NOTE 5: INVESTMENTS IN REAL ESTATE

The table below summarizes our investments in real estate:


	As of September 30, 2014					As of December 31, 2013
	Book Value			Number of Properties		Book Value			Number of Properties
Multi-family real estate properties (a)	$	1,040,808			50	$	716,708			37
Office real estate properties		330,725			14		282,371			11
Retail real estate properties		134,341			6		83,653			4
Parcels of land		50,656			10		49,199			10

Subtotal		1,556,530			80		1,131,931			62
Less: Accumulated depreciation and amortization (a)		(155,815	)				(127,745	)

Investments in real estate	$	1,400,715				$	1,004,186

(a)

As of September 30, 2014, includes 22 apartment properties owned by Independence Realty Trust, Inc., with 6,470 units and a book value of $444,050 and accumulated depreciation of $20,848. As of December 31, 2013, includes 10 apartment properties owned by Independence Realty Trust, Inc., with 2,790 units and a book value of $190,096 and accumulated depreciation of $15,775.

As of September 30, 2014, our investments in real estate of $1,400,715 were financed through $379,242 of mortgages held by third parties and $944,662 of mortgages held by our RAIT I and RAIT II CDO securitizations. As of December 31, 2013, our investments in real estate of $1,004,186 were financed through $171,223 of mortgages held by third parties and $864,689 of mortgages held by our RAIT I and RAIT II CDO securitizations. Together, along with commercial real estate loans held by RAIT I and RAIT II, these mortgages serve as collateral for the CDO notes payable issued by the RAIT I and RAIT II CDO securitizations. All intercompany balances and interest charges are eliminated in consolidation.

Acquisitions:

During the nine-month period ended September 30, 2014, we acquired 14 multi-family properties, two retail properties and three office properties with a combined purchase price of $421,879. We assumed first mortgages on some of these properties. Upon acquisition, we recorded the investment in real estate, including any related working capital and intangible assets, at fair value of $427,194 and recorded a gain on assets of $5,675. Of these acquisitions, Independence Realty Trust, Inc., or IRT, acquired 12 multi-family properties at a fair value of $255,831. We consolidate IRT as it is a VIE and we are the primary beneficiary. See Note 9 for additional disclosures pertaining to VIEs.

The following table summarizes the aggregate estimated fair value of the assets and liabilities associated with the 19 properties acquired during the nine-month period ended September 30, 2014, on the respective date of each acquisition, for the real estate accounted for under FASB ASC Topic 805.


Description	Estimated Fair Value
Assets acquired:
Investments in real estate	$	418,427
Cash and cash equivalents		308
Restricted cash		3,094
Other assets		2,590
Deferred financing costs		993
Intangible assets		8,767

Total assets acquired		434,179
Liabilities assumed:
Loans payable on real estate		127,755
Accounts payable and accrued expenses		5,480
Other liabilities		710

Total liabilities assumed		133,945
Noncontrolling interests assumed:		3,000

Estimated fair value of net assets acquired	$	297,234

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 and cash	$	297,407
Other considerations		(173	)

Total fair value of consideration transferred	$	297,234

During the nine-month period ended September 30, 2014, these investments contributed revenue of $22,042 and a net income allocable to common shares of $1,813. During the nine-month period ended September 30, 2014, we incurred $1,127 of third-party acquisition-related costs, which is included in general and administrative expense in the accompanying consolidated statements of operations.

The tables below present the revenue, net income and earnings per share effect of the acquired properties, as reported in our consolidated financial statements and on a pro forma basis as if the acquisitions occurred on January 1, 2013. 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 Three-Month Period Ended September 30, 2014			For the Three-Month Period Ended September 30, 2013
Total revenue of real estate properties acquired, as reported	$	10,039		$	0
Pro forma rental income		45,347			42,260
Net income (loss) allocable to common shares of real estate properties acquired, as reported		846			0
Pro forma net income (loss) allocable to common shares		(22,393	)		(14,912	)
Earnings (loss) per share attributable to common shareholders of real estate properties acquired
Basic and diluted—as reported		0.01			0.00
Basic and diluted—as pro forma		(0.27	)		(0.21	)


Description	For the Nine-Month Period Ended September 30, 2014			For the Nine-Month Period Ended September 30, 2013
Total revenue of real estate properties acquired, as reported	$	22,042		$	0
Pro forma rental income		133,861			122,776
Net income (loss) allocable to common shares of real estate properties acquired, as reported		1,813			0
Pro forma net income (loss) allocable to common shares		(59,458	)		(166,797	)
Earnings (loss) per share attributable to common shareholders of real estate properties acquired
Basic and diluted—as reported		0.02			0.00
Basic and diluted—as pro forma		(0.73	)		(2.50	)

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. During the nine-month period ended September 30, 2014, we have not recorded any adjustments for prior period real estate acquisitions.

Dispositions:

During the nine-month period ended September 30, 2014, we disposed of one multi-family real estate property for a total sale price of $4,250. We recorded a loss on the sale of this asset of $2,526, of which $319 is included in the accompanying consolidated statements of operations during the nine-month period ended September 30, 2014.