meaning set forth in the Recitals.

“Financial Statements” has the meaning set forth in Section 4(w).

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“GAAP” has the meaning set forth in Section 4(w).

“Governmental Entities” has the meaning set forth in Section 4(o).

“Governmental Licenses” has the meaning set forth in Section 4(r).

“Holder” has the meaning set forth in the New Indenture.

“Impairment” means any claim, counterclaim, setoff, defense, action, demand, litigation (including administrative proceedings or derivative actions), encumbrance, right (including expungement, avoidance, reduction, contractual or equitable subordination, or otherwise) or defect.

“Indemnified Party” has the meaning set forth in Section 8(a). “Indemnified Parties” shall have the correlative meaning.

“Indenture Trustee” has the meaning set forth in the Recitals.

“Investment Company Act” has the meaning set forth in Section 4(j).

“Lien” has the meaning set forth in Section 4(o).

“Material Adverse Effect” means a material adverse effect on the condition (financial or otherwise), earnings, business or assets of the Company and its Subsidiaries, taken as a whole, whether or not arising from transactions occurring in the ordinary course of business.

“Material Adverse Change” has the meaning set forth in Section 3(e)(ii).

“New Indenture” has the meaning set forth in the Recitals.

“Note 1” has the meaning set forth in the Recitals.

“Note 2” has the meaning set forth in the Recitals.

“Note 3” has the meaning set forth in the Recitals.

“Note 4” has the meaning set forth in the Recitals.

“Regulation D” has the meaning set forth in Section 4(h).

“REIT” has the meaning set forth in Section 4(c).

“Repayment Event” has the meaning set forth in Section 4(o).

“Rule 144A(d)(3)” has the meaning set forth in Section 4(j).

“Securities Act” means the Securities Act of 1933, 15 U.S.C. §§77a et seq., as amended, and the rules and regulations promulgated under it.

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“Senior Secured Notes” has the meaning set forth in the Recitals.

“Significant Subsidiary” means, as of any date of determination, a Subsidiary of the Company that would constitute a “significant subsidiary” of the Company as such term is defined under Rule 1-02(w) of Regulation S-X of the Exchange Act as in effect on the date of this Indenture; provided that it shall not include (a) any entity consolidated by the Company where the Company holds 50% or less of the voting power of such entity or (b) any bankruptcy remote, special purpose entity, used to securitize assets and consolidated by the Company, whose indebtedness is without recourse to the Company. “Significant Subsidiaries” means, collectively, each and every Significant Subsidiary.

“Subsidiary” has the meaning set forth in Regulations S-X under the Exchange Act.

“Taberna” has the meaning set forth in the introductory paragraph hereof.

“Taberna Entities” has the meaning set forth in Section 4(e).

“Taberna Transferred Rights” means any and all of Taberna’s right, title, and interest in, to and under the Exchanged Securities, together with the following:

(i) all amounts payable to Taberna under the Exchanged Securities;

(ii) all claims (including “claims” as defined in Section 101(5) of the Bankruptcy Code), suits, causes of action, and any other right of Taberna, whether known or unknown, that in any way is based upon, arises out of or is related to the Exchanged Securities;

(iii) all guarantees and all collateral and security of any kind for or in respect of the foregoing;

(iv) all cash, securities, or other property, and all setoffs and recoupments, to be received, applied, or effected by or for the account of Taberna under the Exchanged Securities, other than fees, costs and expenses expressly payable to Taberna hereunder; and

(v) all proceeds of the foregoing.

“Tax” has the meaning set forth in Section 4(dd).

“Tax Return” has the meaning set forth in Section 4(dd).

2. Exchange of Exchanged Securities for Senior Secured Notes.

(a) Upon execution and delivery of this Agreement, Company and Taberna hereby irrevocably agree to consummate the Exchange in accordance with the terms herein, subject to no conditions other than those expressly set forth herein.

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(b) On the Closing Date, the Company agrees to issue the Senior Secured Notes pursuant to the New Indenture and has requested that Taberna accept such Senior Secured Notes in exchange for the Exchanged Securities, and Taberna hereby agrees to accept such Senior Secured Notes on the Closing Date in exchange for the Exchanged Securities upon the terms and conditions set forth herein.

(c) The closing of the exchange contemplated herein shall occur at the offices of Nixon Peabody, LLP in New York, New York (the “Closing Room”), or such other place as the parties hereto and the Indenture Trustee shall agree, at 9:00 a.m. New York time, on the date hereof or such later date as the parties may agree (such date and time of delivery the “Closing Date”). The Company and Taberna hereby agree that the exchange (the “Exchange”) will occur in accordance with the following requirements:

(i) Taberna Capital Management, LLC (as collateral manager for Taberna (the “Collateral Manager”)) shall have delivered an issuer order instructing the trustee (in such capacity, a “CDO Trustee”) under the applicable indenture pursuant to which such CDO Trustee serves as trustee for Taberna to exchange the Exchanged Securities for the Senior Secured Notes.

(ii) An original of each of the Senior Secured Notes shall have been delivered to the Closing Room, a copy of each of the Senior Secured Notes shall have previously been made available for inspection, if so requested.

(iii) The Company shall have directed the Indenture Trustee to authenticate each of the Senior Secured Notes and deliver the Senior Secured Notes to the applicable CDO Trustee.

(iv) The Indenture Trustee shall have authenticated each of the Senior Secured Notes in accordance with the terms of the New Indenture and delivered the Senior Secured Notes as provided above.

(v) CDO Trustee shall have caused the Exchanged Securities to be transferred to the Company.

(vi) Upon the occurrence of the events described in clauses (i) through (v) above and all of the conditions precedent set forth in Section 3 hereof, the Company and Taberna shall consummate the Exchange and (A) Taberna hereby irrevocably transfers, assigns, grants and conveys the Exchanged Securities and the related Taberna Transferred Rights to the Company and the Company assumes all rights and obligations of Taberna with respect to the Exchanged Securities and the Taberna Transferred Rights and (B) each Holder shall be entitled to all of the rights, title and interest of a Holder of the Senior Secured Notes under the terms of the Senior Secured Notes, the New Indenture and any other Operative Documents.

(vii) The Company shall have paid to the Indenture Trustee and the Collateral Manager all of such party’s legal fees, costs and other expenses in connection with the Exchange.

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(viii) Original executed counterparts of the Operative Documents shall be delivered to the parties thereto along with all opinions, certificates and other documents required pursuant thereto and hereto.

3. Conditions Precedent. The obligations of the parties under this Agreement are subject to the following conditions precedent:

(a) The representations and warranties contained herein shall be accurate as of the Closing Date.

(b) The Company shall have furnished to the Indenture Trustee and the Holders of the Senior Secured Notes a certificate signed by the Company’s Chief Executive Officer, President, an Executive Vice President, Chief Financial Officer, Treasurer or Chief Operations Officer or Chief Accounting Officer (each a “Designated Officer”), dated the Closing Date, addressed to the Holders of the Senior Secured Notes, in substantially the form set out in Exhibit A of the New Indenture.

(c) Taberna shall have been furnished the opinion of the Nixon Peabody LLP, dated as of the Closing Date, addressed to Taberna and the Indenture Trustee, in substantially the form set out in Annex B hereto.

(d) Taberna shall have received the certificate of the Indenture Trustee, dated as of the Closing Date, addressed to Taberna, in substantially the form set out in Annex C hereto.

(e) The Company shall have furnished to Taberna a certificate of the Company, signed by any Designated Officer, dated as of the Closing Date, as to (i) and (ii) below:

(i) the representations and warranties in this Agreement and the New Indenture are true and correct on and as of the Closing Date, and the Company has complied with all the agreements and satisfied all the conditions on its part to be performed or satisfied at or prior to the Closing Date; and

(ii) since the date of the latest Financial Statements, there has been no material adverse change in the condition (financial or other), earnings, business or assets of the Company and its Subsidiaries, taken as a whole, whether or not arising from transactions occurring in the ordinary course of business (a “Material Adverse Change”).

(f) Prior to the Closing Date, the Company shall have furnished to Taberna and its counsel such further information, certificates and documents as Taberna or its counsel may reasonably request.

If any of the conditions specified in this Section 3 shall not have been fulfilled when and as provided in this Agreement, or if any of the opinions, certificates and documents mentioned above or elsewhere in this Agreement shall not be reasonably satisfactory in form and substance to Taberna or its counsel, this Agreement and any obligations of Taberna hereunder, whether as holder of the Exchanged Securities or as prospective Holder of the Senior Secured Notes, may be

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canceled at, or at any time prior to, the Closing Date by Taberna. Notice of such cancellation shall be given to the Company in writing or by telephone and confirmed in writing, or by e-mail or facsimile.

Each certificate signed by any officer of the Company and delivered to Taberna or Taberna’s counsel in connection with the Operative Documents and the transactions contemplated hereby and thereby shall be deemed to be a representation and warranty of the Company and not by such officer in any individual capacity.

4. Representations and Warranties of the Company. The Company represents and warrants to, and agrees with Taberna, as holder of the Exchanged Securities and with the Holders of the Senior Secured Notes, as follows:

(a) It (i) is duly organized and validly existing under the laws of Maryland, (ii) is in good standing under such laws and (iii) has full power and authority to execute, deliver and perform its obligations under this Agreement and the other Operative Documents.

(b) It is an “accredited investor” as defined in Rule 501 under the Securities Act, and it is not acquiring the Exchanged Securities or the Taberna Transferred Rights with a view towards the sale or distribution thereof in violation of the Securities Act.

(c) The Company is organized and operated in conformity with the requirements for qualification and taxation as a real estate investment trust (a “REIT”) under Sections 856-860 of the Code and no actions have been taken (or not taken which are required to be taken) which would cause such qualification to be lost.

(d) The Company (i) has no current intention to initiate any bankruptcy or insolvency proceedings and (i) has not entered into the Operative Documents with the actual intent to hinder, delay, or defraud any creditor. None of the New Indenture, the Senior Secured Notes or the Exchange is subject to any Impairment.

(e) It (i) is a sophisticated entity with respect to the Exchange, (ii) has sufficient knowledge and experience, and has made investments of a similar nature, so as to be aware of the risks and uncertainties inherent in the Exchange and (iii) has independently and without reliance upon Taberna, the Holder, the CDO Trustee, the Collateral Manager or the Indenture Trustee (collectively, the “Taberna Entities”), and based on such information as it has deemed appropriate, made its own analysis and decision to enter into this Agreement, except that it has relied upon Taberna’s express representations, warranties, covenants and agreements in this Agreement. The Company acknowledges that none of the Taberna Entities has given it any investment advice, credit information or opinion on whether the Exchange is prudent.

(f) It has not engaged any broker, finder or other entity acting under the authority of it or any of its affiliates that is entitled to any broker’s commission in connection with the transaction for which the Taberna Entities or any of their affiliates could be responsible.

(g) No interest in the Taberna Transferred Rights is being acquired by or on behalf of an entity that is, or at any time while the Taberna Transferred Rights are held thereby will be, one or more Benefit Plans.

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(h) Neither the Company nor any of its “Affiliates” (as defined in Rule 501(b) of Regulation D (“Regulation D”) under the Securities Act), nor any person acting on its or their behalf, has, directly or indirectly, made offers or sales of any security, or solicited offers to buy any security, under circumstances that would require the registration of the Senior Secured Notes under the Securities Act.

(i) Neither the Company nor any of its Affiliates, nor any person acting on its or their behalf, has engaged in any form of general solicitation or general advertising (within the meaning of Regulation D) in connection with any offer or sale of the Senior Secured Notes.

(j) None of the Senior Secured Notes (i) are or has been listed on a national securities exchange registered under Section 6 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or quoted on a U.S. automated inter-dealer quotation system or (ii) are of an open-end investment company, unit investment trust or face-amount certificate company that is, or is required to be, registered under Section 8 of the Investment Company Act of 1940, as amended (the “Investment Company Act”), and the Senior Secured Notes otherwise satisfy the eligibility requirements of Rule 144A(d)(3) promulgated pursuant to the Securities Act (“Rule 144A(d)(3)”).

(k) Neither the Company nor any of its Affiliates, nor any person acting on its or their behalf, has engaged, or will engage, in any “directed selling efforts” within the meaning of Regulation S under the Securities Act with respect to the Senior Secured Notes.

(l) The Company is not, and immediately following consummation of the transactions contemplated hereby, will not be, an “investment company” or an entity “controlled” by an “investment company,” in each case within the meaning of Section 3(a) of the Investment Company Act.

(m) Each of this Agreement and the New Indenture and the consummation of the transactions contemplated herein and therein have been duly authorized by the Company and, on the Closing Date, will have been duly executed and delivered by the Company, and, assuming due authorization, execution and delivery by Taberna and/or the Indenture Trustee, as applicable, will be a legal, valid and binding obligations of the Company enforceable against it in accordance with its terms, subject to applicable bankruptcy, insolvency and similar laws affecting creditors’ rights generally and to general principles of equity.

(n) The Senior Secured Notes have been duly authorized by the Company and, on the Closing Date, will have been duly executed and delivered to the Indenture Trustee for authentication in accordance with the New Indenture and, when authenticated in the manner provided for in the New Indenture and delivered to Taberna, will constitute legal, valid and binding obligations of the Company, enforceable against the Company in accordance with their terms, subject to applicable bankruptcy, insolvency and similar laws affecting creditors’ rights generally and to general principles of equity.

(o) Neither the issue of the Senior Secured Notes and exchange of the Senior Secured Notes for the Exchanged Securities, nor the execution and delivery of and compliance with the Operative Documents by the Company, nor the consummation of the transactions

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contemplated herein or therein, (i) will conflict with or constitute a violation or breach of (x) the charter or bylaws or similar organizational documents of the Company or any Significant Subsidiary of the Company or (y) any applicable law, statute, rule, regulation, judgment, order, writ or decree of any government, governmental authority, agency or instrumentality or court, domestic or foreign, having jurisdiction over the Company or any of its Significant Subsidiaries or their respective properties or assets (collectively, the “Governmental Entities”), (ii) will conflict with or constitute a violation or breach of, or a default or Repayment Event (as defined below) under, or, except in connection with the Operative Documents, result in the creation or imposition of any pledge, security interest, claim, lien or other encumbrance of any kind (each, a “Lien”) upon any property or assets of the Company or any of its Significant Subsidiaries pursuant to any contract, indenture, mortgage, loan agreement, note, lease or other agreement or instrument to which (A) the Company or any of its Significant Subsidiaries is a party or by which it or any of them may be bound, or (B) to which any of the property or assets of any of them is subject, or any judgment, order or decree of any court, Governmental Entity or arbitrator, except, in the case of clause (i)(y) or this clause (ii), for such conflicts, breaches, violations, defaults, Repayment Events or Liens which (X) would not, singly or in the aggregate, adversely affect the consummation of the transactions contemplated by the Operative Documents and (Y) would not, singly or in the aggregate, have a Material Adverse Effect or (iii) will require the consent, approval, authorization or order of any court or Governmental Entity. As used herein, a “Repayment Event” means any event or condition which gives the holder of any note, debenture or other evidence of indebtedness (or any person acting on such holder’s behalf) the right to require the repurchase, redemption or repayment of all or a portion of such indebtedness by the Company or any of its Subsidiaries prior to its scheduled maturity.

(p) The Company has all requisite power and authority to own, lease and operate its properties and assets and conduct the business it transacts and proposes to transact, and is duly qualified to transact business and is in good standing in each jurisdiction where the nature of its activities requires such qualification, except where the failure of the Company to be so qualified would not, singly or in the aggregate, have a Material Adverse Effect.

(q) The Significant Subsidiaries are listed in Schedule 1 attached hereto. Each Significant Subsidiary is an entity duly and properly incorporated or organized or formed, as the case may be, validly existing and in good standing under the laws of the jurisdiction in which it is chartered or organized or formed, with all requisite power and authority to own, lease and operate its properties and conduct the business it transacts, except where the failure to be in good standing would not, singly or in the aggregate, have a Material Adverse Effect. Each Significant Subsidiary is duly qualified to transact business as a foreign corporation, partnership or limited liability company, as applicable, and is in good standing in each jurisdiction where the nature of its activities requires such qualification, except where the failure to be so qualified would not, singly or in the aggregate, have a Material Adverse Effect.

(r) The Company and each of the Company’s Significant Subsidiaries hold all necessary approvals, authorizations, orders, licenses, consents, registrations, qualifications, certificates and permits (collectively, the “Governmental Licenses”) of and from Governmental Entities necessary to conduct their respective businesses as now being conducted, and neither the Company nor any of the Significant Subsidiaries has received any notice of proceedings relating to the revocation or modification of any such Government License, except where the failure to be

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so licensed or approved or the receipt of an unfavorable decision, ruling or finding, would not, singly or in the aggregate, have a Material Adverse Effect; all of the Governmental Licenses are valid and in full force and effect, except where the invalidity or the failure of such Governmental Licenses to be in full force and effect, would not, singly or in the aggregate, have a Material Adverse Effect; and the Company and its Significant Subsidiaries are in compliance with all applicable laws, rules, regulations, judgments, orders, decrees and consents, except where the failure to be in compliance would not, singly or in the aggregate, have a Material Adverse Effect.

(s) All of the issued and outstanding Equity Interests of the Company and each of its Significant Subsidiaries are validly issued, fully paid and non-assessable; except with respect to the Significant Subsidiaries that are issuers of collateralized debt obligations, all of the issued and outstanding Equity Interests of each Significant Subsidiary of the Company is owned by the Company, directly or through Subsidiaries, free and clear of any Lien, claim or equitable right; and none of the issued and outstanding Equity Interests of the Company or any Significant Subsidiaries was issued in violation of any preemptive or similar rights arising by operation of law, under the charter, by-laws certificate of formation, limited liability company agreement, certificate of limited partnership, agreement of limited partnership or similar organizational document of such entity or under any agreement to which the Company or any of its Significant Subsidiaries is a party.

(t) Neither the Company nor any of its Significant Subsidiaries is (i) in violation of its respective charter, by-laws certificate of formation, limited liability company agreement, certificate of limited partnership, agreement of limited partnership or similar organizational document or (ii) in default in the performance or observance of any obligation, agreement, covenant or condition contained in any contract, indenture, mortgage, loan agreement, note, lease or other agreement or instrument to which the Company or any such Subsidiary is a party or by which it or any of them may be bound or to which any of the property or assets of any of them is subject, except, in the case of clause (ii), where such violation or default would not, singly or in the aggregate, have a Material Adverse Effect.

(u) Other than as set forth in the filings of the Company filed with the Commission, there is no action, suit or proceeding before or by any Governmental Entity, arbitrator or court, domestic or foreign, now pending or, to the Actual Knowledge of the Company after due inquiry, threatened against or affecting the Company or any of its Subsidiaries, except for such actions, suits or proceedings that, if adversely determined, would not, singly or in the aggregate, adversely affect the consummation of the transactions contemplated by the Operative Documents or have a Material Adverse Effect.

(v) The accountants of the Company who certified the Financial Statements (defined below) are independent public accountants of the Company and its Subsidiaries within the meaning of the Securities Act, and the rules and regulations of the Securities and Exchange Commission (the “Commission”) thereunder.

(w) The audited consolidated financial statements (including the notes thereto) and schedules of the Company and its consolidated Subsidiaries for the fiscal year ended December 31, 2010 (the “Financial Statements”) provided to Taberna are the most recent available audited consolidated financial statements of the Company and its consolidated

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Subsidiaries, respectively, and fairly present in all material respects, in accordance with U.S. generally accepted accounting principles (“GAAP”), the financial position of the Company and its consolidated Subsidiaries, and the results of operations and changes in financial condition as of the dates and for the periods therein specified. Such consolidated financial statements and schedules have been prepared in accordance with GAAP consistently applied throughout the periods involved (except as otherwise noted therein).

(x) Other than as set forth in the filings of the Company filed with the Commission, neither the Company nor any of its Subsidiaries has any material liability, whether asserted or unasserted, whether absolute or contingent, whether accrued or unaccrued, whether liquidated or unliquidated, and whether due or to become due, including any liability for taxes (and there is no past or present fact, situation, circumstance, condition or other basis for any present or future action, suit, proceeding, hearing, charge, complaint, claim or demand against the Company or any of its Subsidiaries that could give rise to any such liability), except for (i) liabilities set forth in the Financial Statements and (ii) normal fluctuations in the amount of the liabilities referred to in clause (i) above occurring in the ordinary course of business of the Company and all of its Subsidiaries since the date of the most recent balance sheet included in such Financial Statements.

(y) Since the date of the Financial Statements, there has not been (A) any Material Adverse Change or (B) any dividend or distribution of any kind declared, paid or made by the Company on any class of its Equity Interests, other than annual and regular quarterly dividends on the Company’s Equity Interests.

(z) The documents of the Company filed with the Commission in accordance with the Exchange Act, from and including the commencement of the fiscal year covered by the Company’s most recent Annual Report on Form 10-K, at the time they were or hereafter are filed by the Company with the Commission (collectively, the “1934 Act Reports”), complied and will comply in all material respects with the requirements of the Exchange Act and the rules and regulations of the Commission thereunder (the “1934 Act Regulations”), and, at the date of this Agreement and on the Closing Date, do not and will not include an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading; and other than such instruments, agreements, contracts and other documents as are filed as exhibits to the Company’s Annual Report on Form 10-K, Quarterly Reports on Form 10-Q or Current Reports on Form 8-K, there are no instruments, agreements, contracts or documents required to be filed pursuant to Item 601 of Regulation S-K promulgated by the Commission to which the Company or any of its Subsidiaries is a party. The Company is in compliance in all material respects with all currently applicable requirements of the Exchange Act that were added by the Sarbanes-Oxley Act of 2002, as amended, except for such failure to comply which would not reasonably be expected to have a Material Adverse Effect.

(aa) No labor dispute with the employees of the Company or any of its Subsidiaries exists or, to the Actual Knowledge of the Company, is imminent, except those which would not, singly or in the aggregate, have a Material Adverse Effect.

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(bb) No filing with, or authorization, approval, consent, license, order, registration, qualification or decree of, any Governmental Entity, other than those that have been made or obtained, is necessary or required for the performance by the Company of its obligations under the Operative Documents or the consummation by the Company of the transactions contemplated by the Operative Documents.

(cc) The Company and each of its Significant Subsidiaries has good and marketable title to all of its respective real and personal property, in each case free and clear of all Liens and defects, except for those that would not, singly or in the aggregate, reasonably be expected to have a Material Adverse Effect; and all of the leases and subleases under which the Company or any of its Significant Subsidiaries holds properties are in full force and effect, except where the failure of such leases and subleases to be in full force and effect would not, singly or in the aggregate, have a Material Adverse Effect, and neither the Company nor any of its Significant Subsidiaries has any notice of any claim of any sort that has been asserted by anyone adverse to the rights of the Company or any Significant Subsidiary under any such leases or subleases, or affecting or questioning the rights of such entity to the continued possession of the leased or subleased premises under any such lease or sublease, except for such claims that would not, singly or in the aggregate, have a Material Adverse Effect.

(dd) Other than as set forth in the filings of the Company filed with the Commission, the Company and each Significant Subsidiary has timely and duly filed all Tax Returns (as defined below) required to be filed by them, and all such Tax Returns are true, correct and complete in all material respects, except for such failures to timely file or inaccuracies that would not, singly or in the aggregate, have a Material Adverse Effect. The Company and each of the Significant Subsidiaries have timely and duly paid in full all Taxes required to be paid by them (whether or not such amounts are shown as due on any Tax Return), except for such failures to timely and duly pay that would not, singly or in the aggregate, have a Material Adverse Effect. To the Actual Knowledge of the Company, there are no federal, state, or other Tax audits or deficiency assessments proposed or pending with respect to the Company or and Significant Subsidiary, and to the Actual Knowledge of the Company, no such audits or assessments are threatened, except for audits or assessments that would not, singly or in the aggregate, have a Material Adverse Effect. As used herein, the terms “Tax” or “Taxes” mean (i) all federal, state, local, and foreign taxes, and other assessments of a similar nature (whether imposed directly or through withholding), including any interest, additions to tax, or penalties applicable thereto, imposed by any Governmental Entity, and (ii) all liabilities in respect of such amounts arising as a result of being a member of any affiliated, consolidated, combined, unitary or similar group, as a successor to another person or by contract. As used herein, the term “Tax Returns” means all federal, state, local, and foreign Tax returns, declarations, statements, reports, schedules, forms, and information returns and any amendments thereto filed or required to be filed with any Governmental Entity.

(ee) Interest payable by the Company on the Senior Secured Notes is deductible by the Company for United States federal income tax purposes. To the Actual Knowledge of the Company, there are no rulemaking or similar proceedings before the United States Internal Revenue Service or comparable federal, state, local or foreign government bodies which involve or affect the Company or any Subsidiary, which, if the subject of an action unfavorable to the Company or any Subsidiary, could result in a Material Adverse Effect.

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(ff) The books, records and accounts of the Company and its Subsidiaries accurately and fairly reflect, in reasonable detail, the transactions in, and dispositions of, the assets of, and the results of operations of, the Company and its Subsidiaries. The Company and each of its Subsidiaries maintains a system of internal accounting controls sufficient to provide reasonable assurances that (i) transactions are executed in accordance with management’s general or specific authorizations, (ii) transactions are recorded as necessary to permit preparation of financial statements in accordance with GAAP and to maintain asset accountability, (iii) access to assets is permitted only in accordance with management’s general or specific authorization and (iv) the recorded accountability for assets is compared with the existing assets at reasonable intervals and appropriate action is taken with respect to any differences.

(gg) The Company and its Significant Subsidiaries are insured by insurers of recognized financial responsibility against such losses and risks and in such amounts in all material respects as are customary in the businesses in which they are engaged or propose to engage after giving effect to the transactions contemplated hereby, including but not limited to, real or personal property owned or leased against theft, damage, destruction, act of vandalism and all other risks customarily insured against. All policies of insurance and fidelity or surety bonds insuring the Company or any of its Significant Subsidiaries of the Company’s or its Significant Subsidiaries’ respective businesses, assets, employees, officers and directors are in full force and effect. The Company and each of the Significant Subsidiaries are in compliance with the terms of such policies and instruments in all material respects. Neither the Company nor any Significant Subsidiary has reason to believe that it will not be able to renew its existing insurance coverage as and when such coverage expires or to obtain similar coverage from similar insurers as may be necessary to continue its business at a cost that would not have a Material Adverse Effect. Within the past twelve months, neither the Company nor any Significant Subsidiary has been denied any insurance coverage it has sought or for which it has applied.

(hh) To the Actual Knowledge of the Company, the Company, its Subsidiaries or any person acting on behalf of the Company and/or its Subsidiaries including, without limitation, any director, officer, manager, agent or employee of the Company or its Subsidiaries has not, directly or indirectly, while acting on behalf of the Company and/or its Subsidiaries (i) used any corporate, partnership or company funds for unlawful contributions, gifts, entertainment or other unlawful expenses relating to political activity; (ii) made any unlawful payment to foreign or domestic government officials or employees or to foreign or domestic political parties or campaigns from corporate, partnership or company funds; (iii) violated any provision of the Foreign Corrupt Practices Act of 1977, as amended; or (iv) made any other unlawful payment.

(ii) The information provided by the Company pursuant to the Operative Documents does not, as of the date hereof, and will not as of the Closing Date, contain any untrue statement of a material fact or omit to state any material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading.

5. Representations and Warranties of Taberna. Taberna, for itself, represents and warrants to, and agrees with, the Company as follows:

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(a) It is a company duly incorporated, validly existing and in good standing under the laws of the jurisdiction in which it is incorporated with all requisite (i) power and authority to execute, deliver and perform under the Operative Documents to which it is a party, to make the representations and warranties specified herein and therein and to consummate the transactions contemplated in the Operative Documents.

(b) This Agreement and the consummation of the transactions contemplated herein has been duly authorized by it and, on the Closing Date, will have been duly executed and delivered by it and, assuming due authorization, execution and delivery by the Company and the Indenture Trustee of the Operative Documents to which each is a party, will be a legal, valid and binding obligation of Taberna, enforceable against Taberna in accordance with its terms, subject to applicable bankruptcy, insolvency and similar laws affecting creditors’ rights generally and to general principles of equity.

(c) No filing with, or authorization, approval, consent, license, order registration, qualification or decree of, any Governmental Entity or any other Person, other than those that have been made or obtained, is necessary or required for the performance by Taberna of its obligations under this Agreement or to consummate the transactions contemplated herein.

(d) It is a “Qualified Holder” as such term is defined in Section 2(a)(51) of the Investment Company Act and a “Qualified Institutional Buyer” as that term is defined in Rule 144A promulgated under the Securities Act and is otherwise eligible to be a pledgee of the collateral securing the Senior Secured Notes under the indentures for, or other documents evidencing, the collateral (an “Eligible Pledgee”).

(e) Taberna is the legal and beneficial owner of the Exchanged Securities and the related Taberna Transferred Rights and shall deliver the Exchanged Securities free and clear of any Lien created by Taberna.

(f) There is no action, suit or proceeding before or by any Governmental Entity, arbitrator or court, domestic or foreign, now pending or, to its Actual Knowledge, threatened against or affecting it, except for such actions, suits or proceedings that, if adversely determined, would not, singly or in the aggregate, adversely affect the consummation of the transactions contemplated by the Operative Documents.

(g) Intentionally Omitted.

(h) It is aware that the Senior Secured Notes have not been and will not be registered under the Securities Act and may not be offered or sold within the United States or to “U.S. persons” (as defined in Regulation S under the Securities Act) except in accordance with Rule 903 of Regulation S under the Securities Act or pursuant to an exemption from the registration requirements of the Securities Act.

(i) It is an “accredited investor,” as such term is defined in Rule 501(a) of Regulation D under the Securities Act. Without characterizing the Senior Secured Notes as “security” within the meaning of applicable securities laws, it has not made any offers to sell, or solicitations of any offers to buy, all or any portion of the Senior Secured Notes in violation of any applicable securities laws.

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(j) Neither it nor any of its Affiliates, nor any person acting on its or its Affiliate’s behalf has engaged, or will engage, any form of “general solicitation or general advertising” (within the meaning of Regulation D under the Securities Act) in connection with any offer or sale of the Senior Secured Notes.

(k) It understands and acknowledges that (i) no public market exists for the Senior Secured Notes and that it is unlikely that a public market will ever exist for the Senior Secured Notes, (ii) it is acquiring the Senior Secured Notes for its own account, for investment and not with a view to, or for offer or sale in connection with, any distribution thereof in violation of the Securities Act or other applicable securities laws, subject to any requirement of law that the disposition of its property be at all times within its control and subject to its ability to resell such Senior Secured Notes pursuant to an effective registration statement under the Securities Act or pursuant to an exemption therefrom or in a transaction not subject thereto, and it agrees to the legends and transfer restrictions applicable to the Senior Secured Notes contained in the New Indenture and (iii) it has had the opportunity to ask questions of, and receive answers and request additional information from, the Company and is aware that it may be required to bear the economic risk of an investment in the Senior Secured Notes.

(l) It has not engaged any broker, finder or other entity acting under its authority that is entitled to any broker’s commission in connection with this Agreement and the consummation of transactions contemplated in this Agreement and the New Indenture for which the Company could be responsible.

(m) It (i) is a sophisticated entity with respect to the Exchange, (ii) has such knowledge and experience, and has made investments of a similar nature, so as to be aware of the risks and uncertainties inherent in the Exchange and (iii) has independently and without reliance upon the Company or any of its affiliates (other than the Collateral Manager), and based on such information as it has deemed appropriate, made its own analysis and decision to enter into this Agreement, except that it has relied upon the Company’s express representations, warranties, covenants and agreements in the Operative Documents and the other documents delivered by the Company in connection therewith.

Except as expressly stated in this Agreement, Taberna makes no representations or warranties, express or implied, with respect to the Exchange, the Taberna Transferred Rights, the Securities, the Exchanged Securities, the Senior Secured Notes or any other matter.

6. Covenants and Agreements of the Company. The Company agrees with Taberna and the Holders as follows:

(a) The Company will arrange for the qualification of the Senior Secured Notes for sale under the laws of such jurisdictions as the Holders of the Senior Secured Notes may designate and will maintain such qualifications in effect so long as required for the sale of the Senior Secured Notes. The Company will promptly advise the Holders of the Senior Secured Notes of the receipt by the Company of any notification with respect to the suspension of the qualification of the Senior Secured Notes for sale in any jurisdiction or the initiation or threatening of any proceeding for such purpose.

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(b) The Company will not, and will not permit any of its Affiliates or any person acting on its or their behalf to, directly or indirectly, make offers or sales of any security, or solicit offers to buy any security, under circumstances that would require the registration of the Senior Secured Notes under the Securities Act.

(c) The Company will not, and will not permit any of its Affiliates or any person acting on its or their behalf to, engage in (i) any form of “general solicitation or general advertising” (within the meaning of Regulation D), or (ii) any “directed selling efforts” within the meaning of Regulation S under the Securities Act, in connection with any offer or sale of the Senior Secured Notes.

(d) So long as the Senior Secured Notes are outstanding, (i) the Senior Secured Notes shall not be listed on a national securities exchange registered under Section 6 of the Exchange Act or quoted in a U.S. automated inter-dealer quotation system and (ii) the Company shall not be an open-end investment company, unit investment trust or face-amount certificate company that is, or is required to be, registered under Section 8 of the Investment Company Act, and, the Senior Secured Notes shall otherwise satisfy the eligibility requirements of Rule 144A(d)(3).

(e) Intentionally Omitted.

(f) The Company shall pay to the CDO Trustee, for distribution to Taberna, a cash payment in an amount equal to the accrued interest on the Exchanged Securities for the period commencing on July 30, 2011 and continuing through but excluding Closing Date, promptly after the Company receives the payment of such accrued interest on the Exchanged Securities for such period or such earlier date as it elects in its sole discretion, provided, however, in no event shall such payment be paid to the CDO Trustee later than December 31, 2011.

7. Payment of Expenses. In addition to the obligations agreed to by the Company under Section 2(c)(vii), the Company agrees to pay all costs and expenses incident to the performance of the obligations of the Company under this Agreement, whether or not the transactions contemplated herein are consummated or this Agreement is terminated, including all costs and expenses incident to (i) the authorization and issuance of the Senior Secured Notes and any taxes payable in connection therewith, (ii) the fees and expenses of counsel, accountants and any other experts or advisors retained by the Company and (iii) the fees and all reasonable expenses of Indenture Trustee and any other trustee or paying agent appointed under the Operative Documents, including the fees and disbursements of counsel for such trustees. The fees of the Indenture Trustee (excluding fees and disbursements of counsel) shall not exceed the amounts set forth in that certain Fee Agreement dated as of the date hereof between the Company and the Indenture Trustee, executed in connection with this Agreement and the New Indenture.

8. Indemnification. (a) The Company agrees to indemnify and hold harmless the Taberna Entities and their respective affiliates (other than the Company) and their successors and assigns (collectively, the “Indemnified Parties”), each person, if any, who controls any of the Indemnified Parties within the meaning of the Securities Act or the Exchange Act, and the

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Indemnified Parties’ respective directors, officers, employees and agents against any and all losses, claims, damages or liabilities, joint or several, to which the Indemnified Parties may become subject, under the Securities Act, the Exchange Act or other federal or state statutory law or regulation, at common law or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based on (i) any untrue statement or alleged untrue statement of a material fact contained in any information or documents provided by or on behalf of the Company to the Indemnified Parties, (ii) any omission or alleged omission to state a material fact required to be stated or necessary to make the statements contained in any information provided by the Company to the Indemnified Parties, in light of the circumstances under which they were made, not misleading, (iii) the breach or alleged breach of any representation, warranty, or agreement of the Company contained herein, or (iv) the execution and delivery by the Company of the Operative Documents and the consummation of the transactions contemplated herein and therein, and agrees to reimburse each such Indemnified Party, as incurred, for any legal or other expenses reasonably incurred by the Indemnified Parties in connection with investigating or defending any such loss, claim, damage, liability or action. This indemnity agreement will be in addition to any liability that the Company may otherwise have.

(b) Promptly after receipt by an Indemnified Party under this Section 8 of notice of the commencement of any action, such Indemnified Party will, if a claim in respect thereof is to be made against the indemnifying party under this Section 8, promptly notify the indemnifying party in writing of the commencement thereof; but the failure so to notify the indemnifying party (i) will not relieve the indemnifying party from liability under paragraph (a) above unless and to the extent that such failure results in the forfeiture by the indemnifying party of material rights and defenses and (ii) will not, in any event, relieve the indemnifying party from any obligations to any Indemnified Party other than the indemnification obligation provided in paragraph (a) above. The Indemnified Parties shall be entitled to appoint counsel to represent the Indemnified Parties in any action for which indemnification is sought. An indemnifying party may participate at its own expense in the defense of any such action; provided, that counsel to the indemnifying party shall not (except with the consent of the Indemnified Party) also be counsel to the Indemnified Party. In no event shall the indemnifying parties be liable for fees and expenses of more than one counsel (in addition to any local counsel) separate from their own counsel for all Indemnified Parties in connection with any one action or separate but similar or related actions in the same jurisdiction arising out of the same general allegations or circumstances, unless an Indemnified Party elects to engage separate counsel because such Indemnified Party reasonably believes that a conflict of interest might result. An indemnifying party will not, without the prior written consent of the Indemnified Parties, settle or compromise or consent to the entry of any judgment with respect to any pending or threatened claim, action, suit or proceeding in respect of which indemnification may be sought hereunder (whether or not the Indemnified Parties are actual or potential parties to such claim, action, suit or proceeding) unless such settlement, compromise or consent includes an unconditional release of each Indemnified Party from all liability arising out of such claim, action, suit or proceeding.

9. Representations and Indemnities to Survive. The respective agreements, representations, warranties, indemnities and other statements of the Company and/or its officers set forth in or made pursuant to this Agreement will remain in full force and effect and will

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survive the Exchange. The provisions of Sections 7 and 8 shall survive the termination or cancellation of this Agreement.

10. Amendments. This Agreement may not be modified, amended, altered or supplemented, except upon the execution and delivery of a written agreement by each of the parties hereto.

11. Notices. All communications hereunder will be in writing and effective only on receipt, and will be mailed, delivered by hand or courier or sent by facsimile and confirmed or by any other reasonable means of communication, including by electronic mail, to the relevant party at its address specified in Exhibit D.

12. Successors and Assigns. This Agreement will inure to the benefit of and be binding upon the parties hereto and their respective successors and permitted assigns. Nothing expressed or mentioned in this Agreement is intended or shall be construed to give any person other than the parties hereto and the affiliates, directors, officers, employees, agents and controlling persons referred to in Section 8 hereof and their successors, assigns, heirs and legal representatives, any right or obligation hereunder. None of the rights or obligations of the Company under this Agreement may be assigned, whether by operation of law or otherwise, without Taberna’s prior written consent. The rights and obligations of Taberna under this Agreement may be assigned by Taberna without the Company’s consent; provided, that the assignee assumes the obligations of Taberna under this Agreement and is an Eligible Pledgee.

13. Applicable Law. THIS AGREEMENT WILL BE GOVERNED BY AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAW OF THE STATE OF NEW YORK WITHOUT REFERENCE TO PRINCIPLES OF CONFLICTS OF LAW (OTHER THAN SECTION 5-1401 OF THE GENERAL OBLIGATIONS LAW).

14. Submission to Jurisdiction. ANY LEGAL ACTION OR PROCEEDING BY OR AGAINST ANY PARTY HERETO OR WITH RESPECT TO OR ARISING OUT OF THIS AGREEMENT MAY BE BROUGHT IN OR REMOVED TO THE COURTS OF THE STATE OF NEW YORK, IN AND FOR THE COUNTY OF NEW YORK, OR OF THE UNITED STATES OF AMERICA FOR THE SOUTHERN DISTRICT OF NEW YORK (IN EACH CASE SITTING IN THE BOROUGH OF MANHATTAN). BY EXECUTION AND DELIVERY OF THIS AGREEMENT, EACH PARTY ACCEPTS, FOR ITSELF AND IN RESPECT OF ITS PROPERTY, GENERALLY AND UNCONDITIONALLY, THE JURISDICTION OF THE AFORESAID COURTS (AND COURTS OF APPEALS THEREFROM) FOR LEGAL PROCEEDINGS ARISING OUT OF OR IN CONNECTION WITH THIS AGREEMENT.

15. Counterparts and Facsimile. This Agreement may be executed by any one or more of the parties hereto in any number of counterparts, each of which shall be deemed to be an original, but all such counterparts shall together constitute one and the same instrument. This Agreement may be executed by any one or more of the parties hereto by facsimile.

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16. Entire Agreement. This Agreement constitutes the entire agreement of the parties to this Agreement and supersedes all prior written or oral and all contemporaneous oral agreements, understandings and negotiations with respect to the subject matter hereof.

[Signature Page Follows]

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IN WITNESS WHEREOF, this Agreement has been entered into as of the date first written above.

COMPANY:
RAIT FINANCIAL TRUST
By:	/s/ James J. Sebra
Name:	James J. Sebra
Title:	SVP & CAO

(Signatures continue on the next page)

SIGNATURE PAGE TO EXCHANGE AGREEMENT

TABERNA, AS HOLDER OF THE EXCHANGED SECURITIES:
TABERNA PREFERRED FUNDING VIII, LTD.
By:	/s/ Karen Ellerbe
	Name:	Karen Ellerbe
	Title:	Director

SIGNATURE PAGE TO EXCHANGE AGREEMENT

EXHIBIT A

Description of Exchanged Securities

EXCHANGED SECURITIES

Name	Type	CUSIP	Original Par		Factor		Current Par
Duke Realty LP	Senior REIT Note	26441YAQ0		10,000,000		1.0000		10,000,000
HCP Inc.	Senior REIT Note	40414LAA7		6,500,000		1.0000		6,500,000
HRPT Properties Trust	Senior REIT Note	40426WAV3		5,000,000		1.0000		5,000,000
HRPT Properties Trust	Senior REIT Note	40426WAV3		5,000,000		1.0000		5,000,000
Hospitality Properties Trust	Senior REIT Note	44106MAN2		5,000,000		1.0000		5,000,000
Hospitality Properties Trust	Senior REIT Note	44106MAN2		2,500,000		1.0000		2,500,000
Realty Income Corporation	Senior REIT Note	756109AK0		5,000,000		1.0000		5,000,000
Realty Income Corporation	Senior REIT Note	756109AK0		1,000,000		1.0000		1,000,000
Simon Property Group LP	Senior REIT Note	828807BW6		1,000,000		1.0000		1,000,000
BACM 2007-4 CL AM	Senior CMBS	059513AG6		1,741,000		1.0000		1,741,000
CD 2005-CD1 CL AJ	Senior CMBS	12513EAK0		1,411,000		1.0000		1,411,000
CGCMT 2007-C6 CL AM	Senior CMBS	17311QBM1		812,500		1.0000		812,500
GCCFC 2006-GG7 CL AM	Senior CMBS	20173MAG5		593,000		1.0000		593,000
CSMC 2006-C1 CL AM	Senior CMBS	225470F99		420,000		1.0000		420,000
JPMCC 2006-LDP7 CL AJ	Senior CMBS	46628FAN1		5,000,000		1.0000		5,000,000
JPMCC 2007-CB20 CL AM	Senior CMBS	46631QAH5		2,500,000		1.0000		2,500,000
LBUBS 2006- C7 CL AM	Senior CMBS	50180CAF7		1,980,000		1.0000		1,980,000
MLMT 2006-C2 CL AJ	Senior CMBS	59022KAG0		5,000,000		1.0000		5,000,000
MLMT 2007-C1 CL AM	Senior CMBS	59025KAG7		3,700,000		1.0000		3,700,000
MLMT 2007-C1 CL AM	Senior CMBS	59025KAG7		324,000		1.0000		324,000
MSC 2006- HQ10 CL AM	Senior CMBS	61750HBA3		4,000,000		1.0000		4,000,000
MSC 2007-HQ11 CL A4	Senior CMBS	61751NAF9		8,400,000		1.0000		8,400,000
WBCMT 2006-C27 CL AM	Senior CMBS	92977QAG0		1,150,000		1.0000		1,150,000
BACM 2007-2 CL K	Mezzanine CMBS	059511BC8		5,000,000		0.8642		4,321,018

A-1

BSCMS 2007-PW15 CL F	Mezzanine CMBS	07388RAP2	3,000,000	1.0000	3,000,000
CD 2007-CD4 CL H	Mezzanine CMBS	12513YAS9	1,000,000	1.0000	1,000,000
CSMC 2007-C3 CL F	Mezzanine CMBS	22544QAP4	5,000,000	1.0000	5,000,000
JPMCC 2006-LDP8 CL H	Mezzanine CMBS	46629MAW5	250,000	1.0000	250,000
JPMCC 2007-LD11 CL F	Mezzanine CMBS	46631BAQ8	5,000,000	1.0000	5,000,000
LBCMT 2007-C3 CL F	Mezzanine CMBS	50177AAN9	5,000,000	1.0000	5,000,000
MLCFC 2007-5	Mezzanine CMBS	55312YAT9	4,000,000	1.0000	4,000,000
MSC 2007-HQ11 H	Mezzanine CMBS	61751NAR3	2,000,000	1.0000	2,000,000
WBCMT 2007-C32 CL F	Mezzanine CMBS	92978YAN0	5,000,000	1.0000	5,000,000
Anthracite CRE CDO 2006-HY3 Ltd.	CRE CDO Note	03703FAQ3	6,000,000	0.7834	4,700,157
ARMSS 2004-1A CL B	CRE CDO Note	03877VAB1	1,154,540	1.0000	1,154,540
ARMSS 2004-1A CL C	CRE CDO Note	03877VAC9	2,895,410	0.5481	1,587,101
ARMSS 2006-1A CL C	CRE CDO Note	03878CAE6	329,509	1.0000	329,509
ARMSS 2006-1A CL F	CRE CDO Note	03878CAH9	548,343	1.0000	548,343
ARMSS 2006-1A CL G	CRE CDO Note	03878CAJ5	1,722,039	1.0000	1,722,039
ARMSS 2006-1A CL H	CRE CDO Note	03878CAK2	1,760,737	1.0000	1,760,737
ARMSS 2005-1A CL F	CRE CDO Note	038927AF6	811,056	0.7576	614,487
ARMSS 2005-1A CL H	CRE CDO Note	038927AH2	1,419,348	0.7576	1,075,352
CBRE 2007-1A CL B	CRE CDO Note	1248MLAG8	5,030,675	1.0000	5,030,675
GKKRE 2007-1A CL A3	CRE CDO Note	38500XAC6	4,167,000	1.0000	4,167,000
GKKRE 2007-1A CL BFL	CRE CDO Note	38500XAD4	1,583,000	1.0000	1,583,000

A-2

EXHIBIT B-1

Form of Note 1

(See attached)

B-1

EXHIBIT B-2

Form of Note 2

(See attached)

B-2

Exhibit B-3

Form of Note 3

(See attached)

B-3

Exhibit B-4

Form of Note 4

(See attached)

B-4

Exhibit D

Notice Information

Taberna:

c/o Taberna Capital Management, LLC

2929 Arch Street, 17^th Floor

Philadelphia, PA 19104

Attention: Mr. Ken Frappier

Facsimile: (215) 243-9039

e-mail: kfrappier@raitft.com

Company:

RAIT Financial Trust

Cira Center

2929 Arch Street, 17^th Floor

Philadelphia, PA 19104

Attention: Raphael Licht

Facsimile: (215) 243-9039

e-mail: rlicht@raitft.com

D-1

SCHEDULE 1

List of Significant Subsidiaries

1. RAIT Financial Trust

2. RAIT Partnership, L.P.

3. Taberna Realty Finance Trust

Sch. 1-1

ANNEX A

Reserved

Annex A-1

ANNEX B

Pursuant to Section 3(c) of the Agreement, Nixon Peabody LLP shall deliver an opinion to the effect that for U.S. federal income tax purposes, the Senior Secured Notes will constitute indebtedness of the Company.

In rendering such opinion, such counsel may (A) state that its opinion is limited to the federal laws of the United States, (B) rely as to matters of fact, to the extent deemed proper, on certificates of responsible officers of the Company and public officials and (C) make such other assumptions and exclusions as it deems reasonably necessary.

Annex B-1

ANNEX C

WILMINGTON TRUST, NATIONAL ASSOCIATION

Trustee’s Certificate

October 5, 2011

The undersigned, Wilmington Trust, National Association, as trustee (the “Trustee”), does hereby certify as follows:

1. The Indenture, dated as of October 5, 2011 (the “Indenture”), between RAIT Financial Trust, a Maryland real estate investment trust (the “Company”) and the Trustee, has been duly executed and validly delivered on behalf of the Trustee.

2. Pursuant to the provisions of Section 2.02 of the Indenture, the Trustee has, in accordance with the instructions of the Company, duly authenticated and delivered $100,000,000 aggregate principal amount of the Company’s Senior Secured Notes (the “Notes”).

3. Each person who, on behalf of the Trustee, executed the Indenture and the Certificate of Authentication on the Notes set forth thereon was at the time of such execution a duly elected or appointed officer of the Trustee authorized and empowered so to act and the signature of each such person appearing on each such document is genuine.

4. Attached hereto as Annex A is an Assistant Secretary’s Certificate of the Trustee which includes a true and correct copy of certain resolutions adopted by the Board of Directors of the Trustee evidencing the authority of the above-mentioned officer of the Trustee, which resolutions have not been amended and are in full force and effect on the date hereof and a copy of the Trustee’s Bylaws which contains provisions relating to the authority of the above-mentioned officer of the Trustee to execute indentures.

[Signature page follows.]

Annex C-1

Annex A to Certificate

WILMINGTON TRUST, NATIONAL ASSOCIATION

The undersigned, a duly appointed Assistant Secretary of Wilmington Trust, National Association, a national banking association (“WTNA”), DOES HEREBY CERTIFY as follows:

1. Each of the persons named on Exhibit A hereto has been duly elected or appointed and is duly qualified as an officer of WTNA on the date hereof, holding the office or offices set forth opposite his or her name, and the signature set forth opposite his or her name is a specimen of his or her genuine signature.

2. Attached hereto as Exhibit B is a true and correct copy of the Articles of Association of WTNA as in effect on the date hereof.

3. Attached hereto as Exhibit C is a true and correct copy of the By-Laws of WTNA as in effect on the date hereof.

4. Attached hereto as Exhibit D is a true and correct copy of a resolution adopted by unanimous written consent of the Board of Directors of WTNA on July 1, 2011. Such resolution has not been amended, modified, rescinded or revoked and is in full force and effect on the date hereof.

5. WTNA is an association existing and in good standing under the laws of the United States.

6. There is no proceeding pending or, to the best of my knowledge, threatened, for the dissolution or liquidation of WTNA.

IN WITNESS WHEREOF, the undersigned has caused this Certificate to be duly executed as of this 5th day of October, 2011.

/s/ Jane Schweiger

Assistant Secretary

THE UNDERSIGNED, a Vice President of WTNA, does hereby certify that Timothy Mowdy is a duly appointed, duly qualified Assistant Secretary of WTNA, and that the signature above is his/her genuine signature.

IN WITNESS WHEREOF, I have hereunto set my hand as of the day and year written above.

/s/ Timothy P. Mowdy

Vice President

Annex C-1

EX-10.6

Exhibit 10.6

THE SECURITIES REPRESENTED BY THIS CERTIFICATE WERE ORIGINALLY ISSUED IN A TRANSACTION EXEMPT FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND SUCH SECURITIES, AND ANY INTEREST THEREIN, MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM. EACH PURCHASER OF ANY SECURITIES IS HEREBY NOTIFIED THAT THE SELLER OF THE SECURITIES MAY BE RELYING ON THE EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF THE SECURITIES ACT PROVIDED BY RULE 144A UNDER THE SECURITIES ACT.

THE HOLDER OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE AGREES FOR THE BENEFIT OF THE COMPANY THAT (A) SUCH SECURITIES MAY BE OFFERED, RESOLD OR OTHERWISE TRANSFERRED ONLY (I) TO THE COMPANY, (II) TO A PERSON WHOM THE SELLER REASONABLY BELIEVES IS (a) A “QUALIFIED INSTITUTIONAL BUYER” (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT AND (b) A “QUALIFIED PURCHASER” (AS DEFINED IN SECTION 2(a)(51) OF THE INVESTMENT COMPANY ACT OF 1940, AS AMENDED) OR (III) TO A PERSON WHO THE SELLER REASONABLY BELIEVES IS (a) AN “ACCREDITED INVESTOR” WITHIN THE MEANING OF SUBPARAGRAPH (a)(1), (2), (3) OR (7) OF RULE 501 UNDER THE SECURITIES ACT AND IS ACQUIRING THE SECURITIES FOR THEIR OWN ACCOUNT FOR INVESTMENT PURPOSES AND (b) A “QUALIFIED PURCHASER” (AS DEFINED IN SECTION 2(a)(51) OF THE INVESTMENT COMPANY ACT OF 1940, AS AMENDED) AND (B) THE HOLDER WILL NOTIFY ANY PURCHASER OF ANY SECURITIES FROM IT OF THE RESALE RESTRICTIONS REFERRED TO IN (A) ABOVE.

THE SECURITIES WILL BE ISSUED AND MAY BE TRANSFERRED ONLY IN BLOCKS HAVING AN AGGREGATE PRINCIPAL AMOUNT OF NOT LESS THAN $100,000 AND MULTIPLES OF $1,000 IN EXCESS THEREOF. TO THE FULLEST EXTENT PERMITTED BY LAW, ANY ATTEMPTED TRANSFER OF SECURITIES, OR ANY INTEREST THEREIN, IN A BLOCK CONTRARY TO SUCH REQUIREMENT SHALL BE DEEMED TO BE VOID AND OF NO LEGAL EFFECT WHATSOEVER. TO THE FULLEST EXTENT PERMITTED BY LAW, ANY SUCH PURPORTED TRANSFEREE SHALL BE DEEMED NOT TO BE THE HOLDER OF SUCH SECURITIES FOR ANY PURPOSE, INCLUDING, BUT NOT LIMITED TO, THE RECEIPT OF PRINCIPAL OF OR INTEREST ON SUCH SECURITIES, OR ANY INTEREST THEREIN, AND SUCH PURPORTED TRANSFEREE SHALL BE DEEMED TO HAVE NO INTEREST WHATSOEVER IN SUCH SECURITIES.

THE HOLDER OF THIS SECURITY, OR ANY INTEREST THEREIN, BY ITS ACCEPTANCE HEREOF OR THEREOF ALSO AGREES, REPRESENTS AND WARRANTS THAT IT IS NOT AN EMPLOYEE BENEFIT PLAN, INDIVIDUAL RETIREMENT ACCOUNT OR OTHER PLAN OR ARRANGEMENT SUBJECT TO TITLE I OF THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED (“ERISA”), OR SECTION 4975 OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE “CODE”), OR SIMILAR LAW (EACH A “PLAN”), OR AN ENTITY WHOSE UNDERLYING ASSETS INCLUDE “PLAN ASSETS” BY REASON OF ANY

PLAN’S INVESTMENT IN THE ENTITY, AND NO PERSON INVESTING “PLAN ASSETS” OF ANY PLAN MAY ACQUIRE OR HOLD THIS SECURITY OR ANY INTEREST THEREIN. ANY PURCHASER OR HOLDER OF THE SECURITIES OR ANY INTEREST THEREIN WILL BE DEEMED TO HAVE REPRESENTED BY ITS PURCHASE AND HOLDING THEREOF THAT IT IS NOT AN EMPLOYEE BENEFIT PLAN WITHIN THE MEANING OF SECTION 3(3) OF ERISA, OR A PLAN TO WHICH SECTION 4975 OF THE CODE IS APPLICABLE, A TRUSTEE OR OTHER PERSON ACTING ON BEHALF OF AN EMPLOYEE BENEFIT PLAN OR PLAN, OR ANY OTHER PERSON OR ENTITY USING THE ASSETS OF ANY EMPLOYEE BENEFIT PLAN OR PLAN TO FINANCE SUCH PURCHASE.

RAIT FINANCIAL TRUST

6.75% Senior Secured Note due 2017

No. 1 $ 25,000,000

RAIT Financial Trust, a real estate investment trust organized and existing under the laws of Maryland (hereinafter called the “Company,” which term includes any successor Person under the Indenture hereinafter referred to), for value received, hereby promises to pay to Hare & Co., or registered assigns, the principal sum of Twenty-Five Million and No/100 Dollars ($25,000,000) on April 30, 2017. The Company further promises to pay interest on said principal sum from October 5, 2011, or from the most recent Interest Payment Date to which interest has been paid or duly provided for, quarterly in arrears on October 30, January 30, April 30, and July 30 of each year, commencing on October 30, 2011, or if any such day is not a Business Day, on the next succeeding Business Day (and no interest shall accrue in respect of the amounts whose payment is so delayed for the period from and after such Interest Payment Date until such next succeeding Business Day), except that, if such Business Day falls in the next succeeding calendar year, such payment shall be made on the immediately preceding Business Day, in each case, with the same force and effect as if made on the Interest Payment Date, at a fixed rate equal to 6.75% per annum until the principal hereof is paid or duly provided for or made available for payment; provided, that any overdue principal and any overdue installment of interest in excess of thirty (30) days shall bear Additional Interest at a fixed rate equal to 8.75% per annum (to the extent that the payment of such interest shall be legally enforceable), compounded quarterly, from the dates such amounts are due until they are paid or made available for payment, and such interest shall be payable on demand.

The amount of interest payable for any Interest Period will be computed on the basis of a three hundred sixty (360)-day year of twelve thirty (30)-day months. The interest so payable, and punctually paid or duly provided for, on any Interest Payment Date shall, as provided in the Indenture, be paid to the Person in whose name this Security (or one or more Predecessor Securities) is registered at the close of business on the Regular Record Date for such interest installment. Any such interest not so punctually paid or duly provided for shall forthwith cease to be payable to the Holder on such Regular Record Date and may either be paid to the Person in whose name this Security (or one or more Predecessor Securities) is registered at the close of business on a Special Record Date for the payment of such Defaulted Interest to be fixed by the Company, notice whereof shall be given to Holders of Securities and the Trustee not less than ten (10) days prior to such Special Record Date, or be paid at any time in any other lawful manner not inconsistent with the requirements of any securities exchange or automated quotation system on which the Securities may be listed, traded or quoted and upon such notice as may be required by such exchange or automated quotation system, all as more fully provided in the Indenture.

Payment of principal of and interest on this Security shall be made in such coin or currency of the United States of America as at the time of payment is legal tender for payment of public and private debts. Payments of principal and interest due at the Maturity of this Security shall be made upon surrender of such Securities to the Paying Agent at the Place of Payment, and payments of interest shall be made, subject to such surrender where applicable, by wire transfer

at such place and to such account at a banking institution in the United States as may be designated in writing to the Paying Agent at least ten (10) Business Days prior to the date for payment by the Person entitled thereto unless proper written transfer instructions have not been received by the relevant record date, in which case such payments shall be made by check mailed to the address of such Person as such address shall appear in the Security Register.

Unless the certificate of authentication hereon has been executed by the Trustee by manual signature, this Security shall not be entitled to any benefit under the Indenture or be valid or obligatory for any purpose.

[REVERSE OF SECURITY]

This Security is one of a duly authorized issue of securities of the Company (the “Securities”) issued under the Indenture, dated as of October 5, 2011 (the “Indenture”), between the Company and Wilmington Trust, National Association, as Trustee (in such capacity, the “Trustee,” which term includes any successor trustee under the Indenture), to which Indenture and all indentures supplemental thereto reference is hereby made for a statement of the respective rights, limitations of rights, duties and immunities thereunder of the Company, the Trustee and the Holders of the Securities, and of the terms upon which the Securities are, and are to be, authenticated and delivered.

All terms used in this Security that are defined in the Indenture shall have the meanings assigned to them in the Indenture.

The Company may at its option, upon not less than fifteen (15) days’ nor more than seventy-five (75) days’ written notice to the Holders of the Securities and subject to the terms and conditions of Article XI of the Indenture, redeem this Security in whole at any time or in part from time to time at a Redemption Price equal to one hundred percent (100%) of the principal amount hereof, together, in the case of any such redemption, with accrued interest, including any Additional Interest, to but excluding the date fixed as the Redemption Date.

In the event of redemption of this Security in part only, a new Security or Securities for the unredeemed portion hereof will be issued in the name of the Holder hereof upon the cancellation hereof. If less than all the Securities are to be redeemed, the particular Securities to be redeemed shall be selected not more than seventy-five (75) days prior to the Redemption Date by the Company from the Outstanding Securities not previously called for redemption.

The Indenture permits, with certain exceptions as therein provided, the Company and the Trustee at any time to enter into a supplemental indenture or indentures for the purpose of modifying in any manner the rights and obligations of the Company and of the Holders of the Securities, with the consent of the Holders of not less than a majority in principal amount of the Outstanding Securities. The Indenture also contains provisions permitting Holders of specified percentages in principal amount of the Securities, on behalf of the Holders of all Securities, to waive compliance by the Company with certain provisions of the Indenture and certain past defaults under the Indenture and their consequences. Any such consent or waiver by the Holder of this Security shall be conclusive and binding upon such Holder and upon all future Holders of this Security and of any Security issued upon the registration of transfer hereof or in exchange herefor or in lieu hereof, whether or not notation of such consent or waiver is made upon this Security.

No reference herein to the Indenture and no provision of this Security or of the Indenture shall alter or impair the obligation of the Company, which is absolute and unconditional, to pay the principal of and interest, including any Additional Interest (to the extent legally enforceable), on this Security at the times, place and rate, and in the coin or currency, herein prescribed.

As provided in the Indenture and subject to certain limitations therein set forth, the transfer of this Security is restricted and is registrable in the Securities Register, upon surrender

of this Security for registration of transfer at the office or agency of the Company maintained for such purpose, duly endorsed by, or accompanied by a written instrument of transfer in form satisfactory to the Company and the Securities Registrar and duly executed by, the Holder hereof or such Holder’s attorney duly authorized in writing, and thereupon one or more new Securities, of like tenor, of authorized denominations and for the same aggregate principal amount, will be issued to the designated transferee or transferees.

The Securities are issuable only in registered form without coupons in minimum denominations of $100,000 and any integral multiple of $1,000 in excess thereof. As provided in the Indenture and subject to certain limitations therein set forth, Securities are exchangeable for a like aggregate principal amount of Securities and of like tenor of a different authorized denomination, as requested by the Holder surrendering the same.

No service charge shall be made for any such registration of transfer or exchange, but the Company may require payment of a sum sufficient to cover any tax or other governmental charge payable in connection therewith.

The Company, the Trustee and any agent of the Company or the Trustee may treat the Person in whose name this Security is registered as the owner hereof for all purposes, whether or not this Security be overdue, and neither the Company, the Trustee nor any such agent shall be affected by notice to the contrary.

The Company and, by its acceptance of this Security or a beneficial interest herein, the Holder of, and any Person that acquires a beneficial interest in, this Security agree that, for United States federal, state and local tax purposes, it is intended that this Security constitute indebtedness.

This Security shall be construed and enforced in accordance with and governed by the laws of the State of New York without reference to its conflict of laws provisions (other than Section 5-1401 of the General Obligations Law).

IN WITNESS WHEREOF, the Company has caused this instrument to be duly executed on this 5th day of October, 2011.

RAIT FINANCIAL TRUST
By:	/s/ James J. Sebra
Name:	James J. Sebra
Title:	SVP & CAO

Signature Page to Note 1

This is one of the Securities referred to in the within mentioned Indenture.

Dated: October 5th, 2011

WILMINGTON TRUST, NATIONAL ASSOCIATION, not in its individual capacity, but solely as Trustee
By:	/s/ Joseph Clark
Name:	Joseph Clark
Title:	Vice President

Authentication Page to Note 1

ASSIGNMENT FORM

To assign this Security, fill in the form below:

I or we assign and transfer this Security to

(Print or type assignee’s name, address and zip code)

(Insert assignee’s Soc. Sec. or tax I.D. No.)

and irrevocably instructs the Securities Registrar to transfer this Security on the Securities Register.

Date:	Your Signature:
	Sign exactly as your name appears on the other side of this Security.

The undersigned confirms that such Securities are being transferred in accordance with its terms:

CHECK ONE BOX BELOW

(1)	¨	pursuant to an effective registration statement under the Securities Act of 1933; or
(2)	¨	to a person who the undersigned reasonably believes is a “qualified institutional buyer” (as defined in Rule 144A under the Securities Act of 1933) that is purchasing for its own account or for the account of a qualified institutional buyer to whom notice is given that such transfer is being made in reliance on Rule 144A, in each case pursuant to and in compliance with Rule 144A under the Securities Act of 1933; or
(3)	¨	outside the United States in an offshore transaction within the meaning of Regulation S under the Securities Act in compliance with Rule 904 under the Securities Act of 1933; or
(4)	¨	pursuant to another available exemption from the registration requirements of the Securities Act of 1933.

Unless one of the boxes is checked, the Trustee will refuse to register any of the Securities evidenced by this certificate in the name of any person other than the registered holder thereof; provided, however, that if box (3) or (4) is checked, the Trustee shall be entitled to require, prior to registering any such transfer of the Securities, such legal opinions, certifications and other information as the Company has reasonably requested to confirm that such transfer is being made pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act of 1933, such as the exemption provided by Rule 144 under such Act.

Signature

Assignment Form to Note 1

TO BE COMPLETED BY PURCHASER IF (2) ABOVE IS CHECKED.

The undersigned represents and warrants that it is purchasing this Security for its own account or an account with respect to which it exercises sole investment discretion and that it and any such account is a “qualified institutional buyer” within the meaning of Rule 144A under the Securities Act of 1933, and is aware that the sale to it is being made in reliance on Rule 144A and acknowledges that it has received such information regarding the Issuers as the undersigned has requested pursuant to Rule 144A or has determined not to request such information and that it is aware that the transferor is relying upon the undersigned’s foregoing representations in order to claim the exemption from registration provided by Rule 144A.

Dated:	__________
		Notice: To be executed by an executive officer

Assignment Form to Note 1

EX-10.7

Exhibit 10.7

THE SECURITIES REPRESENTED BY THIS CERTIFICATE WERE ORIGINALLY ISSUED IN A TRANSACTION EXEMPT FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND SUCH SECURITIES, AND ANY INTEREST THEREIN, MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM. EACH PURCHASER OF ANY SECURITIES IS HEREBY NOTIFIED THAT THE SELLER OF THE SECURITIES MAY BE RELYING ON THE EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF THE SECURITIES ACT PROVIDED BY RULE 144A UNDER THE SECURITIES ACT.

THE HOLDER OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE AGREES FOR THE BENEFIT OF THE COMPANY THAT (A) SUCH SECURITIES MAY BE OFFERED, RESOLD OR OTHERWISE TRANSFERRED ONLY (I) TO THE COMPANY, (II) TO A PERSON WHOM THE SELLER REASONABLY BELIEVES IS (a) A “QUALIFIED INSTITUTIONAL BUYER” (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT AND (b) A “QUALIFIED PURCHASER” (AS DEFINED IN SECTION 2(a)(51) OF THE INVESTMENT COMPANY ACT OF 1940, AS AMENDED) OR (III) TO A PERSON WHO THE SELLER REASONABLY BELIEVES IS (a) AN “ACCREDITED INVESTOR” WITHIN THE MEANING OF SUBPARAGRAPH (a)(1), (2), (3) OR (7) OF RULE 501 UNDER THE SECURITIES ACT AND IS ACQUIRING THE SECURITIES FOR THEIR OWN ACCOUNT FOR INVESTMENT PURPOSES AND (b) A “QUALIFIED PURCHASER” (AS DEFINED IN SECTION 2(a)(51) OF THE INVESTMENT COMPANY ACT OF 1940, AS AMENDED) AND (B) THE HOLDER WILL NOTIFY ANY PURCHASER OF ANY SECURITIES FROM IT OF THE RESALE RESTRICTIONS REFERRED TO IN (A) ABOVE.

THE SECURITIES WILL BE ISSUED AND MAY BE TRANSFERRED ONLY IN BLOCKS HAVING AN AGGREGATE PRINCIPAL AMOUNT OF NOT LESS THAN $100,000 AND MULTIPLES OF $1,000 IN EXCESS THEREOF. TO THE FULLEST EXTENT PERMITTED BY LAW, ANY ATTEMPTED TRANSFER OF SECURITIES, OR ANY INTEREST THEREIN, IN A BLOCK CONTRARY TO SUCH REQUIREMENT SHALL BE DEEMED TO BE VOID AND OF NO LEGAL EFFECT WHATSOEVER. TO THE FULLEST EXTENT PERMITTED BY LAW, ANY SUCH PURPORTED TRANSFEREE SHALL BE DEEMED NOT TO BE THE HOLDER OF SUCH SECURITIES FOR ANY PURPOSE, INCLUDING, BUT NOT LIMITED TO, THE RECEIPT OF PRINCIPAL OF OR INTEREST ON SUCH SECURITIES, OR ANY INTEREST THEREIN, AND SUCH PURPORTED TRANSFEREE SHALL BE DEEMED TO HAVE NO INTEREST WHATSOEVER IN SUCH SECURITIES.

THE HOLDER OF THIS SECURITY, OR ANY INTEREST THEREIN, BY ITS ACCEPTANCE HEREOF OR THEREOF ALSO AGREES, REPRESENTS AND WARRANTS THAT IT IS NOT AN EMPLOYEE BENEFIT PLAN, INDIVIDUAL RETIREMENT ACCOUNT OR OTHER PLAN OR ARRANGEMENT SUBJECT TO TITLE I OF THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED (“ERISA”), OR SECTION 4975 OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE “CODE”), OR SIMILAR LAW (EACH A “PLAN”), OR AN ENTITY WHOSE UNDERLYING ASSETS INCLUDE “PLAN ASSETS” BY REASON OF ANY

PLAN’S INVESTMENT IN THE ENTITY, AND NO PERSON INVESTING “PLAN ASSETS” OF ANY PLAN MAY ACQUIRE OR HOLD THIS SECURITY OR ANY INTEREST THEREIN. ANY PURCHASER OR HOLDER OF THE SECURITIES OR ANY INTEREST THEREIN WILL BE DEEMED TO HAVE REPRESENTED BY ITS PURCHASE AND HOLDING THEREOF THAT IT IS NOT AN EMPLOYEE BENEFIT PLAN WITHIN THE MEANING OF SECTION 3(3) OF ERISA, OR A PLAN TO WHICH SECTION 4975 OF THE CODE IS APPLICABLE, A TRUSTEE OR OTHER PERSON ACTING ON BEHALF OF AN EMPLOYEE BENEFIT PLAN OR PLAN, OR ANY OTHER PERSON OR ENTITY USING THE ASSETS OF ANY EMPLOYEE BENEFIT PLAN OR PLAN TO FINANCE SUCH PURCHASE.

RAIT FINANCIAL TRUST

6.85% Senior Secured Note due 2017

No. 2 $ 25,000,000

RAIT Financial Trust, a real estate investment trust organized and existing under the laws of Maryland (hereinafter called the “Company,” which term includes any successor Person under the Indenture hereinafter referred to), for value received, hereby promises to pay to Hare & Co., or registered assigns, the principal sum of Twenty-Five Million and No/100 Dollars ($25,000,000) on October 30, 2017. The Company further promises to pay interest on said principal sum from October 5, 2011, or from the most recent Interest Payment Date to which interest has been paid or duly provided for, quarterly in arrears on October 30, January 30, April 30, and July 30 of each year, commencing on October 30, 2011, or if any such day is not a Business Day, on the next succeeding Business Day (and no interest shall accrue in respect of the amounts whose payment is so delayed for the period from and after such Interest Payment Date until such next succeeding Business Day), except that, if such Business Day falls in the next succeeding calendar year, such payment shall be made on the immediately preceding Business Day, in each case, with the same force and effect as if made on the Interest Payment Date, at a fixed rate equal to 6.85% per annum until the principal hereof is paid or duly provided for or made available for payment; provided, that any overdue principal and any overdue installment of interest in excess of thirty (30) days shall bear Additional Interest at a fixed rate equal to 8.85% per annum (to the extent that the payment of such interest shall be legally enforceable), compounded quarterly, from the dates such amounts are due until they are paid or made available for payment, and such interest shall be payable on demand.

The amount of interest payable for any Interest Period will be computed on the basis of a three hundred sixty (360)-day year of twelve thirty (30)-day months. The interest so payable, and punctually paid or duly provided for, on any Interest Payment Date shall, as provided in the Indenture, be paid to the Person in whose name this Security (or one or more Predecessor Securities) is registered at the close of business on the Regular Record Date for such interest installment. Any such interest not so punctually paid or duly provided for shall forthwith cease to be payable to the Holder on such Regular Record Date and may either be paid to the Person in whose name this Security (or one or more Predecessor Securities) is registered at the close of business on a Special Record Date for the payment of such Defaulted Interest to be fixed by the Company, notice whereof shall be given to Holders of Securities and the Trustee not less than ten (10) days prior to such Special Record Date, or be paid at any time in any other lawful manner not inconsistent with the requirements of any securities exchange or automated quotation system on which the Securities may be listed, traded or quoted and upon such notice as may be required by such exchange or automated quotation system, all as more fully provided in the Indenture.

Payment of principal of and interest on this Security shall be made in such coin or currency of the United States of America as at the time of payment is legal tender for payment of public and private debts. Payments of principal and interest due at the Maturity of this Security shall be made upon surrender of such Securities to the Paying Agent at the Place of Payment, and payments of interest shall be made, subject to such surrender where applicable, by wire transfer

at such place and to such account at a banking institution in the United States as may be designated in writing to the Paying Agent at least ten (10) Business Days prior to the date for payment by the Person entitled thereto unless proper written transfer instructions have not been received by the relevant record date, in which case such payments shall be made by check mailed to the address of such Person as such address shall appear in the Security Register.

Unless the certificate of authentication hereon has been executed by the Trustee by manual signature, this Security shall not be entitled to any benefit under the Indenture or be valid or obligatory for any purpose.

[REVERSE OF SECURITY]

This Security is one of a duly authorized issue of securities of the Company (the “Securities”) issued under the Indenture, dated as of October 5, 2011 (the “Indenture”), between the Company and Wilmington Trust, National Association, as Trustee (in such capacity, the “Trustee,” which term includes any successor trustee under the Indenture), to which Indenture and all indentures supplemental thereto reference is hereby made for a statement of the respective rights, limitations of rights, duties and immunities thereunder of the Company, the Trustee and the Holders of the Securities, and of the terms upon which the Securities are, and are to be, authenticated and delivered.

All terms used in this Security that are defined in the Indenture shall have the meanings assigned to them in the Indenture.

The Company may at its option, upon not less than fifteen (15) days’ nor more than seventy-five (75) days’ written notice to the Holders of the Securities and subject to the terms and conditions of Article XI of the Indenture, redeem this Security in whole at any time or in part from time to time at a Redemption Price equal to one hundred percent (100%) of the principal amount hereof, together, in the case of any such redemption, with accrued interest, including any Additional Interest, to but excluding the date fixed as the Redemption Date.

In the event of redemption of this Security in part only, a new Security or Securities for the unredeemed portion hereof will be issued in the name of the Holder hereof upon the cancellation hereof. If less than all the Securities are to be redeemed, the particular Securities to be redeemed shall be selected not more than seventy-five (75) days prior to the Redemption Date by the Company from the Outstanding Securities not previously called for redemption.

The Indenture permits, with certain exceptions as therein provided, the Company and the Trustee at any time to enter into a supplemental indenture or indentures for the purpose of modifying in any manner the rights and obligations of the Company and of the Holders of the Securities, with the consent of the Holders of not less than a majority in principal amount of the Outstanding Securities. The Indenture also contains provisions permitting Holders of specified percentages in principal amount of the Securities, on behalf of the Holders of all Securities, to waive compliance by the Company with certain provisions of the Indenture and certain past defaults under the Indenture and their consequences. Any such consent or waiver by the Holder of this Security shall be conclusive and binding upon such Holder and upon all future Holders of this Security and of any Security issued upon the registration of transfer hereof or in exchange herefor or in lieu hereof, whether or not notation of such consent or waiver is made upon this Security.

No reference herein to the Indenture and no provision of this Security or of the Indenture shall alter or impair the obligation of the Company, which is absolute and unconditional, to pay the principal of and interest, including any Additional Interest (to the extent legally enforceable), on this Security at the times, place and rate, and in the coin or currency, herein prescribed.

As provided in the Indenture and subject to certain limitations therein set forth, the transfer of this Security is restricted and is registrable in the Securities Register, upon surrender

of this Security for registration of transfer at the office or agency of the Company maintained for such purpose, duly endorsed by, or accompanied by a written instrument of transfer in form satisfactory to the Company and the Securities Registrar and duly executed by, the Holder hereof or such Holder’s attorney duly authorized in writing, and thereupon one or more new Securities, of like tenor, of authorized denominations and for the same aggregate principal amount, will be issued to the designated transferee or transferees.

The Securities are issuable only in registered form without coupons in minimum denominations of $100,000 and any integral multiple of $1,000 in excess thereof. As provided in the Indenture and subject to certain limitations therein set forth, Securities are exchangeable for a like aggregate principal amount of Securities and of like tenor of a different authorized denomination, as requested by the Holder surrendering the same.

No service charge shall be made for any such registration of transfer or exchange, but the Company may require payment of a sum sufficient to cover any tax or other governmental charge payable in connection therewith.

The Company, the Trustee and any agent of the Company or the Trustee may treat the Person in whose name this Security is registered as the owner hereof for all purposes, whether or not this Security be overdue, and neither the Company, the Trustee nor any such agent shall be affected by notice to the contrary.

The Company and, by its acceptance of this Security or a beneficial interest herein, the Holder of, and any Person that acquires a beneficial interest in, this Security agree that, for United States federal, state and local tax purposes, it is intended that this Security constitute indebtedness.

This Security shall be construed and enforced in accordance with and governed by the laws of the State of New York without reference to its conflict of laws provisions (other than Section 5-1401 of the General Obligations Law).

IN WITNESS WHEREOF, the Company has caused this instrument to be duly executed on this 5^th day of October, 2011.

RAIT FINANCIAL TRUST
By:	/s/ James J. Sebra
Name:	James J. Sebra
Title:	SVP & CAO

Signature Page to Note 2

This is one of the Securities referred to in the within mentioned Indenture.

Dated: October 5^th 2011

WILMINGTON TRUST, NATIONAL ASSOCIATION, not in its individual capacity, but solely as Trustee
By:	/s/ Joseph Clark
Name:	Joseph Clark
Title:	Vice President

Authentication Page to Note 2

ASSIGNMENT FORM

To assign this Security, fill in the form below:

I or we assign and transfer this Security to

(Print or type assignee’s name, address and zip code)

(Insert assignee’s Soc. Sec. or tax I.D. No.)

and irrevocably instructs the Securities Registrar to transfer this Security on the Securities Register.

Date:	Your Signature:
	Sign exactly as your name appears on the other side of this Security.

The undersigned confirms that such Securities are being transferred in accordance with its terms:

CHECK ONE BOX BELOW

(1)	¨	pursuant to an effective registration statement under the Securities Act of 1933; or
(2)	¨	to a person who the undersigned reasonably believes is a “qualified institutional buyer” (as defined in Rule 144A under the Securities Act of 1933) that is purchasing for its own account or for the account of a qualified institutional buyer to whom notice is given that such transfer is being made in reliance on Rule 144A, in each case pursuant to and in compliance with Rule 144A under the Securities Act of 1933; or
(3)	¨	outside the United States in an offshore transaction within the meaning of Regulation S under the Securities Act in compliance with Rule 904 under the Securities Act of 1933; or
(4)	¨	pursuant to another available exemption from the registration requirements of the Securities Act of 1933.

Unless one of the boxes is checked, the Trustee will refuse to register any of the Securities evidenced by this certificate in the name of any person other than the registered holder thereof; provided, however, that if box (3) or (4) is checked, the Trustee shall be entitled to require, prior to registering any such transfer of the Securities, such legal opinions, certifications and other information as the Company has reasonably requested to confirm that such transfer is being made pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act of 1933, such as the exemption provided by Rule 144 under such Act.

Signature

Assignment Form to Note 2

TO BE COMPLETED BY PURCHASER IF (2) ABOVE IS CHECKED.

The undersigned represents and warrants that it is purchasing this Security for its own account or an account with respect to which it exercises sole investment discretion and that it and any such account is a “qualified institutional buyer” within the meaning of Rule 144A under the Securities Act of 1933, and is aware that the sale to it is being made in reliance on Rule 144A and acknowledges that it has received such information regarding the Issuers as the undersigned has requested pursuant to Rule 144A or has determined not to request such information and that it is aware that the transferor is relying upon the undersigned’s foregoing representations in order to claim the exemption from registration provided by Rule 144A.

Dated:	__________
		Notice: To be executed by an executive officer

Assignment Form to Note 2

EX-10.8

Exhibit 10.8

THE SECURITIES REPRESENTED BY THIS CERTIFICATE WERE ORIGINALLY ISSUED IN A TRANSACTION EXEMPT FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND SUCH SECURITIES, AND ANY INTEREST THEREIN, MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM. EACH PURCHASER OF ANY SECURITIES IS HEREBY NOTIFIED THAT THE SELLER OF THE SECURITIES MAY BE RELYING ON THE EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF THE SECURITIES ACT PROVIDED BY RULE 144A UNDER THE SECURITIES ACT.

THE HOLDER OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE AGREES FOR THE BENEFIT OF THE COMPANY THAT (A) SUCH SECURITIES MAY BE OFFERED, RESOLD OR OTHERWISE TRANSFERRED ONLY (I) TO THE COMPANY, (II) TO A PERSON WHOM THE SELLER REASONABLY BELIEVES IS (a) A “QUALIFIED INSTITUTIONAL BUYER” (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT AND (b) A “QUALIFIED PURCHASER” (AS DEFINED IN SECTION 2(a)(51) OF THE INVESTMENT COMPANY ACT OF 1940, AS AMENDED) OR (III) TO A PERSON WHO THE SELLER REASONABLY BELIEVES IS (a) AN “ACCREDITED INVESTOR” WITHIN THE MEANING OF SUBPARAGRAPH (a)(1), (2), (3) OR (7) OF RULE 501 UNDER THE SECURITIES ACT AND IS ACQUIRING THE SECURITIES FOR THEIR OWN ACCOUNT FOR INVESTMENT PURPOSES AND (b) A “QUALIFIED PURCHASER” (AS DEFINED IN SECTION 2(a)(51) OF THE INVESTMENT COMPANY ACT OF 1940, AS AMENDED) AND (B) THE HOLDER WILL NOTIFY ANY PURCHASER OF ANY SECURITIES FROM IT OF THE RESALE RESTRICTIONS REFERRED TO IN (A) ABOVE.

THE SECURITIES WILL BE ISSUED AND MAY BE TRANSFERRED ONLY IN BLOCKS HAVING AN AGGREGATE PRINCIPAL AMOUNT OF NOT LESS THAN $100,000 AND MULTIPLES OF $1,000 IN EXCESS THEREOF. TO THE FULLEST EXTENT PERMITTED BY LAW, ANY ATTEMPTED TRANSFER OF SECURITIES, OR ANY INTEREST THEREIN, IN A BLOCK CONTRARY TO SUCH REQUIREMENT SHALL BE DEEMED TO BE VOID AND OF NO LEGAL EFFECT WHATSOEVER. TO THE FULLEST EXTENT PERMITTED BY LAW, ANY SUCH PURPORTED TRANSFEREE SHALL BE DEEMED NOT TO BE THE HOLDER OF SUCH SECURITIES FOR ANY PURPOSE, INCLUDING, BUT NOT LIMITED TO, THE RECEIPT OF PRINCIPAL OF OR INTEREST ON SUCH SECURITIES, OR ANY INTEREST THEREIN, AND SUCH PURPORTED TRANSFEREE SHALL BE DEEMED TO HAVE NO INTEREST WHATSOEVER IN SUCH SECURITIES.

THE HOLDER OF THIS SECURITY, OR ANY INTEREST THEREIN, BY ITS ACCEPTANCE HEREOF OR THEREOF ALSO AGREES, REPRESENTS AND WARRANTS THAT IT IS NOT AN EMPLOYEE BENEFIT PLAN, INDIVIDUAL RETIREMENT ACCOUNT OR OTHER PLAN OR ARRANGEMENT SUBJECT TO TITLE I OF THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED (“ERISA”), OR SECTION 4975 OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE “CODE”), OR SIMILAR LAW (EACH A “PLAN”), OR AN ENTITY WHOSE UNDERLYING ASSETS INCLUDE “PLAN ASSETS” BY REASON OF ANY

PLAN’S INVESTMENT IN THE ENTITY, AND NO PERSON INVESTING “PLAN ASSETS” OF ANY PLAN MAY ACQUIRE OR HOLD THIS SECURITY OR ANY INTEREST THEREIN. ANY PURCHASER OR HOLDER OF THE SECURITIES OR ANY INTEREST THEREIN WILL BE DEEMED TO HAVE REPRESENTED BY ITS PURCHASE AND HOLDING THEREOF THAT IT IS NOT AN EMPLOYEE BENEFIT PLAN WITHIN THE MEANING OF SECTION 3(3) OF ERISA, OR A PLAN TO WHICH SECTION 4975 OF THE CODE IS APPLICABLE, A TRUSTEE OR OTHER PERSON ACTING ON BEHALF OF AN EMPLOYEE BENEFIT PLAN OR PLAN, OR ANY OTHER PERSON OR ENTITY USING THE ASSETS OF ANY EMPLOYEE BENEFIT PLAN OR PLAN TO FINANCE SUCH PURCHASE.

RAIT FINANCIAL TRUST

7.15% Senior Secured Note due 2018

No. 3 $ 25,000,000

RAIT Financial Trust, a real estate investment trust organized and existing under the laws of Maryland (hereinafter called the “Company,” which term includes any successor Person under the Indenture hereinafter referred to), for value received, hereby promises to pay to Hare & Co., or registered assigns, the principal sum of Twenty-Five Million and No/100 Dollars ($25,000,000) on October 30, 2018. The Company further promises to pay interest on said principal sum from October 5, 2011, or from the most recent Interest Payment Date to which interest has been paid or duly provided for, quarterly in arrears on October 30, January 30, April 30, and July 30 of each year, commencing on October 30, 2011, or if any such day is not a Business Day, on the next succeeding Business Day (and no interest shall accrue in respect of the amounts whose payment is so delayed for the period from and after such Interest Payment Date until such next succeeding Business Day), except that, if such Business Day falls in the next succeeding calendar year, such payment shall be made on the immediately preceding Business Day, in each case, with the same force and effect as if made on the Interest Payment Date, at a fixed rate equal to 7.15% per annum until the principal hereof is paid or duly provided for or made available for payment; provided, that any overdue principal and any overdue installment of interest in excess of thirty (30) days shall bear Additional Interest at a fixed rate equal to 9.15% per annum (to the extent that the payment of such interest shall be legally enforceable), compounded quarterly, from the dates such amounts are due until they are paid or made available for payment, and such interest shall be payable on demand.

The amount of interest payable for any Interest Period will be computed on the basis of a three hundred sixty (360)-day year of twelve thirty (30)-day months. The interest so payable, and punctually paid or duly provided for, on any Interest Payment Date shall, as provided in the Indenture, be paid to the Person in whose name this Security (or one or more Predecessor Securities) is registered at the close of business on the Regular Record Date for such interest installment. Any such interest not so punctually paid or duly provided for shall forthwith cease to be payable to the Holder on such Regular Record Date and may either be paid to the Person in whose name this Security (or one or more Predecessor Securities) is registered at the close of business on a Special Record Date for the payment of such Defaulted Interest to be fixed by the Company, notice whereof shall be given to Holders of Securities and the Trustee not less than ten (10) days prior to such Special Record Date, or be paid at any time in any other lawful manner not inconsistent with the requirements of any securities exchange or automated quotation system on which the Securities may be listed, traded or quoted and upon such notice as may be required by such exchange or automated quotation system, all as more fully provided in the Indenture.

Payment of principal of and interest on this Security shall be made in such coin or currency of the United States of America as at the time of payment is legal tender for payment of public and private debts. Payments of principal and interest due at the Maturity of this Security shall be made upon surrender of such Securities to the Paying Agent at the Place of Payment, and payments of interest shall be made, subject to such surrender where applicable, by wire transfer

at such place and to such account at a banking institution in the United States as may be designated in writing to the Paying Agent at least ten (10) Business Days prior to the date for payment by the Person entitled thereto unless proper written transfer instructions have not been received by the relevant record date, in which case such payments shall be made by check mailed to the address of such Person as such address shall appear in the Security Register.

Unless the certificate of authentication hereon has been executed by the Trustee by manual signature, this Security shall not be entitled to any benefit under the Indenture or be valid or obligatory for any purpose.

[REVERSE OF SECURITY]

This Security is one of a duly authorized issue of securities of the Company (the “Securities”) issued under the Indenture, dated as of October 5, 2011 (the “Indenture”), between the Company and Wilmington Trust, National Association, as Trustee (in such capacity, the “Trustee,” which term includes any successor trustee under the Indenture), to which Indenture and all indentures supplemental thereto reference is hereby made for a statement of the respective rights, limitations of rights, duties and immunities thereunder of the Company, the Trustee and the Holders of the Securities, and of the terms upon which the Securities are, and are to be, authenticated and delivered.

All terms used in this Security that are defined in the Indenture shall have the meanings assigned to them in the Indenture.

The Company may at its option, upon not less than fifteen (15) days’ nor more than seventy-five (75) days’ written notice to the Holders of the Securities and subject to the terms and conditions of Article XI of the Indenture, redeem this Security in whole at any time or in part from time to time at a Redemption Price equal to one hundred percent (100%) of the principal amount hereof, together, in the case of any such redemption, with accrued interest, including any Additional Interest, to but excluding the date fixed as the Redemption Date.

In the event of redemption of this Security in part only, a new Security or Securities for the unredeemed portion hereof will be issued in the name of the Holder hereof upon the cancellation hereof. If less than all the Securities are to be redeemed, the particular Securities to be redeemed shall be selected not more than seventy-five (75) days prior to the Redemption Date by the Company from the Outstanding Securities not previously called for redemption.

The Indenture permits, with certain exceptions as therein provided, the Company and the Trustee at any time to enter into a supplemental indenture or indentures for the purpose of modifying in any manner the rights and obligations of the Company and of the Holders of the Securities, with the consent of the Holders of not less than a majority in principal amount of the Outstanding Securities. The Indenture also contains provisions permitting Holders of specified percentages in principal amount of the Securities, on behalf of the Holders of all Securities, to waive compliance by the Company with certain provisions of the Indenture and certain past defaults under the Indenture and their consequences. Any such consent or waiver by the Holder of this Security shall be conclusive and binding upon such Holder and upon all future Holders of this Security and of any Security issued upon the registration of transfer hereof or in exchange herefor or in lieu hereof, whether or not notation of such consent or waiver is made upon this Security.

No reference herein to the Indenture and no provision of this Security or of the Indenture shall alter or impair the obligation of the Company, which is absolute and unconditional, to pay the principal of and interest, including any Additional Interest (to the extent legally enforceable), on this Security at the times, place and rate, and in the coin or currency, herein prescribed.

As provided in the Indenture and subject to certain limitations therein set forth, the transfer of this Security is restricted and is registrable in the Securities Register, upon surrender

of this Security for registration of transfer at the office or agency of the Company maintained for such purpose, duly endorsed by, or accompanied by a written instrument of transfer in form satisfactory to the Company and the Securities Registrar and duly executed by, the Holder hereof or such Holder’s attorney duly authorized in writing, and thereupon one or more new Securities, of like tenor, of authorized denominations and for the same aggregate principal amount, will be issued to the designated transferee or transferees.

The Securities are issuable only in registered form without coupons in minimum denominations of $100,000 and any integral multiple of $1,000 in excess thereof. As provided in the Indenture and subject to certain limitations therein set forth, Securities are exchangeable for a like aggregate principal amount of Securities and of like tenor of a different authorized denomination, as requested by the Holder surrendering the same.

No service charge shall be made for any such registration of transfer or exchange, but the Company may require payment of a sum sufficient to cover any tax or other governmental charge payable in connection therewith.

The Company, the Trustee and any agent of the Company or the Trustee may treat the Person in whose name this Security is registered as the owner hereof for all purposes, whether or not this Security be overdue, and neither the Company, the Trustee nor any such agent shall be affected by notice to the contrary.

The Company and, by its acceptance of this Security or a beneficial interest herein, the Holder of, and any Person that acquires a beneficial interest in, this Security agree that, for United States federal, state and local tax purposes, it is intended that this Security constitute indebtedness.

This Security shall be construed and enforced in accordance with and governed by the laws of the State of New York without reference to its conflict of laws provisions (other than Section 5-1401 of the General Obligations Law).

IN WITNESS WHEREOF, the Company has caused this instrument to be duly executed on this 5th day of October, 2011.

RAIT FINANCIAL TRUST
By:	/s/ James J. Sebra
Name:	James J. Sebra
Title:	SVP & CAO

Signature Page to Note 3

This is one of the Securities referred to in the within mentioned Indenture.

Dated: October 5th, 2011

WILMINGTON TRUST, NATIONAL ASSOCIATION, not in its individual capacity, but solely as Trustee
By:	/s/ Joseph Clark
Name:	Joseph Clark
Title:	SVP & CAO

Authentication Page to Note 3

ASSIGNMENT FORM

To assign this Security, fill in the form below:

I or we assign and transfer this Security to

(Print or type assignee’s name, address and zip code)

(Insert assignee’s Soc. Sec. or tax I.D. No.)

and irrevocably instructs the Securities Registrar to transfer this Security on the Securities Register.

Date:	Your Signature:
	Sign exactly as your name appears on the other side of this Security.

The undersigned confirms that such Securities are being transferred in accordance with its terms:

CHECK ONE BOX BELOW

(1)	¨	pursuant to an effective registration statement under the Securities Act of 1933; or
(2)	¨	to a person who the undersigned reasonably believes is a “qualified institutional buyer” (as defined in Rule 144A under the Securities Act of 1933) that is purchasing for its own account or for the account of a qualified institutional buyer to whom notice is given that such transfer is being made in reliance on Rule 144A, in each case pursuant to and in compliance with Rule 144A under the Securities Act of 1933; or
(3)	¨	outside the United States in an offshore transaction within the meaning of Regulation S under the Securities Act in compliance with Rule 904 under the Securities Act of 1933; or
(4)	¨	pursuant to another available exemption from the registration requirements of the Securities Act of 1933.

Unless one of the boxes is checked, the Trustee will refuse to register any of the Securities evidenced by this certificate in the name of any person other than the registered holder thereof; provided, however, that if box (3) or (4) is checked, the Trustee shall be entitled to require, prior to registering any such transfer of the Securities, such legal opinions, certifications and other information as the Company has reasonably requested to confirm that such transfer is being made pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act of 1933, such as the exemption provided by Rule 144 under such Act.

Signature

Assignment Form to Note 3

TO BE COMPLETED BY PURCHASER IF (2) ABOVE IS CHECKED.

The undersigned represents and warrants that it is purchasing this Security for its own account or an account with respect to which it exercises sole investment discretion and that it and any such account is a “qualified institutional buyer” within the meaning of Rule 144A under the Securities Act of 1933, and is aware that the sale to it is being made in reliance on Rule 144A and acknowledges that it has received such information regarding the Issuers as the undersigned has requested pursuant to Rule 144A or has determined not to request such information and that it is aware that the transferor is relying upon the undersigned’s foregoing representations in order to claim the exemption from registration provided by Rule 144A.

Dated:________________
	Notice: To be executed by an executive officer

Assignment Form to Note 3

EX-10.9

Exhibit 10.9

THE SECURITIES REPRESENTED BY THIS CERTIFICATE WERE ORIGINALLY ISSUED IN A TRANSACTION EXEMPT FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND SUCH SECURITIES, AND ANY INTEREST THEREIN, MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM. EACH PURCHASER OF ANY SECURITIES IS HEREBY NOTIFIED THAT THE SELLER OF THE SECURITIES MAY BE RELYING ON THE EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF THE SECURITIES ACT PROVIDED BY RULE 144A UNDER THE SECURITIES ACT.

THE HOLDER OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE AGREES FOR THE BENEFIT OF THE COMPANY THAT (A) SUCH SECURITIES MAY BE OFFERED, RESOLD OR OTHERWISE TRANSFERRED ONLY (I) TO THE COMPANY, (II) TO A PERSON WHOM THE SELLER REASONABLY BELIEVES IS (a) A “QUALIFIED INSTITUTIONAL BUYER” (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT AND (b) A “QUALIFIED PURCHASER” (AS DEFINED IN SECTION 2(a)(51) OF THE INVESTMENT COMPANY ACT OF 1940, AS AMENDED) OR (III) TO A PERSON WHO THE SELLER REASONABLY BELIEVES IS (a) AN “ACCREDITED INVESTOR” WITHIN THE MEANING OF SUBPARAGRAPH (a)(1), (2), (3) OR (7) OF RULE 501 UNDER THE SECURITIES ACT AND IS ACQUIRING THE SECURITIES FOR THEIR OWN ACCOUNT FOR INVESTMENT PURPOSES AND (b) A “QUALIFIED PURCHASER” (AS DEFINED IN SECTION 2(a)(51) OF THE INVESTMENT COMPANY ACT OF 1940, AS AMENDED) AND (B) THE HOLDER WILL NOTIFY ANY PURCHASER OF ANY SECURITIES FROM IT OF THE RESALE RESTRICTIONS REFERRED TO IN (A) ABOVE.

THE SECURITIES WILL BE ISSUED AND MAY BE TRANSFERRED ONLY IN BLOCKS HAVING AN AGGREGATE PRINCIPAL AMOUNT OF NOT LESS THAN $100,000 AND MULTIPLES OF $1,000 IN EXCESS THEREOF. TO THE FULLEST EXTENT PERMITTED BY LAW, ANY ATTEMPTED TRANSFER OF SECURITIES, OR ANY INTEREST THEREIN, IN A BLOCK CONTRARY TO SUCH REQUIREMENT SHALL BE DEEMED TO BE VOID AND OF NO LEGAL EFFECT WHATSOEVER. TO THE FULLEST EXTENT PERMITTED BY LAW, ANY SUCH PURPORTED TRANSFEREE SHALL BE DEEMED NOT TO BE THE HOLDER OF SUCH SECURITIES FOR ANY PURPOSE, INCLUDING, BUT NOT LIMITED TO, THE RECEIPT OF PRINCIPAL OF OR INTEREST ON SUCH SECURITIES, OR ANY INTEREST THEREIN, AND SUCH PURPORTED TRANSFEREE SHALL BE DEEMED TO HAVE NO INTEREST WHATSOEVER IN SUCH SECURITIES.

THE HOLDER OF THIS SECURITY, OR ANY INTEREST THEREIN, BY ITS ACCEPTANCE HEREOF OR THEREOF ALSO AGREES, REPRESENTS AND WARRANTS THAT IT IS NOT AN EMPLOYEE BENEFIT PLAN, INDIVIDUAL RETIREMENT ACCOUNT OR OTHER PLAN OR ARRANGEMENT SUBJECT TO TITLE I OF THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED (“ERISA”), OR SECTION 4975 OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE “CODE”), OR SIMILAR LAW (EACH A “PLAN”), OR AN ENTITY WHOSE UNDERLYING ASSETS INCLUDE “PLAN ASSETS” BY REASON OF ANY

PLAN’S INVESTMENT IN THE ENTITY, AND NO PERSON INVESTING “PLAN ASSETS” OF ANY PLAN MAY ACQUIRE OR HOLD THIS SECURITY OR ANY INTEREST THEREIN. ANY PURCHASER OR HOLDER OF THE SECURITIES OR ANY INTEREST THEREIN WILL BE DEEMED TO HAVE REPRESENTED BY ITS PURCHASE AND HOLDING THEREOF THAT IT IS NOT AN EMPLOYEE BENEFIT PLAN WITHIN THE MEANING OF SECTION 3(3) OF ERISA, OR A PLAN TO WHICH SECTION 4975 OF THE CODE IS APPLICABLE, A TRUSTEE OR OTHER PERSON ACTING ON BEHALF OF AN EMPLOYEE BENEFIT PLAN OR PLAN, OR ANY OTHER PERSON OR ENTITY USING THE ASSETS OF ANY EMPLOYEE BENEFIT PLAN OR PLAN TO FINANCE SUCH PURCHASE.

RAIT FINANCIAL TRUST

7.25% Senior Secured Note due 2019

No. 4 $ 25,000,000

RAIT Financial Trust, a real estate investment trust organized and existing under the laws of Maryland (hereinafter called the “Company,” which term includes any successor Person under the Indenture hereinafter referred to), for value received, hereby promises to pay to Hare & Co., or registered assigns, the principal sum of Twenty-Five Million and No/100 Dollars ($25,000,000) on April 30, 2019. The Company further promises to pay interest on said principal sum from October 5, 2011, or from the most recent Interest Payment Date to which interest has been paid or duly provided for, quarterly in arrears on October 30, January 30, April 30, and July 30 of each year, commencing on October 30, 2011, or if any such day is not a Business Day, on the next succeeding Business Day (and no interest shall accrue in respect of the amounts whose payment is so delayed for the period from and after such Interest Payment Date until such next succeeding Business Day), except that, if such Business Day falls in the next succeeding calendar year, such payment shall be made on the immediately preceding Business Day, in each case, with the same force and effect as if made on the Interest Payment Date, at a fixed rate equal to 7.25% per annum until the principal hereof is paid or duly provided for or made available for payment; provided, that any overdue principal and any overdue installment of interest in excess of thirty (30) days shall bear Additional Interest at a fixed rate equal to 9.25% per annum (to the extent that the payment of such interest shall be legally enforceable), compounded quarterly, from the dates such amounts are due until they are paid or made available for payment, and such interest shall be payable on demand.

The amount of interest payable for any Interest Period will be computed on the basis of a three hundred sixty (360)-day year of twelve thirty (30)-day months. The interest so payable, and punctually paid or duly provided for, on any Interest Payment Date shall, as provided in the Indenture, be paid to the Person in whose name this Security (or one or more Predecessor Securities) is registered at the close of business on the Regular Record Date for such interest installment. Any such interest not so punctually paid or duly provided for shall forthwith cease to be payable to the Holder on such Regular Record Date and may either be paid to the Person in whose name this Security (or one or more Predecessor Securities) is registered at the close of business on a Special Record Date for the payment of such Defaulted Interest to be fixed by the Company, notice whereof shall be given to Holders of Securities and the Trustee not less than ten (10) days prior to such Special Record Date, or be paid at any time in any other lawful manner not inconsistent with the requirements of any securities exchange or automated quotation system on which the Securities may be listed, traded or quoted and upon such notice as may be required by such exchange or automated quotation system, all as more fully provided in the Indenture.

Payment of principal of and interest on this Security shall be made in such coin or currency of the United States of America as at the time of payment is legal tender for payment of public and private debts. Payments of principal and interest due at the Maturity of this Security shall be made upon surrender of such Securities to the Paying Agent at the Place of Payment, and payments of interest shall be made, subject to such surrender where applicable, by wire transfer

at such place and to such account at a banking institution in the United States as may be designated in writing to the Paying Agent at least ten (10) Business Days prior to the date for payment by the Person entitled thereto unless proper written transfer instructions have not been received by the relevant record date, in which case such payments shall be made by check mailed to the address of such Person as such address shall appear in the Security Register.

Unless the certificate of authentication hereon has been executed by the Trustee by manual signature, this Security shall not be entitled to any benefit under the Indenture or be valid or obligatory for any purpose.

[REVERSE OF SECURITY]

This Security is one of a duly authorized issue of securities of the Company (the “Securities”) issued under the Indenture, dated as of October 5, 2011 (the “Indenture”), between the Company and Wilmington Trust, National Association, as Trustee (in such capacity, the “Trustee,” which term includes any successor trustee under the Indenture), to which Indenture and all indentures supplemental thereto reference is hereby made for a statement of the respective rights, limitations of rights, duties and immunities thereunder of the Company, the Trustee and the Holders of the Securities, and of the terms upon which the Securities are, and are to be, authenticated and delivered.

All terms used in this Security that are defined in the Indenture shall have the meanings assigned to them in the Indenture.

The Company may at its option, upon not less than fifteen (15) days’ nor more than seventy-five (75) days’ written notice to the Holders of the Securities and subject to the terms and conditions of Article XI of the Indenture, redeem this Security in whole at any time or in part from time to time at a Redemption Price equal to one hundred percent (100%) of the principal amount hereof, together, in the case of any such redemption, with accrued interest, including any Additional Interest, to but excluding the date fixed as the Redemption Date.

In the event of redemption of this Security in part only, a new Security or Securities for the unredeemed portion hereof will be issued in the name of the Holder hereof upon the cancellation hereof. If less than all the Securities are to be redeemed, the particular Securities to be redeemed shall be selected not more than seventy-five (75) days prior to the Redemption Date by the Company from the Outstanding Securities not previously called for redemption.

The Indenture permits, with certain exceptions as therein provided, the Company and the Trustee at any time to enter into a supplemental indenture or indentures for the purpose of modifying in any manner the rights and obligations of the Company and of the Holders of the Securities, with the consent of the Holders of not less than a majority in principal amount of the Outstanding Securities. The Indenture also contains provisions permitting Holders of specified percentages in principal amount of the Securities, on behalf of the Holders of all Securities, to waive compliance by the Company with certain provisions of the Indenture and certain past defaults under the Indenture and their consequences. Any such consent or waiver by the Holder of this Security shall be conclusive and binding upon such Holder and upon all future Holders of this Security and of any Security issued upon the registration of transfer hereof or in exchange herefor or in lieu hereof, whether or not notation of such consent or waiver is made upon this Security.

No reference herein to the Indenture and no provision of this Security or of the Indenture shall alter or impair the obligation of the Company, which is absolute and unconditional, to pay the principal of and interest, including any Additional Interest (to the extent legally enforceable), on this Security at the times, place and rate, and in the coin or currency, herein prescribed.

As provided in the Indenture and subject to certain limitations therein set forth, the transfer of this Security is restricted and is registrable in the Securities Register, upon surrender

of this Security for registration of transfer at the office or agency of the Company maintained for such purpose, duly endorsed by, or accompanied by a written instrument of transfer in form satisfactory to the Company and the Securities Registrar and duly executed by, the Holder hereof or such Holder’s attorney duly authorized in writing, and thereupon one or more new Securities, of like tenor, of authorized denominations and for the same aggregate principal amount, will be issued to the designated transferee or transferees.

The Securities are issuable only in registered form without coupons in minimum denominations of $100,000 and any integral multiple of $1,000 in excess thereof. As provided in the Indenture and subject to certain limitations therein set forth, Securities are exchangeable for a like aggregate principal amount of Securities and of like tenor of a different authorized denomination, as requested by the Holder surrendering the same.

No service charge shall be made for any such registration of transfer or exchange, but the Company may require payment of a sum sufficient to cover any tax or other governmental charge payable in connection therewith.

The Company, the Trustee and any agent of the Company or the Trustee may treat the Person in whose name this Security is registered as the owner hereof for all purposes, whether or not this Security be overdue, and neither the Company, the Trustee nor any such agent shall be affected by notice to the contrary.

The Company and, by its acceptance of this Security or a beneficial interest herein, the Holder of, and any Person that acquires a beneficial interest in, this Security agree that, for United States federal, state and local tax purposes, it is intended that this Security constitute indebtedness.

This Security shall be construed and enforced in accordance with and governed by the laws of the State of New York without reference to its conflict of laws provisions (other than Section 5-1401 of the General Obligations Law).

IN WITNESS WHEREOF, the Company has caused this instrument to be duly executed on this 5th day of October, 2011.

RAIT FINANCIAL TRUST
By:	/s/ James J. Sebra
Name:	James J. Sebra
Title:	SVP & CAO

Signature Page to Note 4

This is one of the Securities referred to in the within mentioned Indenture.

Dated: October 5th, 2011

WILMINGTON TRUST, NATIONAL ASSOCIATION, not in its individual capacity, but solely as Trustee
By:	/s/ Joseph Clark
Name:	Joseph Clark
Title:	Vice President

Authentication Page to Note 4

ASSIGNMENT FORM

To assign this Security, fill in the form below:

I or we assign and transfer this Security to

(Print or type assignee’s name, address and zip code)

(Insert assignee’s Soc. Sec. or tax I.D. No.)

and irrevocably instructs the Securities Registrar to transfer this Security on the Securities Register.

Date:	Your Signature:
	Sign exactly as your name appears on the other side of this Security.

The undersigned confirms that such Securities are being transferred in accordance with its terms:

CHECK ONE BOX BELOW

(1)	¨	pursuant to an effective registration statement under the Securities Act of 1933; or
(2)	¨	to a person who the undersigned reasonably believes is a “qualified institutional buyer” (as defined in Rule 144A under the Securities Act of 1933) that is purchasing for its own account or for the account of a qualified institutional buyer to whom notice is given that such transfer is being made in reliance on Rule 144A, in each case pursuant to and in compliance with Rule 144A under the Securities Act of 1933; or
(3)	¨	outside the United States in an offshore transaction within the meaning of Regulation S under the Securities Act in compliance with Rule 904 under the Securities Act of 1933; or
(4)	¨	pursuant to another available exemption from the registration requirements of the Securities Act of 1933.

Unless one of the boxes is checked, the Trustee will refuse to register any of the Securities evidenced by this certificate in the name of any person other than the registered holder thereof; provided, however, that if box (3) or (4) is checked, the Trustee shall be entitled to require, prior to registering any such transfer of the Securities, such legal opinions, certifications and other information as the Company has reasonably requested to confirm that such transfer is being made pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act of 1933, such as the exemption provided by Rule 144 under such Act.

Signature

Assignment Form to Note 4

TO BE COMPLETED BY PURCHASER IF (2) ABOVE IS CHECKED.

The undersigned represents and warrants that it is purchasing this Security for its own account or an account with respect to which it exercises sole investment discretion and that it and any such account is a “qualified institutional buyer” within the meaning of Rule 144A under the Securities Act of 1933, and is aware that the sale to it is being made in reliance on Rule 144A and acknowledges that it has received such information regarding the Issuers as the undersigned has requested pursuant to Rule 144A or has determined not to request such information and that it is aware that the transferor is relying upon the undersigned’s foregoing representations in order to claim the exemption from registration provided by Rule 144A.

Dated:___________________
	Notice: To be executed by an executive officer

Assignment Form to Note 4

EX-10.10

Exhibit 10.10

MASTER REPURCHASE AGREEMENT

Dated as of October 27, 2011

between

RAIT CMBS CONDUIT I, LLC,

as Seller,

and

CITI BANK, N.A.,

as Buyer

TABLE OF CONTENTS

		Page
1.	APPLICABILITY		1
2.	DEFINITIONS		1
3.	INITIATION; CONFIRMATION; TERMINATION; FEES		14
4.	MARGIN MAINTENANCE		18
5.	INCOME PAYMENTS AND PRINCIPAL PAYMENTS		19
6.	SECURITY INTEREST		21
7.	PAYMENT, TRANSFER AND CUSTODY		22
8.	SALE, TRANSFER, HYPOTHECATION OR PLEDGE OF PURCHASED LOANS		25
9.	[INTENTIONALLY OMITTED]		25
10.	REPRESENTATIONS		25
11.	NEGATIVE COVENANTS OF SELLER		30
12.	AFFIRMATIVE COVENANTS OF SELLER		31
13.	SINGLE-PURPOSE ENTITY		33
14.	EVENTS OF DEFAULT; REMEDIES		35
15.	SINGLE AGREEMENT		40
16.	RECORDING OF COMMUNICATIONS		40
17.	NOTICES AND OTHER COMMUNICATIONS		41
18.	ENTIRE AGREEMENT; SEVERABILITY		41
19.	NON-ASSIGNABILITY		41
20.	GOVERNING LAW		42
21.	NO WAIVERS, ETC.		42
22.	USE OF EMPLOYEE PLAN ASSETS		42
23.	INTENT		42
24.	DISCLOSURE RELATING TO CERTAIN FEDERAL PROTECTIONS		43
25.	CONSENT TO JURISDICTION; WAIVER OF JURY TRIAL		44
26.	NO RELIANCE		45
27.	INDEMNITY		45
28.	DUE DILIGENCE		46
29.	SERVICING		47
30.	MISCELLANEOUS		48

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ANNEXES AND EXHIBITS

ANNEX I	Names and Addresses for Communications between Parties
EXHIBIT I	Form of Confirmation
EXHIBIT II	Authorized Representatives of Seller
EXHIBIT III	Form of Custodial Delivery
EXHIBIT IV	Conduit Loan Due Diligence Checklist
EXHIBIT V	Form of Power of Attorney
EXHIBIT VI	Representations and Warranties Regarding Each Individual Purchased Loan
EXHIBIT VII	Collateral Tape
EXHIBIT VIII	Form of Transaction Request
EXHIBIT IX	Form of Irrevocable Direction Letter

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MASTER REPURCHASE AGREEMENT, dated as of October 27, 2011, by and among RAIT CMBS CONDUIT I, LLC, a Delaware limited liability company (“Seller”) and CITIBANK, N.A., a national banking association (“Buyer”).

1. APPLICABILITY

From time to time the parties hereto may enter into transactions in which Seller agrees to transfer to Buyer Purchased Loans against the transfer of funds by Buyer, with a simultaneous agreement by Buyer to transfer to Seller such Purchased Loans at a date certain, against the transfer of funds by Seller. Each such transaction shall be referred to herein as a “Transaction” and, unless otherwise agreed in writing, shall be governed by this Agreement, including any supplemental terms or conditions contained in any exhibits identified herein as applicable hereunder.

2. DEFINITIONS

“Acceptable Attorney” means Ledgewood; Alston & Bird LLP; Cadwalader, Wickersham & Taft LLP; McKenna Long & Aldridge LLP; Dechert LLP; Sills Cummis & Gross P.C. or any other attorney-at-law acceptable to Buyer in its commercially reasonable discretion.

“Accepted Servicing Practices” shall mean with respect to any Purchased Loan, those mortgage servicing practices of prudent mortgage lending institutions which service mortgage loans of the same type as such Purchased Loan in the jurisdiction where the related Mortgaged Property is located.

“Accelerated Repurchase Date” shall have the meaning specified in Section 14(b)(i) of this Agreement.

“Act of Insolvency” shall mean with respect to any party, (i) the commencement by such party as debtor of any case or proceeding under any bankruptcy, insolvency, reorganization, liquidation, moratorium, dissolution, delinquency or similar law, or such party seeking the appointment or election of a receiver, conservator, trustee, custodian or similar official for such party or any substantial part of its property, or the convening of any meeting of creditors for purposes of commencing any such case or proceeding or seeking such an appointment or election, (ii) the commencement of any such case or proceeding against such party, or another seeking such an appointment or election, or the filing against a party of an application for a protective decree under the provisions of the Securities Investor Protection Act of 1970, which (A) is consented to or not timely contested by such party, (B) results in the entry of an order for relief, such an appointment or election, the issuance of such a protective decree or the entry of an order having a similar effect, or (C) is not dismissed within 60 days, (iii) the making by such party of a general assignment for the benefit of creditors, or (iv) the admission in writing by such party of such party’s inability to pay such party’s debts as they become due.

“Affiliate” shall mean, when used with respect to any specified Person, any other Person directly or indirectly controlling, controlled by, or under common control with, such Person. Control shall mean the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities or by contract and “controlling” and “controlled” shall have meanings correlative thereto.

“Agreement” shall mean this Master Repurchase Agreement, dated as of October 27, 2011, by and between RAIT CMBS Conduit I, LLC, and Citibank, N.A., as such agreement may be modified or supplemented from time to time.

“Alternative Rate” shall have the meaning specified in Section 3(g) of this Agreement.

“Alternative Rate Transaction” shall mean, with respect to any Pricing Rate Period, any Transaction with respect to which the Pricing Rate for such Pricing Rate Period is determined with reference to the Alternative Rate.

“Applicable Spread” shall mean, with respect to each Transaction:

(i) so long as no Event of Default shall have occurred and be continuing, two hundred fifty basis points (i.e., 2.50%),

(ii) after the occurrence and during the continuance of an Event of Default, the applicable incremental per annum rate described in clause (i) of this definition, as applicable, plus 400 basis points (4.0%).

“Assignment Documents in Blank” shall mean the (i) allonge in blank, (ii) omnibus assignment in blank, (iii) Assignment of Mortgage in blank, and (iv) assignment of Assignment of Leases in blank, for each Purchased Loan.

“Assignment of Leases” shall mean, with respect to any Mortgage, an assignment of leases thereunder, notice of transfer or equivalent instrument in recordable form, sufficient under the laws of the jurisdiction wherein the Mortgaged Property is located to reflect the assignment of leases, subject to the terms, covenants and provisions of this Agreement.

“Assignment of Mortgage” shall mean, with respect to any Mortgage, an assignment of the mortgage, notice of transfer or equivalent instrument in recordable form, sufficient under the laws of the jurisdiction wherein the related property is located to reflect the assignment and pledge of the Mortgage, subject to the terms, covenants and provisions of this Agreement.

“Attorney’s Bailee Letter” shall mean a letter from an Acceptable Attorney, in form and substance acceptable to the Buyer, wherein such Acceptable Attorney in possession of a Purchased Loan File (i) acknowledges receipt of such Purchased Loan File, (ii) confirms that such Acceptable Attorney is holding the same as bailee of the Buyer under such letter and (iii) agrees that such Acceptable Attorney shall deliver such Purchased Loan File to the Custodian by not later than the third (3^rd) Business Day following the Purchase Date for the related Purchased Loan.

“Blocked Account Agreement” shall mean that certain Blocked Account Agreement, dated as of the date hereof, between Buyer, Seller and the Depository, relating to the Cash Management Account, as the same may be amended, modified and/or restated from time to time.

“Business Day” shall mean a day other than (i) a Saturday or Sunday, or (ii) a day in which the New York Stock Exchange or banks in the State of New York are authorized or obligated by law or executive order to be closed. When used with respect to a Pricing Rate

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Determination Date, “Business Day” shall mean any day other than a Saturday, a Sunday or a day on which banks in London, England are closed for interbank or foreign exchange transactions.

“Buyer” shall mean Citibank, N.A., or any successor or assign.

“Capital Stock” shall mean any and all shares, interests, participations or other equivalents (however designated) of capital stock of a corporation, any and all equivalent equity ownership interests in a Person which is not a corporation, including, without limitation, any and all member or other equivalent interests in any limited liability company, and any and all warrants or options to purchase any of the foregoing.

“Cash Management Account” shall mean a segregated interest bearing account, in the name of Seller for the benefit of Buyer, established at the Depository.

“Certified Operating Histories” shall have the meaning specified in Exhibit VI.

“Change of Control” shall mean any of the following events shall have occurred without the prior approval of the Buyer:

(i) Sponsor shall no longer own 100% of the common shares of Taberna Realty Finance Trust or Taberna Realty Finance Trust shall no longer own, directly or indirectly, 100% of the ownership interest in Seller; provided, that Buyer shall not unreasonably withhold or delay its approval to any request from Sponsor to reduce either of the aforementioned 100% to a lower percentage (but not less than 51%);

(ii) Sponsor shall no longer control Seller;

(iii) any merger, reorganization or consolidation of the Sponsor where the successor entity is not the Sponsor as of the date of this Agreement; or

(iv) any conveyance, transfer or disposal of all or substantially all assets of Seller to any Person (other than Buyer) that does not result in the repurchase by Seller of all Purchased Loans.

“Collateral” shall have the meaning specified in Section 6 of this Agreement.

“Collateral Tape” shall mean, with respect to each Eligible Loan, the tape containing the fields of information set forth in Exhibit VII attached hereto.

“Collection Period” shall mean with respect to the Remittance Date in any month, the period beginning on but excluding the Cut-off Date in the month preceding the month in which such Remittance Date occurs and continuing to and including the Cut-off Date immediately preceding such Remittance Date.

“Conduit Loan Due Diligence Checklist” shall mean the due diligence materials set forth in Exhibit IV attached hereto.

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“Confirmation” shall have the meaning specified in Section 3(b) of this Agreement.

“Custodial Agreement” shall mean the Custodial Agreement, dated as of October 27, 2011, by and among the Custodian, the Seller and the Buyer.

“Custodial Delivery” shall mean the form executed by Seller in order to deliver the Purchased Loan Schedule and the Purchased Loan File to Buyer or its designee (including the Custodian) pursuant to Section 7 hereof, a form of which is attached hereto as Exhibit III.

“Custodian” shall mean Wells Fargo Bank, National Association, or any successor Custodian appointed by Buyer with the prior written consent of Seller (which consent shall not be unreasonably withheld or delayed).

“Cut-off Date” shall mean the second Business Day preceding each Remittance Date.

“Default” shall mean any event which, with the giving of notice, the passage of time, or both, would constitute an Event of Default.

“Depository” shall mean Wells Fargo Bank, National Association, or any successor Depository appointed by Buyer with the prior written consent of Seller (which consent shall not be unreasonably withheld or delayed).

“Draft Appraisal” shall mean a short form appraisal, “letter opinion of value,” or any other form of draft appraisal reasonably acceptable to Buyer.

“Due Diligence Package” shall mean (i) the Collateral Tape, (ii) the items on the Conduit Loan Due Diligence Checklist, in each case to the extent applicable and (iii) such other documents or information as Buyer or its counsel shall reasonably deem necessary.

“Early Repurchase Date” shall have the meaning specified in Section 3(d) of this Agreement.

“Eligible Loans” shall mean performing whole mortgage loans (“Whole Loans”) or Senior Interests in Whole Loans secured by first liens on stabilized commercial properties which meet current standards for inclusion in commercial mortgage-backed securities transactions and which loans are acceptable to Buyer in its sole discretion.

“Environmental Law” shall mean, any federal, state, foreign or local statute, law, rule, regulation, ordinance, code, guideline, written policy and rule of common law now or hereafter in effect and in each case as amended, and any judicial or administrative interpretation thereof, including any judicial or administrative order, consent decree or judgment, relating to the environment, employee health and safety or Hazardous Materials, including, without limitation, CERCLA; RCRA; the Federal Water Pollution Control Act, 33 U.S.C. § 1251 et seq.; the Toxic Substances Control Act, 15 U.S.C. § 2601 et seq.; the Clean Air Act, 42 U.S.C. § 7401 et seq.; the Safe Drinking Water Act, 42 U.S.C. § 3803 et seq.; the Oil Pollution Act of 1990, 33 U.S.C. § 2701 et seq.; the Emergency Planning the Community Right-to-Know Act of 1986, 42 U.S.C. § 11001 et seq.; the Hazardous Material Transportation Act, 49 U.S.C. § 1801 et seq.; and the

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Occupational Safety and Health Act, 29 U.S.C. § 651 et seq.; and any state and local or foreign counterparts or equivalents, in each case as amended from time to time.

“ERISA” shall mean the Employee Retirement Income Security Act of 1974, as amended from time to time, and the regulations promulgated thereunder. Section references to ERISA are to ERISA, as in effect at the date of this Agreement and, as of the relevant date, any subsequent provisions of ERISA, amendatory thereof, supplemental thereto or substituted therefor.

“ERISA Affiliate” shall mean any corporation or trade or business that is a member of any group of organizations (i) described in Section 414(b) or (c) of the Code of which Seller is a member and (ii) solely for purposes of potential liability under Section 302(c)(11) of ERISA and Section 412(c)(11) of the Code and the lien created under Section 302(f) of ERISA and Section 412(n) of the Code, described in Section 414(m) or (o) of the Code of which Seller is a member.

“Event of Default” shall have the meaning specified in Section 14(a) of this Agreement.

“Facility Amount” shall mean $100,000,000.

“Facility Expiration Date” shall mean October 27, 2013.

“Federal Funds Rate” shall mean, for any day, the weighted average of the rates on overnight federal funds transactions with members of the Federal Reserve System arranged by federal funds brokers, as published on the next succeeding Business Day by the Federal Reserve Bank of New York, or, if such rate is not so published for any day that is a Business Day, the average of the quotations for the day of such transactions received by Buyer from three federal funds brokers of recognized standing selected by it.

“Fee Agreement” shall mean that certain letter agreement, dated as of October 27, 2011, between the Seller and the Buyer.

“Filings” shall have the meaning specified in Section 6 of this Agreement.

“GAAP” shall mean United States generally accepted accounting principles consistently applied as in effect from time to time.

“Governmental Authority” shall mean any national or federal government, any state, regional, local or other political subdivision thereof with jurisdiction and any Person with jurisdiction exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government.

“Ground Lease” shall mean a ground lease containing the following terms and conditions: (a) a remaining term (exclusive of any unexercised extension options) of thirty (30) years or more from the Purchase Date of the Purchased Loan; (b) the right of the lessee to mortgage and encumber its interest in the leased property without the consent of the lessor or with such consent given; (c) the obligation of the lessor to give the holder of any mortgage lien on such leased property written notice of any defaults on the part of the lessee and agreement of such lessor that such lease will not be terminated until such holder has had a reasonable opportunity to cure or complete foreclosures, and fails to do so; (d) reasonable transferability of

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the lessee’s interest under such lease, including ability to sublease; and (e) such other rights customarily required by mortgagees making a loan secured by the interest of the holder of the leasehold estate demised pursuant to a ground lease.

“Guaranty” shall mean the Guaranty, dated as of the date hereof, from Sponsor to Buyer, of amounts due under this Agreement to Buyer, plus any actual, out-of-pocket costs reasonably incurred in connection with the enforcement, and pursuant to the terms, of such Guaranty.

“Hedging Transactions” shall mean, with respect to any or all of the Purchased Loans, any short sale of U.S. Treasury Securities or mortgage-related securities, futures contract (including Eurodollar futures) or options contract or any interest rate swap, cap or collar agreement or similar arrangements providing for protection against fluctuations in interest rates or the exchange of nominal interest obligations, either generally or under specific contingencies, entered into by Seller with Buyer or an Affiliate of Buyer or one or more other counterparties reasonably acceptable to the Buyer.

“Income” shall mean, with respect to any Purchased Loan at any time, the sum of (x) any principal thereof and all interest, dividends or other distributions thereon and (y) all net sale proceeds received by Seller in connection with a sale of such Purchased Loan to a Person other than Buyer.

“Indemnified Amounts” and “Indemnified Parties” shall have the meaning specified in Section 27 of this Agreement.

“Independent Director” shall mean a duly appointed manager or member of the board of directors (or managers) of the relevant entity who shall not have been, at the time of such appointment or at any time while serving as a director or manager of the relevant entity and may not have been at any time in the preceding five (5) years, (a) a direct or indirect legal or beneficial owner in such entity or any of its Affiliates, (b) a creditor, supplier, employee, officer, director (other than in its capacity as Independent Director), family member, manager or contractor of such entity or any of its Affiliates, or (c) a Person who controls (directly, indirectly or otherwise) such entity or any of its Affiliates or any creditor, supplier, employee, officer, director, family member, manager or contractor of such Person or any of its Affiliates.

“Irrevocable Direction Letter” shall have the meaning specified in Section 5(b).

“Junior Interest” shall mean a “B-note” in an “A/B” structure in a commercial real estate loan.

“ISDA Master Agreement” shall mean the ISDA 2002 Master Agreement (including respective schedules, annexes and confirmations), dated as of August 10, 2011, by and between Seller and Buyer, as such agreement may be modified or supplemented from time to time.

“LIBOR” shall mean, with respect to each Pricing Rate Period, the rate (expressed as a percentage per annum and rounded upward, if necessary, to the next nearest 1/1000 of 1%) for deposits in U.S. dollars, for a one month period, that appears on Reuters Screen LIBOR01 (or the successor thereto) as of 11:00 a.m., London time, on the related Pricing Rate Determination Date. If such rate does not appear on Reuters Screen LIBOR01 as of 11:00 a.m., London time,

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on such Pricing Rate Determination Date, Buyer shall request the principal London office of any four major reference banks in the London interbank market selected by Buyer to provide such bank’s offered quotation (expressed as a percentage per annum) to prime banks in the London interbank market for deposits in U.S. dollars for a one month period as of 11:00 a.m., London time, on such Pricing Rate Determination Date for amounts of not less than the Repurchase Price of the applicable Transaction. If at least two such offered quotations are so provided, LIBOR shall be the arithmetic mean of such quotations. If fewer than two such quotations are so provided, Buyer shall request any three major banks in New York City selected by Buyer to provide such bank’s rate (expressed as a percentage per annum) for loans in U.S. dollars to leading European banks for a one month period as of approximately 11:00 a.m., New York City time on the applicable Pricing Rate Determination Date for amounts of not less than the Repurchase Price of such Transaction. If at least two such rates are so provided, LIBOR shall be the arithmetic mean of such rates. LIBOR shall be determined by Buyer or its agent, which determination shall be conclusive absent manifest error.

“LIBO Rate” shall mean, with respect to any Pricing Rate Period pertaining to a Transaction, a rate per annum determined for such Pricing Rate Period in accordance with the following formula (rounded upward to the nearest 1/100th of 1%):

LIBOR

1 – Reserve Requirement

“Lien” shall mean any mortgage, lien, encumbrance, charge or other security interest, whether arising under contract, by operation of law, judicial process or otherwise.

“Material Adverse Effect” shall mean a material adverse effect on (a) the business, financial condition or operations of Seller and Sponsor, taken as a whole, (b) the ability of Seller or Sponsor to pay and perform its obligations under any of the Transaction Documents, (c) the legality, validity or enforceability of any of the Transaction Documents, (d) the rights and remedies of Buyer under any of the Transaction Documents, or (e) the perfection or priority of any Lien granted under any Purchased Loan Document.

“Margin Amount” shall mean, with respect to any Transaction as of any date of determination, an amount equal to the product of the Margin Percentage and the outstanding Purchase Price of the Purchased Loan for such Transaction as of such date.

“Margin Deficit” shall have the meaning specified in Section 4(a) hereof.

“Margin Excess” shall have the meaning specified in Section 4(c) hereof.

“Margin Percentage” shall mean 133.33%.

“Market Value” shall mean with respect to any Purchased Loan, the market value for such Purchased Loan, as determined by Buyer on each Business Day in its sole good faith discretion. Market value may be adjusted by Buyer due to either (i) price, yield or spread movements related to comparable loans or (ii) credit events with respect to such Purchased Loan, the related Mortgagor or relevant property market related to such Purchased Loan.

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The value (positive or negative) of any Hedging Transactions assigned to Buyer or to which Seller and Buyer are parties in connection with such Purchased Loan shall be included in the determination of Market Value.

“Mortgage” shall mean a mortgage, deed of trust, deed to secure debt or other instrument, creating a valid and enforceable first lien on or a first priority ownership interest in an estate in fee simple in real property and the improvements thereon, securing a mortgage note or similar evidence of indebtedness.

“Mortgage Note” shall mean a note or other evidence of indebtedness of a Mortgagor secured by a Mortgage in connection with a Purchased Loan.

“Mortgaged Property” shall mean the real property securing repayment of the debt evidenced by a Mortgage Note.

“Mortgagee” shall mean the record holder of a Mortgage Note secured by a Mortgage.

“Mortgagor” shall mean the obligor on a Mortgage Note and the grantor of the related Mortgage.

“Multiemployer Plan” shall mean a multiemployer plan defined as such in Section 3(37) of ERISA to which contributions have been, or were required to have been, made by Seller or any ERISA Affiliate and which is covered by Title IV of ERISA.

“OFAC List” shall mean the Specially Designated Nationals list maintained by the U.S. Department of Treasury, Office of Foreign Assets Control (OFAC).

“Permitted Purchased Loan Modification” shall mean any modification or amendment of a Purchased Loan which is not a Significant Purchased Loan Modification.

“Person” shall mean an individual, corporation, limited liability company, business trust, partnership, joint tenant or tenant-in-common, trust, unincorporated organization, or other entity, or a federal, state or local government or any agency or political subdivision thereof.

“Plan” shall mean an employee benefit or other plan established or maintained by Seller or any ERISA Affiliate during the five year period ended prior to the date of this Agreement or to which Seller or any ERISA Affiliate makes, is obligated to make or has, within the five year period ended prior to the date of this Agreement, been required to make contributions and that is covered by Title IV of ERISA or Section 302 of ERISA or Section 412 of the Code, other than a Multiemployer Plan.

“Plan Party” shall have the meaning specified in Section 22(a) of this Agreement.

“Price Differential” shall mean, with respect to any Transaction as of any date, the aggregate amount obtained by daily application of the Pricing Rate for such Transaction to the outstanding Purchase Price for such Transaction on a 360-day-per-year basis for the actual number of days during the period commencing on (and including) the Purchase Date for such

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Transaction and ending on (but excluding) the date of determination (reduced by any amount of such Price Differential previously paid by Seller to Buyer with respect to such Transaction).

“Pricing Rate” shall mean, for any Pricing Rate Period, an annual rate equal to the LIBO Rate for such Pricing Rate Period plus the Applicable Spread for such Transaction and shall be subject to adjustment and/or conversion as provided in Sections 3(g) and 3(h) of this Agreement.

“Pricing Rate Determination Date” shall mean with respect to any Pricing Rate Period with respect to any Transaction, the second (2nd) Business Day preceding the first day of such Pricing Rate Period.

“Pricing Rate Period” shall mean, (a) in the case of the first Pricing Rate Period with respect to any Transaction, the period commencing on and including the Purchase Date for such Transaction and ending on and excluding the following Remittance Date, and (b) in the case of any subsequent Pricing Rate Period, the period commencing on and including such Remittance Date and ending on and excluding the following Remittance Date; provided, however, that in no event shall any Pricing Rate Period end subsequent to the Repurchase Date.

“Prime Rate” shall mean the prime rate of U.S. commercial banks as published in The Wall Street Journal (or, if more than one such rate is published, the average of such rates).

“Principal Payment” shall mean, with respect to any Purchased Loan, any payment or prepayment of principal received by the Depository in respect thereof.

“Prohibited Person” shall mean any (1) person or entity who is on the OFAC List; a “designated national,” “specially designated national,” “specially designated terrorist,” “specially designated global terrorist,” “foreign terrorist organization,” or “blocked person” within the definitions set forth in the Foreign Assets Control Regulations of the United States Treasury Department, 31 C.F.R., Subtitle B, Chapter V, as amended, (2) person acting on behalf of, or an entity owned or controlled by, any government against whom the United States maintains economic sanctions or embargoes under the Regulations of the United States Treasury Department, 31 C.F.R., Subtitle B, Chapter V, as amended, including, but not limited to, the “Government of Sudan,” the “Government of Iran,” and the “Government of Cuba,” and any person or organization determined by the Director of the Office of Foreign Assets Control to be included within 31 C.F.R. Section 575.306 (definition of “Government of Iraq”), (3) person or entity who is listed in the Annex to or is otherwise within the scope of Executive Order 13224 - Blocking Property and Prohibiting Transactions with Person who Commit, Threaten to Commit, or Support Terrorism, effective September 24, 2001, or (4) person or entity subject to additional restrictions imposed by the following statutes or Regulations and Executive Orders issued thereunder: the Trading with the Enemy Act, 50 U.S.C. app. §§ 1 et seq., the Iraq Sanctions Act, Pub. L. 101-513, Title V, §§ 586 to 586J, 104 Stat. 2047, the National Emergencies Act, 50 U.S.C. §§ 1601 et seq., the Anti-Terrorism and Effective Death Penalty Act of 1996, Pub. L. 104-132, 110 Stat. 1214-1319, the International Emergency Economic Powers Act, 50 U.S.C. §§ 1701 et seq., the United Nations Participation Act, 22 U.S.C. § 287c, the International Security and Development Cooperation Act, 22 U.S.C. § 2349aa-9, the Nuclear Proliferation Prevention Act of 1994, Pub. L. 103-236, 108 Stat. 507, the Foreign Narcotics Kingpin Designation Act, 21 U.S.C. §§ 1901 et seq., the Iran and Libya Sanctions Act of 1996, Pub. L.

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104-172, 110 Stat. 1541, the Cuban Democracy Act, 22 U.S.C. §§ 6001 et seq., the Cuban Liberty and Democratic Solidarity Act, 22 U.S.C. §§ 6201-91, the Foreign Operations, Export Financing and Related Programs Appropriations Act, 1997, Pub. L. 104-208, 110 Stat. 3009-172, the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001, Pub. L. 107-56, 115 Stat. 272, or any other law of similar import as to any non-U.S. country, as each such Act or law has been or may be amended, adjusted, modified, or reviewed from time to time.

“Purchase Date” shall mean any date on which a Purchased Loan is to be transferred by Seller to Buyer.

“Purchase Percentage” shall mean 75.00%.

“Purchase Price” shall mean, with respect to any Purchased Loan, (x) as of any Purchase Date for any Purchased Loan an amount (expressed in dollars) equal to the product obtained by multiplying (i) the lesser of (x) the Market Value of such Purchased Loan and (y) the par amount of such Purchased Loan by (ii) the Purchase Percentage and (y) thereafter, such amount referred to in clause (x) reduced by (a) any amount applied to reduce the Purchase Price pursuant to Section 4(a) or 5 of this Agreement and increased by (b) any amount transferred by Buyer to Seller pursuant to Section 4(c) of this Agreement.

“Purchased Loan File” shall mean the documents specified as the “Purchased Loan File” in Section 7(e), together with any additional documents and information required to be delivered to Buyer or its designee (including the Custodian) pursuant to this Agreement.

“Purchased Loan Documents” shall mean, with respect to a Purchased Loan, the documents comprising the Purchased Loan File for such Purchased Loan.

“Purchased Loans” shall mean (i) with respect to any Transaction, the Eligible Loans sold by Seller to Buyer in such Transaction and (ii) with respect to the Transactions in general, all Eligible Loans sold by Seller to Buyer.

“Purchased Loan Schedule” shall mean a schedule of Purchased Loans attached to each Trust Receipt and Custodial Delivery, which may but is not required to, contain information substantially similar to the Collateral Tape.

“REC” shall have the meaning specified in Exhibit VI.

“REMIC” shall mean a real estate mortgage investment conduit, within the meaning of Section 860D(a) of the Code.

“Remittance Date” shall mean the fifteenth (15th) calendar day of each month, or the next succeeding Business Day, if such calendar day shall not be a Business Day, or such other day as is mutually agreed to by Seller and Buyer.

“Repurchase Date” shall mean, with respect to each Purchased Loan, the earlier of:

(x) the Facility Expiration Date, or

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(y) the thirtieth (30^th) day of the month (or if such day is not a Business Day, the immediately succeeding Business Day) in the month following the month in which the Purchase Date occurs; provided, that notwithstanding the foregoing, so long as an Event of Default has not occurred and is not continuing as of such date, the Repurchase Date initially determined pursuant to this clause (y) shall be automatically extended for one calendar month to the thirtieth (30^th) day of the immediately following month (or if such day is not a Business Day, the immediately succeeding Business Day) up to five times (i.e. a total of six consecutive months in total).

“Repurchase Price” shall mean, with respect to any Purchased Loan as of any date, the price at which such Purchased Loan is to be transferred from Buyer to Seller upon termination of the related Transaction; such price will be determined in each case as the sum of (a) the outstanding Purchase Price of such Purchased Loan, (b) the accrued but unpaid Price Differential thereon with respect to such Purchased Loan as of such date, and (c) all other amounts due and payable as of such date by Seller to Buyer under this Agreement or any Transaction Document with respect to such Purchased Loan (including, but not limited to, accrued and unpaid fees, expenses and indemnity amounts).

“Requirement of Law” shall mean any law, treaty, rule, regulation, code, directive, policy, order or requirement or determination of an arbitrator or a court or other Governmental Authority whether now or hereafter enacted or in effect.

“Reserve Requirement” shall mean, with respect to any Pricing Rate Period, the aggregate (without duplication) of the rates (expressed as a decimal fraction) of reserve requirements in effect during such Pricing Rate Period (including, without limitation, basic, supplemental, marginal and emergency reserves under any regulations of the Board of Governors of the Federal Reserve System or other Governmental Authority having jurisdiction with respect thereto) dealing with reserve requirements prescribed for eurocurrency funding (currently referred to as “Eurocurrency Liabilities” in Regulation D of such Board of Governors) maintained by the Buyer. Notwithstanding anything herein to the contrary, Buyer shall not implement Reserve Requirements for purposes of determining the LIBO Rate unless Buyer shall be making the same determination generally on all of its similarly situated customers.

“Reset Date” shall mean, with respect to any Pricing Rate Period, the second Business Day preceding the first day of such Pricing Rate Period with respect to any Transaction.

“Seller” shall mean RAIT CMBS Conduit I, LLC, a Delaware limited liability company.

“Senior Interest” shall mean an “A note” in an “A/B structure” in a commercial real estate loan.

“Servicing Agreement” shall have the meaning specified in Section 29(b).

“Servicing Rights” shall mean Seller’s right, title and interest in and to any and all of the following: (a) any and all rights to service the related Purchased Loan; (b) any payments to or monies received by such Seller or any other Person for servicing such Purchased Loan; (c) any late fees, penalties or similar payments with respect to such Purchased Loan; (d) all agreements

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or documents creating, defining or evidencing any such servicing rights to the extent they relate to such servicing rights and all rights of such Seller or any other Person thereunder; (e) escrow payments or other similar payments with respect to such Purchased Loan and any amounts actually collected by such Seller or any other Person with respect thereto; (f) the right, if any, to appoint a special servicer or liquidator of such Purchased Loan; and (g) all accounts and other rights to payment related to the servicing of such Purchased Loan.

“Servicing Records” shall have the meaning specified in Section 29(b).

“Significant Purchased Loan Modification” means any written modification or amendment of a Purchased Loan which

(i) reduces the principal amount of the Purchased Loan in question other than (1) with respect to a dollar-for-dollar principal payment or (2) reductions of principal to the extent of deferred, accrued or capitalized interest added to principal which additional amount was not taken into account by Buyer in determining the related Purchase Price,

(ii) increases the principal amount of a Purchased Loan other than increases which are derived from accrual or capitalization of deferred interest which is added to principal or protective advances,

(iii) modifies the amount or timing of any regularly scheduled payments of principal and non-contingent interest of the Purchased Loan in question,

(iv) changes the frequency of scheduled payments of principal and interest in respect of a Purchased Loan,

(v) subordinates the lien priority of the Purchased Loan in question or the payment priority of the Purchased Loan in question other than subordinations required under the then existing terms and conditions of the Purchased Loan in question (provided, however, the foregoing shall not preclude the execution and delivery of subordination, nondisturbance and attornment agreements with tenants, subordination to tenant leases, easements, plats of subdivision and condominium declarations and similar instruments which in the commercially reasonable judgment of the Seller do not materially adversely affect the rights and interest of the holder of the Purchased Loan in question),

(vi) releases any collateral for the Purchased Loan in question other than releases required under the then existing Purchased Loan documents or releases in connection with eminent domain or under threat of eminent domain,

(vii) waives, amends or modifies any cash management or reserve account requirements of the Purchased Loan other than changes required under the then existing Purchased Loan documentation, or

(viii) waives any due-on-sale or due-on-encumbrance provisions of the Purchased Loan in question other than waivers required to be given under the then existing Purchased Loan documents, or

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(ix) waives, amends or modifies the underlying insurance requirements of the Purchased Loan.

“Single-Purpose Entity” shall mean a Person, other than an individual, which is formed or organized solely for the purpose of holding, directly and subject to this Agreement, the Purchased Loans, does not engage in any business unrelated to the Purchased Loans and the financing thereof, does not have any assets other than the Purchased Loans and the financing thereof, or any indebtedness other than as permitted by this Agreement, has its own separate books and records and its own accounts, in each case which are separate and apart from the books and records and accounts of any other Person, and holds itself out as being a Person, separate and apart from any other Person.

“Sponsor” shall mean RAIT Financial Trust, a Maryland real estate investment trust.

“Survey” shall mean a certified ALTA/ACSM (or applicable state standards for the state in which the Collateral is located) survey of a Mortgaged Property prepared by a registered independent surveyor or engineer and in form and content satisfactory to the Buyer in its commercially reasonable discretion and the company issuing the Title Policy for such Mortgaged Property.

“Title Exceptions” shall have the meaning specified in Exhibit VI.

“Title Policy” shall have the meaning specified in Exhibit VI.

“Transaction” shall have the meaning set forth in Section 1 of this Agreement.

“Transaction Conditions Precedent” shall have the meaning specified in Section 3(b) of this Agreement.

“Transaction Documents” shall mean, collectively, this Agreement, any applicable Annexes to this Agreement, the Guaranty, the Custodial Agreement, the Blocked Account Agreement, the ISDA Master Agreement and all Confirmations executed pursuant to this Agreement in connection with specific Transactions, any other documents or instruments relating to any such documents executed by Seller or Sponsor, and any written modifications, extensions, renewals, restatements, or replacements of any of the foregoing.

“Transaction Request” shall mean a request to enter into a Transaction, in the form of Exhibit VIII attached hereto.

“Trust Receipt” shall mean a trust receipt issued by Custodian to Buyer confirming the Custodian’s possession of certain Purchased Loan Files which are the property of and held by Custodian for the benefit of the Buyer (or any other holder of such trust receipt) or a bailment arrangement with an Acceptable Attorney.

“UCC” shall have the meaning specified in Section 6 of this Agreement.

“Whole Loans” shall have the meaning specified in the definition of the term “Eligible Loan”.

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3. INITIATION; CONFIRMATION; TERMINATION; FEES

(a) Subject to the terms and conditions set forth in this Agreement (including, without limitation, the “Transaction Conditions Precedent” specified in Section 3(b) of this Agreement), an agreement to enter into a Transaction shall be made in writing at the initiation of Seller as provided below; provided, however, that (i) the aggregate outstanding Purchase Price at any time for all Transactions shall not exceed the Facility Amount and (ii) Buyer shall not have any obligation to enter into Transactions with Seller after the occurrence and during the continuance of a Default or an Event of Default or during the thirty (30) day period immediately prior to the Facility Expiration Date. Seller may, from time to time, submit to Buyer a Transaction Request, in the form of Exhibit VIII attached hereto, for Buyer’s review and approval in order to enter into a Transaction with respect to any Eligible Loan that Seller proposes to be included as Collateral under this Agreement. Upon Buyer’s receipt of a complete Due Diligence Package, Buyer shall have the right to request, in Buyer’s good faith business judgment, additional diligence materials and deliveries with respect to the applicable Eligible Loan, to the extent necessary for the Buyer’s underwriting of such Eligible Loan. Upon Buyer’s receipt of the Transaction Request and diligence materials, Buyer shall use commercially reasonable efforts to within ten (10) Business Days and following receipt of internal credit approval, either (i) notify Seller of the Purchase Price and the Market Value for the Eligible Loan or (ii) deny Seller’s request for a Transaction. Buyer’s failure to respond to Seller within ten (10) Business Days, as applicable, shall be deemed to be a denial of Seller’s request for a Transaction, unless Buyer and Seller have agreed otherwise in writing. Buyer shall have the right to review all Eligible Loans proposed to be sold to Buyer in any Transaction and to conduct its own due diligence investigation of such Eligible Loans as Buyer reasonably determines. Buyer shall be entitled to make a determination, in its sole discretion, that it shall or shall not purchase any or all of the Eligible Loans proposed to be sold to Buyer by Seller. On the Purchase Date for the Transaction which shall be on a date mutually agreed upon by Buyer and Seller following the approval of an Eligible Loan by Buyer, the Purchased Loan shall be transferred to Buyer against the transfer of the Purchase Price to an account of Seller.

(b) Upon agreeing to enter into a Transaction hereunder, provided each of the Transaction Conditions Precedent shall have been satisfied (or waived by Buyer), Buyer shall promptly deliver to Seller a written confirmation in the form of Exhibit I attached hereto of each Transaction (a “Confirmation”). Such Confirmation shall describe the Purchased Loans, shall identify Buyer and Seller, and shall set forth:

(i) the Purchase Date,

(ii) the Purchase Price for such Purchased Loan,

(iii) the Repurchase Date,

(iv) the Pricing Rate, and

(v) any additional terms or conditions not inconsistent with this Agreement.

With respect to any Transaction, the Pricing Rate shall be determined initially on the Pricing Rate Determination Date applicable to the first Pricing Rate Period for such Transaction,

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and shall be reset on each Reset Date for the next succeeding Pricing Rate Period for such Transaction. Buyer or its agent shall determine in accordance with the terms of this Agreement the Pricing Rate on each Pricing Rate Determination Date for the related Pricing Rate Period and notify Seller of such rate for such period on the Reset Date. For purposes of this Section 3(b), the “Transaction Conditions Precedent” shall be deemed to have been satisfied with respect to any proposed Transaction if:

(A) no Default or Event of Default under this Agreement shall have occurred and be continuing as of the Purchase Date for such proposed Transaction;

(B) the representations and warranties made by Seller in any of the Transaction Documents shall be true and correct in all material respects as of the Purchase Date for such Transaction (except to the extent such representations and warranties are made as of a particular date);

(C) Buyer shall have received from Seller all corporate and governmental approvals, legal opinions and closing documentation as Buyer may reasonably request,

(D) Seller shall have paid all of Buyer’s out-of-pocket costs and expenses pursuant to Section 30(d) of this Agreement; and

(E) Buyer shall have (A) determined, in accordance with the applicable provisions of Section 3(a) of this Agreement, that the Assets proposed to be sold to Buyer by Seller in such Transaction are Eligible Loans and (B) obtained internal credit approval for the inclusion of such Eligible Loan as a Purchased Loan in a Transaction.

(c) Each Confirmation, together with this Agreement, shall be conclusive evidence of the terms of the Transaction(s) covered thereby unless specific objection is made no less than three (3) Business Days after the date thereof. In the event of any conflict between the terms of such Confirmation and the terms of this Agreement, the Confirmation shall prevail. An objection sent by Seller with respect to any Confirmation must state specifically that the writing is an objection, must specify the provision(s) of such Confirmation being objected to by Seller, must set forth such provision(s) in the manner that Seller believes such provisions should be stated, and must be sent by Seller no more than five (5) Business Days after such Confirmation is received by Seller.

(d) No Transaction shall be terminable on demand by Buyer (other than upon the occurrence and during the continuance of an Event of Default). Seller shall be entitled to terminate a Transaction on demand, in whole only, and repurchase the Purchased Loan subject to a Transaction on any Business Day prior to the Repurchase Date (an “Early Repurchase Date”); provided, however, that:

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(i) Seller notifies Buyer in writing of its intent to terminate such Transaction and repurchase such Purchased Loan no later than three (3) Business Days prior to such Early Repurchase Date,

(ii) on such Early Repurchase Date Seller pays to Buyer an amount equal to the sum of the Repurchase Price for such Transaction, the amount, if any, payable by Seller in the event any Hedging Transaction related to such Purchased Loan is being terminated as of such date and any other amounts payable under this Agreement (including, without limitation, Section 3(i) of this Agreement) with respect to such Transaction against transfer to the Seller or its agent of such Purchased Loan,

(iii) on such Early Repurchase Date, following the payment of the amounts set forth in subclause (ii) above, no Margin Deficit exists.

Such notice shall set forth the Early Repurchase Date and shall identify with particularity the Purchased Loans to be repurchased on such Early Repurchase Date.

(e) On the Repurchase Date, termination of the applicable Transaction will be effected by transfer to Seller or its agent of the applicable Purchased Loan and any Income in respect thereof received by Buyer (and not previously credited or transferred to, or applied to the obligations of, Seller pursuant to Section 5 of this Agreement) against the simultaneous transfer to an account of Buyer of the Repurchase Price, the amount, if any, payable by Seller in the event any Hedging Transaction related to such Purchased Loan is being terminated as of such date and any other amounts payable under this Agreement with respect to such Transaction.

(f) On any Remittance Date before the Repurchase Date, Seller shall have the right, from time to time, to transfer cash to Buyer for the purpose of reducing the Purchase Price of, but not terminating, a Transaction and without the release of any Collateral and without any prepayment fee or penalty.

(g) If prior to the first day of any Pricing Rate Period with respect to any Transaction, Buyer shall have determined in the exercise of its reasonable business judgment (which determination (with respect to subparagraph (i) only) shall be conclusive and binding upon Seller) that, (i) by reason of circumstances affecting the relevant market, adequate and reasonable means do not exist for ascertaining the LIBO Rate for such Pricing Rate Period, or (ii) the LIBO Rate determined or to be determined for such Pricing Rate Period will not adequately and fairly reflect the cost to Buyer (as determined and certified by Buyer) of making or maintaining Transactions during such Pricing Rate Period, Buyer shall give telecopy or telephonic notice (with written notice to follow the next Business Day) thereof to Seller as soon as practicable thereafter. If such notice is given, and provided Buyer shall be making the same determination generally on all of its similarly situated customers, the Pricing Rate with respect to such Transaction for such Pricing Rate Period, and for any subsequent Pricing Rate Periods until (1) the LIBO Rate is ascertainable for subsequent pricing periods (as determined by Buyer in the exercise of its reasonable business judgment) or (2) the LIBO Rate adequately and fairly reflects the cost to Buyer of making or maintaining Transactions during such Pricing Rate Period, as

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applicable, shall be a per annum rate equal to the Federal Funds Rate plus 25 basis points (0.25%) plus the Applicable Spread (the “Alternative Rate”).

(h) Notwithstanding any other provision herein, if the adoption of or any change in any Requirement of Law or in the interpretation or application thereof shall make it unlawful for Buyer to effect Transactions as contemplated by the Transaction Documents, (a) the commitment of Buyer hereunder to enter into new Transactions shall forthwith be canceled, and (b) the Transactions then outstanding shall be converted automatically to Alternative Rate Transactions on the last day of the then current Pricing Rate Period or within such earlier period as may be required by law. If any such conversion of a Transaction occurs on a day which is not the last day of the then current Pricing Rate Period with respect to such Transaction, Seller shall pay to Buyer such amounts, if any, as may be required pursuant to Section 3(i) of this Agreement.

(i) Upon written demand by Buyer, Seller shall indemnify Buyer and hold Buyer harmless from any net actual, out-of-pocket loss or expense (not to include any lost profit or opportunity) (including, without limitation, reasonable actual attorneys’ fees and disbursements) which Buyer sustains or incurs as a consequence of (i) default by the Seller in terminating any Transaction after the Seller has given a notice in accordance with Section 3(d) hereof of a termination of a Transaction, (ii) any payment of the Repurchase Price on any day other than a Remittance Date or the Repurchase Date (including, without limitation, any such actual, out-of-pocket loss or expense arising from the reemployment of funds obtained by Buyer to maintain Transactions hereunder or from customary and reasonable fees payable to terminate the deposits from which such funds were obtained) or (iii) a default by Seller in selling Eligible Loans after Seller has notified Buyer of a proposed Transaction and Buyer has agreed to purchase such Eligible Loans in accordance with the provisions of this Agreement. A certificate as to such actual costs, losses, damages and expenses, setting forth the calculations therefor shall be submitted promptly by Buyer to Seller.

(j) If the adoption of or any change in any Requirement of Law or in the interpretation or application thereof by any Governmental Authority or compliance by Buyer with any request or directive from any central bank or other Governmental Authority having jurisdiction over Buyer made subsequent to the date hereof:

(i) shall subject Buyer to any tax of any kind whatsoever with respect to the Transaction Documents, any Purchased Loan or any Transaction, or change the basis of taxation of payments to Buyer in respect thereof (except for income taxes and any changes in the rate of tax on Buyer’s overall net income); or

(ii) shall impose, modify or hold applicable any reserve, special deposit, compulsory loan or similar requirement against assets held by, deposits or other liabilities in or for the account of, advances, loans or other extensions of credit by, or any other acquisition of funds by, any office of Buyer which is not otherwise included in the determination of the LIBO Rate hereunder;

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and the result of any of the foregoing is to increase the cost to Buyer, by an amount which Buyer deems, in the exercise of its reasonable business judgment, to be material, of entering into, continuing or maintaining Transactions or to reduce in a material manner any amount receivable under the Transaction Documents in respect thereof; then, in any such case and provided Buyer imposes such additional costs generally on all of its similarly situated customers, Seller shall promptly pay Buyer any additional amounts necessary to compensate Buyer for such increased cost or reduced amount receivable. If Buyer becomes entitled to claim any additional amounts pursuant to this Section 3(j), it shall notify Seller in writing of the event by reason of which it has become so entitled. Such notification as to the calculation of any additional amounts payable pursuant to this subsection shall be submitted by Buyer to Seller. This covenant shall survive the termination of this Agreement and the repurchase by Seller of any or all of the Purchased Loans.

(k) If Buyer shall have determined that the adoption of or any change in any Requirement of Law regarding capital adequacy or in the interpretation or application thereof or compliance by Buyer or any corporation controlling Buyer with any request or directive regarding capital adequacy (whether or not having the force of law) from any Governmental Authority made subsequent to the date hereof has the effect of reducing the rate of return on Buyer’s or such corporation’s capital as a consequence of its obligations hereunder to a level below that which Buyer or such corporation could have achieved but for such adoption, change or compliance (taking into consideration Buyer’s or such corporation’s policies with respect to capital adequacy) by an amount deemed by Buyer, in the exercise of its reasonable business judgment, to be material, then from time to time, after submission by Buyer to Seller of a written request therefor, and provided Buyer imposes such additional costs generally on all of its similarly situated customers, Seller shall pay to Buyer such additional amount or amounts as will compensate Buyer for such reduction. Such notification as to the calculation of any additional amounts payable pursuant to this subsection shall be submitted by Buyer to Seller. This covenant shall survive the termination of this Agreement and the repurchase by Seller of any or all of the Purchased Loans.

4. MARGIN MAINTENANCE

(a) If at any time, the aggregate Market Value of the Purchased Loans shall be less than the product of (x) 98.00% and (y) the sum of the Margin Amounts calculated individually with respect to each Purchased Loan (a “Margin Deficit”), then Buyer may by notice to Seller in writing (including therein a description of the Market Value calculation for each Purchased Loan) require Seller to cure such Margin Deficit by either (i) transferring to Buyer additional cash collateral in an amount equal to (a) the difference between the sum of the Margin Amounts calculated individually with respect to each Purchased Loan and the aggregate Market Value of the Purchased Loans multiplied by (b) the Purchase Percentage, (ii) reducing the outstanding Purchase Price of the Purchased Loans such that the aggregate Market Value of the Purchased Loans is equal to the sum of the Margin Amounts or (iii) doing an early repurchase on an Early Repurchase Date pursuant to Section 3(d) of this Agreement in order to cure such Margin Deficit. Any cash transferred to Buyer pursuant to clause (ii) of Section 4(a) of this Agreement with respect to any Purchased Loan shall be applied to reduce the Purchase Price for each Purchased Loan on a dollar-for-dollar basis for which there was a Margin Deficit.

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(b) If any notice is given by Buyer under Section 4(a) of this Agreement on any Business Day, the Seller shall transfer cash or additional collateral as provided in Section 4(a) by no later than the close of business on the second Business Day following the Business Day on which such notice is given. The failure of Buyer, on any one or more occasions, to exercise its rights under Section 4(a) of this Agreement shall not change or alter the terms and conditions to which this Agreement is subject or limit the right of Buyer to do so at a later date. Buyer and Seller agree that any failure or delay by Buyer to exercise its rights under Section 4(a) of this Agreement shall not limit such party’s rights under this Agreement or otherwise existing by law or in any way create additional rights for such party.

(c) If on any date no Margin Deficit or Default or Event of Default exists and the Market Value for any particular Purchased Loan exceeds the Margin Amount for such Purchased Loan as of such date, then Buyer, in response to Seller’s written request, to be delivered no more frequently than once each calendar month with respect to any Purchased Loan, shall transfer cash to Seller in an amount up to such excess multiplied by the Purchase Percentage (such amount, the “Margin Excess”); provided, that, Buyer shall not have any obligation to transfer cash to Seller with respect to any individual Purchased Loan in an amount greater than the amount of cash transferred by Seller to Buyer pursuant to Section 4(a) of this Agreement in reduction of the Purchase Price of such Purchased Loan.

(d) If any notice is given by Seller under Section 4(c) of this Agreement on any Business Day, the Buyer shall transfer cash as provided in Section 4(c) by no later than the close of business on the second Business Day following the Business Day on which such notice is given. The failure of Seller, on any one or more occasions, to exercise its rights under Section 4(c) of this Agreement shall not change or alter the terms and conditions to which this Agreement is subject or limit the right of Seller to do so at a later date. Buyer and Seller agree that any failure or delay by Seller to exercise its rights under Section 4(c) of this Agreement shall not limit such party’s rights under this Agreement or otherwise existing by law or in any way create additional rights for such party.

5. INCOME PAYMENTS AND PRINCIPAL PAYMENTS

(a) The Cash Management Account shall be established at the Depository concurrently with the execution and delivery of this Agreement by Seller and Buyer. Buyer shall have sole dominion and control over the Cash Management Account. All Income in respect of the Purchased Loans and any payments in respect of associated Hedging Transactions, as well as any interest received from the reinvestment of such Income, shall be deposited directly into the Cash Management Account and shall be remitted by the Depository in accordance with the applicable provisions of Sections 5(d), 5(e), 5(f) and 14(b)(iii) of this Agreement.

(b) With respect to each Purchased Loan, Seller shall deliver to each Mortgagor, issuer of a participation or borrower under a Purchased Loan an irrevocable direction letter (the “Irrevocable Direction Letter”) in the form attached as Exhibit IX to this Agreement instructing the Mortgagor, issuer of a participation or borrower to pay all amounts payable under the related Purchased Loan to the Cash Management Account and shall provide to Buyer proof of such delivery. If a Mortgagor, issuer of a participation or borrower forwards any Income with respect to a Purchased Loan to Seller rather than directly to the Cash Management Account, Seller shall

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(i) deliver an additional Irrevocable Direction Letter to the applicable Mortgagor, issuer of a participation or borrower and make other commercially reasonable efforts to cause such Mortgagor, issuer of a participation or borrower to forward such amounts directly to the Cash Management Account and (ii) deposit in the Cash Management Account any such amounts within two (2) Business Days of Seller’s receipt thereof.

(c) On each Remittance Date, Seller shall pay to Buyer an amount equal to the Price Differential which has accrued during the related Pricing Rate Period for the related Transaction to the extent not previously paid to Buyer.

(d) So long as no Event of Default shall have occurred and be continuing, all Income received by the Depository in respect of the Purchased Loans and the associated Hedging Transactions (other than Principal Payments and net sale proceeds) and any deposits to reserve accounts made pursuant to the terms of the Purchased Loan Documents during each Collection Period shall be remitted by the Depository on the next Business Day to the account of Seller specified in the Confirmation.

(e) So long as no Event of Default shall have occurred and be continuing, (i) all partial Principal Payments in respect of each Purchased Loan (whether scheduled or unscheduled) received by the Depository during each Collection Period shall be paid to Buyer on the next Remittance Date and applied toward the reduction of the Purchase Price of each Purchased Loan until such Purchase Price has been reduced to zero and (ii) any Principal Payment of such Purchased Loan in full (whether scheduled or unscheduled) received by the Depository during each Collection Period shall be paid to Buyer on the next Remittance Date first in the amount necessary to reduce the Purchase Price of such Purchased Loan to zero and then to the extent necessary to cause the Purchase Price with respect to each other Purchased Loan to equal the product of the related Market Value and the applicable Purchase Percentage. Any Principal Payments not paid to Buyer pursuant to the preceding sentence on each Remittance Date shall be remitted to Seller.

(f) If an Event of Default shall have occurred and be continuing, all Income received by the Depository in respect of the Purchased Loans and the associated Hedging Transactions shall be applied by the Depository on the Business Day next following the Business Day on which such funds are deposited in the Cash Management Account as follows:

(i) first, to the Depository and Custodian an amount equal to the depository and custodial fees due and payable;

(ii) second, to Buyer an amount equal to its out-of-pocket costs and expenses and any other amounts due and payable under this Agreement;

(iii) third, to Buyer an amount equal to the Price Differential which has accrued and is outstanding in respect of all of the Purchased Loans as of such Business Day;

(iv) fourth, to make a payment to Buyer in reduction of the Repurchase Price of the Purchased Loans, such payment to be allocated amongst the

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Purchased Loans as determined by Buyer in its sole discretion, until the Repurchase Price for all of the Purchased Loans has been reduced to zero;

(v) fifth, to pay, the amount, if any, payable by Seller in the event any Hedging Transaction related to such Purchased Loan is being terminated as of such date; and

(vi) sixth, the surplus, if any, to whoever may be lawfully entitled to receive such surplus.

6. SECURITY INTEREST

The Buyer and Seller intend that all Transactions hereunder be sales to the Buyer of the Purchased Loans and not loans from the Buyer to Seller secured by the Purchased Loans. However, in the event any such Transaction is deemed to be a loan, Seller hereby pledges all of its right, title, and interest in, to and under and grants a first priority lien on, and security interest in, all of the following property, whether now owned or hereafter acquired, now existing or hereafter created and wherever located (collectively, the “Collateral”) to the Buyer to secure the payment and performance of all other amounts or obligations owing to the Buyer pursuant to this Agreement, the ISDA Master Agreement and the related documents described herein, subject to the terms of this Agreement:

(a) the Purchased Loans, the Servicing Rights, Servicing Agreements, Servicing Records, insurance relating to the Purchased Loans, and collection and escrow accounts relating to the Purchased Loans;

(b) the Hedging Transactions entered into pursuant to this Agreement;

(c) the Cash Management Account and all financial assets (including, without limitation, all security entitlements with respect to all financial assets) from time to time on deposit in the Cash Management Account;

(d) all “general intangibles”, “accounts” and “chattel paper” as defined in the UCC relating to or constituting any and all of the foregoing; and

(e) all replacements, substitutions or distributions on or proceeds, payments, Income and profits of, and records (but excluding any financial models or other proprietary information) and files relating to any and all of any of the foregoing.

The Buyer’s security interest in the Collateral shall terminate only upon termination of the Seller’s obligations under this Agreement and the documents delivered in connection herewith and therewith. Upon such termination, Buyer shall deliver to Seller such UCC termination statements and other release documents as may be commercially reasonable and to return the Purchased Loans to Seller. For purposes of the grant of the security interest pursuant to this Section 6, this Agreement shall be deemed to constitute a security agreement under the New York Uniform Commercial Code (the “UCC”). Buyer shall have all of the rights and may exercise all of the remedies of a secured creditor under the UCC and the other laws of the State of New York. In furtherance of the foregoing, (a) Buyer, at Seller’s sole cost and expense, shall

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cause to be filed in such locations as may be reasonably necessary to perfect and maintain perfection and priority of the security interest granted hereby, UCC financing statements and continuation statements (collectively, the “Filings”), and shall forward copies of such Filings to Seller upon completion thereof, and (b) while Buyer owns the Purchased Loans, Seller shall from time to time take such further actions as may be reasonably requested by Buyer to maintain and continue the perfection and priority of the security interest granted hereby (including marking its records and files to evidence the interests granted to Buyer hereunder).

7. PAYMENT, TRANSFER AND CUSTODY

(a) On the Purchase Date for each Transaction, ownership of the Purchased Loans shall be transferred to Buyer or its designee (including the Custodian) against the simultaneous transfer of the Purchase Price to an account of Seller specified in the Confirmation relating to such Transaction.

(b) On or before each Purchase Date, Seller shall deliver or cause to be delivered to Buyer or its designee the Custodial Delivery in the form attached hereto as Exhibit III; provided, that notwithstanding the foregoing, upon request of Seller, Buyer in its commercially reasonable discretion may elect to permit the Seller to make such delivery by not later than the third (3^rd) Business Day after the related Purchase Date, so long as the Seller causes an Acceptable Attorney to deliver to the Buyer and the Custodian an Attorney’s Bailee Letter on or prior to such Purchase Date. In connection with each sale, transfer, conveyance and assignment of a Purchased Loan, on or prior to the Purchase Date with respect to such Purchased Loan, the Seller shall deliver or cause to be delivered and released the following documents (collectively, the “Purchased Loan File”) pertaining to such Purchased Loan to the Custodian on or prior to the Purchase Date with respect to such Purchased Loan (or, pursuant to the proviso in the immediately preceding sentence, by not later than the third (3^rd) Business Day after the related Purchase Date):

With respect to each Purchased Loan that is a Whole Loan, to the extent applicable:

(i) The original Mortgage Note (or senior Mortgage Note in an “A/B” structure) bearing all intervening endorsements.

(ii) An original or copy of any guarantee executed in connection with the Mortgage Note (if any).

(iii) An original or copy of the Mortgage with evidence of recordation, or submission for recordation, from the appropriate governmental recording office of the jurisdiction where the Mortgaged Property is located.

(iv) Originals or copies of all assumption, modification, consolidation or extension agreements with evidence of recordation, or submission for recordation, from the appropriate governmental recording office of the jurisdiction where the Mortgaged Property is located.

(v) An original of the Assignment Documents in Blank.

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(vi) Originals or copies of all intervening assignments of mortgage with evidence of recordation, or submission for recordation, from the appropriate governmental recording office of the jurisdiction where the Mortgaged Property is located.

(vii) An original or copy of the attorney’s opinion of title and abstract of title or the original mortgagee title insurance policy, or if the original mortgagee title insurance policy has not been issued, the irrevocable marked commitment to issue the same (or irrevocable signed proforma policy).

(viii) An original or copy of any security agreement, chattel mortgage or equivalent document executed in connection with the Purchased Loan.

(ix) An original or copy of the assignment of leases and rents, if any, with evidence of recordation, or submission for recordation, from the appropriate governmental recording office of the jurisdiction where the Mortgaged Property is located.

(x) Originals or copies of all intervening assignments of assignment of leases and rents, if any, or copies thereof, with evidence of recordation, or submission for recordation, from the appropriate governmental recording office of the jurisdiction where the Mortgaged Property is located.

(xi) A copy of the UCC financing statements and all necessary UCC continuation statements with evidence of filing or submission for filing thereon, and UCC assignments prepared by Seller in blank, which UCC assignments shall be in form and substance acceptable for filing.

(xii) An environmental indemnity agreement (if any).

(xiii) A disbursement letter from the Mortgagor to the original mortgagee (if any).

(xiv) Mortgagor’s certificate or title affidavit (if any).

(xv) A survey of the Mortgaged Property (if any) as accepted by the title company for issuance of the Title Policy.

(xvi) A copy of the Mortgagor’s opinion of counsel (if any).

(xvii)  An assignment of permits, contracts and agreements (if any).

With respect to each Purchased Loan which is a Senior Interest in a Whole Loan:

(i) the original or a copy of all of the documents described above with respect to a Purchased Loan which is a whole mortgage loan;

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(ii) if applicable, an original participation certificate bearing all intervening endorsements, endorsed “Pay to the order of ______ without recourse” and signed in the name of the Last Endorsee by an authorized Person;

(iii) an original or copy of any participation agreement and an original or copy of any intercreditor agreement, co–lender agreement and/or servicing agreement executed in connection with the Purchased Loan; and

(iv) the omnibus assignment of Purchased Loan sufficient to transfer to Buyer all of Seller’s rights, title and interest in and to the Purchased Loan.

From time to time, Seller shall forward to the Custodian additional original documents or additional documents evidencing any assumption, modification, consolidation or extension of a Purchased Loan approved in accordance with the terms of this Agreement, and upon receipt of any such other documents, the Custodian shall hold such other documents as Buyer shall request from time to time. With respect to any documents which have been delivered or are being delivered to recording offices for recording and have not been returned to Seller in time to permit their delivery hereunder at the time required, in lieu of delivering such original documents, Seller shall deliver to Buyer a true copy thereof with an officer’s certificate certifying that such copy is a true, correct and complete copy of the original, which has been transmitted for recordation. Seller shall deliver such original documents to the Custodian promptly when they are received. With respect to all of the Purchased Loans delivered by Seller to Buyer or its designee (including the Custodian), Seller shall execute an omnibus power of attorney substantially in the form of Exhibit V attached hereto irrevocably appointing Buyer its attorney-in-fact with full power to (i) complete and record the Assignment of Mortgage, (ii) complete the endorsement of the Mortgage Note and (iii) after the occurrence and during the continuance of an Event of Default, take such other steps as may be reasonably necessary or desirable to enforce Buyer’s rights against such Purchased Loans and the related Purchased Loan Files and the Servicing Records. Buyer shall deposit the Purchased Loan Files representing the Purchased Loans, or direct that the Purchased Loan Files be deposited directly, with the Custodian. The Purchased Loan Files shall be maintained in accordance with the Custodial Agreement. Any Purchased Loan Files not delivered to Buyer or its designee (including the Custodian) are and shall be held in trust by Seller or its designee for the benefit of Buyer as the owner thereof. Seller or its designee shall maintain a copy of the Purchased Loan File and the originals of the Purchased Loan File not delivered to Buyer or its designee. The possession of the Purchased Loan File by Seller or its designee is at the will of the Buyer for the sole purpose of servicing the related Purchased Loan, and such retention and possession by the Seller or its designee is in a custodial capacity only. The books and records (including, without limitation, any computer records or tapes) of Seller or its designee shall be marked appropriately to reflect clearly the sale of the related Purchased Loan to Buyer. Seller or its designee (including the Custodian) shall release its custody of the Purchased Loan File only in accordance with written instructions from Buyer, unless such release is required as incidental to the servicing of the Purchased Loans, is in connection with a repurchase of any Purchased Loan by Seller or as otherwise required by law.

(c) Unless an Event of Default shall have occurred and be continuing, Buyer shall exercise all voting and corporate rights with respect to the Purchased Loans in accordance with Seller’s written instructions; provided, however, that Buyer shall not be required to follow

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Seller’s instructions concerning any vote or corporate right if doing so would, in Buyer’s good faith business judgment, be inconsistent with or result in any violation of any provision of the Transaction Documents or any Requirement of Law. Upon the occurrence and during the continuation of an Event of Default, Buyer shall be entitled to exercise all voting and corporate rights with respect to the Purchased Loans without regard to Seller’s instructions.

8. SALE, TRANSFER, HYPOTHECATION OR PLEDGE OF PURCHASED LOANS

(a) Title to all Purchased Loans shall pass to Buyer on the applicable Purchase Date, and Buyer shall have free and unrestricted use of all Purchased Loans, subject however, to the terms of this Agreement. Nothing in this Agreement or any other Transaction Document shall preclude Buyer from engaging in repurchase transactions with the Purchased Loans or otherwise selling, transferring, pledging, repledging, hypothecating, or rehypothecating the Purchased Loans, but no such transaction shall relieve Buyer of its obligations to transfer the Purchased Loans to Seller pursuant to Section 3 of this Agreement or of Buyer’s obligation to credit or pay Income to, or apply Income to the obligations of, Seller pursuant to Section 5 hereof.

(b) Nothing contained in this Agreement or any other Transaction Document shall obligate Buyer to segregate any Purchased Loans delivered to Buyer by Seller. Notwithstanding anything to the contrary in this Agreement or any other Transaction Document, no Purchased Loan shall remain in the custody of the Seller or an Affiliate of the Seller.

9. [INTENTIONALLY OMITTED]

10. REPRESENTATIONS

(a) Each of Buyer and Seller represents and warrants to the other that (i) it is duly authorized to execute and deliver this Agreement, to enter into Transactions contemplated hereunder and to perform its obligations hereunder and has taken all necessary action to authorize such execution, delivery and performance, (ii) it will engage in such Transactions as principal (or, if agreed in writing, in the form of an annex hereto or otherwise, in advance of any Transaction by the other party hereto, as agent for a disclosed principal), (iii) the person signing this Agreement on its behalf is duly authorized to do so on its behalf (or on behalf of any such disclosed principal), (iv) it has obtained all authorizations of any governmental body required in connection with this Agreement and the Transactions hereunder and such authorizations are in full force and effect and (v) the execution, delivery and performance of this Agreement and the Transactions hereunder will not violate any law, ordinance or rule applicable to it or its organizational documents or any agreement by which it is bound or by which any of its assets are affected.

(b) In addition to the representations and warranties in subsection (a) above, Seller represents and warrants to Buyer that as of the Purchase Date for the purchase of any Purchased Loans by Buyer from Seller and any Transaction thereunder and as of the date of this Agreement and at all times while this Agreement and any Transaction thereunder is in full force and effect:

(i) Organization. Seller is duly formed, validly existing and in good standing under the laws and regulations of the state of Seller’s formation and is duly licensed, qualified, and in good standing in every state where such

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licensing or qualification is necessary for the transaction of Seller’s business. Seller has the power to own and hold the assets it purports to own and hold, and to carry on its business as now being conducted and proposed to be conducted, and has the power to execute, deliver, and perform its obligations under this Agreement and the other Transaction Documents.

(ii) Due Execution; Enforceability. The Transaction Documents have been or will be duly executed and delivered by Seller, for good and valuable consideration. The Transaction Documents constitute the legal, valid and binding obligations of Seller, enforceable against Seller in accordance with their respective terms subject to bankruptcy, insolvency, and other limitations on creditors’ rights generally and to equitable principles.

(iii) Non-Contravention. Neither the execution and delivery of the Transaction Documents, nor consummation by Seller of the transactions contemplated by the Transaction Documents (or any of them), nor compliance by Seller with the terms, conditions and provisions of the Transaction Documents (or any of them) will conflict with or result in a breach of any of the terms or provisions of (i) the organizational documents of Seller, (ii) any contractual obligation to which Seller is now a party or the rights under which have been assigned to Seller or the obligations under which have been assumed by Seller or to which the assets of Seller are subject or constitute a default thereunder, or result thereunder in the creation or imposition of any lien upon any of the assets of Seller, other than pursuant to the Transaction Documents, (iii) any judgment or order, writ, injunction, decree or demand of any court applicable to Seller, or (iv) any applicable Requirement of Law, in the case of clauses (ii)-(iv) above, to the extent that such conflict or breach would have a Material Adverse Effect upon Seller’s ability to perform its obligations hereunder. Seller has all necessary licenses, permits and other consents from Governmental Authorities necessary to acquire, own and sell the Purchased Loans and for the performance of its obligations under the Transaction Documents.

(iv) Litigation; Requirements of Law. Except as disclosed in writing to Buyer, there is no action, suit, proceeding, investigation, or arbitration pending or, to the best knowledge of Seller, threatened against Seller, the Sponsor or any of their respective assets, nor is there any action, suit, proceeding, investigation, or arbitration pending or, to the best knowledge of Seller, threatened against the Sponsor which may result in any material adverse change in the business, operations, financial condition, properties, or assets of Seller or the Sponsor, or which may have a material adverse effect on the validity of the Transaction Documents or the Purchased Loans or any action taken or to be taken in connection with the obligations of Seller under any of the Transaction Documents. Seller is in compliance in all material respects with all Requirements of Law. Neither Seller nor the Sponsor is in default in any material respect with respect to any

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judgment, order, writ, injunction, decree, rule or regulation of any arbitrator or Governmental Authority.

(v) No Broker. Seller has not dealt with any broker, investment banker, agent, or other Person (other than Buyer or an Affiliate of Buyer) who may be entitled to any commission or compensation in connection with the sale of Purchased Loans pursuant to any of the Transaction Documents.

(vi) Good Title to Purchased Loans. Immediately prior to the purchase of any Purchased Loans by Buyer from Seller, such Purchased Loans are free and clear of any lien, encumbrance or impediment to transfer (including any “adverse claim” as defined in Section 8-102(a)(1) of the UCC), and Seller is the record and beneficial owner of and has good and marketable title to and the right to sell and transfer such Purchased Loans to Buyer and, upon transfer of such Purchased Loans to Buyer, Buyer shall be the owner of such Purchased Loans free of any adverse claim, subject to the rights of Seller pursuant to the terms of this Agreement. In the event the related Transaction is recharacterized as a secured financing of the Purchased Loans, the provisions of this Agreement are effective to create in favor of the Buyer a valid security interest in all rights, title and interest of the Seller in, to and under the Collateral and the Buyer shall have a valid, perfected first priority security interest in the Purchased Loans.

(vii) No Default. No Default or Event of Default exists under or with respect to the Transaction Documents.

(viii) Representations and Warranties Regarding Purchased Loans; Delivery of Purchased Loan File. Seller represents and warrants to the Buyer that each Purchased Loan sold hereunder and each pool of Purchased Loans sold in a Transaction hereunder, as of each Purchase Date for a Transaction conform to the applicable representations and warranties set forth in Exhibit VI attached hereto in all material respects, except as disclosed to the Buyer in writing. With respect to each Purchased Loan, the Mortgage Note, the Mortgage, the Assignment of Mortgage and any other documents required to be delivered under this Agreement and the Custodial Agreement for such Purchased Loan have been delivered to Buyer or the Custodian on its behalf (or shall be delivered in accordance with the time periods set forth herein).

(ix) Adequate Capitalization; No Fraudulent Transfer. Seller has adequate capital for the normal obligations reasonably foreseeable in a business of its size and character and in light of its contemplated business operations. Seller is generally able to pay, and as of the date hereof is paying, its debts as they come due. Seller has not become, or is presently, financially insolvent nor will Seller be made insolvent by virtue of Seller’s execution of or performance under any of the Transaction Documents within the meaning of the bankruptcy laws or the insolvency laws of any jurisdiction.

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Seller has not entered into any Transaction Document or any Transaction pursuant thereto in contemplation of insolvency or with intent to hinder, delay or defraud any creditor.

(x) Consents. No consent, approval or other action of, or filing by Seller with, any Governmental Authority or any other Person is required to authorize, or is otherwise required in connection with, the execution, delivery and performance of any of the Transaction Documents (other than consents, approvals and filings that have been obtained or made, as applicable).

(xi) Members. Seller does not have any members other than RAIT Funding, LLC.

(xii) Organizational Documents. Seller has delivered to Buyer certified copies of its organizational documents, together with all amendments thereto, if any.

(xiii) No Encumbrances. Except to the extent expressly set forth in this Agreement, there are (i) no outstanding rights, options, warrants or agreements on the part of Seller for a purchase, sale or issuance, in connection with the Purchased Loans, (ii) no agreements on the part of the Seller to issue, sell or distribute the Purchased Loans, and (iii) no obligations on the part of the Seller (contingent or otherwise) to purchase, redeem or otherwise acquire any securities or any interest therein or to pay any dividend or make any distribution in respect of the Purchased Loans.

(xiv) Federal Regulations. Seller is not (A) required to register as an “investment company,” or a company “controlled by an investment company,” within the meaning of the Investment Company Act of 1940, as amended, or (B) a “holding company,” or a “subsidiary company of a holding company,” or an “affiliate” of either a “holding company” or a “subsidiary company of a holding company,” as such terms are defined in the Public Utility Holding Company Act of 1935, as amended.

(xv) Taxes. Seller has filed or caused to be filed all tax returns which to the knowledge of Seller would be delinquent if they had not been filed on or before the date hereof and has paid all taxes shown to be due and payable on or before the date hereof on such returns or on any assessments made against it or any of its property and all other taxes, fees or other charges imposed on it and any of its assets by any Governmental Authority except for any such taxes as are being appropriately contested in good faith by appropriate proceedings diligently conducted and with respect to which adequate reserves have been provided in accordance with GAAP; no tax liens have been filed against any of Seller’s assets and, to Seller’s knowledge, no claims are being asserted with respect to any such taxes, fees or other charges.

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(xvi) ERISA. Seller does not have any Plans or any ERISA Affiliates and makes no contributions to any Plans or any Multiemployer Plans.

(xvii)  Judgments/Bankruptcy. Except as disclosed in writing to Buyer, there are no judgments against Seller or the Sponsor unsatisfied of record or docketed in any court located in the United States of America. No Act of Insolvency has ever occurred with respect to Seller or the Sponsor.

(xviii)  Full and Accurate Disclosure. No information contained in the Transaction Documents, or any written statement furnished by Seller pursuant to the terms of the Transaction Documents, contains any untrue statement of a material fact or omits to state a material fact necessary to make the statements contained herein or therein not misleading in light of the circumstances under which they were made.

(xix) Financial Information. All financial data concerning Seller that has been delivered by or on behalf of Seller to Buyer is true, complete and correct in all material respects and has been prepared in accordance with GAAP. To the actual knowledge of Seller, all financial data concerning the Purchased Loans that has been delivered by or on behalf of Seller to Buyer is true, complete and correct in all material respects. Since the delivery of such data, except as otherwise disclosed in writing to Buyer, there has been no change in the financial position of Seller or in the operations of the Seller or, to the actual knowledge of Seller, the financial position of the Purchased Loans, which change is reasonably likely to have in a Material Adverse Effect on Seller.

(xx) Notice Address; Jurisdiction of Organization. On the date of this Agreement, the Seller’s address for notices is located at c/o RAIT Financial Trust, 450 Park Avenue, New York, New York, 10022. Seller’s jurisdiction of organization is Delaware. The location where the Seller keeps its books and records, including all computer tapes and records relating to the Collateral, is its notice address.

(xxi) Prohibited Person. None of the funds or other assets of Seller or Sponsor constitute property of, or are beneficially owned, directly or indirectly, by a Prohibited Person with the result that the investment in Seller or Sponsor, as applicable (whether directly or indirectly), is prohibited by law or the entering into this Agreement by Buyer is in violation of law; (b) no Prohibited Person has any interest of any nature whatsoever in Seller or Sponsor, as applicable, with the result that the investment in Seller or Sponsor, as applicable (whether directly or indirectly), is prohibited by law or the entering into this Agreement is in violation of law; (c) none of the funds of Seller or Sponsor, as applicable, have been derived from any unlawful activity with the result that the investment in Seller or Sponsor, as applicable (whether directly or indirectly), is prohibited by law or the entering into this Agreement is in violation of law; (d) to the actual

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knowledge of Seller, none of Seller or Sponsor or any of their Affiliates has conducted or will conduct any business or has engaged or will engage in any transaction dealing with any Prohibited Person in violation of applicable laws; and (e) none of Seller or Sponsor is a Prohibited Person. The foregoing representation is made to Seller’s knowledge with respect to the members (and its direct and indirect owners) of Seller and Sponsor not controlled by Sponsor.

11. NEGATIVE COVENANTS OF SELLER

On and as of the date hereof and until this Agreement is no longer in force with respect to any Transaction, Seller shall not without the prior written consent of the Buyer:

(a) take any action which would directly or indirectly impair or adversely affect Buyer’s title to the Purchased Loans;

(b) transfer, assign, convey, grant, bargain, sell, set over, deliver or otherwise dispose of, or pledge or hypothecate, directly or indirectly, any interest in the Purchased Loans (or any of them) to any Person other than Buyer, or engage in repurchase transactions or similar transactions with respect to the Purchased Loans (or any of them) with any Person other than Buyer, unless and until such Purchased Loans are repurchased by Seller in accordance with this Agreement;

(c) create, incur or permit to exist any lien, encumbrance or security interest in or on the Purchased Loans, except as described in Section 6 of this Agreement;

(d) create, incur or permit to exist any lien, encumbrance or security interest in or on any of the other Collateral subject to the security interest granted by Seller pursuant to Section 6 of this Agreement;

(e) modify or terminate any of the organizational documents of Seller (except Buyer shall not unreasonably withhold or delay any request for a consent to such modification to the organizational documents (excluding the special purpose entity provisions));

(f) consent or assent to any amendment or supplement to, or termination of any note, loan agreement, mortgage or guaranty relating to the Purchased Loans or other material agreement or instrument relating to the Purchased Loans (other than Permitted Purchased Loan Modifications), unless and until such Purchased Loans are repurchased by Seller in accordance with this Agreement;

(g) admit any additional members in Seller, or permit the sole member of Seller to assign or transfer all or any portion of its membership interest in Seller;

(h) after the occurrence and during the continuation of an Event of Default, make any distribution, payment on account of, or set apart assets for, a sinking or other analogous fund for the purchase, redemption, defeasance, retirement or other acquisition of any Capital Stock of Seller, whether now or hereafter outstanding, or make any other distribution in respect thereof, either directly or indirectly, whether in cash or property or in obligations of Seller.

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12. AFFIRMATIVE COVENANTS OF SELLER

(a) Seller shall promptly notify Buyer of any material adverse change in its business operations and/or financial condition; provided, however, that nothing in this Section 12 shall relieve Seller of its obligations under this Agreement.

(b) Seller shall provide Buyer with copies of such documents as Buyer may reasonably request evidencing the truthfulness of the representations set forth in Section 10, which requests, so long as an Event of Default has not occurred and is not continuing, shall not be made more frequently than once every thirty (30) days.

(c) Seller (1) shall defend the right, title and interest of the Buyer in and to the Collateral against, and take such other action as is necessary to remove, the Liens, security interests, claims and demands of all Persons (other than security interests by or through Buyer) and (2) shall, at Buyer’s reasonable request, take all action necessary to ensure that Buyer will have a first priority security interest in the Purchased Loans subject to any of the Transactions in the event such Transactions are recharacterized as secured financings.

(d) Seller shall notify Buyer and the Depository of the occurrence of any Default or Event of Default with respect to Seller as soon as possible but in no event later than the second (2nd) Business Day after obtaining actual knowledge of such event.

(e) With respect to each Purchased Loan, Seller shall enter into Hedging Transactions pursuant to a hedging strategy acceptable to Buyer in Buyer’s commercially reasonable discretion and pledge such Hedging Transactions to Buyer as Collateral (including, without limitation, to the extent such Hedging Transactions are entered into with a party other than Buyer, delivering a collateral assignment of such Hedging Transactions in form and substance acceptable to Buyer). Seller acknowledges Buyer will mark to market such Hedging Transactions from time to time in accordance with and subject to the terms of this Agreement.

(f) Seller shall promptly (and in any event not later than three (3) Business Days following receipt) deliver to Buyer (i) any written notice of the occurrence of an event of default received by Seller pursuant to the Purchased Loan Documents and (ii) any other information with respect to the Purchased Loans as may be reasonably requested by Buyer from time to time.

(g) Seller will permit Buyer or its designated representative to inspect Seller’s records with respect to the Collateral and the conduct and operation of its business related thereto upon reasonable prior written notice from Buyer or its designated representative, at such reasonable times and with reasonable frequency, and to make copies of extracts of any and all thereof, subject to the terms of any confidentiality agreement between Buyer and Seller, and if no such confidentiality agreement then exists between Buyer and Seller, Buyer and Seller shall act in accordance with customary market standards regarding confidentiality. Buyer shall act in a commercially reasonable manner in requesting and conducting any inspection relating to the conduct and operation of Seller’s business.

(h) At any time from time to time upon the reasonable request of Buyer, at the sole expense of Seller, Seller will promptly and duly execute and deliver such further instruments and documents and take such further actions as Buyer may reasonably request for the purposes of

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obtaining or preserving the full benefits of this Agreement including the first priority security interest granted hereunder and of the rights and powers herein granted (including, among other things, filing such UCC financing statements as Buyer may reasonably request). If any amount payable under or in connection with any of the Collateral shall be or become evidenced by any promissory note, other instrument or chattel paper, such note, instrument or chattel paper shall be immediately delivered to the Buyer, duly endorsed in a manner reasonably satisfactory to the Buyer, to be held as Collateral pursuant to this Agreement, and the documents delivered in connection herewith.

(i) Seller shall provide Buyer with the following financial and reporting information:

(i) Within 60 days after the last day of each of the first three fiscal quarters in any fiscal year, Sponsor’s and Seller’s unaudited consolidated balance sheets as of the end of such quarter, in each case certified as being true and correct by an officer’s certificate;

(ii) Within 120 days after the last day of its fiscal year, Sponsor’s audited and Seller’s unaudited (or, if generated by Seller, Seller’s audited) consolidated statements of income and statements of changes in cash flow for such year and balance sheets as of the end of such year, in each case presented fairly in accordance with GAAP, and accompanied, in the case of Sponsor, by an unqualified report of a nationally recognized independent certified public accounting firm, Grant Thornton LLP or any other accounting firm consented to by Buyer in its reasonable discretion;

(iii) Within 30 days after the last day of each calendar month, any and all property level financial information with respect to the Purchased Loans that was received during the preceding calendar month and is in the possession of the Seller or an Affiliate, including, without limitation, rent rolls and income statements; and

(iv) Within 30 days after the last day of each calendar quarter in any fiscal year, an officer’s certificate from the Seller addressed to Buyer certifying that, as of such calendar month, (x) Seller and Sponsor are in compliance in all material respects with all of the terms and requirements of this Agreement, (y) Sponsor is in compliance with the financial covenants set forth in the Guaranty (including therein detailed calculations demonstrating such compliance) and (z) no Event of Default exists.

(j) Seller shall at all times comply in all material respects with all laws, ordinances, rules and regulations of any federal, state, municipal or other public authority having jurisdiction over Seller or any of its assets and Seller shall do or cause to be done all things reasonably necessary to preserve and maintain in full force and effect its legal existence, and all licenses material to its business.

(k) Seller shall at all times keep proper books of records and accounts in which full, true and correct entries shall be made of its transactions in accordance with GAAP and set aside

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on its books from its earnings for each fiscal year all such proper reserves in accordance with GAAP.

(l) Seller shall observe, perform and satisfy all the terms, provisions and covenants required to be observed, performed or satisfied by it, and shall pay when due all costs, fees and expenses required to be paid by it, under the Transaction Documents. Seller shall pay and discharge all taxes, levies, liens and other charges on its assets and on the Collateral that, in each case, in any manner would create any lien or charge upon the Collateral, except for any such taxes as are being appropriately contested in good faith by appropriate proceedings diligently conducted and with respect to which adequate reserves have been provided, in all material respects, in accordance with GAAP.

(m) Seller will maintain records with respect to the Collateral and the conduct and operation of its business with no less a degree of prudence than if the Collateral were held by Seller for its own account and will furnish Buyer, upon reasonable request by Buyer or its designated representative, with reasonable information reasonably obtainable by Seller with respect to the Collateral and the conduct and operation of its business.

(n) Seller shall provide Buyer with reasonable access to operating statements, the occupancy status and other property level information, with respect to the Mortgaged Properties, plus any such additional reports (in each case, to the extent in Seller’s possession) as Buyer may reasonably request.

13. SINGLE-PURPOSE ENTITY

Seller hereby represents and warrants to Buyer, and covenants with Buyer, that as of the date hereof and so long as any of the Transaction Documents shall remain in effect:

(a) It is and intends to remain solvent and it has paid and will pay its debts and liabilities (including employment and overhead expenses) from its own assets as the same shall become due.

(b) It has complied and will comply with the provisions of its organizational documents.

(c) It has done or caused to be done and will, to the extent under its control, do all things necessary to observe corporate formalities and to preserve its existence.

(d) It has maintained and will maintain all of its books, records, financial statements and bank accounts separate from those of its Affiliates, its members and any other Person, and it will file its own tax returns, if any, which are required by law (except to the extent consolidation is required under GAAP or as a matter of law).

(e) It has been, is and will be, and at all times will hold itself out to the public as, a legal entity separate and distinct from any other entity (including any Affiliate), shall correct any known misunderstanding regarding its status as a separate entity, shall conduct business in its own name, shall not identify itself or any of its Affiliates as a division or part of the other, shall

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maintain and utilize separate stationery, invoices and checks, and allocate fairly and reasonably any overhead for shared office space and for services performed by an employee of an Affiliate.

(f) It has not owned and will not own any property or any other assets other than Purchased Loans, cash and its interest under any associated Hedging Transactions.

(g) It has not engaged and will not engage in any business other than the acquisition, origination, ownership, financing and disposition of Purchased Loans in accordance with the applicable provisions of the Transaction Documents.

(h) It has not entered into, and will not enter into, any contract or agreement with any of its Affiliates, except upon terms and conditions that are substantially similar to those that would be available on an arm’s-length basis with Persons other than such Affiliate.

(i) It has not incurred and will not incur any indebtedness or obligation, secured or unsecured, direct or indirect, absolute or contingent (including guaranteeing any obligation), other than (A) obligations under the Transaction Documents and (B) unsecured trade payables, in an aggregate amount not to exceed $200,000 at any one time outstanding, incurred in the ordinary course of acquiring, owning, financing and disposing of Purchased Loans; provided, however, that any such trade payables incurred by Seller shall be paid within 60 days of the date incurred.

(j) It has not made and will not make any loans or advances to any other Person, except as permitted under this Agreement, and shall not acquire obligations or securities of any member or any Affiliate of any member or any other Person.

(k) It will maintain adequate capital for the normal obligations reasonably foreseeable in a business of its size and character and in light of its contemplated business operations.

(l) It shall not seek its dissolution, liquidation or winding up, in whole or in part, or suffer any Change of Control or consolidation or merger with respect to Seller.

(m) It will not commingle its funds and other assets with those of any of its Affiliates or any other Person.

(n) It has maintained and will maintain its assets in such a manner that it will not be costly or difficult to segregate, ascertain or identify its individual assets from those of any of its Affiliates or any other Person.

(o) It has not held and will not hold itself out to be responsible for the debts or obligations of any other Person.

(p) The Seller shall not take any of the following actions without the affirmative vote of the Independent Director: (i) permit its members to dissolve or liquidate the Seller, in whole or in part; (ii) consolidate or merge with or into any other entity or convey or transfer all or substantially all of its properties and assets to any entity; or (iii) institute any proceeding to be adjudicated as bankrupt or insolvent, or consent to the institution of bankruptcy or insolvency proceedings against it, or file a petition or answer or consent seeking reorganization or relief

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under the Bankruptcy Code, or effect any similar procedure under any similar law, or consent to the filing of any such petition or to the appointment of a receiver, rehabilitator, conservator, liquidator, assignee, trustee or sequestrator (or other similar official) of the Seller or of any substantial part of its property, or ordering the winding up or liquidation of its affairs, or make an assignment for the benefit of creditors, or admit in writing its inability to pay its debts generally as they become due, or take any action in furtherance of any of the foregoing.

(q) It has no liabilities, contingent or otherwise, other than those normal and incidental to the acquisition, origination, ownership, financing and disposition of Purchased Loans.

(r) It has conducted and shall conduct its business consistent with the requirements of being a Single-Purpose Entity.

(s) It shall not maintain any employees.

(t) It shall at all times maintain at least one Independent Director. For so long as the Seller’s obligations under this Agreement and the other Transaction Documents are outstanding, Seller shall not take any of the actions contemplated by Section 13(p) above (including when applicable without the affirmative vote of such Independent Director).

14. EVENTS OF DEFAULT; REMEDIES

(a) After the occurrence and during the continuance of an Event of Default, Seller hereby appoints Buyer as attorney-in-fact of Seller for the purpose of carrying out the provisions of this Agreement and taking any action and executing or endorsing any instruments that Buyer may deem necessary or advisable to accomplish the purposes hereof, which appointment as attorney-in-fact is irrevocable and coupled with an interest. With respect to each Transaction, each of the following clauses (i) through (xv) shall be an Event of Default under this Agreement:

(i) Seller fails to repurchase the Purchased Loans upon the applicable Repurchase Date;

(ii) Seller fails to comply in all material respects with Section 4 hereof;

(iii) an Act of Insolvency occurs with respect to Seller or Sponsor;

(iv) Seller shall admit in writing to the Buyer its inability to, or its intention not to, perform any of its obligations hereunder;

(v) either (A) the Transaction Documents shall for any reason not cause, or shall cease to cause, Buyer to be the owner free of any adverse claim of any of the Purchased Loans, or (B) if a Transaction is recharacterized as a secured financing, the Transaction Documents with respect to any Transaction shall for any reason cease to create a valid first priority security interest in favor of Buyer in any of the Purchased Loans;

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(vi) if an event occurs which would constitute (a) an Event of Default under the ISDA Master Agreement or (b) a Termination Event or an Additional Termination Event under the ISDA Master Agreement (and, in the case of this clause (b), Seller has failed to meet its obligation to pay the Early Termination Amount, if any, pursuant to the terms of Section 6 of such ISDA Master Agreement);

(vii) failure of the Buyer to receive within one (1) Business Day after any Remittance Date the accreted value of the Price Differential (less any amount of such Price Differential previously paid by Seller to Buyer);

(viii) failure of the Seller to make any other payment owing to the Buyer which has become due, whether by acceleration or otherwise under the terms of this Agreement which failure is not remedied within the applicable period (in the case of a failure pursuant to Section 4) or five (5) Business Days (in the case of any other such failure);

(ix) any governmental, regulatory, or self-regulatory authority shall have removed, restricted, suspended or terminated the rights, privileges, or operations of Seller which has a material adverse effect on the financial condition or business operations of Seller;

(x) a Change of Control shall have occurred;

(xi) any representation made by Seller shall have been incorrect or untrue in any material respect when made or repeated or deemed to have been made or repeated (other than the representations and warranties set forth in Section 10(b)(viii) made by the Seller, which shall not be considered an Event of Default if incorrect or untrue in any material respect, provided the Seller repurchases the related Purchased Loan on an Early Repurchase Date no later than five (5) Business Days after receiving notice of such incorrect or untrue representation and terminates the related Transaction; provided further Seller shall not have made any such representation with actual knowledge that it was materially incorrect or untrue at the time made);

(xii) the Sponsor shall fail to observe any of the financial covenants set forth in the Guaranty or shall have defaulted or failed to perform under the Guaranty in any material respect (after the expiration of any applicable grace, notice and/or cure periods);

(xiii) a final non-appealable judgment by any competent court in the United States of America having jurisdiction over Seller for the payment of money in an amount greater than $100,000 (in the case of the Seller) or $2,500,000 (in the case of the Sponsor) shall have been rendered against Seller or the Sponsor, unless execution of such judgment is stayed by the

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posting of cash or a bond or other collateral acceptable to Buyer in the amount of the judgment;

(xiv) Sponsor shall have defaulted or failed to perform under any note, indenture, loan agreement, guaranty, swap agreement or any other contract, agreement or transaction to which it is a party, which default (A) involves the failure to pay a monetary obligation in excess of $2,500,000, or (B) permits the acceleration of the maturity of obligations in excess of $2,500,000 by any other party to or beneficiary of such note, indenture, loan agreement, guaranty, swap agreement or other contract agreement or transaction; provided, however, that any such default, failure to perform or breach shall not constitute an Event of Default if Sponsor cures such default, failure to perform or breach, as the case may be, within the grace notice and/or cure period, if any, provided under the applicable agreement; or

(xv) if Seller shall breach or fail to perform any of the terms, covenants or obligations of this Agreement, other than as specifically otherwise referred to in this definition of “Event of Default”, and such breach or failure to perform is not remedied within fifteen (15) days after written notice thereof to Seller from the applicable party or its successors or assigns, provided, that if such breach or failure is of a nature that it cannot be cured within said fifteen (15) day period and Seller commences and diligently continues curing such breach or failure within such fifteen (15) day period, then Seller shall have an additional fifteen (15) days (i.e. thirty (30) days in total) to cure such breach or failure (each of (i) through (xv), an “Event of Default”).

(b) If an Event of Default shall occur and be continuing, the following rights and remedies shall be available to Buyer:

(i) At the option of Buyer, exercised by written notice to Seller (which option shall be deemed to have been exercised, even if no notice is given, immediately upon the occurrence of an Act of Insolvency), the Repurchase Date for each Transaction hereunder shall, if it has not already occurred, be deemed immediately to occur (the date on which such option is exercised or deemed to have been exercised being referred to hereinafter as the “Accelerated Repurchase Date”).

(ii) If Buyer exercises or is deemed to have exercised the option referred to in Section 14(b)(i) of this Agreement:

(A) Seller’s obligations hereunder to repurchase all Purchased Loans shall become immediately due and payable on and as of the Accelerated Repurchase Date; and

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(B) to the extent permitted by applicable law, the Repurchase Price with respect to each Transaction (determined as of the Accelerated Repurchase Date) shall be increased by the aggregate amount obtained by daily application of, on a 360 day per year basis for the actual number of days during the period from and including the Accelerated Repurchase Date to but excluding the date of payment of the Repurchase Price (as so increased), (x) the Pricing Rate for such Transaction multiplied by (y) the Repurchase Price for such Transaction (decreased by (I) any amounts actually remitted to Buyer by the Depository or Seller from time to time pursuant to Sections 4 or 5 of this Agreement and applied to such Repurchase Price, and (II) any amounts applied to the Repurchase Price pursuant to Section 14(b)(iii) of this Agreement); and

(C) the Custodian shall, upon the request of Buyer, deliver to Buyer all instruments, certificates and other documents then held by the Custodian relating to the Purchased Loans.

(iii) Upon the occurrence of an Event of Default with respect to Seller, Buyer may (A) immediately sell, at a public or private sale in a commercially reasonable manner and at such price or prices as Buyer may reasonably deem satisfactory any or all of the Purchased Loans or (B) in its sole discretion elect, in lieu of selling all or a portion of such Purchased Loans, to give Seller credit for such Purchased Loans in an amount equal to the market value of such Purchased Loans as determined by Buyer in its sole discretion against the aggregate unpaid Repurchase Price for such Purchased Loans and any other amounts owing by Seller under the Transaction Documents. The proceeds of any disposition of Purchased Loans effected pursuant to this Section 14(b)(iii) shall be applied, (v) first, to the actual, out-of-pocket costs and expenses reasonably incurred by Buyer in connection with Seller’s default; (w) second, the amount, if any, payable by Seller in the event any Hedging Transactions related to such Purchased Loans are being terminated; (x) third, to the Repurchase Price; (y) fourth, to any other outstanding obligation of Seller to Buyer or its Affiliates pursuant to this Agreement; and (z) fifth, to pay the surplus, if any, to whoever may be lawfully entitled to receive such surplus.

(iv) The parties recognize that it may not be possible to purchase or sell all of the Purchased Loans on a particular Business Day, or in a transaction with the same purchaser, or in the same manner because the market for such Purchased Loans may not be liquid. In view of the nature of the Purchased Loans, the parties agree that liquidation of a Transaction or the Purchased Loans does not require a public purchase or sale and that a good faith private purchase or sale shall be deemed to have been made in a commercially reasonable manner. Accordingly, Buyer may elect, in its sole discretion, the time and manner of liquidating any Purchased Loans, and nothing contained herein shall (A) obligate Buyer to liquidate any

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Purchased Loans on the occurrence and during the continuance of an Event of Default or to liquidate all of the Purchased Loans in the same manner or on the same Business Day or (B) constitute a waiver of any right or remedy of Buyer.

(v) Seller shall be liable to Buyer for (A) the amount of all actual out-of-pocket expenses, including reasonable legal fees and expenses, actually incurred by Buyer in connection with or as a consequence of an Event of Default with respect to Seller, (B) all actual costs incurred in connection with the termination of Hedging Transactions, and (C) any other actual loss, damage, cost or expense directly arising or resulting from the occurrence of an Event of Default with respect to Seller.

(vi) Buyer shall have, in addition to its rights and remedies under the Transaction Documents, all of the rights and remedies provided by applicable federal, state, foreign, and local laws (including, without limitation, if the Transactions are recharacterized as secured financings, the rights and remedies of a secured party under the UCC of the State of New York, to the extent that the UCC is applicable, and the right to offset any mutual debt and claim), in equity, and under any other agreement between Buyer and Seller. Without limiting the generality of the foregoing, Buyer shall be entitled to set off the proceeds of the liquidation of the Purchased Loans against all of Seller’s obligations to Buyer pursuant to this Agreement, whether or not such obligations are then due, without prejudice to Buyer’s right to recover any deficiency.

(vii) Subject to the notice and grace periods set forth herein, Buyer may exercise any or all of the remedies available to Buyer immediately upon the occurrence of an Event of Default (other than with respect to Buyer) and at any time during the continuance thereof. All rights and remedies arising under the Transaction Documents, as amended from time to time, are cumulative and not exclusive of any other rights or remedies which Buyer may have.

(viii) Buyer may enforce its rights and remedies hereunder without prior judicial process or hearing, and Seller hereby expressly waives any defenses Seller might otherwise have to require Buyer to enforce its rights by judicial process. Seller also waives any defense Seller might otherwise have arising from the use of nonjudicial process, disposition of any or all of the Purchased Loans, or from any other election of remedies. Seller recognizes that nonjudicial remedies are consistent with the usages of the trade, are responsive to commercial necessity and are the result of a bargain at arm’s length.

(ix) Upon the designation of any Accelerated Repurchase Date, the Buyer may, without prior notice to the Seller, set off any sum or obligation (whether or not arising under this Agreement, whether matured or

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unmatured, whether or not contingent and irrespective of the currency, place of payment or booking office of the sum or obligation) owed by Seller to Buyer or any Affiliate of Buyer against any sum or obligation (whether or not arising under this Agreement, whether matured or unmatured, whether or not contingent and irrespective of the currency, place of payment or booking office of the sum or obligation) owed by Buyer or any Affiliate of Buyer to Seller. Buyer will give written notice to the other party of any set off effected under this Section 14(b)(ix). If a sum or obligation is unascertained, Buyer may in good faith estimate that obligation and set-off in respect of the estimate, subject to the relevant party accounting to the other when the obligation is ascertained. Nothing in this Section 14(b)(ix) shall be effective to create a charge or other security interest. This Section 14(b)(ix) shall be without prejudice and in addition to any right of set-off, combination of accounts, lien or other rights to which any party is at any time otherwise entitled (whether by operation of law, contract or otherwise).

15. SINGLE AGREEMENT

Buyer and Seller acknowledge that, and have entered hereinto and will enter into each Transaction hereunder in consideration of and in reliance upon the fact that, all Transactions hereunder constitute a single business and contractual relationship and have been made in consideration of each other. Accordingly, each of Buyer and Seller agrees (i) to perform all of its obligations in respect of each Transaction hereunder, and that a default in the performance of any such obligations shall constitute a default by it in respect of all Transactions hereunder, (ii) that each of them shall be entitled to set off claims and apply property held by them in respect of any Transaction against obligations owing to them in respect of any other Transactions hereunder and (iii) that payments, deliveries and other transfers made by either of them in respect of any Transaction shall be deemed to have been made in consideration of payments, deliveries and other transfers in respect of any other Transactions hereunder, and the obligations to make any such payments, deliveries and other transfers may be applied against each other and netted.

16. RECORDING OF COMMUNICATIONS

EACH OF BUYER AND SELLER SHALL HAVE THE RIGHT (BUT NOT THE OBLIGATION) FROM TIME TO TIME TO MAKE OR CAUSE TO BE MADE TAPE RECORDINGS OF COMMUNICATIONS BETWEEN ITS EMPLOYEES, IF ANY, AND THOSE OF THE OTHER PARTY WITH RESPECT TO TRANSACTIONS; PROVIDED, HOWEVER, THAT SUCH RIGHT TO RECORD COMMUNICATIONS SHALL BE LIMITED TO COMMUNICATIONS OF EMPLOYEES TAKING PLACE ON THE TRADING FLOOR OF THE APPLICABLE PARTY. EACH OF BUYER AND SELLER HEREBY CONSENTS TO THE ADMISSIBILITY OF SUCH TAPE RECORDINGS IN ANY COURT, ARBITRATION, OR OTHER PROCEEDINGS, IF AND TO THE EXTENT CONSISTENT WITH APPLICABLE LAW AND THE RULES OF COURT AND EVIDENCE.

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17. NOTICES AND OTHER COMMUNICATIONS

Unless otherwise provided in this Agreement, all notices, consents, approvals and requests required or permitted hereunder shall be given in writing and shall be effective for all purposes if hand delivered or sent by (a) hand delivery, with proof of attempted delivery, (b) certified or registered United States mail, postage prepaid, (c) expedited prepaid delivery service, either commercial or United States Postal Service, with proof of attempted delivery, or (d) by telecopier (with answerback acknowledged) provided that such telecopied notice must also be delivered by one of the means set forth in (a), (b) or (c) above, to the address specified in Annex I hereto or at such other address and person as shall be designated from time to time by any party hereto, as the case may be, in a written notice to the other parties hereto in the manner provided for in this Section. A notice shall be deemed to have been given: (a) in the case of hand delivery, at the time of delivery, (b) in the case of registered or certified mail, when delivered or the first attempted delivery on a Business Day, (c) in the case of expedited prepaid delivery upon the first attempted delivery on a Business Day, or (d) in the case of telecopier, upon receipt of answerback confirmation, provided that such telecopied notice was also delivered as required in this Section. A party receiving a notice which does not comply with the technical requirements for notice under this Section may elect to waive any deficiencies and treat the notice as having been properly given.

18. ENTIRE AGREEMENT; SEVERABILITY

This Agreement shall supersede any existing agreements between the parties containing general terms and conditions for repurchase transactions. Each provision and agreement herein shall be treated as separate and independent from any other provision or agreement herein and shall be enforceable notwithstanding the unenforceability of any such other provision or agreement.

19. NON-ASSIGNABILITY

(a) The rights and obligations of the Seller under the Transaction Documents and under any Transaction shall not be assigned by the Seller without the prior written consent of the Buyer.

(b) Buyer shall be entitled to assign its rights and obligations under the Transaction Documents and/or under any Transaction (subject to the terms of Section 8(a)) to any other Person or issue one or more participation interests with respect to any or all of the Transactions and, in connection therewith, may bifurcate or allocate (i.e. senior/subordinate) amounts due to Buyer; provided, however, with respect to participations, Seller shall not be obligated to deal directly with any party other than Buyer or to pay or reimburse Buyer for any costs that would not have been incurred by Buyer had no participation interests in such Transactions been issued.

(c) Subject to the foregoing, the Transaction Documents and any Transactions shall be binding upon and shall inure to the benefit of the parties and their respective successors and assigns. Nothing in the Transaction Documents, express or implied, shall give to any Person, other than the parties to the Transaction Documents and their respective successors, any benefit or any legal or equitable right, power, remedy or claim under the Transaction Documents.

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20. GOVERNING LAW

This Agreement shall be governed by the laws of the State of New York without giving effect to the conflict of law principles thereof.

21. NO WAIVERS, ETC.

No express or implied waiver of any Event of Default by either party shall constitute a waiver of any other Event of Default and no exercise of any remedy hereunder by any party shall constitute a waiver of its right to exercise any other remedy hereunder. No modification or waiver of any provision of this Agreement and no consent by any party to a departure herefrom shall be effective unless and until such shall be in writing and duly executed by both of the parties hereto. Without limitation on any of the foregoing, the failure to give a notice pursuant to Section 4(a) or 4(b) hereof will not constitute a waiver of any right to do so at a later date.

22. USE OF EMPLOYEE PLAN ASSETS

(a) If assets of an employee benefit plan subject to any provision of the Employee Retirement Income Security Act of 1974 (“ERISA”) are intended to be used by either party hereto (the “Plan Party”) in a Transaction, the Plan Party shall so notify the other party prior to the Transaction. The Plan Party shall represent in writing to the other party that the Transaction does not constitute a prohibited transaction under ERISA or is otherwise exempt therefrom, and the other party may proceed in reliance thereon but shall not be required so to proceed.

(b) Subject to the last sentence of subparagraph (a) of this Section, any such Transaction shall proceed only if Seller furnishes or has furnished to Buyer its most recent available unaudited statement of its financial condition.

(c) By entering into a Transaction pursuant to this Section, Seller shall be deemed (i) to represent to Buyer that since the date of Seller’s latest such financial statements, there has been no material adverse change in Seller’s financial condition which Seller has not disclosed to Buyer, and (ii) to agree to provide Buyer with future audited and unaudited statements of its financial condition as they are issued, so long as it is a Seller in any outstanding Transaction involving a Plan Party.

23. INTENT

(a) The parties recognize and agree that: (i) each Transaction is a “repurchase agreement” as that term is defined in Section 101 of the Bankruptcy Code and a “securities contract” as that term is defined in Section 741 of the Bankruptcy Code and (ii) the grant of a security interest set forth in Sections 6 and 29(b) hereof to secure the rights of the Buyer hereunder also constitutes a “repurchase agreement” as contemplated by Section 101(47)(A)(v) of the Bankruptcy Code and a “securities contract” as contemplated by Section 741(7)(A)(xi) of the Bankruptcy Code. It is further understood that this Agreement constitutes a “master netting agreement” as defined in Section 101(38A) of the Bankruptcy Code, as amended, with respect to the Transaction so constituting a “repurchase agreement” or “securities contract”. Each party hereto hereby further agrees that it shall not challenge the characterization of this Agreement as a “repurchase agreement”, “securities contract” and/or “master netting agreement” within the

42

meaning of the Bankruptcy Code except insofar as the type of asset subject to the Transactions or, in the case of a “repurchase agreement”, the term of the Transactions, would render such definition inapplicable.

(b) It is understood that either party’s right to accelerate or terminate this Agreement or to liquidate assets delivered to it in connection with the Transactions hereunder or to exercise any other remedies pursuant to Section 14 or 29 hereof is a contractual right to accelerate, terminate or liquidate this Agreement or the Transactions as described in Sections 555 and 559 of the Bankruptcy Code. It is further understood and agreed that either party’s right to cause the termination, liquidation, or acceleration of, or to offset net termination values, payment amounts or other transfer obligations arising under or in connection with, this Agreement or the Transactions hereunder is a contractual right to cause the termination, liquidation, or acceleration of, or to offset net termination values, payment amounts or other transfer obligations arising under or in connection with, this Agreement as described in Section 561 of the Bankruptcy Code.

(c) The parties agree and acknowledge that if a party hereto is an “insured depository institution,” as such term is defined in the Federal Deposit Insurance Act, as amended (“FDIA”), then the Transactions hereunder is a “qualified financial contract,” as that term is defined in FDIA and any rules, orders or policy statements thereunder (except insofar as the type of assets subject to the Transactions would render such definition inapplicable).

(d) It is understood that this Agreement constitutes a “netting contract” as defined in and subject to Title IV of the Federal Deposit Insurance Corporation Improvement Act of 1991 (“FDICIA”) and each payment entitlement and payment obligation under the Transactions hereunder shall constitute a “covered contractual payment entitlement” or “covered contractual payment obligation”, respectively, as defined in and subject to FDICIA (except insofar as one or both of the parties is not a “financial institution” as that term is defined in FDICIA).

(e) In light of the intent set forth above in this Section 23, Seller agrees that, from time to time upon the written request of Buyer, Seller will execute and deliver any supplements, modifications, addendums or other documents as may be necessary or desirable, in Buyer’s good faith discretion, in order to cause this Agreement and the Transactions contemplated hereby to qualify for, comply with the provisions of, or otherwise satisfy, maintain or preserve the criteria for safe harbor treatment under the Bankruptcy Code for “repurchase agreements”, “securities contracts” and “master netting agreements”; provided, however, that Buyer’s failure to request, or Buyer’s or Seller’s failure to execute, such supplements, modifications, addendums or other documents does not in any way alter or otherwise change the intention of the parties hereto that this Agreement and the Transactions hereunder constitute “repurchase agreements”, “securities contracts” and/or a “master netting agreement” as such terms are defined in the Bankruptcy Code.

24. DISCLOSURE RELATING TO CERTAIN FEDERAL PROTECTIONS

The parties acknowledge that they have been advised that:

(a) in the case of Transactions in which one of the parties is a broker or dealer registered with the Securities and Exchange Commission (“SEC”) under Section 15 of the

43

Securities Exchange Act of 1934 (“1934 Act”), the Securities Investor Protection Corporation has taken the position that the provisions of the Securities Investor Protection Act of 1970 (“SIPA”) do not protect the other party with respect to any Transaction hereunder;

(b) in the case of Transactions in which one of the parties is a government securities broker or a government securities dealer registered with the SEC under Section 15C of the 1934 Act, SIPA will not provide protection to the other party with respect to any Transaction hereunder; and

(c) in the case of Transactions in which one of the parties is a financial institution, funds held by the financial institution pursuant to a Transaction hereunder are not a deposit and therefore are not insured by the Federal Deposit Insurance Corporation or the National Credit Union Share Insurance Fund, as applicable.

25. CONSENT TO JURISDICTION; WAIVER OF JURY TRIAL

(a) Each party irrevocably and unconditionally (i) submits to the non-exclusive jurisdiction of any United States Federal or New York State court sitting in Manhattan, and any appellate court from any such court, solely for the purpose of any suit, action or proceeding brought to enforce its obligations under this Agreement or relating in any way to this Agreement or any Transaction under this Agreement and (ii) waives, to the fullest extent it may effectively do so, any defense of an inconvenient forum to the maintenance of such action or proceeding in any such court and any right of jurisdiction on account of its place of residence or domicile.

(b) To the extent that either party has or hereafter may acquire any immunity (sovereign or otherwise) from any legal action, suit or proceeding, from jurisdiction of any court or from set off or any legal process (whether service or notice, attachment prior to judgment, attachment in aid of execution of judgment, execution of judgment or otherwise) with respect to itself or any of its property, such party hereby irrevocably waives and agrees not to plead or claim such immunity in respect of any action brought to enforce its obligations under this Agreement or relating in any way to this Agreement or any Transaction under this Agreement.

(c) The parties hereby irrevocably waive, to the fullest extent it may effectively do so, the defense of an inconvenient forum to the maintenance of such action or proceeding and irrevocably consent to the service of any summons and complaint and any other process by the mailing of copies of such process to them at their respective address specified herein. The parties hereby agree that a final judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law. Nothing in this Section 25 shall affect the right of the Buyer or Seller to serve legal process in any other manner permitted by law or affect the right of the Buyer or Seller to bring any action or proceeding against the other party or its property in the courts of other jurisdictions.

(d) EACH OF THE PARTIES HEREBY IRREVOCABLY WAIVES ALL RIGHT TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS AGREEMENT, ANY OTHER TRANSACTION

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DOCUMENT OR ANY INSTRUMENT OR DOCUMENT DELIVERED HEREUNDER OR THEREUNDER.

26. NO RELIANCE

Each of Buyer and Seller hereby acknowledges, represents and warrants to the other that, in connection with the negotiation of, the entering into, and the performance under, the Transaction Documents and each Transaction thereunder:

(a) It is not relying (for purposes of making any investment decision or otherwise) upon any advice, counsel or representations (whether written or oral) of the other party to the Transaction Documents, other than the representations expressly set forth in the Transaction Documents;

(b) It has consulted with its own legal, regulatory, tax, business, investment, financial and accounting advisors to the extent that it has deemed necessary, and it has made its own investment, hedging and trading decisions (including decisions regarding the suitability of any Transaction) based upon its own judgment and upon any advice from such advisors as it has deemed necessary and not upon any view expressed by the other party;

(c) It is a sophisticated and informed Person that has a full understanding of all the terms, conditions and risks (economic and otherwise) of the Transaction Documents and each Transaction thereunder and is capable of assuming and willing to assume (financially and otherwise) those risks;

(d) It is entering into the Transaction Documents and each Transaction thereunder for the purposes of managing its borrowings or investments or hedging its underlying assets or liabilities and not for purposes of speculation; and

(e) It is not acting as a fiduciary or financial, investment or commodity trading advisor for the other party and has not given the other party (directly or indirectly through any other Person) any assurance, guaranty or representation whatsoever as to the merits (either legal, regulatory, tax, business, investment, financial accounting or otherwise) of the Transaction Documents or any Transaction thereunder.

27. INDEMNITY

The Seller hereby agrees to indemnify the Buyer and each of its officers, directors, employees and agents (“Indemnified Parties”) from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, taxes (including stamp, excise, sales or other taxes which may be payable or determined to be payable with respect to any of the Collateral or in connection with any of the transactions contemplated by this Agreement and the documents delivered in connection herewith, other than income or similar taxes of the Buyer), fees, costs, expenses (including reasonable attorneys fees and disbursements) or disbursements (all of the foregoing, collectively “Indemnified Amounts”) which may at any time (including, without limitation, such time as this Agreement shall no longer be in effect and the Transactions shall have been repaid in full) be imposed on or asserted against any Indemnified Party in any way whatsoever arising out of or in connection with, or relating to, this Agreement or any

45

Transactions thereunder or any action taken or omitted to be taken by any Indemnified Party under or in connection with any of the foregoing; provided, that Seller shall not be liable for Indemnified Amounts resulting from the gross negligence or willful misconduct of any Indemnified Party. Without limiting the generality of the foregoing, Seller agrees to hold Buyer harmless from and indemnify Buyer against all Indemnified Amounts with respect to all Purchased Loans relating to or arising out of any violation or alleged violation of any Environmental Law, rule or regulation or any consumer credit laws, including without limitation ERISA, the Truth in Lending Act and/or the Real Estate Settlement Procedures Act, that, in each case, results from anything other than Buyer’s gross negligence or willful misconduct. In any suit, proceeding or action brought by Buyer in connection with any Purchased Loan for any sum owing thereunder, or to enforce any provisions of any Purchased Loan, Seller will save, indemnify and hold Buyer harmless from and against all actual out-of-pocket expense (including reasonable attorneys’ fees), actual out-of-pocket loss or damage suffered by reason of any defense, set-off, counterclaim, recoupment or reduction or liability whatsoever of the account debtor or obligor thereunder, arising out of a breach by Seller of any obligation thereunder or arising out of any other agreement, indebtedness or liability at any time owing to or in favor of such account debtor or obligor or its successors from Seller. Seller also agrees to reimburse Buyer as and when billed by Buyer for all Buyer’s actual costs and out-of-pocket expenses incurred in connection with Buyer’s due diligence reviews with respect to the Purchased Loans (including, without limitation, those incurred pursuant to Section 28 hereof) and the enforcement or the preservation of Buyer’s rights under this Agreement or any Transaction contemplated hereby, including without limitation the reasonable fees and disbursements of its counsel. Seller hereby acknowledges that, the obligation of Seller under this Agreement is a recourse obligation of Seller.

28. DUE DILIGENCE

Seller acknowledges that, at reasonable times and upon reasonable notice to Seller, Buyer has the right to perform continuing due diligence reviews with respect to the Purchased Loans, for purposes of verifying compliance with the representations, warranties and specifications made hereunder, or otherwise, and Seller agrees that upon reasonable prior written notice to Seller, Buyer or its authorized representatives will be permitted during normal business hours to examine, inspect, and make copies and extracts of, the Purchased Loan Files, Servicing Records and any and all documents, records, agreements, instruments or information relating to such Purchased Loans in the possession or under the control of Seller, any other servicer or subservicer of Seller and/or the Custodian. Seller also shall make available to Buyer a knowledgeable financial or accounting officer for the purpose of answering financial or accounting questions respecting the Purchased Loan Files and the Purchased Loans. Without limiting the generality of the foregoing, Seller acknowledges that Buyer may enter into Transactions with the Seller based solely upon the information provided by Seller to Buyer and the representations, warranties and covenants contained herein, and that Buyer, at its option, has the right at any time to conduct a partial or complete due diligence review on some or all of the Purchased Loans. Buyer may underwrite such Purchased Loans itself or engage a third party underwriter to perform such underwriting. Seller agrees to reasonably cooperate with Buyer and any third party underwriter reasonably acceptable to Seller in connection with such underwriting, including, but not limited to, providing Buyer and any third party underwriter with access to any and all documents, records, agreements, instruments or information relating to such Purchased

46

Loans in the possession, or under the control, of Seller. Seller further agrees that Seller shall reimburse Buyer for any and all actual costs and expenses reasonably incurred by Buyer in connection with Buyer’s activities pursuant to this Section 28.

29. SERVICING

(a) Seller and Buyer agree that all Servicing Rights with respect to the Purchased Loans are being transferred hereunder to Buyer on the applicable Purchase Date and such Servicing Rights shall be transferred by Buyer to Seller upon Seller’s payment of the Repurchase Price for such applicable Purchased Loan. Notwithstanding the purchase and sale of the Purchased Loans and Servicing Rights hereby, Seller or, upon request of Seller, any third party servicer approved by Buyer shall be granted a revocable license to exercise the Servicing Rights with respect to the Purchased Loans for the benefit of Buyer and, if Buyer shall exercise its rights to pledge or hypothecate a Purchased Loan prior to the Repurchase Date pursuant to Section 8, Buyer’s assigns (which license shall be deemed automatically revoked upon the occurrence and during the continuance of an Event of Default); provided, however, that the obligations of Seller or such third party to service the Purchased Loans shall cease, at Seller’s option, upon the payment by Seller to Buyer of the Repurchase Price therefor. Seller shall service or cause the servicer to service the Purchased Loans pursuant to this Agreement in accordance with Accepted Servicing Practices approved by Buyer in the exercise of its reasonable business judgment and maintained by other prudent mortgage lenders with respect to senior interests in mortgage loans similar to the Purchased Loans. Seller shall obtain the written consent of Buyer prior to appointing any third party servicer for a Purchased Loan, which consent shall not be unreasonably withheld or delayed so long as such servicer is rated not lower than “Average” by Standard & Poor’s Ratings Services in its ratings of primary servicers.

(b) Seller agrees that Buyer is the owner of all servicing records, including but not limited to any and all servicing agreements (the “Servicing Agreements”), files, documents, records, data bases, computer tapes, copies of computer tapes, proof of insurance coverage, insurance policies, appraisals, other closing documentation, payment history records, and any other records relating to or evidencing the servicing of Purchased Loans (the “Servicing Records”) so long as the Purchased Loans are subject to this Agreement. Seller grants Buyer a security interest in all servicing fees and rights relating to the Purchased Loans and all Servicing Records to secure the obligation of the Seller or its designee to service in conformity with this Section and any other obligation of Seller to Buyer. Seller covenants to safeguard such Servicing Records which are in Seller’s possession and to deliver them promptly to Buyer or its designee (including the Custodian) at Buyer’s request.

(c) Upon the occurrence and during the continuance of an Event of Default, Buyer may, in its sole discretion, (i) sell its right to the Purchased Loans on a servicing released basis or (ii) terminate the Seller or any servicer of the Purchased Loans with or without cause, in each case without payment of any termination fee.

(d) Seller shall not employ or permit a servicer to employ sub-servicers to service the Purchased Loans without the prior written approval of Buyer, which consent shall not be unreasonably withheld or delayed so long as such sub-servicer is rated not lower than “Average” by Standard & Poor’s Ratings Services in its ratings of primary servicers. If the Purchased

47

Loans are serviced by a sub-servicer to Seller, Seller shall irrevocably assign all rights, title and interest in the Servicing Agreements in the Purchased Loans to Buyer.

(e) Seller shall cause any sub-servicers engaged by Seller to execute a letter agreement with Buyer acknowledging Buyer’s security interest, agreeing that it shall deposit all Income with respect to the applicable Purchased Loan(s) in the Cash Management Accounts and acknowledging that upon the occurrence and during the continuance of an Event of Default Buyer may terminate such sub-servicer without the requirement to pay any termination or similar fee.

(f) The payment of servicing fees shall be subordinate to payment of amounts outstanding under any Transaction and this Agreement.

30. MISCELLANEOUS

(a) All rights, remedies and powers of Buyer hereunder and in connection herewith are irrevocable and cumulative, and not alternative or exclusive, and shall be in addition to all other rights, remedies and powers of Buyer whether under law, equity or agreement. In addition to the rights and remedies granted to it in this Agreement, to the extent this Agreement is determined to create a security interest, Buyer shall have all rights and remedies of a secured party under the UCC.

(b) The Transaction Documents may be executed in counterparts, each of which so executed shall be deemed to be an original, but all of such counterparts shall together constitute but one and the same instrument.

(c) The headings in the Transaction Documents are for convenience of reference only and shall not affect the interpretation or construction of the Transaction Documents.

(d) Without limiting the rights and remedies of Buyer under the Transaction Documents, Seller shall pay Buyer’s reasonable actual out-of-pocket costs and expenses, including reasonable fees and expenses of accountants, attorneys and advisors, incurred in connection with the preparation, negotiation, execution and consummation of, and any amendment, supplement or modification to, the Transaction Documents and the Transactions thereunder. Seller agrees to pay Buyer promptly all costs and expenses (including reasonable expenses for legal services of every kind) of any subsequent enforcement of any of the provisions hereof, or of the performance by Buyer of any obligations of Seller in respect of the Purchased Loans, or any actual or attempted sale, or any exchange, enforcement, collection, compromise or settlement in respect of any of the Collateral and for the custody, care or preservation of the Collateral (including insurance costs) and defending or asserting rights and claims of Buyer in respect thereof, by litigation or otherwise. In addition, Seller agrees to pay Buyer promptly all reasonable costs and expenses (including reasonable expenses for legal services) incurred in connection with the maintenance of the Cash Management Account and registering the Collateral in the name of Buyer or its nominee. All such expenses shall be recourse obligations of Seller to Buyer under this Agreement.

(e) Each provision of this Agreement shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement shall be

48

prohibited by or be invalid under such law, such provision shall be ineffective to the extent of such prohibition or invalidity, without invalidating the remainder of such provision or the remaining provisions of this Agreement.

(f) This Agreement contains a final and complete integration of all prior expressions by the parties with respect to the subject matter hereof and thereof and shall constitute the entire agreement among the parties with respect to such subject matter, superseding all prior oral or written understandings.

(g) The parties understand that this Agreement is a legally binding agreement that may affect such party’s rights. Each party represents to the other that it has received legal advice from counsel of its choice regarding the meaning and legal significance of this Agreement and that it is satisfied with its legal counsel and the advice received from it.

(h) Should any provision of this Agreement require judicial interpretation, it is agreed that a court interpreting or construing the same shall not apply a presumption that the terms hereof shall be more strictly construed against any Person by reason of the rule of construction that a document is to be construed more strictly against the Person who itself or through its agent prepared the same, it being agreed that all parties have participated in the preparation of this Agreement.

(i) The parties recognize that each Transaction is a “securities contract” as that term is defined in Section 741 of Title 11 of the United States Code, as amended.

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IN WITNESS WHEREOF, the parties have executed this Agreement as of the day first written above.

BUYER:
CITIBANK, N.A.
By:	/s/ Richard B. Schlenger
Name:	Richard B. Schlenger
Title:	Authorized Signatory

[SIGNATURES CONTINUE ON NEXT PAGE]

Signature Page to Master Repurchase Agreement

SELLER:
RAIT CMBS CONDUIT I, LLC, a Delaware limited liability company
By:	RAIT Funding, LLC, a Delaware limited liability company, its sole Member

By: Taberna Realty Finance Trust, a Maryland real estate investment trust, its sole Member

By:	/s/ James J. Sebra
Name:	James J. Sebra
Title:	SVP & CAO

Signature Page to Master Repurchase Agreement

ANNEXES AND EXHIBITS

ANNEX I	Names and Addresses for Communications between Parties
EXHIBIT I	Form of Confirmation
EXHIBIT II	Authorized Representatives of Seller
EXHIBIT III	Form of Custodial Delivery
EXHIBIT IV	Conduit Loan Due Diligence Checklist
EXHIBIT V	Form of Power of Attorney
EXHIBIT VI	Representations and Warranties Regarding Each Individual Purchased Loan
EXHIBIT VII	Collateral Tape
EXHIBIT VIII	Form of Transaction Request
EXHIBIT IX	Form of Irrevocable Direction Letter

ANNEX I

Names and Addresses for Communications Between Parties

Buyer:

Citibank, N.A.

388 Greenwich Street

New York, New York 10013

Attention: Richard Schlenger

Tel: (212) 816-7806

Fax: (212) 816-8307

and

Sidley Austin LLP

787 Seventh Avenue

New York, New York 10019

Attention: Brian Krisberg, Esq.

Tel: (212) 839-8735

Fax: (212) 839-5599

Seller:

RAIT CMBS Conduit I, LLC

c/o RAIT Financial Trust

450 Park Avenue

New York, New York 10022

Attention: Ron Wechsler and Scott Davidson

Tel: (212) 735-1490

Fax: (212) 735-1499

With copies to:

RAIT Financial Trust

2929 Arch Street, 17^th Floor

Philadelphia, PA 19104

Attention: Jamie Reyle, Esq., Corporate Counsel

Tel: (215) 243-9019

Fax: (215) 405-2945

And, if the notice is being sent under Section 4(a), with a copy to:

RAIT Financial Trust

2929 Arch Street, 17^th Floor

Philadelphia, PA 19104

Attention: James Sebra, Chief Accounting Officer

Tel: (215) 243-9000

Fax: (215) 243-9097

EXHIBIT I

CONFIRMATION STATEMENT

Ladies and Gentlemen:

Citibank, N.A., is pleased to deliver our written CONFIRMATION of our agreement to enter into the Transaction pursuant to which Citibank, N.A. shall purchase from you the Purchased Loans identified in the Master Repurchase Agreement, dated as of October 27, 2011 (the “Agreement”), between Citibank, N.A. (“Buyer”) and RAIT CMBS Conduit I, LLC (“Seller”) as follows below and on the attached Schedule 1. Capitalized terms used herein without definition have the meanings given in the Agreement.

Purchase Date:	__________, 2011
Purchased Loans:	As identified on attached Schedule 1
Aggregate Principal Amount of Purchased Loans:	As identified on attached Schedule 1
Repurchase Date:	__________, 2011, subject to extension as provided in the Agreement
Purchase Price:	$
Pricing Rate:	one month LIBOR plus 2.50%
Buyer’s Margin Percentage:	133.33%
Governing Agreements:	As identified on attached Schedule 1
Seller’s Account Information:

Name and address for communications:	Buyer:	Citibank, N.A. 388 Greenwich Street New York, New York 10013 Attention: Richard Schlenger Tel: (212) 816-7806 Fax: (212) 816-8307
	Seller:	RAIT CMBS Conduit I, LLC, c/o RAIT Financial Trust 2929 Arch Street, 17th Floor Philadelphia, PA 19104 Attention: Jamie Reyle, Esq., Corporate Counsel Tel: (215) 243-9019 Fax: (215) 405-2945

CITIBANK, N.A.

By:

Name:

Title:

By:

Name:

Title:

AGREED AND ACKNOWLEDGED:

RAIT CMBS CONDUIT I, LLC, a Delaware limited liability company
By:	RAIT Funding, LLC, a Delaware limited liability company, its sole Member
	By:	Taberna Realty Finance Trust, a Maryland real estate investment trust, its sole Member
		By:
		Name:
		Title:

Schedule 1 to Confirmation Statement

Purchased Loan:

Aggregate Principal Amount:

EXHIBIT II

AUTHORIZED REPRESENTATIVES OF SELLER

Name Specimen Signature

EXHIBIT III

FORM OF CUSTODIAL DELIVERY

On this ______ of ________, 20__, RAIT CMBS Conduit I, LLC, as Seller under that certain Master Repurchase Agreement, dated as of October 27, 2011 (the “Repurchase Agreement”) between Citibank, N.A. (“Buyer”) and RAIT CMBS Conduit I, LLC, does hereby deliver to Wells Fargo Bank National Association (“Custodian”), as custodian under that certain Custodial Agreement, dated as of October 27, 2011 (the “Custodial Agreement”), among Buyer, Custodian and RAIT CMBS Conduit I, LLC, the Purchased Loan Files with respect to the Purchased Loans to be purchased by Buyer pursuant to the Repurchase Agreement, which Purchased Loans are listed on the Purchased Loan Schedule attached hereto and which Purchased Loans shall be subject to the terms of the Custodial Agreement on the date hereof.

With respect to the Purchased Loan Files delivered hereby, for the purposes of issuing the Trust Receipt, the Custodian shall review the Purchased Loan Files to ascertain delivery of the documents listed in Section 3(g) to the Custodial Agreement.

Capitalized terms used herein and not otherwise defined shall have the meanings set forth in the Repurchase Agreement.

IN WITNESS WHEREOF, the Seller has caused its name to be signed hereto by its officer thereunto duly authorized as of the day and year first above written.

RAIT CMBS CONDUIT I, LLC, a Delaware limited liability company
By:	RAIT Funding, LLC, a Delaware limited liability company, its sole Member
	By:	Taberna Realty Finance Trust, a Maryland real estate investment trust, its sole Member
		By:
		Name:
		Title:

EXHIBIT IV

CONDUIT LOAN DUE DILIGENCE CHECKLIST

General Information

Asset Summary Report

Site Inspection Report

Maps and Photos

Borrower/Sponsor Information

Credit Reports

Financial Statements & Tax Returns

Borrower Structure or Org Chart

Bankruptcy and Foreclosure History

Property Information

Historical Operating Statements

Rent Rolls

Budget

Insurance Review

Retail Sales Figures

Market Survey

Leasing Information

Stacking Plan

Major Leases

Tenant Estoppels

Standard Lease Forms

SNDA’s

Third Party Reports

Appraisals

Environmental Site Assessments

Engineering Reports

Seismic Reports

Other Information

Hotel Franchise Compliance Reports

Hotel Franchise Agreement

Hotel Franchise Comfort Letters

Ground Lease

Management Contract

Documentation

Purchase and Sale Agreement

Closing Statement

Legal Binder

EXHIBIT V

FORM OF POWER OF ATTORNEY

“Know All Men by These Presents, that RAIT CMBS Conduit I, LLC (“Seller”), does hereby appoint Citibank, N.A. (“Buyer”), its attorney-in-fact to act in Seller’s name, place and stead in any way which Seller could do with respect to (i) the completion of the endorsements of the Mortgage Notes and the Assignments of Mortgages, (ii) the recordation of the Assignments of Mortgages and (iii) after the occurrence and during the continuance of an Event of Default, the enforcement of the Seller’s rights under the Purchased Loans purchased by Buyer pursuant to the Master Repurchase Agreement dated as of October 27, 2011 (the “Repurchase Agreement”), between Buyer and Seller, and to take such other steps as may be necessary or desirable to enforce Buyer’s rights against such Purchased Loans, the related Purchased Loan Files and the Servicing Records to the extent that Seller is permitted by law to act through an agent.

Capitalized terms used herein and not otherwise defined shall have the meanings set forth in the Repurchase Agreement.

TO INDUCE ANY THIRD PARTY TO ACT HEREUNDER, SELLER HEREBY AGREES THAT ANY THIRD PARTY RECEIVING A DULY EXECUTED COPY OF FACSIMILE OF THIS INSTRUMENT MAY ACT HEREUNDER, AND THAT REVOCATION OR TERMINATION HEREOF SHALL BE INEFFECTIVE AS TO SUCH THIRD PARTY UNLESS AND UNTIL ACTUAL NOTICE OR KNOWLEDGE OR SUCH REVOCATION OR TERMINATION SHALL HAVE BEEN RECEIVED BY SUCH THIRD PARTY, AND SELLER ON ITS OWN BEHALF AND ON BEHALF OF SELLER’S ASSIGNS, HEREBY AGREES TO INDEMNIFY AND HOLD HARMLESS ANY SUCH THIRD PARTY FROM AND AGAINST ANY AND ALL CLAIMS THAT MAY ARISE AGAINST SUCH THIRD PARTY BY REASON OF SUCH THIRD PARTY HAVING RELIED ON THE PROVISIONS OF THIS INSTRUMENT.

IN WITNESS WHEREOF Seller has caused this Power of Attorney to be executed as a deed this 27^th day of October, 2011.

RAIT CMBS CONDUIT I, LLC, a Delaware limited liability company
By:	RAIT Funding, LLC, a Delaware limited liability company, its sole Member
	By:	Taberna Realty Finance Trust, a Maryland real estate investment trust, its sole Member
		By:
		Name:
		Title:

EXHIBIT VI

REPRESENTATIONS AND WARRANTIES

REGARDING EACH INDIVIDUAL PURCHASED LOAN

(1) Purchased Loan Schedule. The information pertaining to each Purchased Loan set forth in the Purchased Loan Schedule is true and accurate in all material respects as of the Purchase Date.

(2) Legal Compliance – Origination. The origination practices of the Seller (or the related originator if the Seller was not the originator) have been, in all material respects, legal and as of the date of its origination, such Purchased Loan (or the related Whole Loan, as applicable) and the origination thereof complied in all material respects with, or was exempt from, all requirements of federal, state or local law relating to the origination of such Purchased Loan; provided that such representation and warranty does not address or otherwise cover any matters with respect to federal, state or local law otherwise covered in this Exhibit VI.

(3) Good Title; Conveyance. Immediately prior to the sale, transfer and assignment to the Buyer, the Seller had good title to, and was the sole owner of, each Purchased Loan, and the Seller is transferring such Purchased Loan free and clear of any and all liens, pledges, charges or security interests of any nature encumbering such Purchased Loan (other than the rights of the holder of a related Junior Interest). Upon consummation of the transactions contemplated by this Agreement, the Seller will have validly and effectively conveyed to the Buyer all legal and beneficial interest in and to such Purchased Loan free and clear of any pledge, lien or security interest (other than the rights of a holder of a Junior Interest).

(4) Future Advances. The proceeds of such Purchased Loan have been fully disbursed (except in those cases where the full amount of the Purchased Loan has been disbursed but a portion thereof is being held in escrow or reserve accounts pending the satisfaction of certain conditions relating to leasing, repairs or other matters with respect to the Mortgaged Property), and there is no requirement for future advances thereunder by the mortgagee.

(5) Legal, Valid and Binding Obligation. Each related Mortgage Note, Mortgage, Assignment of Leases (if contained in a document separate from the Mortgage) and other agreement that evidences or secures such Purchased Loan (or the related Whole Loan, as applicable) and was executed in connection with such Purchased Loan by or on behalf of the related Mortgagor is the legal, valid and binding obligation of the related Mortgagor (subject to any non-recourse provisions therein and any state anti-deficiency or market value limit deficiency legislation), enforceable in accordance with its terms, except (i) that certain provisions contained in such Purchased Loan Documents are or may be unenforceable in whole or in part under applicable state or federal laws, but neither the application of any such laws to any such provision nor the inclusion of any such

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provisions renders any of the Purchased Loan documents invalid as a whole and such Purchased Loan documents taken as a whole are enforceable to the extent necessary and customary for the practical realization of the rights and benefits afforded thereby and (ii) as such enforcement may be limited by bankruptcy, insolvency, receivership, reorganization, moratorium, redemption, liquidation or other laws affecting the enforcement of creditors’ rights generally, or by general principles of equity (regardless of whether such enforcement is considered in a proceeding in equity or at law). The Assignment of Leases (as set forth in the Mortgage or in a document separate from the related Mortgage and related to and delivered in connection with each Purchased Loan) establishes and creates a valid and enforceable first priority assignment of, or a valid first priority security interest in, the related Mortgagor’s right to receive payments due under all leases, subleases, licenses or other agreements pursuant to which any Person is entitled to occupy, use or possess all or any portion of the Mortgaged Property, subject to any license granted to the related Mortgagor to exercise certain rights and to perform certain obligations of the lessor under such leases, and subject to the limitations set forth above and the Title Exceptions. The related Mortgage Note, Mortgage and Assignment of Leases (if contained in a document separate from the Mortgage) contain no provision limiting the right or ability of the Seller to assign, transfer and convey the related Purchased Loan to any other Person.

(6) No Offset or Defense. Subject to the limitations set forth in paragraph (5), as of the date of its origination there was, and as of the Purchase Date there is, no valid right of offset and no valid defense, counterclaim, abatement or right to rescission with respect to any of the related Mortgage Notes, Mortgage(s) or other agreements executed in connection therewith, except in each case, with respect to the enforceability of any provisions requiring the payment of default interest, late fees, additional interest, prepayment premiums or yield maintenance charges.

(7) Assignment of Mortgage and Assignment of Assignment of Leases. Subject to the limitations and exceptions set forth in paragraph (5), each assignment of Mortgage and assignment of Assignment of Leases from the Seller constitutes the legal, valid and binding assignment from the Seller. Each related Mortgage and Assignment of Leases is freely assignable upon notice to but without the consent of the related Mortgagor.

(8) Mortgage Lien. The Mortgagor has good indefeasible fee simple title (or with respect to Purchased Loans described in paragraph (48), leasehold title) to the related Mortgaged Property and each related Mortgage is a valid and enforceable first lien on the related Mortgaged Property (and/or Ground Lease, if applicable), subject to the limitations and exceptions set forth in paragraph (5) and the following title exceptions (each such title exception, a “Title Exception”, and collectively, the “Title Exceptions”): (a) the lien of current real property taxes, ground rents, water charges, sewer rents and assessments not yet due and payable, (b) covenants, conditions and restrictions, rights of way, easements and other matters of public record, (c) the exceptions (general and specific) and exclusions set forth in the applicable Title Policy (described in paragraph (11) below) or appearing of record, (d) other matters to which like properties are commonly subject, (e) the right of tenants (whether under ground leases, space leases or operating leases) pertaining to the related Mortgaged Property and condominium declarations, (f) if such

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Purchased Loan is cross-collateralized and cross-defaulted with any other Purchased Loan, the lien of the Mortgage for such other Purchased Loan and (g) if such Purchased Loan is part of a Whole Loan, the rights of the holder of the related Junior Interest, none of which exceptions described in clauses (a) – (g) above, individually or in the aggregate, materially and adversely interferes with (1) the current use of the Mortgaged Property, (2) the security intended to be provided by such Mortgage, (3) the Mortgagor’s ability to pay its obligations under the Purchased Loan when they become due or (4) the value of the Mortgaged Property. The Mortgaged Property is free and clear of any mechanics’ or other similar liens or claims which are prior to or equal with the lien of the related Mortgage, except those which are insured against by a lender’s title insurance policy. To the Seller’s actual knowledge no rights are outstanding that under applicable law could give rise to any such lien that would be prior or equal to the lien of the related Mortgage, unless such lien is bonded over, escrowed for or covered by insurance.

(9) Taxes and Assessments. All real estate taxes and governmental assessments, or installments thereof, which could be a lien on the related Mortgaged Property and that prior to the Purchase Date have become delinquent in respect of each related Mortgaged Property have been paid, or an escrow of funds in an amount sufficient to cover such payments has been established. For purposes of this representation and warranty, real estate taxes and governmental assessments and installments thereof shall not be considered delinquent until the earlier of (a) the date on which interest and/or penalties would first be payable thereon and (b) the date on which enforcement action is entitled to be taken by the related taxing authority.

(10) Condition of Mortgaged Property; No Condemnation. To the Seller’s actual knowledge, based solely upon due diligence customarily performed in connection with the origination of comparable Purchased Loans, as of the Purchase Date, (a) each related Mortgaged Property was free and clear of any material damage (other than deferred maintenance for which escrows were established at origination) that would affect materially and adversely the value of such Mortgaged Property as security for the Purchased Loan and (b) there was no proceeding pending for the total or partial condemnation of such Mortgaged Property.

(11) Title Insurance. The lien of each related Mortgage as a first priority lien in the original principal amount of such Purchased Loan (or related Whole Loan, as applicable, or, in the case of a Purchased Loan secured by multiple Mortgaged Properties an allocable portion thereof) is insured by an ALTA lender’s title insurance policy (or a binding commitment therefor), or its equivalent as adopted in the applicable jurisdiction (the “Title Policy”), insuring the originator of the Purchased Loan or Whole Loan, its successors and assigns, subject only to the Title Exceptions; such originator or its successors or assigns is the named insured of such policy; such policy is assignable without consent of the insurer and will inure to the benefit of the Buyer as mortgagee of record; such policy, if issued, is in full force and effect and all premiums thereon have been paid; no claims have been made under such policy and the Seller has not done anything, by act or omission, and to the Seller’s actual knowledge there is no matter, which would impair or diminish the coverage of such policy. The insurer issuing such policy is either (x) a nationally-recognized title insurance company or (y) qualified to do

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business in the jurisdiction in which the related Mortgaged Property is located to the extent required. The Title Policy contains no material exclusion for, or alternatively it insures (unless such coverage is unavailable in the relevant jurisdiction) (a) access to a public road or (b) against any loss due to encroachment of any material portion of the improvements thereon.

(12) Insurance. As of the origination date of each Purchased Loan (or related Whole Loan, as applicable), and to the Seller’s actual knowledge, as of the Purchase Date, all insurance coverage required under the related Purchased Loan Documents was in full force and effect. Each Purchased Loan requires insurance in such amounts and covering such risks as were customarily acceptable to prudent commercial and multifamily mortgage lending institutions lending on the security of property comparable to the related Mortgaged Property in the jurisdiction in which such Mortgaged Property is located, including requirements for (a) a fire and extended perils insurance policy, in an amount (subject to a customary deductible) at least equal to the lesser of (i) the replacement cost of improvements located on such Mortgaged Property, or (ii) the outstanding principal balance of the Purchased Loan (or in the case of a Whole Loan, the outstanding principal balance of the Whole Loan), and in any event, the amount necessary to prevent operation of any co-insurance provisions (except with respect to a Purchased Loan secured by mobile home parks or manufactured housing communities, in which case such coverage is required only with respect to buildings owned by the related Mortgagor that are permanently located on the related Mortgaged Property), (b) except if such Mortgaged Property is operated as a mobile home park, business interruption or rental loss insurance, in an amount at least equal to 12 months of operations of the related Mortgaged Property, (c) commercial general liability insurance against claims for personal and bodily injury, death or property damage occurring on, in or about the related Mortgaged Property, in an amount customarily required by prudent institutional lenders and (d) if such Purchased Loan is secured by a Mortgaged Property (other than a manufactured housing property) located in “seismic zones” 3 or 4, a seismic assessment by an independent third party provider was conducted and if the seismic assessment (based on a 450-year lookback with a 10% probability of exceedance in a 50-year period) revealed a probable maximum loss equal to 20% or higher, earthquake insurance. If the Mortgaged Property is located within 25 miles of the coast of the Gulf of Mexico or the Atlantic coast of Florida, Georgia, South Carolina or North Carolina, such Mortgaged Property is insured by windstorm insurance in an amount at least equal to the lesser of (i) the outstanding principal balance of such Purchased Loan and (ii) 100% of the full insurable value, or 100% of the replacement cost, of the improvements located on the related Mortgaged Property. To the Seller’s actual knowledge, as of the Purchase Date, all premiums due and payable through the Purchase Date have been paid and no notice of termination or cancellation with respect to any such insurance policy has been received by the Seller. Except for certain amounts not greater than amounts which would be considered prudent by an institutional commercial mortgage lender with respect to a similar Purchased Loan and which are set forth in the related Mortgage, the related Purchased Loan documents require that any insurance proceeds in respect of a casualty loss, will be applied either (i) to the repair or restoration of all or part of the related Mortgaged Property or (ii) the reduction of the outstanding principal balance of the Purchased Loan, subject in either case to requirements with respect to leases at the related Mortgaged Property and to other

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exceptions customarily provided for by prudent institutional lenders for similar loans. The hazard insurance policies each contain a standard mortgagee clause naming the Seller and its successors and assigns as loss payee or additional insured, as applicable, and each insurance policy provides that they are not terminable without 30 days prior written notice to the mortgagee (or, with respect to non-payment, 10 days prior written notice to the mortgagee) or such lesser period as prescribed by applicable law. The loan documents for each Purchased Loan (a) require that the Mortgagor maintain insurance as described above or permit the mortgagee to require that the Mortgagor maintain insurance as described above, and (b) permit the mortgagee to purchase such insurance at the Mortgagor’s expense if the Mortgagor fails to do so. The insurer with respect to each policy is qualified to write insurance in the relevant jurisdiction to the extent required.

(13) No Material Default. Other than payments due but not yet 30 days or more delinquent, there is no monetary event of default existing under the related Mortgage or the related Mortgage Note and, to the Seller’s actual knowledge, (i) there is no material default, breach, violation or event of acceleration existing under the related Mortgage or the related Mortgage Note, and (ii) there is no event (other than payments due but not yet delinquent) which, with the passage of time or with notice and the expiration of any grace or cure period, would constitute a material default, breach, violation or event of acceleration, provided, however, that this representation and warranty does not address or otherwise cover any default, breach, violation or event of acceleration that specifically pertains to any matter otherwise covered in this Exhibit VI (including any schedule or exhibit hereto). The Seller has not waived any material default, breach, violation or event of acceleration under such Mortgage or Mortgage Note, unless a written waiver to that effect is contained in the related Purchased Asset File being delivered, and pursuant to the terms of the related Mortgage or the related Mortgage Note and other documents in the related Purchased Asset File, no Person or party other than the holder of such Mortgage Note may declare any event of default or accelerate the related indebtedness under either of such Mortgage or Mortgage Note.

(14) Payment Record. As of the Purchase Date, each Purchased Loan is not, and in the prior 12 months (or since the date of origination if such Purchased Loan (or related Whole Loan, as applicable) has been originated within the past 12 months), has not been, 30 days or more past due in respect of any scheduled payment.

(15) Servicing. The servicing and collection practices used by the Seller with respect to the Purchased Loan have been, in all respects, legal and have met customary industry standards for servicing of commercial loans for conduit loan programs.

(16) Qualified Mortgage. Each Purchased Loan constitutes a “qualified mortgage” within the meaning of Section 860G(a)(3) of the Code (but determined without regard to Treasury Regulations Sections 1.860G-2(f)(2) or 1.860G-2(a)(3) that treats a defective obligation as a qualified mortgage, or any substantially similar successor provision), and, accordingly, each Purchased Loan is directly secured by a Mortgage on a commercial property or a multifamily residential property, and either (1) substantially all of the proceeds of such Purchased Loan were used to acquire, improve or protect the portion of such commercial or multifamily residential property that consists of an interest in real

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property (within the meaning of Treasury Regulations Sections 1.856-3(c) and 1.856-3(d)) and such interest in real property was the only security for such Purchased Loan as of the Testing Date (as defined below), or (2) the fair market value of the interest in real property that secures such Purchased Loan was at least equal to (a) 80% of the principal balance of the Purchased Loan as of the Testing Date or (b) 80% of the unpaid principal balance of the Purchased Loan as of the Purchase Date. For purposes of the previous sentence, (1) the fair market value of the referenced interest in real property shall first be reduced by (a) the amount of any lien on such interest in real property that is senior to the Purchased Loan, and (b) a proportionate amount of any lien on such interest in real property that is on a parity with the Purchased Loan, and (2) the “Testing Date” shall be the date on which the referenced Purchased Loan was originated unless (a) such Purchased Loan was modified after the date of its origination in a manner that would cause a “significant modification” of such Purchased Loan within the meaning of Treasury Regulations Section 1.1001-3(b), and (b) such “significant modification” did not occur at a time when such Purchased Loan was in default or when default with respect to such Purchased Loan was reasonably foreseeable. However, if the referenced Purchased Loan has been subjected to a “significant modification” after the date of its origination and at a time when such Purchased Loan was not in default or when default with respect to such Purchased Loan was not reasonably foreseeable, the Testing Date shall be the date upon which the latest such “significant modification” occurred. Each yield maintenance payment and prepayment premium payable under the Purchased Loans is a “customary prepayment penalty” within the meaning of Treasury Regulations Section 1.860G-1(b)(2). As of the Purchase Date, the related Mortgaged Property, if acquired in connection with the default or imminent default of such Purchased Loan, would constitute “foreclosure property” within the meaning of Section 860G(a)(8) of the Code.

(17) Environmental Conditions and Compliance. One or more environmental site assessments or updates thereof were performed by an environmental consulting firm independent of the Seller or the Seller’s Affiliates with respect to each related Mortgaged Property during the 18-months preceding the origination of the related Purchased Loan (or related Whole Loan, as applicable), and the Seller, having made no independent inquiry other than to review the report(s) prepared in connection with the assessment(s) referenced herein, has no actual knowledge and has received no notice of any material and adverse environmental condition or circumstance affecting such Mortgaged Property that was not disclosed in such report(s). If any such environmental report identified any Recognized Environmental Condition (“REC”), as that term is defined in the Standard Practice for Environmental Site Assessments: Phase I Environmental Site Assessment Process Designation: E 1527-05, as recommended by the American Society for Testing and Materials (“ASTM”), with respect to the related Mortgaged Property and the same have not been subsequently addressed in all material respects, then either one or a combination of (i) an escrow greater than or equal to 100% of the amount identified as necessary by the environmental consulting firm to address the REC is held by the Seller for purposes of effecting same (and the Mortgagor has covenanted in the Purchased Loan documents to perform such work), (ii) a responsible party, other than the Mortgagor, having financial resources reasonably estimated to be adequate to address the REC is required to take such actions or is liable for the failure to take such actions, if any, with respect to such

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circumstances or conditions as have been required by the applicable governmental regulatory authority or any environmental law or regulation, (iii) the Mortgagor has provided an environmental insurance policy, (iv) an operations and maintenance plan was the only action recommended and such plan has been or will be implemented or (v) such conditions or circumstances were investigated further and a qualified environmental consulting firm recommended no further investigation or remediation. Each of the Purchased Loans which is covered by a lender’s environmental insurance policy obtained in lieu of an Environmental Site Assessment (“In Lieu of Policy”) is in an amount equal to 125% of the outstanding principal balance of the related Purchased Loan and has a term ending no sooner than the date which is five years after the maturity date of the related Purchased Loan, is non-cancelable by the insurer during such term and the premium for such policy has been paid in full. All environmental assessments or updates that were in the possession of the Seller and that relate to a Mortgaged Property identified as being insured by an In Lieu of Policy have been delivered to or disclosed to the In Lieu of Policy carrier issuing such policy prior to the issuance of such policy.

(18) Customary Mortgage Provisions. Each related Mortgage Note, Mortgage and Assignment of Leases (if contained in a document separate from the Mortgage) contain customary and, subject to the limitations and exceptions set forth in paragraph (5) and applicable state law, enforceable provisions for comparable mortgaged properties similarly situated such as to render the rights and remedies of the holder thereof adequate for the practical realization against the Mortgaged Property of the benefits of the security intended to be provided thereby, including realization by judicial or, if applicable, non-judicial foreclosure.

(19) Bankruptcy. No Mortgagor is a debtor in, and no Mortgaged Property (other than any tenants of such Mortgaged Property) is the subject of, any state or federal bankruptcy or insolvency proceeding.

(20) Whole Loan; No Equity Participation, Contingent Interest or Negative Amortization. Except with respect to a Purchased Loan that is part of a Whole Loan, each Purchased Loan is a whole loan. None of the Purchased Loans contain any equity participation, preferred equity component or shared appreciation feature by the mortgagee nor does any Purchased Loan provide the mortgagee with any contingent or additional interest in the form of participation in the cash flow of the related Mortgaged Property.

(21) Transfers and Subordinate Debt. Subject to specific exceptions set forth below, each Purchased Loan contains a “due on sale” or other such provision for the acceleration of the payment of the unpaid principal balance of such Purchased Loan if, without the consent of the holder of the Mortgage (which consent, in some cases, may not be unreasonably withheld) and/or complying with the requirements of the related Purchased Loan documents (which may provide for transfers without the consent of the lender which are customarily acceptable to prudent commercial and multifamily mortgage lending institutions lending on the security of property comparable to the related Mortgaged Property such as transfers of worn out or obsolete furnishings, fixtures, or equipment promptly replaced with property of equivalent value and functionality and transfers of leases entered into in accordance with the Purchased Loan documents),

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(a) the related Mortgaged Property, or any controlling equity interest in the related Mortgagor, is directly or indirectly pledged, transferred or sold, other than as related to (i) family and estate planning transfers, (ii) transfers to certain affiliates as defined in the related Purchased Loan documents, (iii) transfers of less than a controlling interest in a Mortgagor, (iv) transfers to another holder of direct or indirect equity in the Mortgagor, a specific Person designated in the related Purchased Loan documents or a Person satisfying specific criteria identified in the related Purchased Loan documents, (v) transfers of common stock in publicly traded companies, (vi) a substitution or release of collateral within the parameters of paragraph (24) below or, (vii) by reason of any mezzanine debt that existed at the origination of the related Purchased Loan or that was permitted after origination of the related Purchased Loan or may be permitted in the future under the related Purchased Loan documents, or (b) the related Mortgaged Property is encumbered with a subordinate lien or security interest against the related Mortgaged Property, other than (i) any Junior Interest of any Purchased Loan or any subordinate debt that existed at origination and is permitted under the related Purchased Loan documents, (ii) trade debt and equipment or other personal property financing in the ordinary course of business or (iii) any Purchased Loan that is cross-collateralized and cross-defaulted with another Purchased Loan. Except as related to (a)(i), (ii), (iii), (iv), (v), (vi) or (vii) above or (b)(i), (ii) or (iii) above, no Purchased Loan may be assigned to another entity without the mortgagee’s consent. The Mortgage or other Purchased Loan document provides that the Mortgagor is required to pay all reasonable out-of-pocket expenses of the lender incurred with respect to any transfer or encumbrance, including rating agency fees that are incurred in connection with the review and consent to any transfer or encumbrance.

(22) Waivers and Modification. Except as set forth in the related Purchased Asset File, the terms of the related Mortgage Note and Mortgage have not been waived, modified, altered, satisfied, impaired, canceled, subordinated or rescinded in any manner which materially interferes with the security intended to be provided by such Mortgage.

(23) Inspection. Each related Mortgaged Property was inspected by or on behalf of the related originator or an affiliate of the originator during the 12 month period prior to the related origination date.

(24) Releases of Mortgaged Property. (A) Since origination, no material portion of the related Mortgaged Property has been released from the lien of the related Mortgage in any manner which materially and adversely affects the value of the Purchased Loan or materially interferes with the security intended to be provided by such Mortgage; and (B) the terms of the related Purchased Loan documents do not permit the release of any portion of the Mortgaged Property from the lien of the Mortgage except in compliance with REMIC Provisions and only (i) in consideration of payment in full (or in certain cases, the allocated loan amount) therefor, (ii) in connection with the substitution of all or a portion of the Mortgaged Property in exchange for delivery of U.S. “government securities” within the meaning of Section 2(a)(16) of the Investment Company Act of 1940, as amended, in a defeasance (or a partial defeasance, in the case of a release of a portion of the Mortgaged Property) meeting the requirements of paragraph (42) below, (iii) where such portion to be released was not considered material for purposes of

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underwriting the Purchased Loan and such release was contemplated at origination, (iv) conditioned on the satisfaction of certain underwriting and other requirements, including payment of (or partial defeasance in the amount of) a release price in an amount equal to not less than 125% of the allocated loan amount for such Mortgaged Property or the portion thereof to be released, or (v) in connection with the substitution of a replacement property in compliance with REMIC Provisions; provided that in the case of clauses (i), (iii) and (iv), for all Purchased Loans originated after December 6, 2010, a payment of principal is required to be made in an amount required by the REMIC Provisions if the fair market value of the real property constituting the remaining Mortgaged Property after the release is not equal to at least (x) 80% of the principal balance of the Purchased Loan (or Whole Loan, if applicable) outstanding after the release or (y) the fair market value of the Mortgaged Property immediately before the release. The Purchased Loan documents require the Mortgagor to pay all related reasonable out-of-pocket expenses of the lender in connection with any release described in this paragraph (24).

(25) Compliance with Applicable Law. To the Seller’s actual knowledge, based upon a letter from governmental authorities, a legal opinion, an endorsement to the related title policy, or other due diligence considered reasonable by prudent commercial mortgage lenders taking into account the location of the Mortgaged Property, as of the date of origination of such Purchased Loan (or related Whole Loan, as applicable) and as of the Purchase Date, there are no material violations of any applicable zoning ordinances, building codes and land laws applicable to the Mortgaged Property or the use and occupancy thereof other than those which (i) are insured by the Title Policy or a law and ordinance insurance policy or (ii) would not have a material adverse effect on the value, operation or net operating income of the Mortgaged Property. The terms of the Purchased Loan documents evidencing such Purchased Loan require the Mortgagor to comply in all material respects with all applicable local, state and federal laws and regulations.

(26) Improvements. To the Seller’s actual knowledge based on the Title Policy or surveys obtained in connection with the origination of each Purchased Loan (or related Whole Loan, as applicable), none of the material improvements which were included for the purposes of determining the appraised value of the related Mortgaged Property at the time of the origination of the Purchased Loan (or related Whole Loan, as applicable) lies outside of the boundaries and building restriction lines of such property nor encroaches upon any easements (except Mortgaged Properties, in each case, which are legal non-conforming improvements or uses), to an extent which would have a material adverse affect on the value of the Mortgaged Property or related Mortgagor’s use and operation of such Mortgaged Property (unless affirmatively covered by the related Title Policy) and no improvements on adjoining properties encroached upon such Mortgaged Property to any material and adverse extent (unless affirmatively covered by the related Title Policy).

(27) Single Purpose Entity. With respect to each Purchased Loan with a unpaid principal balance (A) in excess of $5,000,000 the related Mortgagor has covenanted in its organizational documents and/or the Purchased Loan documents to own no significant asset other than the related Mortgaged Property and assets incidental to its ownership and operation of such Mortgaged Property, and to hold itself out as being a legal entity,

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separate and apart from any other Person; and (B) in excess of $20,000,000, the representation and warranty in (A) above is true and the related Mortgagor (or if the Mortgagor is a limited partnership or a multi-member limited liability company, the special purpose general partner or special purpose managing member, as applicable, of the related Mortgagor), has at least one independent director, and the related Mortgagor has delivered a non-consolidation opinion of counsel. For each Purchased Loan for which the related Mortgagor has covenanted in its organizational documents and/or the Purchased Loan documents to own no significant asset other than the related Mortgaged Property and assets incidental to its ownership and operation of such Mortgaged Property, at the time of origination of the Purchased Loan (or related Whole Loan, as applicable), to the Seller’s actual knowledge, the Mortgagor was in compliance with such requirements.

(28) Advance of Funds. (A) After origination, the Seller has not, directly or indirectly, advanced any funds to the Mortgagor, other than pursuant to the related Purchased Loan documents; and (B) to the Seller’s actual knowledge, no funds have been received from any Person other than the Mortgagor or it property manager, for or on account of payments due on the Mortgage Note (other than amounts paid by the tenant into a lender-controlled lockbox as specifically required under the related lease).

(29) Litigation or Other Proceedings. As of the date of origination and, to the Seller’s actual knowledge, as of the Purchase Date, there was no pending action, suit or proceeding, or governmental investigation of which it has received notice, against the Mortgagor or the related Mortgaged Property the adverse outcome of which could reasonably be expected to materially and adversely affect (i) such Mortgagor’s ability to pay its obligations under the Purchased Loan, (ii) the security intended to be provided by the Purchased Loan documents or (iii) the current use of the Mortgaged Property.

(30) Trustee Under Deed of Trust. As of the date of origination, and, to the Seller’s actual knowledge, as of the Purchase Date, if the related Mortgage is a deed of trust, a trustee, duly qualified under applicable law to serve as such, has either been properly designated and serving under such Mortgage or may be substituted in accordance with the Mortgage and applicable law.

(31) Usury. The Purchased Loan accrues interest (exclusive of any default interest, late charges, yield maintenance charges or prepayment premiums) at a fixed rate, and complied as of the date of origination with, or is exempt from, applicable state or federal laws, regulations and other requirements pertaining to usury.

(32) Other Collateral. Except with respect to the Junior Interest of any Whole Loan or any Purchased Loan that is cross-collateralized and cross-defaulted with another Purchased Loan, to the Seller’s actual knowledge, the related Mortgage Note is not secured by any collateral that secures a loan that is not a Purchased Loan, except for loans permitted pursuant to paragraph (21)(b)(ii).

(33) Flood Insurance. If the improvements on the Mortgaged Property are located in a federally designated special flood hazard area, the Mortgagor is required to maintain

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flood insurance with respect to such improvements and such policy is in full force and effect.

(34) Escrow Deposits. All escrow deposits and payments required to be deposited with the Seller or its agent in accordance with the Purchased Loan documents have been (or by the Purchase Date will be) so deposited, are in the possession of or under the control of the Seller or its agent, and there are no deficiencies in connection therewith, other than amounts released from such escrows in accordance with the terms of the related Purchased Loan.

(35) Licenses and Permits. To the Seller’s actual knowledge, based on the due diligence customarily performed in the origination of comparable Purchased Loans by prudent commercial lending institutions considering the related geographic area and properties comparable to the related Mortgaged Property, (i) as of the date of origination of the Purchased Loan (or related Whole Loan, as applicable), the related Mortgagor, the related lessee, franchisor or operator was in possession of all material licenses, permits and authorizations then required for use of the related Mortgaged Property, and, (ii) as of the Purchase Date, the Seller has no actual knowledge that the related Mortgagor, the related lessee, franchisor or operator was not in possession of such licenses, permits and authorizations. The Purchased Loan documents require the Mortgagor to maintain all such material licenses, permits and authorizations.

(36) Organization of Mortgagors. With respect to each Purchased Loan, in reliance on certified copies of the organizational documents of the Mortgagor delivered by the Mortgagor in connection with the origination of such Purchased Loan (or related Whole Loan, as applicable), the Mortgagor is an entity organized under the laws of a state of the United States of America, the District of Columbia or the Commonwealth of Puerto Rico. Except with respect to any Purchased Loan that is cross-collateralized and cross defaulted with another Purchased Loan, no Purchased Loan has a Mortgagor that is an affiliate of another Mortgagor.

(37) Fee Simple Interest. Except with respect to the Purchased Loans covered by paragraph (48), the Purchased Loan is secured in whole or in material part by the fee simple interest in the related Mortgaged Property.

(38) Recourse. Each Purchased Loan is non-recourse to the related Mortgagor except that the Mortgagor and a natural person (or an entity with assets other than an interest in the Mortgagor) as guarantor have agreed to be liable with respect to losses incurred due to (i) fraud and/or other intentional material misrepresentation, (ii) misappropriation of rents collected in advance or received by the related Mortgagor after the occurrence of an event of default and not paid to the mortgagee or applied to the Mortgaged Property in the ordinary course of business, (iii) misapplication or conversion by the Mortgagor of insurance proceeds or condemnation awards or (iv) breach of the environmental covenants in the related Purchased Loan documents.

(39) Access; Tax Parcels. Each Mortgaged Property (a) is located on or adjacent to a dedicated road, or has access to an irrevocable easement permitting ingress and egress,

15

(b) is served by public utilities, water and sewer (or septic facilities) and (c) constitutes one or more separate tax parcels.

(40) Financial Statements. Each Mortgage or loan agreement requires the Mortgagor to provide the mortgagee with (i) quarterly (other than for single-tenant properties) and annual operating statements, (ii) quarterly (other than for single-tenant properties) rent rolls listing each lease contributing more than 5% of the in-place base rent and (iii) annual financial statements, which annual financial statements (a) with respect to each Purchased Loan with more than one Mortgagor are in the form of an annual combined balance sheet of the Mortgagor entities (and no other entities), together with the related combined statements of operations, members’ capital and cash flows, including a combined balance sheet and statement of income for the Mortgaged Properties on a combined basis and (b) for each Purchased Loan with an original principal balance greater than $75 million are required to be audited by an independent certified public accountant upon the request of the mortgagee.

(41) Rent Rolls; Operating Histories. Except with respect to Purchased Loans secured by one or more hospitality properties, the Seller has obtained a rent roll certified by the related Mortgagor or the related guarantor(s) as accurate and complete in all material respects as of a date within 180 days of the date of origination of the related Purchased Loan. With respect to each Mortgaged Property, the Seller has obtained operating histories (the “Certified Operating Histories”) certified by the related Mortgagor or the related guarantor(s) as accurate and complete in all material respects as of a date within 180 days of the date of origination of the related Purchased Loan. The Certified Operating Histories collectively report on operations for (a) a continuous period of at least three years or (b) in the event the Mortgaged Property was owned or operated in its current form by the Mortgagor or an affiliate for less than three years prior to origination, then for a continuous period from the date that such Mortgaged Property was first owned or operated in its current form by the Mortgagor or an affiliate through the end of the calendar month most recently ended prior to origination, it being understood however that for Mortgaged Properties acquired with the proceeds of a Purchased Loan, Certified Operating Histories may not have been available.

(42) Defeasance. If the Purchased Loan permits defeasance, the Purchased Loan documents (A) permit defeasance or partial defeasance (1) no earlier than two years after the date of origination, and (2) only with substitute collateral constituting “government securities” within the meaning of Section 2(a)(16) of the Investment Company Act of 1940, as amended, in an amount sufficient to make all scheduled payments under the Mortgage Note through the related maturity date (or first day of the open period) and the balloon payment that would be due on such date, (B) require the delivery of (or otherwise contain provisions pursuant to which the mortgagee can require delivery of) (i) an opinion to the effect that such mortgagee has a first priority security interest in the defeasance collateral, (ii) an accountant’s certification as to the adequacy of the defeasance collateral to make all payments required under the related Purchased Loan through the related maturity date (or first day of the open period) and the balloon payment that would be due on such date, (iii) an opinion of counsel that the defeasance complies with all applicable REMIC Provisions, and (iv) assurances from the rating agencies that the defeasance will not result

16

in the withdrawal, downgrade or qualification of the ratings assigned to the certificates and (C) contain provisions pursuant to which the mortgagee can require the Mortgagor to pay expenses associated with a defeasance (including reasonable rating agencies’ fees, accountant’s fees and attorneys’ fees, subject in certain cases to a cap on such fees and expenses). Such Purchased Loan (or related Whole Loan, as applicable) was not originated with the intent to collateralize a REMIC offering with obligations that are not real estate mortgages.

(43) Authorization in Jurisdiction. To the extent required under applicable law and necessary for the enforcement of the Purchased Loan, as of the date of origination and at all times it held the Purchased Loan, the originator of such Purchased Loan (or related Whole Loan, as applicable) was authorized to do business in the jurisdiction in which the related Mortgaged Property is located.

(44) Capital Contributions. Neither the Seller nor any affiliate thereof has any obligation to make any capital contributions to the Mortgagor under the Purchased Loan documents.

(45) Subordinate Debt. Except with respect to the Junior Interest of any Whole Loan or any Purchased Loan that is cross-collateralized and cross-defaulted with another Purchased Loan, none of the Mortgaged Properties are encumbered by any lien securing the payment of money of equal priority with, or superior to, the lien of the related Mortgage (other than Title Exceptions, taxes, assessments and contested mechanics and materialmens liens that become payable after the Purchase Date) and debt permitted pursuant to paragraph (21)(b)(ii). As of the date of origination of the related Purchased Loan and, to the Seller’s knowledge, as of the Purchase Date, except with respect to the Junior Interest of any Whole Loan or any Purchased Loan that is cross-collateralized and cross-defaulted with another Purchased Loan, none of the Mortgaged Properties are encumbered by any lien securing the payment of money junior to the lien of the related Mortgage (other than Title Exceptions, taxes, assessments and contested mechanics and materialmens liens that become payable after the Purchase Date) and debt permitted pursuant to paragraph (21)(b)(ii).

(46) Condemnation. In the case of any Purchased Loan (or Whole Loan, if applicable) originated after December 6, 2010, in the event of a taking of any portion of a Mortgaged Property by a State or any political subdivision or authority thereof, whether by legal proceeding or by agreement, the Mortgagor can be required to pay down the principal balance of the Purchased Loan (or Whole Loan, if applicable) in an amount required by the REMIC Provisions and, to such extent, may not be required to be applied to the restoration of the Mortgaged Property or released to the Mortgagor, if, immediately after the release of such portion of the Mortgaged Property from the lien of the Mortgage (but taking into account the planned restoration), the fair market value of the real property constituting the remaining Mortgaged Property is not equal to at least (x) 80% of the remaining principal balance of the Purchased Loan (or Whole Loan, if applicable) or (y) the fair market value of the Mortgaged Property immediately before the release.

(47) Release of Cross-Collateralization. In the case of any Purchased Loan (or Whole Loan, if applicable) originated after December 6, 2010, no such Purchased Loan (or Whole Loan,

17

if applicable) that is secured by more than one Mortgaged Property or that is cross-collateralized with another Purchased Loan (or Whole Loan, if applicable) permits the release of cross-collateralization of the related Mortgaged Properties, other than in compliance with the REMIC Provisions.

(48) Ground Lease Representations and Warranties. With respect to each Purchased Loan secured by a leasehold interest (except with respect to any Purchased Loan also secured by the corresponding fee interest in the related Mortgaged Property), the Seller represents and warrants the following with respect to the related Ground Lease:

(a) Such Ground Lease or a memorandum thereof has been or will be duly recorded and such Ground Lease permits the interest of the lessee thereunder to be encumbered by the related Mortgage or, if consent of the lessor thereunder is required, it has been obtained prior to the Purchase Date.

(b) Upon the foreclosure of the Purchased Loan (or acceptance of a deed in lieu thereof), the Mortgagor’s interest in such Ground Lease is assignable to the mortgagee and its assigns without the consent of the lessor thereunder (or, if any such consent is required, it has been obtained prior to the Purchase Date).

(c) Subject to the limitations on and exceptions to enforceability set forth in paragraph (5), such Ground Lease may not be amended, modified, canceled or terminated without the prior written consent of the mortgagee and any such action without such consent is not binding on the mortgagee, its successors or assigns, except that termination or cancellation without such consent may be binding on the mortgagee if (i) an event of default occurs under the Ground Lease, (ii) notice is provided to the mortgagee and (iii) such default is curable by the mortgagee as provided in the Ground Lease but remains uncured beyond the applicable cure period.

(d) Such Ground Lease is in full force and effect and other than payments due but not yet 30 days or more delinquent, (i) there is no material default, and (ii) to the actual knowledge of the Seller, there is no event which, with the passage of time or with notice and the expiration of any grace or cure period, would constitute a material default under such Ground Lease; provided, however, that this representation and warranty does not address or otherwise cover any default, breach, violation or event of acceleration that specifically pertains to any matter otherwise covered by any other representation and warranty made by the Seller elsewhere in this Exhibit VI or in any of the exceptions to the representations and warranties in Exhibit C hereto.

(e) The Ground Lease or ancillary agreement between the lessor and the lessee (i) requires the lessor to give notice of any default by the lessee to the mortgagee and (ii) provides that no notice given is effective against the mortgagee unless a copy has been delivered to the mortgagee in the manner described in the ground lease or ancillary agreement.

18

(f) The Ground Lease (i) is not subject to any liens or encumbrances superior to, or of equal priority with, the Mortgage, other than the ground lessor’s fee interest and Title Exceptions or (ii) is subject to a subordination, non-disturbance and attornment agreement to which the mortgagee on the lessor’s fee interest in the Mortgaged Property is subject.

(g) The mortgagee is permitted a reasonable opportunity (including, where necessary, sufficient time to gain possession of the interest of the lessee under the ground lease) to cure any curable default under such Ground Lease after receipt of notice of such default before the lessor thereunder may terminate such Ground Lease.

(h) Such Ground Lease has an original term (together with any extension options, whether or not currently exercised, set forth therein all of which can be exercised by the mortgagee if the mortgagee acquires the lessee’s rights under the Ground Lease) that extends not less than 20 years beyond the Stated Maturity Date or if such Purchased Loan is fully amortizing, extends not less than 10 years after the amortization term for the Purchased Loan.

(i) Under the terms of the Ground Lease and the related Purchased Loan documents (including, without limitation, any estoppel or consent letter received by the mortgagee from the lessor), taken together, any related insurance proceeds or condemnation award (other than de minimis amounts for minor casualties or in respect of a total or substantially total loss or taking) will be applied either to the repair or restoration of all or part of the related Mortgaged Property, with the mortgagee or a trustee appointed by it having the right to hold and disburse such proceeds as repair or restoration progresses, or to the payment or defeasance of the outstanding principal balance of the Purchased Loan, together with any accrued interest (except in cases where a different allocation would not be viewed as commercially unreasonable by any commercial mortgage lender, taking into account the relative duration of the ground lease and the related Mortgage and the ratio of the market value of the related Mortgaged Property to the outstanding principal balance of such Purchased Loan).

(j) The Ground Lease does not restrict the use of the related Mortgaged Property by the lessee or its successors or assigns in a manner that would materially adversely affect the security provided by the related mortgage.

(k) The Ground Lease does not impose any restrictions on subletting that would be viewed as commercially unreasonable by a prudent commercial mortgage lender.

(l) The ground lessor under such Ground Lease is required to enter into a new lease upon termination of the Ground Lease for any reason, including the rejection of the Ground Lease in bankruptcy.

Other. For purposes of these representations and warranties, the term “to the Seller’s actual knowledge” shall mean that an officer, employee or agent of the Seller responsible for the underwriting, origination and sale or servicing of the Purchased Loans does

19

not actually know of any facts or circumstances that would cause such person to believe that such representation or warranty was inaccurate. The “actual knowledge” of any such Seller shall be deemed to include the actual knowledge of any servicer servicing a Purchased Loan on behalf of the Seller. The “actual knowledge of any servicer” shall mean that an officer or employee of the servicer responsible for the servicing of the Purchased Loans does not actually know of any facts or circumstances that would cause such person to believe that such representation or warranty was inaccurate.

20

EXHIBIT VII

COLLATERAL TAPE

Control Number

Loan Number

Loan / Property Flag

Number of Properties

Seller

Property Name

Street Address

City

State

County

Zip Code

Property Type

Property Type Detail

Year Built

Year Renovated

Number of Units

Unit Description

Loan per Unit

Original Balance

Cut-off Date Balance as of [7/6/2011]

Allocated Cut-off Date Balance (multi-property)

% of Initial Pool Balance

Pari Passu Split (Y/N)

Interest Rate

Administrative Fee

Monthly Payment

Annual Debt Service

Interest Accrual Method

Origination Date

First Payment Date

Last IO Payment Date

First P&I Payment Date

Payment Date

Grace Days - Late Fee

Grace Days - Default

Amort Type

Original Interest Only Term

Remaining Interest Only Term

Original Loan Term

Remaining Loan Term

Original Amortization Term

Remaining Amortization Term

Seasoning

Maturity Date

Hyper Amortizing Loan

Hyper Am Loan Maturity Date

Balloon Balance

Lockbox

Cash Management

Cross Collateralized (Y/N)

Cross Collateralized Group

Lockout Period

Lockout Expiration Date

Prepayment / Defeasance Begin Date

Prepayment / Defeasance End Date

Open Period Begin Date

Open Period

Prepayment Type

Prepay Description

YM Index

YM Discount

YM Margin

YM Calculation Method

Day Prepayment Permitted

Due On Sale

Due on Encumbrance

B Note Original Amount

B Note Cut-Off Date Balance

B Note Interest Rate

B Note Annual Payment

B Note Maturity Date

Whole Loan Original Balance

Whole Loan Cut-Off Date Balance

Whole Loan Interest Rate

Whole Loan Annual Payment

Whole Loan LTV

Whole Loan DSCR

Name of Mezzanine Lender

Mezzanine Debt Original Amount

Mezzanine Debt Cut-Off Date Balance

Mezzanine Debt Interest Rate

Mezzanine Debt Annual Payment

Mezzanine Debt Maturity Date

Total Loan Original Balance

Total Loan Cut-Off Date Balance

Total Loan Interest Rate

Total Loan Annual Payment

Total Loan LTV

Total Loan DSCR

Other Subordinate Debt Balance

Other Subordinate Debt Type

Future Debt Allowed?

2

Assumable?

Assumption Fee

Appraiser Designation

Appraisal FIRREA (Y/N)

Appraisal Date

Appraisal Value

Stabilized Appraisal Date

Stabilized Appraised Value

Cut-off Date LTV

Scheduled Maturity Date LTV

Occupancy %

Occupancy As of Date

Largest Tenant (Based on Square Footage)

Largest Tenant Sq. Ft.

Largest Tenant Lease Expiration

Second Largest Tenant

Second Largest Tenant Sq. Ft.

Second Largest Tenant Lease Expiration

Third Largest Tenant

Third Largest Tenant Sq. Ft.

Third Largest Tenant Lease Expiration

Fourth Largest Tenant

Fourth Largest Tenant Sq. Ft.

Fourth Largest Tenant Lease Expiration

Fifth Largest Tenant

Fifth Largest Tenant Sq. Ft.

Fifth Largest Tenant Lease Expiration

Single Tenant (Y/N)

Engineering Report Date

Phase I Date

Phase II Performed (Y/N)

Phase II Date

SEL %

Seismic Report Date

Earthquake Insurance Required (Y/N)

Terrorism Insurance Required (Y/N)

Lien Position

Ownership Interest

Ground Lease (Y/N)

Ground Lease Payment (Annual)

Ground Lease Expiration Date

Ground Lease Extension (Y/N)

# of Ground Lease Extension Options

Ground Lease Expiration Date with Extension

2008 NOI Date

2008 NOI

2008 NCF

2008 NCF DSCR

3

2009 NOI Date

2009 NOI

2009 NCF

2009 NCF DSCR

2010 NOI Date

2010 NOI

2010 NCF

2010 NCF DSCR

Partial Year Date (if past 2010)

Partial Year # of months

Partial Year Description

Partial Year NOI

Partial Year NCF

Partial Year NCF DSCR

Underwritten Revenue

Underwritten Expenses

Underwritten NOI

Underwritten NOI DSCR

Debt Yield on Underwritten NOI

Underwritten Replacement Reserve

Underwritten TI/LC Reserve

Underwritten Other Reserve

Underwritten NCF

Underwritten NCF DSCR

Debt Yield on Underwritten NCF

Upfront RE Tax Reserve

Ongoing RE Tax Reserve

Upfront Insurance Reserve

Ongoing Insurance Reserve

Upfront Replacement Reserve

Ongoing Replacement Reserve

Replacement Reserve Caps

Upfront TI/LC Reserve

Ongoing TI/LC Reserve

TI/LC Caps

Upfront Debt Service Reserve

Ongoing Debt Service Reserve

Upfront Deferred Maintenance Reserve

Ongoing Deferred Maintenance Reserve

Upfront Environmental Reserve

Ongoing Environmental Reserve

Upfront Other Reserve

Ongoing Other Reserve

Other Reserve Detail / Description

Letter of Credit?

LOC Balance

Letter of Credit Description

Release Provisions (Y/N)

4

Loan Purpose

If Acquisition, Purchase Price

Borrower Name

Principal / Sponsor

Recourse

Related Sponsor

Borrower SPE (Y/N)

Property Manager

Franchise Flag (Hotel Only)

Utilities Paid by Tenant

# of Studios

Studio Avg. Rents

# of One Bedroom Units

One Bedroom Avg. Rents

# of Two Bedroom Units

Two Bedroom Avg. Rents

# of Three Bedroom Units

Three Bedroom Avg. Rents

# of Four Bedroom Units

Four Bedroom Avg. Rents

# of Five Bedroom Units

Five Bedroom Avg. Rents

Elevators (Y/N)

Section 42 Units? (Y/N)

Section 8 Units? (Y/N)

Student / Military / Other Concentration? (Y/N)

# of Sponsor Owned Units that are Rented or Available for Rent

Sponsor Owned Units Avg. Rent

# of Owner Occupied or Vacant Units Not Available For Rent

# of Manufactured Housing Pads

Average Rent Per Pad

Total Gross Income of Park

Total Gross Income of MH Pads Only

Total Gross Income From All Sources

Total Gross Income Retail and Commercial Only

Loan Group

ADR

RevPar

5

EXHIBIT VIII

FORM OF TRANSACTION REQUEST

Ladies and Gentlemen:

Pursuant to Section 3(a) of that certain Master Repurchase Agreement, dated as of October 27, 2011 (the “Agreement”), between Citibank, N.A. (“Buyer”) and RAIT CMBS Conduit I, LLC (“Seller”), Seller hereby requests that Buyer enter into a Transaction with respect to the Eligible Loans set forth on Schedule 1 attached hereto, upon the proposed terms set forth below. Capitalized terms used herein without definition have the meanings given in the Agreement.

Proposed Eligible Loans:	[_________________]
Aggregate Principal Amount of Proposed Eligible Loans	[_________________]

Name and address for communications:	Buyer:
		Citibank, N.A.
		388 Greenwich Street
		New York, New York 10013
		Attention: Richard Schlenger
		Telephone: (212) 816-7806
		Telecopy: (212) 816-8307
		with a copy to:
		Sidley Austin LLP
		787 Seventh Avenue
		New York, New York 10019
		Attention: Brian Krisberg, Esq.
		Telephone: (212) 839-8735
		Telecopy: (212) 839-5599
	Seller:
		RAIT CMBS Conduit I, LLC,
		c/o RAIT Financial Trust
		450 Park Avenue
		New York, NY 10022
		Attention: Ron Wechsler and Scott Davidson
		Telephone: (212) 735-1490
		Telecopy: (212) 735-1499
		with a copy to:
		RAIT Financial Trust
		2929 Arch Street, 17th Floor
		Philadelphia, PA 19104
		Attention: Jamie Reyle, Esq., Corporate Counsel
		Telephone: (215) 243-9019
		Telecopy: (215) 405-2945
		And, if the notice is being sent under Section 4(a), with a copy to:
		RAIT Financial Trust
		2929 Arch Street, 17th Floor
		Philadelphia, PA 19104
		Attention: James Sebra, Chief Accounting Officer
		Telephone: (215) 243-9000
		Telecopy: (215) 243-9097

2

SELLER:
RAIT CMBS CONDUIT I, LLC,
a Delaware limited liability company
By:	RAIT Funding, LLC, a Delaware limited liability company, its sole Member
	By:	Taberna Realty Finance Trust, a Maryland real estate investment trust, its sole Member
		By:
		Name:
		Title:

3

Schedule 1 to Transaction Request

(Attachments: Collateral Tape and Conduit Loan Due Diligence Checklist)

Eligible Loans:

Aggregate Principal Amount of Eligible Loans: $[                            ]

4

EXHIBIT IX

FORM OF IRREVOCABLE DIRECTION LETTER

[SELLER]

[LETTERHEAD]

IRREVOCABLE DIRECTION LETTER

AS OF [        ], 20[    ]

Ladies and Gentlemen:

Please refer to: (a) that certain [Loan Agreement], dated [             ], 20[    ], by and among [ ] (the “Borrower”), as borrower, and RAIT CMBS Conduit I, LLC (the “Lender”), as lender; and (b) all documents securing or relating to that certain $[             ] loan made by the Lender to the Borrower on [             ], 20[    ] (the “Loan”).

You are advised as follows, effective as of the date of this letter.

Assignment of the Loan. The Lender has entered into a Master Repurchase Agreement, dated as October 27, 2011 (as the same may be amended and/or restated from time to time, the “Repo Agreement”), with Citibank, N.A. (“Citi”), 388 Greenwich Street, New York, New York 10013, and has assigned its rights and interests in the Loan (and all of its rights and remedies in respect of the Loan) to Citi. This assignment shall remain in effect unless and until Citi has notified Borrower otherwise in writing.

Direction of Funds. In connection with Lender’s obligations under the Repo Agreement, Lender hereby directs Borrower to disburse, by wire transfer, any and all payments to be made under or in respect of the Loan to the following account at [                    ] for the benefit of Citi:

________________

________________

________________

Account: _____________

Attn: ____________________

This direction shall remain in effect unless and until Citi has notified Borrower otherwise in writing.

Please acknowledge your acceptance of the terms and directions contained in this correspondence by executing a counterpart of this correspondence and returning it to the undersigned.

[Signature Page Follows]

Very truly yours,
RAIT CMBS CONDUIT I, LLC,
a Delaware limited liability company
By:	RAIT Funding, LLC, a Delaware limited liability company, its sole Member
	By:	Taberna Realty Finance Trust, a Maryland real estate investment trust, its sole Member
		By:
		Name:
		Title:
Date: [                 ], 20[    ]

Agreed and accepted this [     ]

day of [         ], 20[    ]

[                                      ]

By:

Name:

Title:

2

EX-10.11

Exhibit 10.11

GUARANTY

This GUARANTY (this “Guaranty”) is made and entered into by RAIT FINANCIAL TRUST, a Maryland real estate investment trust, whose address is 450 Park Avenue, New York, New York 10022 (“Guarantor”), for the benefit of CITIBANK, N.A., a national banking association whose address is 388 Greenwich Street, New York, New York 10013 (“Buyer”) on this October 27, 2011. This Guaranty is made with reference to the following facts (with some capitalized terms being defined below):

A. RAIT CMBS Conduit I, LLC, a Delaware limited liability company, as seller, and Buyer have entered into that certain Master Repurchase Agreement, dated October 27, 2011 (the “Repurchase Agreement”), pursuant to which the Buyer may, from time to time, purchase certain Eligible Loans from RAIT CMBS Conduit I, LLC with a simultaneous agreement from RAIT CMBS Conduit I, LLC to repurchase such Eligible Loans at a date certain or on demand (the “Transactions”);

B. Buyer has requested, as a condition of entering into the Repurchase Agreement, that Guarantor deliver to Buyer this Guaranty;

C. Guarantor owns 100% of the common shares of Taberna Realty Finance Trust, which indirectly owns 100% of RAIT CMBS Conduit I, LLC;

D. Guarantor expects to benefit if Buyer enters into the Repurchase Agreement with RAIT CMBS Conduit I, LLC, and desires that Buyer enter into the Repurchase Agreement with RAIT CMBS Conduit I, LLC; and

E. Buyer would not enter into the Repurchase Agreement with RAIT CMBS Conduit I, LLC unless Guarantor executed this Guaranty. This Guaranty is therefore delivered to Buyer to induce Buyer to enter into the Repurchase Agreement.

NOW, THEREFORE, in exchange for good, adequate, and valuable consideration, the receipt of which Guarantor acknowledges, and to induce Buyer to enter into the Repurchase Agreement, Guarantor agrees as follows:

1. Definitions. For purposes of this Guaranty, the following terms shall be defined as set forth below. In addition, any capitalized term defined in the Repurchase Agreement but not defined in this Guaranty shall have the same meaning in this Guaranty as in the Repurchase Agreement.

(a) “Buyer Entity” means, as designated by Buyer from time to time, Buyer or Buyer’s assignee, designee, nominee, servicer, or wholly owned subsidiary as permitted in accordance with the terms of the Repurchase Agreement.

(b) “Capital Lease” means, as applied to any Person, any lease of any property (whether real, personal or mixed) by that Person or entity as lessee that, in conformity with GAAP, is accounted for as a capital lease on the balance sheet of that Person or entity.

(c) “Capital Stock” means any and all shares, interests, participations or other equivalents (however designated) of capital stock of a corporation, any and all similar ownership interests in a Person (other than a corporation) and any and all warrants or options to purchase any of the foregoing.

(d) “Cash” means coin or currency of the United States of America or immediately available federal funds, including such funds delivered by wire transfer.

(e) “Cash Equivalents” means any of the following, to the extent owned by Guarantor or any of its Subsidiaries free and clear of all Liens and having a maturity of not greater than 90 days from the date of issuance thereof: (a) readily marketable direct obligations of the government of the United States or any agency or instrumentality thereof or obligations unconditionally guaranteed by the full faith and credit of the government of the United States, (b) certificates of deposit of or time deposits with Buyer or a member of the Federal Reserve System that issues (or the parent of which issues) commercial paper rated as described in clause (c) below, is organized under the laws of the United States or any state thereof and has combined capital and surplus of at least $1,000,000,000 or (c) commercial paper in an aggregate amount of not more than $50,000,000 per issuer outstanding at any time, issued by any corporation organized under the laws of any state of the United States and rated at least “Prime-1” (or the then equivalent grade) by Moody’s or “A-1” (or the then equivalent grade) by S&P.

(f) “Cash Liquidity” means, at any date of determination, the sum of (i) unrestricted Cash plus (ii) Cash Equivalents.

(g) “Consolidated Net Income” for any period means the amount of consolidated net income (or loss) of the Guarantor and its Subsidiaries for such period determined on a consolidated basis in accordance with GAAP.

(h) “Consolidated Net Worth” means, as of a particular date, (i) Total Assets, less (ii) the sum of Total Liabilities plus Intangible Assets of the Guarantor and its consolidated Subsidiaries.

(i) “EBITDA” means, at any date of determination, the Consolidated Net Income for the four consecutive fiscal quarters of the Guarantor most recently ended, excluding the effects of interest expense, taxes, depreciation, amortization, asset write-ups or impairment charges, provisions for loan losses, and changes in mark-to-market value(s) (both gains and losses) of financial instruments.

(j) “Equity Interests” means, with respect to any Person, (a) any share, interest, participation and other equivalent (however denominated) of Capital Stock of (or other ownership, equity or profit interests in) such Person, (b) any security convertible into or exchangeable for any of the foregoing to the extent such security has actually been converted or exchanged, and (c) any other ownership or profit interest in such Person (including partnership, member or trust interests therein), whether voting or nonvoting, and whether or not such share, right or other interest is authorized or otherwise existing on any date.

(k) “ERISA” means the Employee Retirement Income Security Act of 1974, as amended from time to time, and the regulations promulgated thereunder. Section

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references to ERISA are to ERISA, as in effect at the date of this Guaranty and, as of the relevant date, any subsequent provisions of ERISA, amendatory thereof, supplemental thereto or substituted therefor.

(l) “Fixed Charge Coverage Ratio” means, at any date of determination, the ratio of EBITDA to Interest Expense for the four consecutive fiscal quarters of the Guarantor most recently ended.

(m) “GAAP” means with respect to the financial statements or other financial information of any Person, generally accepted accounting principles in the United States which are in effect from time to time.

(n) “Governmental Authority” means any national or federal government, any state, regional, local or other political subdivision thereof with jurisdiction and any Person with jurisdiction exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government.

(o) “Guarantied Obligations” means Seller’s obligations (without regard to any limitation of recourse against Seller): (a) to fully and promptly pay the Repurchase Price and other sums owed under the Transaction Documents at the times and according to the terms required by the Transaction Documents, without regard to any modification, suspension, or limitation of such terms not agreed to by Buyer, such as a modification, suspension, or limitation arising in or pursuant to any Insolvency Proceeding affecting Seller (even if any such modification, suspension, or limitation causes Seller’s obligation to become discharged or unenforceable), and (b) to pay all other sums expended by Buyer or Buyer’s designee or nominee acting on Buyer’s behalf in exercising Buyer’s rights and remedies under the Transaction Documents, including Buyer’s Legal Costs relating to the enforcement of remedies pursuant to the Transaction Documents.

(p) “Guarantor Litigation” means any litigation, arbitration, investigation, or administrative proceeding of or before any court, arbitrator, or Governmental Authority, bureau or agency that relates to or affects this Guaranty or any asset(s) or property(ies) of Guarantor.

(q) “Indebtedness” means, for any Person: (a) obligations created, issued or incurred by such Person for borrowed money (whether by loan, the issuance and sale of debt securities or the sale of property to another Person subject to an understanding or agreement, contingent or otherwise, to repurchase such property from such Person); (b) obligations of such Person to pay the deferred purchase or acquisition price of property or services, other than trade accounts payable (other than for borrowed money) arising, and accrued expenses incurred, in the ordinary course of business so long as such trade accounts payable are payable within ninety (90) days of the date the respective goods are delivered or the respective services are rendered; (c) indebtedness of others secured by a Lien on the property of such Person, whether or not the respective indebtedness so secured has been assumed by such Person; (d) obligations of such Person in respect of letters of credit or similar instruments issued or accepted by banks and other financial institutions for account of such person; (e) Capital Leases of such Person; and (f) indebtedness of others guaranteed by such Person.

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(r) “Insolvency Proceeding” means any case under Title 11 of the United States Code or any successor statute or any other insolvency, bankruptcy, reorganization, liquidation, or like proceeding, or other statute or body of law relating to creditors’ rights, whether brought under state, federal, or foreign law.

(s) “Intangible Assets” means, for any Person on any date, assets that are considered to be intangible assets under GAAP, including customer lists, goodwill, computer software, copyrights, trade names, trademarks, patents, franchises, licenses, unamortized deferred charges, unamortized debt discount and capitalized research and development costs.

(t) “Interest Expense” means for any period, total interest expense, both expensed and capitalized, of Guarantor and its Subsidiaries for such period with respect to all outstanding Indebtedness of Guarantor and its Subsidiaries (including, without limitation, all commissions, discounts and other fees and charges owed with respect to letters of credit and bankers’ acceptance financing and net costs under interest rate protection agreements), determined on a consolidated basis in accordance with GAAP, net of interest income of Guarantor and its Subsidiaries for such period (determined on a consolidated basis in accordance with GAAP).

(u) “Investment Securities” means any of the following:

(i) par value of negotiable debt obligations issued by the U.S. Treasury Department having a remaining maturity of less than 1 year; or

(ii) par value of negotiable debt obligations issued by the U.S. Treasury Department having a remaining maturity of 1-10 years; or

(iii) par value of negotiable debt obligations issued by the U.S. Treasury Department having a remaining maturity of more than 10 years; or

(iv) par value of single-class mortgage participation certificates (“FHLMC Certificates”) in book-entry form backed by single-family residential mortgage loans, the full and timely payment of interest at the applicable certificate rate and the ultimate collection of principal of which are guaranteed by the Federal Home Loan Mortgage Corporation (excluding Real Estate Mortgage Investment Conduit (“REMIC”) or other multi-class pass-through certificates, collateralized mortgage obligations, pass-through certificates backed by adjustable rate mortgages, securities paying interest or principal only and similar derivative securities); or

(v) par value of single-class mortgage pass-through certificates (“FNMA Certificates”) in book-entry form backed by single-family residential mortgage loans, the full and timely payment of interest at the applicable certificate rate and ultimate collection of principal of which are guaranteed by the Federal National Mortgage Association (excluding REMIC or other multi-class pass-through certificates, pass-through certificates backed by adjustable rate mortgages collateralized mortgage obligations, securities paying interest or principal only and similar derivative securities); or

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(vi) par value of single-class fully modified pass-through certificates (“GNMA Certificates”) in book-entry form backed by single-family residential mortgage loans, the full and timely payment of principal and interest of which is guaranteed by the Government National Mortgage Association (excluding REMIC or other multi-class pass-through certificates, collateralized mortgage obligations, pass-through certificates backed by adjustable rate mortgages, securities paying interest or principal only and similar derivatives securities); or

(vii) par value of all actively and regularly traded investment-grade residential mortgage-backed securities; or

(viii) such other collateral as Guarantor and Buyer may agree, with such valuation percentage applied thereto as Buyer, in its sole discretion acting in good faith shall deem appropriate.

(v) “Legal Costs” means all costs and actual out-of-pocket expenses reasonably incurred by Buyer in any Proceeding, any Guarantor Litigation, or any default by Seller under the Transaction Documents or by any Guarantor under this Guaranty, including reasonable attorneys’ fees, disbursements, and other reasonable charges incurred by Buyer’s attorneys, court costs and expenses, and reasonable charges for the services of paralegals, law clerks, and all other personnel whose services are charged to Buyer in connection with Buyer’s receipt of legal services incurred in connection with the enforcement of this Guaranty.

(w) “Leverage Ratio” means, at any date of determination, the ratio, expressed as a percentage, of Total Liabilities to Total Assets.

(x) “Lien” means any mortgage, lien, encumbrance, charge or other security interest, whether arising under contract, by operation of law, judicial process or otherwise.

(y) “Net Worth” means the amount which would be included under stockholders’ equity on a consolidated balance sheet of Guarantor and its Subsidiaries determined on a consolidated basis in accordance with GAAP.

(z) “Person” means an individual, partnership, corporation, joint stock company, trust or unincorporated organization or a governmental agency or political subdivision thereof.

(aa) “Proceeding” means any action, suit, arbitration, or other proceeding arising out of, or relating to the interpretation or enforcement of, this Guaranty or the Transaction Documents, including (a) an Insolvency Proceeding; and (b) any proceeding in which Buyer endeavors to realize upon any Security or to enforce any Transaction Document(s) (including this Guaranty) against Seller or Guarantor.

(bb) “Requirement of Law” shall mean any law, treaty, rule, regulation, code, directive, policy, order or requirement or determination of an arbitrator or a court or other Governmental Authority whether now or hereafter enacted or in effect.

(cc) “Security” means any security or collateral held by or for Buyer for the Transactions or the Guarantied Obligations, whether real or personal property, including

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any mortgage, deed of trust, financing statement, security agreement, and other security document or instrument of any kind securing the Transactions in whole or in part. “Security” shall include all assets and property of any kind whatsoever pledged to Buyer pursuant to the Transaction Documents.

(dd) “Seller” means: (a) RAIT CMBS Conduit I, LLC, acting on its own behalf; (b) any estate created by the commencement of an Insolvency Proceeding affecting RAIT CMBS Conduit I, LLC; (c) any trustee, liquidator, sequestrator, or receiver of Seller or Seller’s property; and (d) any similar person duly appointed pursuant to any law governing any Insolvency Proceeding.

(ee) “State” means the State of New York.

(ff) “Subsidiary” means as to any Person, a corporation, partnership, limited liability company or other entity of which shares of stock or other ownership interests having ordinary voting power (other than stock or such other ownership interests having such power only by reason of a contingency) to elect a majority of the board of directors or other managers of such corporation, partnership, limited liability company or other entity are at the time owned, or the management of which is otherwise controlled, directly or indirectly through one or more intermediaries, or both, by such Person.

(gg) “Total Assets” means, as of a particular date, all amounts that would be included under total assets on a balance sheet of Guarantor and its consolidated Subsidiaries at such date, determined on a consolidated basis in accordance with GAAP.

(hh) “Total Liabilities” means, as of a particular date, all amounts that would be included under total liabilities on a balance sheet of Guarantor and its consolidated Subsidiaries at such date, determined on a consolidated basis in accordance with GAAP.

(ii) “Total Liquidity” means, at any date of determination, the sum of (i) Cash Liquidity plus (ii) unencumbered Investment Securities.

2. Absolute Guaranty of All Guarantied Obligations. Guarantor unconditionally and irrevocably guarantees Seller’s prompt and complete payment, observance, fulfillment, and performance of all Guarantied Obligations when due. Guarantor shall be liable for, and obligated to pay and perform, all Guarantied Obligations when due. All assets and property of Guarantor shall be subject to recourse if Guarantor fails to pay and perform any Guarantied Obligation(s) when and as required to be paid and performed pursuant to the Transaction Documents.

3. Nature and Scope of Liability. Guarantor’s liability under this Guaranty is primary and not secondary. Guarantor’s liability under this Guaranty shall be in the full amount of all Guarantied Obligations, including any interest, default interest, costs and fees (including Legal Costs) payable by Seller under the Repurchase Agreement.

4. Changes in Transaction Documents. Without notice to, or consent by, Guarantor, and in Buyer’s sole and absolute discretion and without prejudice to Buyer or in any way limiting or reducing Guarantor’s liability under this Guaranty but subject to the terms of the

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Transaction Documents, Buyer may: (a) grant extensions of time, renewals or other indulgences or modifications to Seller or any other party under any of the Transaction Document(s), (b) change, amend or modify any Transaction Document(s), (c) authorize the sale, exchange, release or subordination of any Security, (d) accept or reject additional Security, (e) discharge or release any party or parties liable under the Transaction Documents, (f) foreclose or otherwise realize on any Security, or attempt to foreclose or otherwise realize on any Security, whether such attempt is successful or unsuccessful, (g) accept or make compositions or other arrangements or file or refrain from filing a claim in any existing Insolvency Proceeding, (h) make other or additional Transactions to Seller in such amount(s) and at such time(s) as Buyer may determine, (i) except as otherwise specifically set forth in the Repurchase Agreement, credit payments in such manner and order of priority to the Repurchase Price or other obligations as Buyer may determine in its discretion, and (j) otherwise deal with Seller and any other party related to the Transactions or any Security as Buyer may determine in its sole and absolute discretion. Without limiting the generality of the foregoing, Guarantor’s liability under this Guaranty shall continue even if Buyer alters any obligations under the Transaction Documents in any respect or Buyer’s or Guarantor’s remedies or rights against Seller are in any way impaired or suspended without Guarantor’s consent. If Buyer performs any of the actions described in this paragraph, then Guarantor’s liability shall continue in full force and effect even if Buyer’s actions impair, diminish or eliminate Guarantor’s subrogation, contribution, or reimbursement rights (if any) against Seller or otherwise adversely affect Guarantor or expand Guarantor’s liability hereunder.

5. Certain Financial Covenants. Guarantor shall not permit with respect to itself (and its Subsidiaries on a consolidated basis) any of the following to be breached, as determined quarterly on a consolidated basis in conformity with GAAP:

Minimum Consolidated Net Worth. Consolidated Net Worth to be less than the sum of (x) $700 million plus (y) 75% of the net proceeds received by Guarantor in connection with any issuance of Equity Interests in Guarantor, minus (z) 100% of the amount paid by Guarantor for the repurchase of any Equity Interests in Guarantor, in each case subsequent to the date of this Guaranty;

Minimum Fixed Charge Coverage Ratio. Fixed Charge Coverage Ratio to be less than 1.20 to 1;

Maximum Leverage Ratio. Leverage Ratio to exceed 80%;

Minimum Cash Liquidity. Cash Liquidity to be less than $10 million;

Minimum Total Liquidity. Total Liquidity to be less than $20 million.

6. Nature of Guaranty. Guarantor’s liability under this Guaranty is a guaranty of payment of the Guarantied Obligations, and is not a guaranty of collection or collectibility. Guarantor’s liability under this Guaranty is not conditioned or contingent upon the genuineness, validity, regularity or enforceability of any of the Transaction Documents. Guarantor’s liability under this Guaranty is a continuing, absolute, and unconditional obligation under any and all circumstances whatsoever (except as expressly stated, if at all, in this Guaranty), without regard to the validity, regularity or enforceability of any of the Guarantied

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Obligations. Guarantor acknowledges that Guarantor is fully obligated under this Guaranty even if Seller had no liability at the time of execution of the Transaction Documents or later ceases to be liable under any Transaction Document pursuant to Insolvency Proceedings. Guarantor shall not be entitled to claim, and irrevocably covenants not to raise or assert, any defenses against the Guarantied Obligations that would or might be available to Seller, other than actual payment and performance of all Guarantied Obligations in full in accordance with their terms. Guarantor waives any right to compel Buyer to proceed first against Seller or any Security before proceeding against Guarantor. Guarantor agrees that if any of the Guarantied Obligations are or become void or unenforceable (because of inadequate consideration, lack of capacity, or Insolvency Proceedings), then Guarantor’s liability under this Guaranty shall continue in full force with respect to all Guarantied Obligations as if they were and continued to be legally enforceable, all in accordance with their terms before giving effect to the Insolvency Proceedings. Guarantor also recognizes and acknowledges that its liability under this Guaranty may be more extensive in amount and more burdensome than that of Seller. Guarantor waives any defense that might otherwise be available to Guarantor based on the proposition that a guarantor’s liability cannot exceed the liability of the principal. Guarantor intends to be fully liable under the Guarantied Obligations regardless of the scope of Seller’s liability thereunder. Without limiting the generality of the foregoing, if the Guarantied Obligations are “nonrecourse” as to Seller or Seller’s liability for the Guarantied Obligations is otherwise limited in some way, Guarantor nevertheless intends to be fully liable, to the full extent of all of Guarantor’s assets, with respect to all the Guarantied Obligations, even though Seller’s liability for the Guarantied Obligations may be less limited in scope or less burdensome. Guarantor waives any defenses to this Guaranty arising or purportedly arising from the manner in which Buyer conducts the Transactions with Seller or otherwise, or any waiver of the terms of any Transaction Document by Buyer or other failure of Buyer to require full compliance with the Transaction Documents. Guarantor’s liability under this Guaranty shall continue until all sums due under the Transaction Documents have been paid in full and all other performance required under the Transaction Documents has been rendered in full, except as expressly provided otherwise in this Guaranty. Guarantor’s liability under this Guaranty shall not be limited or affected in any way by any impairment or any diminution or loss of value of any Security whether caused by (a) hazardous substances, (b) Buyer’s failure to perfect a security interest in any Security, (c) any disability or other defense(s) of Seller, or (d) any breach by Seller of any representation or warranty contained in any Transaction Document.

7. Waivers of Rights and Defenses. Guarantor waives any right to require Buyer to (a) proceed against Seller, (b) proceed against or exhaust any Security, or (c) pursue any other right or remedy for Guarantor’s benefit. Guarantor agrees that Buyer may proceed against Guarantor with respect to the Guarantied Obligations without taking any actions against Seller and without proceeding against or exhausting any Security. Guarantor agrees that Buyer may unqualifiedly exercise in its sole discretion (or may waive or release, intentionally or unintentionally) any or all rights and remedies available to it against Seller without impairing Buyer’s rights and remedies in enforcing this Guaranty, under which Guarantor’s liabilities shall remain independent and unconditional. Guarantor agrees and acknowledges that Buyer’s exercise (or waiver or release) of certain of such rights or remedies may affect or eliminate Guarantor’s right of subrogation or recovery against Seller (if any) and that Guarantor may incur a partially or totally nonreimbursable liability in performing under this Guaranty. Guarantor has assumed the risk of any such loss of subrogation rights, even if caused by Buyer’s acts or

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omissions. If Buyer’s enforcement of rights and remedies, or the manner thereof, limits or precludes Guarantor from exercising any right of subrogation that might otherwise exist, then the foregoing shall not in any way limit Buyer’s rights to enforce this Guaranty. Without limiting the generality of any other waivers in this Guaranty, Guarantor expressly waives any statutory or other right (except as set forth herein) that Guarantor might otherwise have to: (i) limit Guarantor’s liability after a nonjudicial foreclosure sale to the difference between the Guarantied Obligations and the fair market value of the property or interests sold at such nonjudicial foreclosure sale or to any other extent, (ii) otherwise limit Buyer’s right to recover a deficiency judgment after any foreclosure sale, or (iii) require Buyer to exhaust its Security before Buyer may obtain a personal judgment for any deficiency. Any proceeds of a foreclosure or similar sale may be applied first to any obligations of Seller that do not also constitute Guarantied Obligations within the meaning of this Guaranty. Guarantor acknowledges and agrees that any nonrecourse or exculpation provided for in any Transaction Document, or any other provision of a Transaction Document limiting Buyer’s recourse to specific Security or limiting Buyer’s right to enforce a deficiency judgment against Seller or any other person, shall have absolutely no application to Guarantor’s liability under this Guaranty. To the extent that Buyer collects or receives any sums or payments from Seller or any proceeds of a foreclosure or similar sale, Buyer shall have the right, but not the obligation, to, unless otherwise set forth in the Repurchase Agreement, apply such amounts first to that portion of Seller’s obligations to Buyer (if any) that is not covered by this Guaranty, regardless of the manner in which any such payments and/or amounts are characterized by the person making payment.

8. Additional Waivers. Guarantor waives diligence and all demands, protests, presentments and notices of every kind or nature, including notices of protest, dishonor, nonpayment, acceptance of this Guaranty and the creation, renewal, extension, modification or accrual of any of the Guarantied Obligations. Guarantor further waives the right to plead any and all statutes of limitations as a defense to Guarantor’s liability under this Guaranty or the enforcement of this Guaranty. No failure or delay on Buyer’s part in exercising any power, right or privilege under this Guaranty shall impair or waive any such power, right or privilege.

9. No Duty to Prove Loss. To the extent that Guarantor at any time incurs any liability under this Guaranty, Guarantor shall immediately pay Buyer (to be applied on account of the Guarantied Obligations) the amount provided for in this Guaranty, without any requirement that Buyer demonstrate that the Security is inadequate for the Transactions; or that Buyer has otherwise exercised (to any degree) or exhausted any of Buyer’s rights or remedies with respect to Seller or any Security.

10. Full Knowledge. Guarantor acknowledges, represents, and warrants that Guarantor has had a full and adequate opportunity to review the Transaction Documents, the transaction contemplated by the Transaction Documents, and all underlying facts relating to such transaction. Guarantor represents and warrants that Guarantor fully understands: (a) the remedies Buyer may pursue against Seller and/or Guarantor in the event of a default under the Transaction Documents, (b) the value (if any) and character of any Security, and (c) Seller’s financial condition and ability to perform under the Transaction Documents. Guarantor agrees to keep itself fully informed regarding all aspects of the foregoing and the performance of Seller’s obligations to Buyer. Buyer has no duty, whether now or in the future, to disclose to Guarantor any information pertaining to Seller, the Transactions or any Security. At any time provided for

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in the Transaction Documents, Guarantor agrees and acknowledges that an Insolvency Proceeding affecting Guarantor, or other actions or events relating to Guarantor (including Guarantor’s death, disability, or change in financial position), as set forth in the Transaction Documents, may be event(s) of default under the Transaction Documents.

11. Representations and Warranties. Guarantor acknowledges, represents and warrants as follows, and acknowledges that Buyer is relying upon the following acknowledgments, representations, and warranties by Guarantor in making the Transactions:

(a) Transaction Documents. This Guaranty has been duly authorized, executed, and delivered, and is fully valid, binding, and enforceable against Guarantor in accordance with its terms, except as enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting the enforcement of creditors’ rights generally and by general principles of equity (whether enforcement is sought in proceedings in equity or at law).

(b) No Conflict. The execution, delivery, and performance of this Guaranty will not violate any provision of any law, regulation, judgment, order, decree, determination, or award of any court, arbitrator or governmental authority, or of any mortgage, indenture, loan, or security agreement, lease, contract or other agreement, instrument or undertaking to which Guarantor is a party or that purports to bind Guarantor or any of Guarantor’s property or assets.

(c) No Third Party Consent Required. No consent of any person (including creditors or partners, members, stockholders, or other owners of Guarantor), other than those consents obtained as of the date hereof, is required in connection with Guarantor’s execution of this Guaranty or performance of Guarantor’s obligations under this Guaranty. Guarantor’s execution of, and obligations under, this Guaranty are not contingent upon any consent, license, permit, approval, or authorization of, exemption by, notice or report to, or registration, filing, or declaration with, any governmental authority, bureau, or agency, whether local, state, federal, or foreign.

(d) Authority and Execution. Guarantor has full power, authority, and legal right to execute, deliver and perform its obligations under this Guaranty. Guarantor has taken all necessary corporate and legal action to authorize this Guaranty, which has been duly executed and delivered.

(e) No Representations by Buyer. Guarantor delivers this Guaranty based solely upon Guarantor’s own independent investigation and based in no part upon any representation or statement by Buyer, except for those set forth in the other Transaction Documents.

(f) Organization. Guarantor is duly incorporated, validly existing and in good standing under the laws and regulations of the state of Guarantor’s incorporation and is duly licensed, qualified, and in good standing in every state where such licensing or qualification is necessary for the transaction of Guarantor’s business. Guarantor has the power to own and hold the assets it purports to own and hold, and to carry on its business as now being conducted

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and proposed to be conducted, and has the power to execute, deliver, and perform its obligations under this Guaranty and the other Transaction Documents.

(g) Litigation; Requirements of Law. Except to the extent set forth in any public filing made by Guarantor, there is no action, suit, proceeding, investigation, or arbitration pending or, to the best knowledge of Guarantor, threatened against Guarantor or any of its respective assets, nor is there any action, suit, proceeding, investigation, or arbitration pending or threatened against the Guarantor which may result in any material adverse change in the business, operations, financial condition, properties, or assets of Guarantor, or which may have an adverse effect on the validity of the Guaranty or any action taken or to be taken in connection with the obligations of Guarantor under the Guaranty. Guarantor is in compliance in all material respects with all Requirements of Law, including ERISA. Guarantor is not in default in any material respect with respect to any judgment, order, writ, injunction, decree, rule or regulation of any arbitrator or Governmental Authority.

(h) Financial Information. All financial data concerning Guarantor that has been delivered by or on behalf of Guarantor to Buyer is true, complete and correct in all material respects and has been prepared in accordance with GAAP. Since the delivery of such data, except as otherwise disclosed in writing to Buyer, there has been no material adverse change in the business, operations, financial condition, properties, or assets of Guarantor.

(i) Adequate Capitalization. Guarantor and its Subsidiaries have not become, or are presently, financially insolvent nor will Guarantor and its Subsidiaries be made insolvent by virtue of Guarantor’s execution of or performance under this Guaranty or any of the Transaction Documents within the meaning of the bankruptcy laws or the insolvency laws of any jurisdiction.

(j) No Misstatements. No information, exhibit, report or certificate furnished by Guarantor to Buyer in connection with the Transactions or any Transaction Document contains any material misstatement of fact or, to the best of Guarantor’s knowledge, has omitted to state a material fact or any fact necessary to make the statements contained therein not materially misleading.

12. Reimbursement and Subrogation Rights. Except to the extent that Buyer notifies Guarantor to the contrary in writing from time to time:

(a) General Deferral of Reimbursement. Guarantor waives any right to be reimbursed by Seller for any payment(s) made by Guarantor on account of the Guarantied Obligations, unless and until all Guarantied Obligations have been paid in full and all periods within which such payments may be set aside or invalidated have expired. Guarantor acknowledges that Guarantor has received adequate consideration for execution of this Guaranty by virtue of Buyer’s entering into the Transactions (which benefits Guarantor, as an owner or principal of Seller) and Guarantor does not require or expect, and is not entitled to, any other right of reimbursement against Seller as consideration for this Guaranty.

(b) Deferral of Subrogation and Contribution. Guarantor agrees it shall have no right of subrogation against Seller or Buyer and no right of subrogation against any

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Security unless and until: (a) such right of subrogation does not violate (or otherwise produce any result adverse to Buyer under) any applicable law, including any bankruptcy or insolvency law; (b) all amounts due under the Transaction Documents have been paid in full; and (c) all periods within which such payment may be set aside or invalidated have expired (such deferral of Guarantor’s subrogation and contribution rights, the “Subrogation Deferral”).

(c) Effect of Invalidation. To the extent that a court of competent jurisdiction determines that Guarantor’s Subrogation Deferral is void or voidable for any reason, Guarantor agrees, notwithstanding any acts or omissions by Buyer that Guarantor’s rights of subrogation against Seller or Buyer and Guarantor’s right of subrogation against any Security shall at all times be junior and subordinate to Buyer’s rights against Seller and to Buyer’s right, title, and interest in such Security.

(d) Claims in Insolvency Proceeding. Guarantor shall not file any claim in any Insolvency Proceeding affecting Seller unless Guarantor simultaneously assigns and transfers such claim to Buyer, without consideration, pursuant to documentation fully satisfactory to Buyer. Guarantor shall automatically be deemed to have assigned and transferred such claim to Buyer whether or not Guarantor executes documentation to such effect, and by executing this Guaranty hereby authorizes Buyer (and grants Buyer a power of attorney coupled with an interest, and hence irrevocable) to execute and file such assignment and transfer documentation on Guarantor’s behalf. Buyer shall have the sole right to vote, receive distributions, and exercise all other rights with respect to any such claim, provided, however, that if and when the Guarantied Obligations have been paid in full Buyer shall release to Guarantor any further payments received on account of any such claim.

13. Waiver Disclosure. Guarantor acknowledges that pursuant to this Guaranty, Guarantor has waived a substantial number of defenses that Guarantor might otherwise under some circumstance(s) be able to assert against Guarantor’s liability to Buyer. Guarantor acknowledges and confirms that Guarantor has substantial experience as a sophisticated participant in substantial commercial real estate transactions and is fully familiar with the legal consequences of signing this or any other guaranty. In addition, Guarantor is represented by competent counsel. Guarantor has obtained from such counsel, and understood, a full explanation of the nature, scope, and effect of the waivers contained in this Guaranty (a “Waiver Disclosure”). In the alternative, Guarantor has, with advice from such counsel, knowingly and intentionally waived obtaining a Waiver Disclosure. Accordingly Guarantor does not require or expect Buyer to provide a Waiver Disclosure. It is not necessary for Buyer or this Guaranty to provide or set forth any Waiver Disclosure, notwithstanding any principles of law to the contrary. Nevertheless, Guarantor specifically acknowledges that Guarantor is fully aware of the nature, scope, and effect of all waivers contained in this Guaranty, all of which have been fully disclosed to Guarantor. Guarantor acknowledges that as a result of the waivers contained in this Guaranty:

(a) Actions by Buyer. Buyer will be able to take a wide range of actions relating to Seller, the Transactions, and the Transaction Documents, all without Guarantor’s consent or notice to Guarantor. Guarantor’s full and unconditional liability under this Guaranty will continue whether or not Guarantor has consented to such actions. Guarantor may disagree with or disapprove such actions, and Guarantor may believe that such actions should terminate or

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limit Guarantor’s obligations under this Guaranty, but such disagreement, disapproval, or belief on the part of Guarantor will in no way limit Guarantor’s obligations under this Guaranty.

(b) Interaction with Seller Liability. Guarantor shall be fully liable for all Guarantied Obligations even if Seller has no liability whatsoever under the Transaction Documents or the Transaction Documents are otherwise invalid, unenforceable, or subject to defenses available to Seller. Guarantor acknowledges that Guarantor’s full and unconditional liability under this Guaranty (with respect to the Guarantied Obligations as if they were fully enforceable against Seller) will continue notwithstanding any such limitations on or impairment of Seller’s liability.

(c) Timing of Enforcement. Buyer will be able to enforce this Guaranty against Guarantor even though Buyer might also have available other rights and remedies that Buyer could conceivably enforce against the Security or against other parties. As a result, Buyer may require Guarantor to pay the Guarantied Obligations earlier than Guarantor would prefer to pay the Guarantied Obligations, including immediately upon the occurrence of a default by Seller. Guarantor will not be able to assert against Buyer various defenses, theories, excuses, or procedural requirements that might otherwise force Buyer to delay or defer the enforcement of this Guaranty against Guarantor. Guarantor acknowledges that Guarantor intends to allow Buyer to enforce the Guaranty against Guarantor in such manner. All of Guarantor’s assets will be available to satisfy Buyer’s claims against Guarantor under this Guaranty.

(d) Continuation of Liability. Guarantor’s liability for the Guarantied Obligations shall continue at all times until the Guarantied Obligations have actually been paid in full, even if other circumstances have changed such that in Guarantor’s view Guarantor’s liability under this Guaranty should terminate, except to the extent that any express conditions to the termination of this Guaranty, as set forth in this Guaranty, have been satisfied.

14. Buyer’s Disgorgement of Payments. Upon payment of all or any portion of the Guarantied Obligations, Guarantor’s obligations under this Guaranty shall continue and remain in full force and effect if all or any part of such payment is, pursuant to any Insolvency Proceeding or otherwise, avoided or recovered directly or indirectly from Buyer as a preference, fraudulent transfer, or otherwise, irrespective of (a) any notice of revocation given by Guarantor prior to such avoidance or recovery, or (b) payment in full of the Transactions. Guarantor’s liability under this Guaranty shall continue until all periods have expired within which Buyer could (on account of Insolvency Proceedings, whether or not then pending, affecting Seller or any other person) be required to return, repay, or disgorge any amount paid at any time on account of the Guarantied Obligations.

15. Financial Information. Within 120 days after the end of each calendar year or other fiscal year of Guarantor (or within five business days after filing, in the case of tax returns), Guarantor shall deliver to Buyer: (a) complete and current audited financial statements of Guarantor prepared in accordance with GAAP, in all material respects; provided, that the timely filings of Guarantor’s annual report on Form 10-K and quarterly reports on Form 10-Q shall be deemed to satisfy the requirement of this subsection (a); (b) copies of Guarantor’s tax returns; and (c) such other financial information relating to Guarantor and in Guarantor’s possession as Buyer may reasonably request.

13

16. Consent to Jurisdiction. Guarantor agrees that any Proceeding to enforce this Guaranty may be brought in any state or federal court located in the state of New York, as Buyer may select. By executing this Guaranty, Guarantor irrevocably accepts and submits to the nonexclusive personal jurisdiction of each of the aforesaid courts, generally and unconditionally with respect to any such Proceeding. Guarantor agrees not to assert any basis for transferring jurisdiction of any such proceeding to another court. Guarantor further agrees that a final non-appealable judgment against Guarantor in any Proceeding shall be conclusive evidence of Guarantor’s liability for the full amount of such judgment.

17. Merger; No Conditions; Amendments. This Guaranty and documents referred to herein contain the entire agreement among the parties with respect to the matters set forth in this Guaranty. This Guaranty supersedes all prior agreements among the parties with respect to the matters set forth in this Guaranty. No course of prior dealings among the parties, no usage of trade, and no parol or extrinsic evidence of any nature shall be used to supplement, modify, or vary any terms of this Guaranty. This Guaranty is unconditional. There are no unsatisfied conditions to the full effectiveness of this Guaranty. No terms or provisions of this Guaranty may be changed, waived, revoked, or amended without Buyer’s written agreement. If any provision of this Guaranty is determined to be unenforceable, then all other provisions of this Guaranty shall remain fully effective.

18. Enforcement. Guarantor acknowledges that this Guaranty is an “instrument for the payment of money only,” within the meaning of New York Civil Practice Law and Rules Section 3213.

19. Fundamental Changes. Guarantor shall not wind up, liquidate, or dissolve its affairs or enter into any transaction of merger or consolidation, or sell, lease, or otherwise dispose of (or agree to do any of the foregoing) all or substantially all of its property or assets, without Buyer’s prior written consent.

20. Further Assurances. Guarantor shall execute and deliver such further documents, and perform such further acts, as Buyer may request to achieve the intent of the parties as expressed in this Guaranty, provided in each case that any such documentation is consistent with this Guaranty and with the Transaction Documents.

21. Counterparts. This Guaranty may be executed in counterparts.

22. WAIVER OF TRIAL BY JURY. GUARANTOR WAIVES TRIAL BY JURY IN ANY ACTION OR PROCEEDING ARISING FROM OR RELATING TO THIS GUARANTY OR THE TRANSACTION DOCUMENTS OR ANY OBLIGATION(S) OF GUARANTOR HEREUNDER OR UNDER THE TRANSACTION DOCUMENTS.

23. Miscellaneous.

(a) Assignability. Buyer may assign this Guaranty (in whole or in part) together with any one or more of the Transaction Documents, in accordance with the terms of the Transaction Documents without in any way affecting Guarantor’s or Seller’s liability. Upon request in connection with any such assignment Guarantor shall deliver such documentation as Buyer shall reasonably request (at Buyer’s expense). Buyer may from time to time designate any

14

Buyer Entity to hold and exercise any or all of Buyer’s rights and remedies under this Guaranty. This Guaranty shall benefit Buyer and its successors and assigns (including any Buyer Entity) and shall bind Guarantor and its successors, and assigns. Guarantor may not assign this Guaranty in whole or in part without the prior written consent of Buyer.

(b) Notices. All notices, requests and demands to be made under this Guaranty shall be given in writing at the address set forth in the opening paragraph of this Guaranty and shall be effective for all purposes if hand delivered or sent by: (i) hand delivery, with proof of attempted delivery, (ii) certified or registered United States mail, postage prepaid, (iii) expedited prepaid delivery service, either commercial or United States Postal Service, with proof of attempted delivery, or (iv) by telecopier (with answerback acknowledged) provided that such telecopied notice must also be delivered by one of the means set forth in (i), (ii) or (iii) above, to the address set forth in the opening paragraph of this Guaranty or at such other address and person as shall be designated from time to time by any party hereto, as the case may be, in a written notice to the other parties hereto in the manner provided for in this Section 23(b). Any notice, request or demand shall be deemed to have been given: (i) in the case of hand delivery, at the time of delivery, (ii) in the case of registered or certified mail, when first delivered or the first attempted delivery on a business day, (iii) in the case of expedited prepaid delivery upon the first attempted delivery on a business day, or (iv) in the case of telecopier, upon receipt of answerback confirmation, provided that such telecopied notice was also delivered as required in this Section 23(b).

(c) Interpretation. This Guaranty shall be enforced and interpreted according to the laws of the state of New York, disregarding its rules on conflicts of laws. The word “include” and its variants shall be interpreted in each case as if followed by the words “without limitation.”

24. Business Purposes. Guarantor acknowledges that this Guaranty is executed and delivered for business and commercial purposes, and not for personal, family, household, consumer, or agricultural purposes. Guarantor acknowledges that Guarantor is not entitled to, and does not require the benefits of, any rights, protections, or disclosures that would or may be required if this Guaranty were given for personal, family, household, consumer, or agricultural purposes. Guarantor acknowledges that none of Guarantor’s obligation(s) under this Guaranty constitute(s) a “debt” within the meaning of the United States Fair Debt Collection Practices Act, 15 U.S.C. § 1692a(5), and accordingly compliance with the requirements of such Act is not required if Buyer (directly or acting through its counsel) makes any demand or commences any action to enforce this Guaranty.

25. No Third-Party Beneficiaries. This Guaranty is executed and delivered for the benefit of Buyer and its successors, and assigns, and is not intended to benefit any third party.

26. CERTAIN ACKNOWLEDGMENTS BY GUARANTOR. GUARANTOR ACKNOWLEDGES THAT BEFORE EXECUTING THIS GUARANTY: (A) GUARANTOR HAS HAD THE OPPORTUNITY TO REVIEW IT WITH AN ATTORNEY OF GUARANTOR’S CHOICE; (B) BUYER HAS RECOMMENDED TO GUARANTOR THAT GUARANTOR OBTAIN SEPARATE COUNSEL,

15

INDEPENDENT OF SELLER’S COUNSEL, REGARDING THIS GUARANTY; AND (C) GUARANTOR HAS CAREFULLY READ THIS GUARANTY AND UNDERSTOOD THE MEANING AND EFFECT OF ITS TERMS, INCLUDING ALL WAIVERS AND ACKNOWLEDGMENTS CONTAINED IN THIS GUARANTY AND THE FULL EFFECT OF SUCH WAIVERS AND THE SCOPE OF GUARANTOR’S OBLIGATIONS UNDER THIS GUARANTY.

16

IN WITNESS WHEREOF, Guarantor has duly executed this Guaranty as of the date first written above.

GUARANTOR:
RAIT FINANCIAL TRUST, a Maryland real estate investment trust
By:	/s/ James J. Sebra
	Name:	James J. Sebra
	Title:	SVP & CAO

Guaranty

October 27, 2011

EX-15.1

Exhibit 15.1

RAIT Financial Trust

Cira Centre

2929 Arch Street, 17th Floor

Philadelphia, Pennsylvania 19104

We have reviewed, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the unaudited interim consolidated financial information of RAIT Financial Trust and subsidiaries for the periods ended September 30, 2011 and 2010, as indicated in our report dated November 4, 2011; because we did not perform an audit, we expressed no opinion on that information.

We are aware that our report referred to above, which is included in your Quarterly Report on Form 10-Q for the quarter ended September 30, 2011 is incorporated by reference in Registration Statements of RAIT Financial Trust on Form S-3 (File No. 333-177324, effective on October 28, 2011; File No. 333-175901, effective on September 9, 2011; File No. 333-144603, effective on July 16, 2007 and post effective amendment effective April 25, 2008) and Form S-8 (File No. 333-151627, effective June 13, 2008; File No. 333-125480, effective on June 3, 2005; File No. 333-100766, effective on October 25, 2002; and File No. 333-67452, effective on August 14, 2001).

We also are aware that the aforementioned report, pursuant to Rule 436(c) under the Securities Act of 1933, is not considered a part of a Registration Statement prepared or certified by an accountant within the meaning of Sections 7 and 11 of that Act.

/s/ Grant Thornton LLP

Philadelphia, Pennsylvania

November 4, 2011

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, Scott F. Schaeffer, 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 4, 2011		/s/ Scott F. Schaeffer
	Name:	Scott F. Schaeffer
	Title:	Chairman of the Board, Chief Executive Officer and President

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, Jack E. Salmon, 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 4, 2011		/s/ Jack E. Salmon
	Name:	Jack E. Salmon
	Title:	Chief Financial Officer and Treasurer

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of RAIT Financial Trust (the “Company”) on Form 10-Q for the quarterly period ended September 30, 2011 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Scott F. Schaeffer, Chief Executive Officer and President 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/ Scott F. Schaeffer

Scott F. Schaeffer

Chairman of the Board, Chief Executive Officer and President

Date: November 4, 2011

EX-32.2

Exhibit 32.2

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of RAIT Financial Trust (the “Company”) on Form 10-Q for the quarterly period ended September 30, 2011 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Jack E. Salmon, Chief Financial Officer and Treasurer 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/ Jack E. Salmon

Jack E. Salmon

Chief Financial Officer and Treasurer

Date: November 4, 2011

XML

Consolidated Balance Sheets (Parenthetical) (USD $) In Thousands, except Share data	Sep. 30, 2011	Dec. 31, 2010
Deferred financing costs, accumulated amortization	$ 11,010	$ 9,943
Intangible assets, accumulated amortization	2,197	1,777
Indebtedness, fair value	$ 114,440	$ 152,494
Common shares, par value	$ 0.03	$ 0.03
Common shares, shares authorized	200,000,000	200,000,000
Common shares, shares issued	40,077,148	35,300,190
Common shares, shares outstanding	40,077,148	35,300,190
7.75% Series A Cumulative Redeemable Preferred Shares [Member]
Preferred shares, par value	$ 0.01	$ 0.01
Preferred shares, shares authorized	25,000,000	25,000,000
Cumulative redeemable preferred shares, liquidation preference	$ 25	$ 25
Cumulative redeemable preferred shares, shares issued	2,760,000	2,760,000
Cumulative redeemable preferred shares, shares outstanding	2,760,000	2,760,000
8.375% Series B Cumulative Redeemable Preferred Shares [Member]
Preferred shares, par value	$ 0.01	$ 0.01
Preferred shares, shares authorized	25,000,000	25,000,000
Cumulative redeemable preferred shares, liquidation preference	$ 25	$ 25
Cumulative redeemable preferred shares, shares issued	2,258,300	2,258,300
Cumulative redeemable preferred shares, shares outstanding	2,258,300	2,258,300
8.875% Series C Cumulative Redeemable Preferred Shares [Member]
Preferred shares, par value	$ 0.01	$ 0.01
Preferred shares, shares authorized	25,000,000	25,000,000
Cumulative redeemable preferred shares, liquidation preference	$ 25	$ 25
Cumulative redeemable preferred shares, shares issued	1,600,000	1,600,000
Cumulative redeemable preferred shares, shares outstanding	1,600,000	1,600,000

XML

Consolidated Statements Of Operations (USD $) In Thousands, except Share data	3 Months Ended		9 Months Ended
	Sep. 30, 2011	Sep. 30, 2010	Sep. 30, 2011	Sep. 30, 2010
Revenue:
Interest income	$ 33,549	$ 37,252	$ 101,590	$ 117,755
Rental income	23,635	18,443	67,063	52,203
Fee and other income	2,905	3,204	8,578	15,555
Total revenue	60,089	58,899	177,231	185,513
Expenses:
Interest expense	22,689	24,038	68,384	74,170
Real estate operating expense	14,563	13,951	40,971	37,872
Compensation expense	6,898	6,766	19,179	21,704
General and administrative expense	4,042	4,331	13,441	14,588
Provision for losses	500	10,813	3,400	35,807
Depreciation and amortization expense	7,300	7,380	21,668	20,576
Total expenses	55,992	67,279	167,043	204,717
Operating Income	4,097	(8,380)	10,188	(19,204)
Interest and other income (expense)	145	42	295	401
Gains (losses) on sale of assets	1,455	0	3,434	11,616
Gains (losses) on extinguishment of debt	11,371	14,278	14,540	51,290
Change in fair value of financial instruments	(34,997)	14,237	(55,113)	35,120
Income (loss) before taxes and discontinued operations	(17,929)	20,177	(26,656)	79,223
Income tax benefit (provision)	158	627	468	484
Income (loss) from continuing operations	(17,771)	20,804	(26,188)	79,707
Income (loss) from discontinued operations	(50)	(2,556)	747	(1,630)
Net income (loss)	(17,821)	18,248	(25,441)	78,077
(Income) loss allocated to preferred shares	(3,407)	(3,406)	(10,235)	(10,227)
(Income) loss allocated to noncontrolling interests	59	210	176	803
Net income (loss) allocable to common shares	$ (21,169)	$ 15,052	$ (35,500)	$ 68,653
Earnings (loss) per share-Basic:
Continuing operations	$ (0.55)	$ 0.58	$ (0.96)	$ 2.57
Discontinued operations	$ 0.00	$ (0.08)	$ 0.02	$ (0.06)
Total earnings (loss) per share-Basic	$ (0.55)	$ 0.50	$ (0.94)	$ 2.51
Weighted-average shares outstanding-Basic	38,771,022	30,330,259	37,822,750	27,384,451
Earnings (loss) per share-Diluted:
Continuing operations	$ (0.55)	$ 0.57	$ (0.96)	$ 2.53
Discontinued operations	$ 0.00	$ (0.08)	$ 0.02	$ (0.06)
Total earnings (loss) per share-Diluted	$ (0.55)	$ 0.49	$ (0.94)	$ 2.47
Weighted-average shares outstanding-Diluted	38,771,022	30,887,145	37,822,750	27,800,648
Distributions declared per common share	$ 0.06	$ 0.00	$ 0.21	$ 0.00

XML

Document And Entity Information	9 Months Ended
	Sep. 30, 2011	Nov. 02, 2011
Document And Entity Information [Abstract]
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Sep. 30, 2011
Document Fiscal Year Focus	2011
Document Fiscal Period Focus	Q3
Entity Registrant Name	RAIT Financial Trust
Entity Central Index Key	0001045425
Current Fiscal Year End Date	--12-31
Entity Filer Category	Accelerated Filer
Entity Common Stock, Shares Outstanding		40,077,148

XML

Indebtedness

9 Months Ended

Sep. 30, 2011

Indebtedness [Abstract]

Indebtedness

NOTE 6: INDEBTEDNESS

We maintain various forms of short-term and long-term financing arrangements. Generally, these financing agreements are collateralized by assets within securitizations. The following table summarizes our total recourse and non-recourse indebtedness as of September 30, 2011:

Description	Unpaid Principal Balance		Carrying Amount		Weighted- Average Interest Rate			Contractual Maturity
Recourse indebtedness:
7.0% convertible senior notes (1)	$	115,000	$	107,466		7.0	%	Apr. 2031
6.875% convertible senior notes (2)		38,813		38,950		6.9	%	Apr. 2027
Secured credit facilities		10,554		10,554		3.0	%	Dec. 2016
Senior secured notes (7)		43,000		43,000		12.5	%	Apr. 2014
Junior subordinated notes, at fair value (3)		38,052		22,450		5.2	%	Oct. 2015 to Mar. 2035
Junior subordinated notes, at amortized cost		25,100		25,100		7.7	%	Apr. 2037
Total recourse indebtedness		270,519		247,520		7.5	%
Non-recourse indebtedness:
CDO notes payable, at amortized cost (4)(5)		1,323,046		1,323,046		0.6	%	2045 to 2046
CDO notes payable, at fair value (3)(4)(6)		1,122,495		130,694		0.9	%	2037 to 2038
Loans payable on real estate		91,990		91,990		5.9	%	Sept. 2015 to May 2021
Total non-recourse indebtedness		2,537,531		1,545,730		0.9	%
Total indebtedness	$	2,808,050	$	1,793,250		1.6	%

(1) Our 7.0% convertible senior notes are redeemable, at par at the option of the holder, in April 2016, April 2021, and April 2026.

(2) Our 6.875% convertible senior notes are redeemable, at par at the option of the holder, in April 2012, April 2017, and April 2022. During October 2011, we repurchased and retired $34,231 in aggregate principal amount of our 6.875% convertible senior notes, leaving $4,582 outstanding.

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

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

(5) Collateralized by $1,744,031 principal amount of commercial mortgages, mezzanine loans, other loans and preferred equity interests. These obligations were issued by separate legal entities and consequently the assets of the special purpose entities that collateralize these obligations are not available to our creditors.

(6) Collateralized by $1,223,158 principal amount of investments in securities and security-related receivables and loans, before fair value adjustments. The fair value of these investments as of September 30, 2011 was $879,380. 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) In October 2011, we prepaid, in full, our $43,000 12.5% Senior Secured Notes due to mature in April 2014.

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

The current status or activity in our financing arrangements occurring as of or during the nine-month period ended September 30, 2011 is as follows:

Recourse Indebtedness

6.875% convertible senior notes. During the nine-month period ended September 30, 2011, we repurchased $104,800 in aggregate principal amount of our 6.875% Convertible Senior Notes due 2027, or the 6.875% convertible senior notes, for an aggregate purchase price of $103,213. As a result of these transactions, we recorded losses on extinguishment of debt of $120, net of deferred financing costs and unamortized discounts that were written off.

Our 6.875% convertible senior notes are redeemable, at the option of the holder, in April 2012. We expect to acquire, redeem, refinance or otherwise enter into transactions to satisfy our 6.875% convertible senior notes which may include any combination of payments of cash, issuances of our debt and/or equity securities, sales or exchanges of our assets or other methods.

7.0% convertible senior notes. On March 21, 2011, we issued and sold in a public offering $115,000 aggregate principal amount of our 7.0% Convertible Senior Notes due 2031, or the 7.0% convertible senior notes. After deducting the underwriting discount and the estimated offering costs, we received approximately $109,000 of net proceeds. Interest on the 7.0% convertible senior notes is paid semi-annually and the 7.0% convertible senior notes mature on April 1, 2031.

Prior to April 5, 2016, the 7.0% convertible senior notes are not redeemable at RAIT's option, except to preserve RAIT's status as a REIT. On or after April 5, 2016, RAIT may redeem all or a portion of the 7.0% convertible senior notes at a redemption price equal to the principal amount plus accrued and unpaid interest. Holders of 7.0% convertible senior notes may require RAIT to repurchase all or a portion of the 7.0% convertible senior notes at a purchase price equal to the principal amount plus accrued and unpaid interest on April 1, 2016, April 1, 2021, and April 1, 2026, or upon the occurrence of certain defined fundamental changes.

The 7.0% convertible senior notes are convertible at the option of the holder at a current conversion rate of 131.3268 common shares per $1,000 principal amount of 7.0% convertible senior notes (equivalent to a current conversion price of $7.61 per common share). Upon conversion of 7.0% convertible senior notes by a holder, the holder will receive cash, our common shares or a combination of cash and our common shares, at our election. We include the 7.0% convertible senior notes in earnings per share using the treasury stock method if the conversion value in excess of the par amount is considered in the money during the respective periods.

According to FASB ASC Topic 470, "Debt", we recorded a discount on our issued and outstanding 7.0% convertible senior notes of $8,228. This discount reflects the fair value of the embedded conversion option within the 7.0% convertible senior notes and was recorded as an increase to additional paid in capital. The fair value was calculated by discounting the cash flows required in the indenture relating to the 7.0% convertible senior notes agreement by a discount rate that represents management's estimate of our senior, unsecured, non-convertible debt borrowing rate at the time when the 7.0% convertible senior notes were issued. The discount will be amortized to interest expense through April 1, 2016, the date at which holders of our 7.0% convertible senior notes could require repayment.

Secured credit facilities. During the nine-month period ending September 30, 2011, we repaid, in full, a $16,160 secured credit facility due to mature in October 2011.

As of September 30, 2011, we have $10,554 outstanding under our remaining secured credit facility. During the three-month period ended September 30, 2011, we renewed our remaining secured credit facility by repaying $8,993 of the $19,547 outstanding principal amount and amending the terms of the remaining $10,554 balance to extend the maturity date from December 2011 to December 2016 and provide for the full amortization of that balance over that five year period. In addition, the interest rate on our secured credit facility was amended to be a floating interest rate of LIBOR plus 275 basis points.

Senior secured notes. During the nine-month period ended September 30, 2011, the holder of the 10.0% senior secured convertible note, or the 10.0% senior note, converted $5,250 principal amount of the 10.0% senior note into 1,500,000 common shares. On April 26, 2011, we prepaid the remaining $15,700 principal amount of the 10.0% senior note.

Loans payable on real estate. During the nine-month period ended September 30, 2011 we refinanced recourse financing consisting of a first mortgage of $12,500 principal amount with a fixed rate of 5.8%, due in April 2012, that was associated with one of our owned real estate properties with non-recourse financing provided by a consolidated securitization. In addition, we refinanced recourse financing consisting of a first mortgage of $7,113 principal amount with a fixed rate of 5.0% due in September 2013, that was associated with one of our owned real estate properties with non-recourse financing provided by a consolidated securitization.

Non-Recourse Indebtedness

CDO notes payable, at amortized cost. CDO notes payable at amortized cost represent notes issued by consolidated CDO entities which are used to finance the acquisition of unsecured REIT notes, CMBS securities, commercial mortgages, mezzanine loans, and other loans in our commercial real estate portfolio. Generally, CDO notes payable are comprised of various classes of notes payable, with each class bearing interest at variable or fixed rates. Both of our CRE CDOs are meeting all of their overcollateralization, or OC, and interest coverage, or IC, trigger tests as of September 30, 2011.

During the nine-month period ended September 30, 2011, we repurchased, from the market, a total of $6,700 in aggregate principal amount of CDO notes payable issued by our RAIT I CDO securitization. The aggregate purchase price was $2,499 and we recorded a gain on extinguishment of debt of $4,202.

During the nine-month period ended September 30, 2011, we repurchased, from the market, a total of $15,000 in aggregate principal amount of CDO notes payable issued by our RAIT II CDO securitization. The aggregate purchase price was $4,542 and we recorded a gain on extinguishment of debt of $10,458.

CDO notes payable, at fair value. Both of our Taberna consolidated CDOs are failing OC trigger tests which cause a change to the priority of payments to the debt and equity holders of the respective securitizations. Upon the failure of an OC test, the indenture of each CDO requires cash flows that would otherwise have been distributed to us as equity distributions, or in some cases interest payments on our retained CDO notes payable, be used to pay down sequentially the outstanding principal balance of the most senior note holders. The OC tests failures are due to defaulted collateral assets and credit risk securities. During the nine-month period ended September 30, 2011, $24,618 of cash flows were re-directed from our retained interests in these CDOs and were used to repay the most senior holders of our CDO notes payable.

Loans payable on real estate. During the nine-month period ended September 30, 2011, we obtained a first mortgage on an investment in real estate from the Federal National Mortgage Association that has a principal balance of $13,400, 7 year term, and a 5.12% interest rate and a first mortgage on an investment in real estate from Bank of America that has a principal balance of $24,000, 10 year term, and a 6.09% interest rate.

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Earnings (Loss) Per Share

9 Months Ended

Sep. 30, 2011

Earnings (Loss) Per Share [Abstract]

Earnings (Loss) Per Share

NOTE 11: EARNINGS (LOSS) PER SHARE

The following table presents a reconciliation of basic and diluted earnings (loss) per share for the three-month and nine-month periods ended September 30, 2011 and 2010:

	For the  Three-Month Periods Ended September 30						For the  Nine-Month Periods Ended September 30
	2011			2010			2011			2010
Income (loss) from continuing operations	$	(17,771	)	$	20,804		$	(26,188	)	$	79,707
(Income) loss allocated to preferred shares		(3,407	)		(3,406	)		(10,235	)		(10,227	)
(Income) loss allocated to noncontrolling interests		59			210			176			803
Income (loss) from continuing operations allocable to common shares		(21,119	)		17,608			(36,247	)		70,283
Income (loss) from discontinued operations		(50	)		(2,556	)		747			(1,630	)
Net income (loss) allocable to common shares	$	(21,169	)	$	15,052		$	(35,500	)	$	68,653
Weighted-average shares outstanding—Basic		38,771,022			30,330,259			37,822,750			27,384,451
Dilutive securities under the treasury stock method		0			556,886			0			416,197
Weighted-average shares outstanding—Diluted		38,771,022			30,887,145			37,822,750			27,800,648
Earnings (loss) per share—Basic:
Continuing operations	$	(0.55	)	$	0.58		$	(0.96	)	$	2.57
Discontinued operations		0.00			(0.08	)		0.02			(0.06	)
Total earnings (loss) per share—Basic	$	(0.55	)	$	0.50		$	(0.94	)	$	2.51
Earnings (loss) per share—Diluted:
Continuing operations	$	(0.55	)	$	0.57		$	(0.96	)	$	2.53
Discontinued operations		0.00			(0.08	)		0.02			(0.06	)
Total earnings (loss) per share—Diluted	$	(0.55	)	$	0.49		$	(0.94	)	$	2.47

For the three-month and nine-month periods ended September 30, 2011, securities convertible into 1,275,244 common shares, respectively, were excluded from the earnings (loss) per share computations because their effect would have been anti-dilutive. For the three-month and nine-month periods ended September 30, 2010, securities convertible into 3,698,272 common shares, respectively, were excluded from the earnings (loss) per share computations because their effect would have been anti-dilutive.

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Summary Of Significant Accounting Policies

9 Months Ended

Sep. 30, 2011

Summary Of Significant 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, 2010 included in our Annual Report on Form 10-K. In the opinion of management, all adjustments, consisting only of normal recurring adjustments, necessary to present fairly our consolidated financial position and consolidated results of operations and cash flows are included. The results of operations for the interim periods presented are not necessarily indicative of the results for the full year.

Certain prior period amounts have been reclassified to conform with the current period presentation. Previously, interest expense was included as part of net interest margin within total revenue. We have now classified interest expense as a component of expenses. Additionally, interest expense associated with third party financing provided on our owned real estate is included in interest expense whereas previously it was reflected within property operating expenses.

b. 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 interest 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 (FASB) Accounting Standards Codification (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 respective entity. For our commercial mortgages, 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 consolidated the VIEs when we are the primary beneficiary. See Note 9 for additional disclosures pertaining to VIEs.

c. 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. Actual results could differ from those estimates.

d. Investments in Loans

We invest in commercial mortgages, mezzanine loans, debt securities and other loans. We account for our investments in commercial mortgages, mezzanine loans and other loans 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.

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

We maintain an allowance for losses on our investments in commercial mortgages, mezzanine loans and other loans. 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. Management reviews loans for impairment and establishes specific reserves when a loss is probable and reasonably estimable under the provisions of FASB ASC Topic 310, "Receivables." 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. If any trends or characteristics indicate that it is probable that other loans, with similar characteristics to those of impaired loans, have incurred a loss, we consider whether an allowance for loss is needed pursuant to FASB ASC Topic 450, "Contingencies." 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. Payments received for non-accrual or impaired loans are applied to principal until the loan is removed from non-accrual status or no longer impaired. Past due interest is recognized on non-accrual loans when they are removed from non-accrual status and are making current interest payments. The allowance for losses is increased by charges to operations and decreased by charge-offs (net of recoveries). Management charges off impaired loans when the investment is no longer realizable and legally discharged.

f. Investments in Real Estate

Investments in real estate are shown net of accumulated depreciation. We capitalize all costs related to the improvement of 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.

We acquire real estate assets either directly or through the conversion of our investments in loans into owned real estate. Acquisitions of real estate assets and any related intangible assets are recorded initially at fair value under FASB ASC Topic 805, "Business Combinations." Fair value is determined by management based on market conditions and inputs at the time the asset is acquired. All expenses incurred to acquire a real estate asset are expensed as incurred.

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.

g. Investments in Securities

We account for our investments in securities under FASB ASC Topic 320, "Investments—Debt and Equity Securities", and designate each investment security as a trading security, an available-for-sale security, or a held-to-maturity security based on our intent at the time of acquisition. Trading securities are recorded at their fair value each reporting period with fluctuations in fair value reported as a component of earnings. Available-for-sale securities are recorded at fair value with changes in fair value reported as a component of other comprehensive income (loss). We classify certain available-for-sale securities as trading securities when we elect to record them under the fair value option in accordance with FASB ASC Topic 825, "Financial Instruments." See "i. Fair Value of Financial Instruments." Upon the sale of an available-for-sale security, the realized gain or loss on the sale will be recorded as a component of earnings in the respective period. Held-to-maturity investments are carried at amortized cost at each reporting period.

We account for investments in securities where the transfer meets the criteria as a financing under FASB ASC Topic 860, "Transfers and Servicing", at amortized cost. Our investments in security-related receivables represent securities that were transferred to issuers of collateralized debt obligations, or CDOs, in which the transferors maintained some level of continuing involvement.

We use our judgment to determine whether an investment in securities has sustained an other-than-temporary decline in value. If management determines that an investment in securities has sustained an other-than-temporary decline in its value, the investment is written down to its fair value by a charge to earnings, and we establish a new cost basis for the investment. Our evaluation of an other-than-temporary decline is dependent on the specific facts and circumstances. Factors that we consider in determining whether an other-than-temporary decline in value has occurred include: the estimated fair value of the investment in relation to our cost basis; the financial condition of the related entity; and the intent and ability to retain the investment for a sufficient period of time to allow for recovery of the fair value of the investment.

h. Revenue Recognition

1) Interest income—We recognize interest income from investments in commercial mortgages, mezzanine loans, and other securities on a yield to maturity basis. Upon the acquisition of a loan at a discount, we assess the portions of the discount that constitute accretable yields and non-accretable differences. The accretable yield represents the excess of our expected cash flows from the loan over the amount we paid for the loan. That amount, the accretable yield, is accreted to interest income over the remaining life of the loan. Many of our commercial mortgages and mezzanine loans provide for the accrual of interest at specified rates which differ from current payment terms. Interest income is recognized on such loans at the accrual rate subject to management's determination that accrued interest and outstanding principal are ultimately collectible.

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

We recognize interest income from interests in certain securitized financial assets on an estimated effective yield to maturity basis. Management estimates the current yield on the amortized cost of the investment based on estimated cash flows after considering prepayment and credit loss experience.

2) Rental income—We generate rental income from tenant rent and other tenant-related activities at our consolidated real estate properties. For multi-family real estate properties, rental 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, rental 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. Leases also typically provide for tenant reimbursement of a portion of common area maintenance and other operating expenses to the extent that a tenant's pro rata share of expenses exceeds a base year level set in the lease.

3) Fee and other income—We generate fee and other income through our various subsidiaries by (a) providing ongoing asset management services to investment portfolios under cancelable management agreements, (b) providing or arranging to provide financing to our borrowers, (c) providing property management services to third parties, and (d) providing fixed income trading and advisory services to our customers. We recognize revenue for these activities when the fees are fixed or determinable, are evidenced by an arrangement, collection is reasonably assured and the services under the arrangement have been provided. While we may receive asset management fees when they are earned, we eliminate earned asset management fee income from CDOs while such CDOs are consolidated.

During the three-month periods ended September 30, 2011 and 2010, we received $1,308 and $1,343, respectively, of earned asset management fees associated with CDOs, of which we eliminated $919 and $983, respectively, of management fee income with consolidated CDOs.

During the nine-month periods ended September 30, 2011 and 2010, we received $3,908 and $6,447, respectively, of earned asset management fees associated with CDOs, of which we eliminated $2,802 and $2,965, respectively, of management fee income with consolidated CDOs.

i. 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. Generally, assets and liabilities carried at fair value and included in this category are trust preferred securities, or TruPS, and subordinated debentures, 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 we and others are willing to pay for an asset. Ask prices represent the lowest price that we and others are willing to accept for an asset. For financial instruments whose inputs are based on bid-ask prices, we do not require that fair value always be a predetermined point in the bid-ask range. Our policy is to allow for mid-market pricing and adjusting to the point within the bid-ask range that results in our best estimate of fair value.

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

j. Income Taxes

RAIT and Taberna 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 our distributions to shareholders and as long as certain asset, income and share ownership tests are met. If we were to fail to meet these requirements, we would be subject to U.S. federal income tax, which could have a material adverse impact on our results of operations and amounts available for distributions to our shareholders. Management believes that all of the criteria to maintain RAIT's and Taberna'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 estimate of deferred tax asset realizability, if any, are included in income tax expense on the consolidated statements of operations.

From time to time, our TRSs generate taxable income from intercompany transactions. The TRS entities generate taxable revenue from fees for services provided to CDO entities. Some of these fees paid to the TRS entities are capitalized as deferred financing costs by the CDO entities. Certain CDO entities may be consolidated in our financial statements pursuant to FASB ASC Topic 810, "Consolidation." In consolidation, these fees are eliminated when the CDO entity is included in the consolidated group. Nonetheless, all income taxes are accrued by the TRSs in the year in which the taxable revenue is received. These income taxes are not eliminated when the related revenue is eliminated in consolidation.

Certain TRS entities are domiciled in the Cayman Islands and, accordingly, taxable income generated by these entities may not be subject to local income taxation, but generally will be included in our taxable income on a current basis, whether or not distributed. Upon distribution of any previously included income, no incremental U.S. federal, state, or local income taxes would be payable by us.

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.

k. Recent Accounting Pronouncements

On January 1, 2010, we adopted Accounting Standards Update (ASU) No. 2010-06, "Fair Value Measurements and Disclosures (Topic 820): Improving Disclosures about Fair Value Measurements." This accounting standard requires new disclosures for significant transfers in and out of Level 1 and 2 fair value measurements and a description of the reasons for the transfer. This accounting standard also updates existing disclosures by providing fair value measurement disclosures for each class of assets and liabilities and provides disclosures about the valuation techniques and inputs used to measure fair value for both recurring and nonrecurring fair value measurements. For Level 3 fair value measurements, new disclosures will require entities to present information separately for purchases, sales, issuances, and settlements. These disclosures are effective for fiscal years beginning after December 15, 2010, and for interim periods within those fiscal years. The adoption of this standard did not have a material effect on our consolidated financial statements.

On January 1, 2011, we adopted ASU No. 2010-29, "Disclosure of Supplementary Pro Forma Information for Business Combinations." This accounting standard requires that if a public entity presents comparative financial statements, the entity should disclose revenue and earnings of the combined entity as though the business combination(s) that occurred during the current year had occurred as of the beginning of the comparable prior annual reporting period only. This accounting standard also expands the supplemental pro forma disclosures under FASB ASU Topic 805, "Business Combinations" to include a description of the nature and amount of material, nonrecurring pro forma adjustments directly attributable to the business combination included in the reported pro forma revenue and earnings. The adoption of this standard did not have a material effect on our consolidated financial statements.

In April 2011, the FASB issued accounting standards classified under FASB ASC Topic 310, "Receivables". This accounting standard amends existing guidance to provide additional guidance on the determination of whether a creditor has granted a concession and whether a debtor is experiencing financial difficulties for purposes of determining whether a restructuring constitutes a troubled debt restructuring. This standard is effective for the first interim or annual period beginning on or after June 15, 2011, and should be applied retrospectively to the beginning of the annual period of adoption. The adoption of this standard did not have a material effect on our consolidated financial statements.

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Fair Value Of Financial Instruments

9 Months Ended

Sep. 30, 2011

Fair Value Of Financial Instruments [Abstract]

Fair Value Of Financial Instruments

NOTE 8: 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 mortgages and loans, investments in securities, CDO notes payable, convertible senior notes, junior subordinated notes and derivative assets and liabilities is based on significant observable and unobservable inputs. The fair value of cash and cash equivalents, restricted cash, secured credit facilities, senior secured notes, loans payable on real estate and other indebtedness approximates cost due to the nature of these instruments.

The following table summarizes the carrying amount and the fair value of our financial instruments as of September 30, 2011:

Financial Instrument	Carrying Amount		Estimated Fair  Value
Assets
Commercial mortgages, mezzanine loans and other loans	$	1,107,429	$	1,055,886
Investments in securities and security-related receivables		719,546		719,546
Cash and cash equivalents		29,693		29,693
Restricted cash		287,877		287,877
Derivative assets		1,308		1,308
Liabilities
Recourse indebtedness:
7.0% convertible senior notes		107,466		78,775
6.875% convertible senior notes		38,950		38,413
Secured credit facilities		10,554		10,554
Senior secured notes		43,000		43,000
Junior subordinated notes, at fair value		22,450		22,450
Junior subordinated notes, at amortized cost		25,100		14,809
Non-recourse indebtedness:
CDO notes payable, at amortized cost		1,323,046		722,012
CDO notes payable, at fair value		130,694		130,694
Loans payable on real estate		91,990		91,990
Derivative liabilities		194,224		194,224

Fair Value Measurements

The following tables summarize information about our assets and liabilities measured at fair value on a recurring basis as of September 30, 2011, and indicate the fair value hierarchy of the valuation techniques utilized to determine such fair value:

Assets:	Quoted Prices in Active  Markets for Identical Assets (Level 1) (a)		Significant Other Observable  Inputs (Level 2) (a)		Significant Unobservable  Inputs (Level 3) ) (a)		Balance as of September  30, 2011
Trading securities
TruPS	$	0	$	0	$	480,607	$	480,607
Other securities		0		0		0		0
Available-for-sale securities		0		2		0		2
Security-related receivables
TruPS receivables		0		0		84,162		84,162
Unsecured REIT note receivables		0		63,477		0		63,477
CMBS receivables		0		70,709		0		70,709
Other securities		0		20,589		0		20,589
Derivative assets		0		1,308		0		1,308
Total assets	$	0	$	156,085	$	564,769	$	720,854

Liabilities:	Quoted Prices in Active  Markets for Identical Assets (Level 1) (a)		Significant Other Observable  Inputs (Level 2) (a)		Significant Unobservable  Inputs (Level 3) ) (a)		Balance as of September  30, 2011
Junior subordinated notes, at fair value	$	0	$	0	$	22,450	$	22,450
CDO notes payable, at fair value		0		0		130,694		130,694
Derivative liabilities		0		93,904		100,320		194,224
Total liabilities	$	0	$	93,904	$	253,464	$	347,368

(a) During the nine-month period ended September 30, 2011, there were no transfers between Level 1 and Level 2, as well as, there were no transfers into and out of Level 3.

The following tables summarize additional information about assets and liabilities that are measured at fair value on a recurring basis for which we have utilized level 3 inputs to determine fair value for the nine-month period ended September 30, 2011:

Assets	Trading Securities—TruPS and Subordinated Debentures			Security-Related Receivables—TruPS and Subordinated Debenture Receivables		Total Level 3 Assets
Balance, as of December 31, 2010	$	454,473		$	83,087	$	537,560
Change in fair value of financial instruments		84,259			1,075		85,334
Purchases		0			0		0
Sales		(58,125	)		0		(58,125	)
Balance, as of September 30, 2011	$	480,607		$	84,162	$	564,769

Liabilities	Derivative Liabilities		CDO Notes Payable,  at Fair Value			Junior Subordinated Notes, at Fair Value		Total Level 3 Liabilities
Balance, as of December 31, 2010	$	87,632	$	148,072		$	4,422	$	240,126
Change in fair value of financial instruments		12,688		7,239			18,028		37,955
Purchases		0		0			0		0
Sales		0		0			0		0
Principal repayments		0		(24,617	)		0		(24,617	)
Balance, as of September 30, 2011	$	100,320	$	130,694		$	22,450	$	253,464

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" as reported in change in fair value of financial instruments in the accompanying consolidated statements of operations:

	For the  Three-Month Periods Ended September 30						For the  Nine-Month Periods Ended September 30
Description	2011			2010			2011			2010
Change in fair value of trading securities and security-related receivables	$	2,924		$	26,004		$	21,559		$	109,003
Change in fair value of CDO notes payable, trust preferred obligations and other liabilities		(11,406	)		7,555			(25,268	)		(891	)
Change in fair value of derivatives		(26,515	)		(19,322	)		(51,404	)		(72,992	)
Change in fair value of financial instruments	$	(34,997	)	$	14,237		$	(55,113	)	$	35,120

The changes in the fair value for the investment in securities, CDO notes payable and other liabilities for which the fair value option was elected for the three-month and nine-month periods ended September 30, 2011 and 2010 was primarily attributable to changes in instrument specific credit risks. The changes in the fair value of derivatives for which the fair value option was elected for the three-month and nine-month periods ended September 30, 2011 and 2010 was mainly due to changes in interest rates.

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Discontinued Operations

9 Months Ended

Sep. 30, 2011

Discontinued Operations [Abstract]

Discontinued Operations

NOTE 13: DISCONTINUED OPERATIONS

For the three-month and nine-month periods ended September 30, 2011, income (loss) from discontinued operations relates to one real estate property sold since January 1, 2011. For the three-month and nine-month periods ended September 30, 2010, income (loss) from discontinued operations relates to three real estate properties designated as held for sale and four real estate properties that we sold or deconsolidated since January 1, 2010. The following table summarizes revenue and expense information for real estate properties classified as discontinued operations:

	For the  Three-Month Periods Ended September 30						For the  Nine-Month Periods Ended September 30
	2011			2010			2011			2010
Revenue:
Rental income	$	0		$	2,397		$	2,072		$	7,495
Expenses:
Real estate operating expense		(3	)		1,411			1,205			4,626
General and administrative expense		0			0			1			0
Depreciation expense		0			631			0			1,856
Total expenses		(3	)		2,042			1,206			6,482
Income (loss) before interest and other income		3			355			866			1,013
Interest and other income		0			0			0			2
Income (loss) from discontinued operations		3			355			866			1,015
Gain (loss) on sale of assets		(53	)		(2,911	)		(119	)		(2,645	)
Total income (loss) from discontinued operations	$	(50	)	$	(2,556	)	$	747		$	(1,630	)

Discontinued operations have not been segregated in the consolidated statements of cash flows. Therefore, amounts for certain captions will not agree with respective data in the consolidated statements of operations.

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Variable Interest Entities

9 Months Ended

Sep. 30, 2011

Variable Interest Entities [Abstract]

Variable Interest Entities

NOTE 9: VARIABLE INTEREST ENTITIES

The following table presents the assets and liabilities of our consolidated VIEs as of each respective date. As of September 30, 2011 our consolidated VIEs were: Taberna Preferred Funding VIII, Ltd., Taberna Preferred Funding IX, Ltd, RAIT CRE CDO I, Ltd., RAIT Preferred Funding II, Ltd., Willow Grove and Cherry Hill.

	As of September 30, 2011			As of December 31, 2010
Assets
Investments in mortgages and loans, at amortized cost:
Commercial mortgages, mezzanine loans, other loans and preferred equity interests	$	1,869,713		$	1,913,089
Allowance for losses		(13,083	)		(15,526	)
Total investments in mortgages and loans		1,856,630			1,897,563
Investments in real estate		21,046			21,054
Investments in securities and security-related receivables, at fair value		719,555			705,455
Cash and cash equivalents		327			73
Restricted cash		149,972			151,045
Accrued interest receivable		56,894			55,105
Other assets		27,421			0
Deferred financing costs, net of accumulated amortization of $10,359 and $8,608, respectively		16,021			17,999
Total assets	$	2,847,866		$	2,848,294
Liabilities and Equity
Indebtedness (including $130,694 and $148,072 at fair value, respectively)	$	1,691,049		$	1,707,352
Accrued interest payable		45,144			34,745
Accounts payable and accrued expenses		1,450			1,450
Derivative liabilities		194,224			184,878
Deferred taxes, borrowers' escrows and other liabilities		0			3,814
Total liabilities		1,931,867			1,932,239
Equity:
Shareholders' equity:
Accumulated other comprehensive income (loss)		(121,966	)		(123,316	)
RAIT Investment		55,700			103,862
Retained earnings		982,265			935,509
Total shareholders' equity		915,999			916,055
Total liabilities and equity	$	2,847,866		$	2,848,294

The assets of the VIEs can only be used to settle obligations of the VIEs and are not available to our creditors. Certain amounts included in the table above are eliminated upon consolidation with other RAIT subsidiaries that maintain investments in the debt or equity securities issued by these entities.

RAIT does not have any contractual obligation to provide the VIEs listed above with any financial support. RAIT has not provided and does not intend to provide financial support to these VIEs that we were not previously contractually required to provide.

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Derivative Financial Instruments

9 Months Ended

Sep. 30, 2011

Derivative Financial Instruments [Abstract]

Derivative Financial Instruments

NOTE 7: DERIVATIVE FINANCIAL INSTRUMENTS

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

Cash Flow Hedges

We have entered into various interest rate swap contracts to hedge interest rate exposure on floating rate indebtedness. We designate interest rate hedge agreements at inception and determine whether or not the interest rate hedge agreement is highly effective in offsetting interest rate fluctuations associated with the identified indebtedness. At designation, certain of these interest rate swaps had a fair value not equal to zero. However, we concluded, at designation, that these hedging arrangements were highly effective during their term using regression analysis and determined that the hypothetical derivative method would be used in measuring any ineffectiveness. At each reporting period, we update our regression analysis and, as of September 30, 2011, we concluded that these hedging arrangements were highly effective during their remaining term and used the hypothetical derivative method in measuring the ineffective portions of these hedging arrangements.

The following table summarizes the aggregate notional amount and estimated net fair value of our derivative instruments as of September 30, 2011 and December 31, 2010:

	As of September 30, 2011					As of December 31, 2010
	Notional		Fair Value			Notional		Fair Value
Cash flow hedges:
Interest rate swaps	$	1,677,900	$	(194,224	)	$	1,786,698	$	(184,878	)
Interest rate caps		36,000		1,308			36,000		1,496
Net fair value	$	1,713,900	$	(192,916	)	$	1,822,698	$	(183,382	)

In November 2011, an interest rate swap agreement, that had a notional amount of $107,113 and strike rate of 5.25%, as of September 30, 2011, will terminate in accordance with its terms.

For interest rate swaps that are considered effective hedges, we reclassified realized losses of $10,748 and $11,391 to earnings for the three-month periods ended September 30, 2011 and 2010 and $32,884 and $34,662 for the nine-month periods ended September 30, 2011 and 2010. For interest rate swaps that are considered ineffective hedges, we reclassified unrealized gains of $12 to earnings for the three-month period ended September 30, 2010 and $50 for the nine-month period ended September 30, 2010.

On January 1, 2008, we adopted the fair value option, which has been classified under FASB ASC Topic 825, "Financial Instruments", for certain of our CDO notes payable. Upon the adoption of this standard, hedge accounting for any previously designated cash flow hedges associated with these CDO notes payable was discontinued and all changes in fair value of these cash flow hedges are recorded in earnings. As of September 30, 2011, the notional value associated with these cash flow hedges where hedge accounting was discontinued was $967,276 and had a liability balance with a fair value of $99,012. See Note 8: "Fair Value of Financial Instruments" for the changes in value of these hedges during the three-month and nine-month periods ended September 30, 2011 and 2010. The change in value of these hedges was recorded as a component of the change in fair value of financial instruments in our consolidated statement of operations.

Amounts reclassified to earnings associated with effective cash flow hedges are reported in interest expense and the fair value of these hedge agreements is included in other assets or derivative liabilities.

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Consolidated Statements Of Cash Flows (USD $) In Thousands	9 Months Ended
	Sep. 30, 2011	Sep. 30, 2010
Operating activities:
Net income (loss)	$ (25,441)	$ 78,077
Adjustments to reconcile net income (loss) to cash flow from operating activities:
Provision for losses	3,400	35,807
Share-based compensation expense	395	2,277
Depreciation and amortization	21,668	22,432
Amortization of deferred financing costs and debt discounts	3,582	2,046
Accretion of discounts on investments	(1,940)	(3,193)
(Gains) losses on sales of assets	(3,434)	(8,971)
(Gains) losses on extinguishment of debt	(14,540)	(51,290)
Change in fair value of financial instruments	55,113	(35,120)
Other items	(8)	(145)
Changes in assets and liabilities:
Accrued interest receivable	(4,300)	573
Other assets	(5,828)	443
Accrued interest payable	(28,814)	(29,872)
Accounts payable and accrued expenses	487	(1,499)
Deferred taxes, borrowers' escrows and other liabilities	(1,619)	(6,098)
Cash flow from operating activities	(1,279)	5,467
Investing activities:
Proceeds from sales of other securities	12,793	18,040
Purchase and origination of loans for investment	(79,632)	(19,346)
Principal repayments on loans	128,709	82,710
Investments in real estate	(22,546)	(13,752)
Proceeds from dispositions of real estate	65,750	7,064
Acquisition of Independence Realty Trust, Inc. and associated entities	(2,578)	0
Proceeds from sale of collateral management rights	0	14,105
(Increase) Decrease in restricted cash	(62,976)	(45,783)
Cash flow from investing activities	39,520	43,038
Financing activities:
Repayments on secured credit facilities and loans payable on real estate	(46,266)	(14,062)
Proceeds from loans payable on real estate	37,400	0
Repayments and repurchase of CDO notes payable	(28,758)	(17,380)
Proceeds from issuance of 7.0% convertible senior notes	115,000	0
Repayments and repurchase of 6.875% convertible senior notes	(119,320)	(12,357)
Issuance (acquisition) of noncontrolling interests	3,581	(47)
Payments for deferred costs	(7,080)	(170)
Common share issuance, net of costs incurred	25,413	6,384
Distributions paid to preferred shareholders	(10,235)	(10,227)
Distributions paid to common shareholders	(5,513)	0
Cash flow from financing activities	(35,778)	(47,859)
Net change in cash and cash equivalents	2,463	646
Cash and cash equivalents at the beginning of the period	27,230	25,034
Cash and cash equivalents at the end of the period	29,693	25,680
Supplemental cash flow information:
Cash paid for interest	24,771	31,471
Cash paid (refunds received) for taxes	63	(1,774)
Non-cash increase in investments in real estate from the conversion of loans	78,300	91,287
Non-cash decrease in indebtedness from conversion to shares or debt extinguishments	$ (16,246)	$ (32,934)

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Investments In Loans

9 Months Ended

Sep. 30, 2011

Investments In Loans [Abstract]

Investments In Loans

NOTE 3: INVESTMENTS IN LOANS

Investments in Commercial Mortgages, Mezzanine Loans, Other Loans and Preferred Equity Interests

The following table summarizes our investments in commercial mortgages, mezzanine loans, other loans and preferred equity interests as of September 30, 2011:

	Unpaid Principal Balance			Unamortized (Discounts) Premiums			Carrying Amount			Number of Loans		Weighted- Average Coupon (1)			Range of Maturity Dates
Commercial Real Estate (CRE) Loans
Commercial mortgages	$	658,446		$	(3,949	)	$	654,497			39		6.7	%	Nov. 2011 to May 2021
Mezzanine loans		344,870			(5,027	)		339,843			93		8.9	%	Nov. 2011 to Nov. 2038
Preferred equity interests		61,200			(1,130	)		60,070			21		10.5	%	Nov. 2011 to Aug. 2025
Total CRE Loans		1,064,516			(10,106	)		1,054,410			153		7.6	%
Other loans		54,842			(616	)		54,226			4		6.4	%	Nov. 2011 to Oct. 2016
Total Loans	$	1,119,358		$	(10,722	)	$	1,108,636			157		7.6	%
Deferred fees		(1,207	)		0			(1,207	)
Total investments in loans	$	1,118,151		$	(10,722	)	$	1,107,429

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

During the nine-month periods ended September 30, 2011 and 2010, we completed the conversion of three and seven commercial real estate loans with a carrying value of $85,114 and $110,528 to real estate owned properties. During the nine-month periods ended September 30, 2011 and 2010, we charged off $6,814 and $19,241, respectively, related to the conversion of commercial real estate loans to owned properties. See Note 5.

The following table summarizes the delinquency statistics of our commercial real estate loans as of September 30, 2011 and December 31, 2010:

Delinquency Status	As of September  30, 2011		As of December  31, 2010
30 to 59 days	$	1,230	$	27,978
60 to 89 days		7,400		0
90 days or more		31,855		55,450
In foreclosure or bankruptcy proceedings		39,800		46,578
Total	$	80,285	$	130,006

As of September 30, 2011 and December 31, 2010, approximately $91,833 and $122,306, respectively, of our commercial real estate loans were on non-accrual status and had a weighted-average interest rate of 9.6% and 8.8%, respectively. As of September 30, 2011 and December 31, 2010, approximately $19,501 and $20,908 of one other loan was on non-accrual status and had a weighted-average interest rate of 7.2%.

Allowance For Losses And Impaired Loans

The following table provides a roll-forward of our allowance for losses for our commercial mortgages, mezzanine loans, and other loans for the three-month periods ended September 30, 2011 and 2010:

	For the  Three-Month Period Ended September 30, 2011			For the  Three-Month Period Ended September 30, 2010
Beginning balance	$	57,866		$	78,672
Provision		500			10,813
Charge-offs, net of recoveries		(2,240	)		(8,497	)
Ending balance	$	56,126		$	80,988

The following table provides a roll-forward of our allowance for losses for our commercial mortgages, mezzanine loans, and other loans for the nine-month periods ended September 30, 2011 and 2010:

	For the  Nine-Month Period Ended September 30, 2011			For the  Nine-Month Period Ended September 30, 2010
Beginning balance	$	69,691		$	86,609
Provision		3,400			35,807
Charge-offs, net of recoveries		(16,965	)		(41,428	)
Ending balance	$	56,126		$	80,988

As of September 30, 2011 and December 31, 2010, we identified 19 and 27 commercial mortgages, mezzanine loans and other loans with unpaid principal balances of $120,470 and $157,746 as impaired.

The average unpaid principal balance of total impaired loans was $118,164 and $181,301 during the three-month periods ended September 30, 2011 and 2010 and $134,585 and $181,169 during the nine-month periods ended September 30, 2011 and 2010. We recorded interest income from impaired loans of $2 and $141 for the three-month periods ended September 30, 2011 and 2010 and $526 and $2,633 for the nine-month periods ended September 30, 2011 and 2010.

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Investments In Securities

9 Months Ended

Sep. 30, 2011

Investments In Securities [Abstract]

Investments In Securities

NOTE 4: INVESTMENTS IN SECURITIES

Our investments in securities and security-related receivables are accounted for at fair value. The following table summarizes our investments in securities as of September 30, 2011:

Investment Description	Amortized Cost		Net Fair Value Adjustments			Estimated Fair  Value		Weighted Average Coupon (1)			Weighted Average Years to Maturity
Trading securities
TruPS	$	637,376	$	(156,769	)	$	480,607		4.6	%		22.8
Other securities		11,020		(11,020	)		0		4.8	%		41.1
Total trading securities		648,396		(167,789	)		480,607		4.6	%		23.1
Available-for-sale securities		3,600		(3,598	)		2		2.1	%		31.1
Security-related receivables
TruPS receivables		111,199		(27,037	)		84,162		6.9	%		11.2
Unsecured REIT note receivables		61,000		2,477			63,477		6.6	%		6.2
CMBS receivables (2)		153,868		(83,159	)		70,709		5.7	%		32.6
Other securities		73,585		(52,996	)		20,589		3.3	%		30.9
Total security-related receivables		399,652		(160,715	)		238,937		5.7	%		22.3
Total investments in securities	$	1,051,648	$	(332,102	)	$	719,546		5.0	%		22.9

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

(2) CMBS receivables include securities with a fair value totaling $21,101 that are rated between "AAA" and "A-" by Standard & Poor's, securities with a fair value totaling $39,989 that are rated "BBB+" and "B-" by Standard & Poor's, securities with a fair value totaling $7,560 that are rated "CCC" by Standard & Poor's and securities with a fair value totaling $2,059 that are rated "D" by Standard & Poor's.

A substantial portion of our gross unrealized losses is greater than 12 months.

TruPS included above as trading securities include (a) investments in TruPS issued by VIEs of which we are not the primary beneficiary and which we do not consolidate and (b) transfers of investments in TruPS securities to us that were accounted for as a sale pursuant to FASB ASC Topic 860, "Transfers and Servicing."

The following table summarizes the non-accrual status of our investments in securities:

	As of September 30, 2011							As of December 31, 2010
	Principal /Par Amount  on Non-accrual		Weighted Average  Coupon			Fair Value		Principal /Par Amount  on Non-accrual		Weighted Average  Coupon			Fair Value
TruPS and TruPS receivables	$	75,557		1.0	%	$	2,944	$	133,682		4.1	%	$	5,581
Other securities		34,035		3.3	%		2		42,754		2.8	%		976
CMBS receivables		37,204		5.9	%		2,489		29,204		5.9	%		975

The assets of our consolidated CDOs collateralize the debt of such entities and are not available to our creditors. As of September 30, 2011 and December 31, 2010, investment in securities of $748,575 and $806,700, respectively, in principal amount of TruPS and subordinated debentures, and $212,921 and $219,868, respectively, in principal amount of unsecured REIT note receivables and CMBS receivables, collateralized the consolidated CDO notes payable of such entities.

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Related Party Transactions

9 Months Ended

Sep. 30, 2011

Related Party Transactions [Abstract]

Related Party Transactions

NOTE 12: RELATED PARTY TRANSACTIONS

In the ordinary course of our business operations, we have ongoing relationships and have engaged in transactions with several 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 on an arm's-length basis from an unaffiliated third party or otherwise not creating a conflict of interest.

Scott F. Schaeffer is our Chairman, Chief Executive Officer and President, and is a Trustee. Mr. Schaeffer's spouse is a director of The Bancorp, Inc., or Bancorp, and she and Mr. Schaeffer own, in the aggregate, less than 1% of Bancorp's outstanding common shares. Each transaction with Bancorp is described below:

a). Cash and Restricted Cash—We maintain checking and demand deposit accounts at Bancorp. As of September 30, 2011 and December 31, 2010, we had $7,848 and $72, respectively, of cash and cash equivalents and $577 and $985, respectively, of restricted cash on deposit at Bancorp. We did not receive any interest income from the Bancorp during the three-month and nine-month periods ended September 30, 2011 and 2010. Restricted cash held at Bancorp relates to borrowers' escrows for taxes, insurance and capital reserves. Any interest earned on these deposits enures to the benefit of the specific borrower and not to us.

b). Office Leases—We sublease a portion of our downtown Philadelphia office space from Bancorp under a lease agreement extending through August 2014 at an annual rental expense based upon the amount of square footage occupied. We have a sublease agreement with a third party for the remaining term of our sublease. Rent paid to Bancorp was $78 and $79 for the three-month periods ended September 30, 2011 and 2010, respectively and $240 and $226 for the nine-month periods ended September 30, 2011 and 2010. Rent received for our sublease was $42 for the three-month periods ended September 30, 2011 and 2010 and was $127 and $124 for the nine-month periods ended September 30, 2011 and 2010.

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Investments In Real Estate

9 Months Ended

Sep. 30, 2011

Investments In Real Estate [Abstract]

Investments In Real Estate

NOTE 5: INVESTMENTS IN REAL ESTATE

The table below summarizes our investments in real estate:

	As of September 30, 2011					As of December 31, 2010
	Book Value			Number  of Properties		Book Value			Number  of Properties
Multi-family real estate properties	$	591,341			33	$	602,183			33
Office real estate properties		249,212			10		219,567			9
Retail real estate properties		48,979			2		41,838			2
Parcels of land		22,208			3		22,208			3
Subtotal		911,740			48		885,796			47
Less: Accumulated depreciation and amortization		(62,508	)				(46,604	)
Investments in real estate	$	849,232				$	839,192

As of September 30, 2011, our investments in real estate of $849,232 are financed through $91,953 of mortgages held by third parties and $791,804 of mortgages held by our consolidated securitizations. Together, along with commercial real estate loans held by these securitizations, these mortgages serve as collateral for the CDO notes payable issued by our consolidated securitizations. All intercompany balances and interest charges are eliminated in consolidation.

Acquisitions:

During the nine-month period ended September 30, 2011, we converted three loans with a carrying value of $85,388, relating to one office property and two multi-family properties, to owned real estate. Upon conversion, we recorded the investment in real estate acquired including any related working capital at fair value of $78,167.

The following table summarizes the aggregate estimated fair value of the assets and liabilities associated with the three properties acquired during the nine-month period ended September 30, 2011, on the respective date of each conversion, for the real estate accounted for under FASB ASC Topic 805.

Description	Estimated Fair  Value
Assets acquired:
Investments in real estate	$	78,300
Cash and cash equivalents		402
Restricted cash		582
Other assets		137
Total assets acquired		79,421
Liabilities assumed:
Accounts payable and accrued expenses		775
Other liabilities		479
Total liabilities assumed		1,254
Estimated fair value of net assets acquired	$	78,167

The following table summarizes the consideration transferred to acquire the real estate properties and the amounts of identified assets acquired and liabilities assumed at the respective conversion date:

Description	Estimated Fair  Value
Fair value of consideration transferred:
Commercial real estate loans	$	78,300
Other considerations		(133	)
Total fair value of consideration transferred	$	78,167

During the nine-month period ended September 30, 2011, these investments contributed revenue of $3,803 and a net income allocable to common shares of $1,176. During the nine-month period ended September 30, 2011, we did not incur any third-party acquisition-related costs.

Our consolidated unaudited pro forma information, after including the acquisition of real estate properties, is presented below as if the acquisition occurred on January 1, 2010. These pro forma results are not necessarily indicative of the results which actually would have occurred if the acquisition had occurred on the first day of the periods presented, nor does the pro forma financial information purport to represent the results of operations for future periods:

Description	For the Nine-Month Period Ended September 30, 2011			For the Nine-Month Period Ended September 30, 2010
Total revenue, as reported	$	177,231		$	185,513
Pro forma revenue		180,011			192,034
Net income (loss) allocable to common shares, as reported		(35,500	)		68,653
Pro forma net income (loss) allocable to common shares		(34,705	)		70,282

These amounts have been calculated after adjusting the results of the acquired businesses to reflect the additional depreciation that would have been charged assuming the fair value adjustments to our investments in real estate had been applied from January 1, 2010 together with the consequential tax effects.

We have not yet completed the process of estimating the fair value of assets acquired and liabilities assumed. Accordingly, our preliminary estimates and the allocation of the purchase price to the assets acquired and liabilities assumed may change as we complete the process. In accordance with FASB ASC Topic 805, changes, if any, to the preliminary estimates and allocation will be reported in our financial statements retrospectively.

Dispositions:

During the nine-month period ended September 30, 2011, we sold two multi-family properties for a total purchase price of $67,550. We recorded losses on the sale of these assets of $218.

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Acquisitions

9 Months Ended

Sep. 30, 2011

Acquisitions [Abstract]

Acquisitions

NOTE 15: ACQUISITIONS

On January 20, 2011, we acquired a development stage, non-traded public REIT and subsequently changed its name to Independence Realty Trust, Inc., or Independence. We paid approximately $2.5 million for Independence and certain of its affiliated entities including the entity that serves as Independence's external advisor and its dealer manager. Independence is currently a subsidiary of RAIT.

We are the external manager of Independence and expect Independence to raise capital for investing in multi-family commercial real estate assets through a public offering of its common stock. The registration statement relating to Independence's public offering of its common stock was declared effective by the SEC on June 10, 2011. We are the sponsor of Independence's offering and we incurred expenses on Independence's behalf in connection with this offering. Our ability to be reimbursed for these expenses will depend on the terms and success of the offering. Any disclosure concerning Independence is neither an offer nor a solicitation to purchase securities issued by Independence.

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Consolidated Statements Of Comprehensive Income (Loss) (USD $) In Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2011	Sep. 30, 2010	Sep. 30, 2011	Sep. 30, 2010
Consolidated Statements Of Comprehensive Income (Loss) [Abstract]
Net income (loss)	$ (17,821)	$ 18,248	$ (25,441)	$ 78,077
Other comprehensive income (loss):
Change in fair value of interest rate hedges	(18,332)	(20,720)	(31,526)	(63,423)
Reclassification adjustments associated with unrealized losses (gains) from interest rate hedges included in net income (loss)	0	(12)	(8)	(50)
Realized (gains) losses on interest rate hedges reclassified to earnings	10,748	11,391	32,884	34,662
Change in fair value of available-for-sale securities	(12)	901	171	(4,074)
Total other comprehensive income (loss)	(7,596)	(8,440)	1,521	(32,885)
Comprehensive income (loss) before allocation to noncontrolling interests	(25,417)	9,808	(23,920)	45,192
Allocation to noncontrolling interests	59	210	176	803
Comprehensive income (loss)	$ (25,358)	$ 10,018	$ (23,744)	$ 45,995

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Subsequent Events

9 Months Ended

Sep. 30, 2011

Subsequent Events [Abstract]

Subsequent Events

NOTE 16: SUBSEQUENT EVENTS

On October 5, 2011, we entered into an exchange agreement with Taberna VIII pursuant to which we issued four senior secured notes, or the senior notes, with an aggregate principal amount equal to $100 million to Taberna VIII in exchange for a portfolio of real estate related debt securities, or the exchanged securities, held by Taberna VIII. Taberna VIII is a subsidiary of ours and, as a result, the senior secured notes will be eliminated in consolidation. The senior notes and the exchanged securities were determined to have approximately equivalent fair market value at the time of the exchange.

The senior notes were issued pursuant to an indenture agreement dated October 5, 2011 and contains customary events of default, including those relating to nonpayment of principal or interest when due and defaults based upon events of bankruptcy and insolvency. The four senior notes have the following terms:

Note Number	Principal Amount		Fixed Interest Rate			Maturity Date
1	$	25,000		6.75	%	April 30, 2017
2	$	25,000		6.85	%	October 30, 2017
3	$	25,000		7.15	%	October 30, 2018
4	$	25,000		7.25	%	April 30, 2019

Interest accrues from October 5, 2011 and will be payable quarterly in arrears on October 30, January 30, April 30 and July 30 of each year, beginning October 30, 2011. The senior notes are secured and are not convertible into equity securities of RAIT.

In October 2011, we sold four commercial real estate mortgages with an unpaid principal balance of $60,869 for gross proceeds of $63,991. As of September 30, 2011, we were holding $64,152 in restricted cash that was pending the completion of our sale of four loans in October 2011.

During October 2011, we repurchased $34,231 in aggregate principal amount of our 6.875% Convertible Senior Notes due 2027, which are redeemable at the option of the holder in April 2012, for an aggregate purchase price of $34,347. As a result of these transactions we recorded a loss on the extinguishment of debt of $777.

Subsequent to September 30, 2011, we prepaid, in full, our $43,000 12.5% Senior Secured Notes due to mature in April 2014.

On October 27, 2011, we entered into a two year repurchase agreement, or the CMBS facility, pursuant to which we may sell, and later repurchase, performing whole mortgage loans or senior interests in whole mortgage loans secured by first liens on stabilized commercial properties which meet current standards for inclusion in commercial mortgage-backed securities, or CMBS, transactions. The aggregate principal amount of the CMBS facility is $100,000 and incurs interest at LIBOR plus 250 basis points. The CMBS facility contains standard margin call provisions and financial covenants.

Subsequent to September 30, 2011, we completed the conversion of one commercial real estate loan with a carrying value of $22,797 to real estate owned properties. We are completing the process of estimating the fair value of the assets acquired.

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The Company

9 Months Ended

Sep. 30, 2011

The Company [Abstract]

The Company

NOTE 1: THE COMPANY

RAIT Financial Trust invests in and manages a portfolio of real-estate related assets, including direct ownership of real estate properties, and provides a comprehensive set of debt financing options to the real estate industry. References to "RAIT", "we", "us", and "our" refer to RAIT Financial Trust and its subsidiaries, unless the context otherwise requires. We conduct our business through our subsidiaries, RAIT Partnership, L.P. and Taberna Realty Finance Trust, or Taberna, as well as through their respective subsidiaries. RAIT is a self-managed and self-advised Maryland real estate investment trust, or REIT. Taberna is also a Maryland REIT.

We finance a substantial portion of our investments through borrowing and securitization strategies seeking to match the maturities and terms of our financings with the maturities and terms of those investments, and to mitigate interest rate risk through derivative instruments.

We are subject to significant competition in all aspects of our business. Existing industry participants and potential new entrants compete with us for the available supply of investments suitable for origination or acquisition, as well as for debt and equity capital. We compete with many third parties engaged in real estate finance and investment activities, including other REITs, specialty finance companies, savings and loan associations, banks, mortgage bankers, insurance companies, mutual funds, institutional investors, investment banking firms, lenders, governmental bodies and other entities.

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Equity

9 Months Ended

Sep. 30, 2011

Equity [Abstract]

Equity

NOTE 10: EQUITY

Preferred Shares

On January 25, 2011, our board of trustees declared a first quarter 2011 cash dividend of $0.484375 per share on our 7.75% Series A Preferred Shares, $0.5234375 per share on our 8.375% Series B Preferred Shares and $0.5546875 per share on our 8.875% Series C Preferred Shares. The dividends were paid on March 31, 2011 to holders of record on March 1, 2011 and totaled $3,414.

On May 17, 2011, our board of trustees declared a second quarter 2011 cash dividend of $0.484375 per share on our 7.75% Series A Preferred Shares, $0.5234375 per share on our 8.375% Series B Preferred Shares and $0.5546875 per share on our 8.875% Series C Preferred Shares. The dividends were paid on June 30, 2011 to holders of record on June 1, 2011 and totaled $3,414.

On July 26, 2011, our board of trustees declared a third quarter 2011 cash dividend of $0.484375 per share on our 7.75% Series A Preferred Shares, $0.5234375 per share on our 8.375% Series B Preferred Shares and $0.5546875 per share on our 8.875% Series C Preferred Shares. The dividends were paid on September 30, 2011 to holders of record on September 1, 2011 and totaled $3,407.

On October 25, 2011, our board of trustees declared a fourth quarter 2011 cash dividend of $0.484375 per share on our 7.75% Series A Preferred Shares, $0.5234375 per share on our 8.375% Series B Preferred Shares and $0.5546875 per share on our 8.875% Series C Preferred Shares. The dividends will be paid on January 3, 2012 to holders of record on December 1, 2011.

Common Shares

Dividends:

On January 10, 2011, the board of trustees declared a $0.09 dividend on our common shares to holders of record as of January 21, 2011. The dividend was paid on January 31, 2011 and totaled $3,204.

On May 17, 2011, the board of trustees declared a $0.06 dividend on our common shares to holders of record as of July 8, 2011. The dividend was paid on July 29, 2011 and totaled $2,293.

On September 12, 2011, the board of trustees declared a $0.06 dividend on our common shares to holders of record as of October 7, 2011. The dividend was paid on October 31, 2011 and totaled $2,405 and is included in other liabilities in the accompanying consolidated balance sheet.

Reverse Stock Split:

On May 17, 2011, the board of trustees authorized a 1-for-3 reverse stock split of our common shares of beneficial interest that became effective on June 30, 2011, or the effective time. At the effective time, every three common shares issued and outstanding were automatically combined into one issued and outstanding new common share. The par value of new common shares changed to $0.03 per share after the reverse stock split from the par value of common shares prior to the reverse stock split of $0.01 per share. The reverse stock split reduced the number of common shares outstanding but did not change the number of authorized common shares. The reverse stock split did not affect our preferred shares of beneficial interest. All references in the accompanying financial statements to the number of common shares and earnings per share data for all periods presented have been adjusted to reflect the reverse stock split.

Share Repurchases:

On January 25, 2011, the compensation committee of our board of trustees approved a cash payment to the board's eight non-management trustees intended to constitute a portion of their respective 2011 annual non-management trustee compensation. The cash payment was subject to terms and conditions set forth in a letter agreement, or the letter agreement, between each of the non-management trustees and RAIT. The terms and conditions included a requirement that each trustee use a portion of the cash payment to purchase RAIT's common shares in purchases that, individually and in the aggregate with all purchases made by all the other non-management trustees pursuant to their respective letter agreements, complied with Rule 10b-18 promulgated under the Securities Exchange Act of 1934, as amended. The aggregate amount required to be used by all of the non-management trustees to purchase common shares was $210 and was used to purchase 18,898 common shares, in the aggregate, in February 2011.

Equity Compensation:

During the nine-months ended September 30, 2011, 340,649 phantom unit awards were redeemed for common shares, a portion of which was withheld in order to satisfy the applicable withholding taxes. These phantom units were fully vested at the time of redemption.

Dividend Reinvestment and Share Purchase Plan (DRSPP):

We implemented an amended and restated dividend reinvestment and share purchase plan, or DRSPP, effective as of March 13, 2008, pursuant to which we registered and reserved for issuance 6,262,545 common shares. During the nine-month period ended September 30, 2011, we issued a total of 1,158,292 common shares pursuant to the DRSPP at a weighted-average price of $3.74 per share and we received $4,257 of net proceeds. As of September 30, 2011, 2,740,920 common shares, in aggregate, remain available for issuance under the DRSPP. Effective October 28, 2011, we registered and reserved for issuance an additional 7,759,080 common shares for issuance under the DRSPP so that the aggregate number of common shares available for issuance under the DRSPP was 10,500,000 common shares.

Capital on Demand™ Sales Agreement:

On August 6, 2010, we entered into a Capital on Demand™ Sales Agreement, or the COD sales agreement, with JonesTrading Institutional Services LLC, or JonesTrading, pursuant to which we may issue and sell up to 5,833,333 of our common shares from time to time through JonesTrading acting as agent and/or principal, subject to the terms and conditions of the COD sales agreement. For the nine-month period ended September 30, 2011, 2,815,528 common shares were issued pursuant to this arrangement at a weighted average price of $8.77 and we received $22,934 of proceeds. As of September 30, 2011, there are no common shares that remain available for issuance under the COD sales agreement.

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Commitments And Contingencies

9 Months Ended

Sep. 30, 2011

Commitments And Contingencies [Abstract]

Commitments And Contingencies

NOTE 14: COMMITMENTS AND CONTINGENCIES

Routine Litigation

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

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Consolidated Balance Sheets (USD $) In Thousands	Sep. 30, 2011	Dec. 31, 2010
Assets
Commercial mortgages, mezzanine loans, other loans and preferred equity interests	$ 1,107,429	$ 1,219,110
Allowance for losses	(56,126)	(69,691)
Total investments in mortgages and loans	1,051,303	1,149,419
Investments in real estate	849,232	839,192
Investments in securities and security-related receivables, at fair value	719,546	705,451
Cash and cash equivalents	29,693	27,230
Restricted cash	287,877	179,019
Accrued interest receivable	41,110	37,138
Other assets	43,851	32,840
Deferred financing costs, net of accumulated amortization of $11,010 and $9,943, respectively	22,791	19,954
Intangible assets, net of accumulated amortization of $2,197 and $1,777, respectively	2,769	3,189
Total assets	3,048,172	2,993,432
Liabilities and Equity
Indebtedness (including $114,440 and $152,494 at fair value, respectively)	1,793,250	1,838,177
Accrued interest payable	25,495	19,925
Accounts payable and accrued expenses	24,843	25,089
Derivative liabilities	194,224	184,878
Deferred taxes, borrowers' escrows and other liabilities	91,499	6,833
Total liabilities	2,129,311	2,074,902
Equity:
Common shares, $0.03 par value per share, 200,000,000 shares authorized, 40,077,148 and 35,300,190 issued and outstanding	1,205	1,060
Additional paid in capital	1,730,373	1,691,681
Accumulated other comprehensive income (loss)	(126,081)	(127,602)
Retained earnings (deficit)	(690,542)	(647,110)
Total shareholders' equity	915,022	918,096
Noncontrolling interests	3,839	434
Total equity	918,861	918,530
Total liabilities and equity	3,048,172	2,993,432
7.75% Series A Cumulative Redeemable Preferred Shares [Member]
Equity:
Preferred shares, $0.01 par value per share, 25,000,000 shares authorized	28	28
8.375% Series B Cumulative Redeemable Preferred Shares [Member]
Equity:
Preferred shares, $0.01 par value per share, 25,000,000 shares authorized	23	23
8.875% Series C Cumulative Redeemable Preferred Shares [Member]
Equity:
Preferred shares, $0.01 par value per share, 25,000,000 shares authorized	$ 16	$ 16