NOTE 5: 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 March 31, 2016:

Description	Unpaid Principal Balance		Unamortized Discount and Debt Issuance Costs			Carrying Amount		Weighted- Average Interest Rate			Contractual Maturity
Recourse indebtedness:
7.0% convertible senior notes (1)	$	30,048	$	(1,044	)	$	29,004		7.0	%		Apr. 2031
4.0% convertible senior notes (2)		141,750		(7,987	)		133,763		4.0	%		Oct. 2033
7.625% senior notes		60,000		(1,986	)		58,014		7.6	%		Apr. 2024
7.125% senior notes		71,905		(2,009	)		69,896		7.1	%		Aug. 2019
Senior secured notes		68,000		(6,153	)		61,847		7.0	%		Apr. 2017 to Apr. 2019
Junior subordinated notes, at fair value (3)		18,671		(8,886	)		9,785		4.6	%		Mar. 2035
Junior subordinated notes, at amortized cost		25,100		(213	)		24,887		3.1	%		Apr. 2037
CMBS facilities		122,801		(531	)		122,270		2.5	%		Jul. 2016 to Jan 2018
Total recourse indebtedness		538,275		(28,809	)		509,466		5.0	%
Non-recourse indebtedness:
Secured credit facilities (4)		324,977		(4,122	)		320,855		2.9	%		September 2018
Term Loans (5)		90,216		(939	)		89,277		5.4	%		September 2016
CDO notes payable, at amortized cost (6)(7)		917,725		(12,495	)		905,230		1.2	%		2045 to 2046
CMBS securitizations (8)		666,947		(6,808	)		660,139		2.6	%		May 2031 to Dec. 2031
Loans payable on real estate (9)		761,767		(4,099	)		757,668		4.4	%		June 2016 to Apr. 2026
Total non-recourse indebtedness		2,761,632		(28,463	)		2,733,169		2.8	%
Other indebtedness (10)		24,321		274			24,595		—				—
Total indebtedness	$	3,324,228	$	(56,998	)	$	3,267,230		3.1	%

(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 4.0% convertible senior notes are redeemable at par, at the option of the holder, in October 2018, October 2023, and October 2028.

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

(4) Floating rate at 245 basis points over 1-month LIBOR. As of March 31, 2016, 1-month LIBOR was 0.43725%. Interest only payments are due monthly.

(5)	Floating rate at 500 basis points over 1-month LIBOR. As of March 31, 2016, 1-month LIBOR was 0.43725%. Interest only payments are due monthly.

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

(7)

Collateralized by $1,358,687 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.

(8)

Excludes the RAIT FL2 junior notes, RAIT FL3 junior notes, RAIT FL4 junior notes and RAIT FL5 junior notes purchased by us which are eliminated in consolidation. Collateralized by $855,555 principal amount of commercial mortgages loans and participation 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.

(9)	Includes $495,253 of unpaid principal balance and $492,129 of carrying amount, respectively, of third party mortgage indebtedness that encumbers properties owned by IRT. The weighted-average interest rate is 3.8% and has a range of maturity dates from January 2021 to May 2025.

(10)

Represents a 40% interest issued to an unaffiliated third party in a venture to which we contributed the junior notes and equity of a floating rate securitization. We retained a 60% interest in this venture, and, as a result of our controlling financial interest, we consolidated the venture. We received $24,796 of proceeds as a result of issuing this 40% interest and incurred $201 of costs with third parties. This 40% interest has no stated maturity date and does not provide for its mandatory redemption or any required return or interest payment. The venture interests allocate the distributions on such junior notes and equity when made between the parties to the venture.

The following table summarizes our total recourse and non-recourse indebtedness as of December 31, 2015:

Description	Unpaid Principal Balance		Unamortized Discount and Debt Issuance Costs			Carrying Amount		Weighted- Average Interest Rate			Contractual Maturity
Recourse indebtedness:
7.0% convertible senior notes (1)	$	30,048	$	(1,180	)	$	28,868		7.0	%	Apr. 2031
4.0% convertible senior notes (2)		141,750		(8,711	)		133,039		4.0	%	Oct. 2033
7.625% senior notes		60,000		(2,048	)		57,952		7.6	%	Apr. 2024
7.125% senior notes		71,905		(2,156	)		69,749		7.1	%	Aug. 2019
Senior secured notes		70,000		(6,955	)		63,045		7.0	%	Apr. 2017 to Apr. 2019
Junior subordinated notes, at fair value (3)		18,671		(8,167	)		10,504		4.3	%	Mar. 2035
Junior subordinated notes, at amortized cost		25,100		(216	)		24,884		2.7	%	Apr. 2037
CMBS facilities		97,067		(344	)		96,723		2.4	%	Jul. 2016 to Jan. 2018
Total recourse indebtedness		514,541		(29,777	)		484,764		5.1	%
Non-recourse indebtedness:
Secured credit facilities (4)		271,500		(4,345	)		267,155		2.9	%	Sep. 2018
Term Loans (5)		120,000		(1,582	)		118,418		5.4	%	Sept. 2016
CDO notes payable, at amortized cost (6)(7)		950,981		(13,412	)		937,569		0.9	%	Jun. 2045 to Nov. 2046
CMBS securitizations (8)		717,255		(8,745	)		708,510		2.4	%	May 2031 to Dec. 2031
Loans payable on real estate (9)		815,746		(4,080	)		811,666		4.5	%	Apr. 2016 to Apr. 2026
Total non-recourse indebtedness		2,875,482		(32,164	)		2,843,318		2.7	%
Total indebtedness	$	3,390,023	$	(61,941	)	$	3,328,082		3.0	%

(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 4.0% convertible senior notes are redeemable at par, at the option of the holder, in October 2018, October 2023, and October 2028.

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

(4)	Floating rate at 245 basis points over 1-month LIBOR. As of December 31, 2015, 1-month LIBOR was 0.4295%. Interest only payments are due monthly.

(5)	Floating rate at 500 basis points over 1-month LIBOR. As of December 31, 2015, 1-month LIBOR was 0.4295%. Interest only payments are due monthly.

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

(7)

Collateralized by $1,388,194 principal amount of commercial mortgages, mezzanine loans, other loans and preferred equity interests, $815,745 of which eliminates in consolidation. These obligations were issued by separate legal entities and consequently the assets of the special purpose entities that collateralize these obligations are not available to our creditors.

(8)

Excludes the RAIT FL2 junior notes, RAIT FL3 junior notes, RAIT FL4 junior notes and RAIT FL5 junior notes purchased by us which are eliminated in consolidation. Collateralized by $885,055 principal amount of commercial mortgage loans and participation 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.

(9)	Includes $545,956 of unpaid principal balance and $543,080 of carrying amount of third party mortgage indebtedness that encumbers properties owned by IRT. The weighted-average interest rate is 3.8% and has a range of maturity dates from April 2016 to May 2025.

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 (e.g., 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 three months ended March 31, 2016 is as follows:

Recourse Indebtedness

7.0% convertible senior notes. The 7.0% convertible senior notes are convertible at the option of the holder at a current conversion rate of 179.4009 common shares per $1 principal amount of 7.0% convertible senior notes (equivalent to a current conversion price of $5.57 per common share).

On April 1, 2016, we redeemed $29,177 of the 7.0% convertible senior notes at a redemption price equal to the principal amount plus accrued and unpaid interest. After this redemption, $871 of the 7.0% convertible notes remain outstanding.

4.0% convertible senior notes. The 4.0% convertible senior notes are convertible at the option of the holder at a current conversion rate of 108.5803 common shares per $1 principal amount of 4.0% convertible senior notes (equivalent to a current conversion price of $9.21 per common share).

7.625% senior notes. No activity other than recurring interest during the current period.

7.125% senior notes. No activity other than recurring interest during the current period.

Senior secured notes. During the three months ended March 31, 2016, we prepaid $2,000 of the senior secured notes. As of March 31, 2016 we have $68,000 of outstanding senior secured notes.

Junior subordinated notes, at fair value. At issuance, we elected to record the current $18,671 junior subordinated note at fair value under FASB ASC Topic 825, with all subsequent changes in fair value recorded in earnings. The fair value, or carrying amount, of this indebtedness was $9,785 as of March 31, 2016

Junior subordinated notes, at amortized cost. No activity other than recurring interest during the current period.

CMBS facilities. As of March 31, 2016, we had $5,475 of outstanding borrowings under the amended and restated master repurchase agreement, or the Amended MRA. The Amended MRA has a capacity of $200,000 with a limit of $100,000 for floating rate loans. As of March 31, 2016, we were in compliance with all financial covenants contained in the Amended MRA.

As of March 31, 2016, we had $35,496 of outstanding borrowings under the $150,000 CMBS facility. As of March 31, 2016, we were in compliance with all financial covenants contained in the $150,000 CMBS facility.

As of March 31, 2016, we had $40,179 of outstanding borrowings under the $75,000 commercial mortgage facility. As of March 31, 2016, we were in compliance with all financial covenants contained in the $75,000 commercial mortgage facility.

As of March 31, 2016, we had $26,131 of outstanding borrowings under the $150,000 commercial mortgage facility. As of March 31, 2016, we were in compliance with all financial covenants contained in the $150,000 commercial mortgage facility.

As of March 31, 2016, we had $15,520 of outstanding borrowings under the $150,000 commercial mortgage facility. As of March 31, 2016, we were in compliance with all financial covenants contained in the $150,000 commercial mortgage facility.

Non-Recourse Indebtedness

Secured credit facilities. On September 17, 2015, IROP entered into a credit agreement with respect to a $325,000 senior secured credit facility, or the KeyBank senior facility, which will mature on September 17, 2018. The KeyBank senior facility is available for additional loans, may be increased to $450,000 and at the option of IROP may be extended for two additional 12-month periods under certain circumstances. At March 31, 2016, amounts outstanding under the KeyBank secured facility bear interest at 245 basis points over 1-month LIBOR. As of March 31, 2016, there was $23 of availability under the revolver.

Term loans. On September 17, 2015, IROP entered into a credit agreement with respect to a $120,000 senior interim term loan facility, or the KeyBank interim facility, which will mature on September 16, 2016. The KeyBank interim facility may be extended at the option of IROP for an additional six months under certain circumstances. The KeyBank interim facility requires monthly payments of interest only. IROP must apply 100% of all net proceeds from equity issuances, sales of assets, or refinancings of assets towards repaying the KeyBank interim facility. At March 31, 2016, the KeyBank interim facility bears interest at 500 basis points over 1-month LIBOR.

In April of 2016, IROP repaid $11,600 of the KeyBank interim facility subsequent to a property disposition.

In May of 2016, IROP repaid $18,400 of the KeyBank interim facility subsequent to a property disposition.

CDO notes payable, at amortized cost. CDO notes payable at amortized cost represent notes issued by consolidated CDO securitizations 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 RAIT I and RAIT II are meeting all of their over collateralization, or OC, and interest coverage, or IC, trigger tests as of March 31, 2016.

CMBS securitizations. As of March 31, 2016, our subsidiary, RAIT 2014-FL2 Trust, or RAIT FL2, had $134,725 of total collateral at par value, none of which is defaulted. RAIT FL2 had classes of investment grade senior notes with an aggregate principal balance outstanding of approximately $94,537 to investors. We currently own the unrated classes of junior notes, including a class with an aggregate principal balance of $40,188, and the equity, or the retained interests, of RAIT FL2. RAIT FL2 does not have OC triggers or IC triggers.

As of March 31, 2016, our subsidiary, RAIT 2014-FL3 Trust, or RAIT FL3, had $168,278 of total collateral at par value, none of which is defaulted. RAIT FL3 had classes of investment grade senior notes with an aggregate principal balance outstanding of approximately $130,892 to investors. We currently own the unrated classes of junior notes, including a class with an aggregate principal balance of $37,386, and the equity, or the retained interests, of RAIT FL3. RAIT FL3 does not have OC triggers or IC triggers.

As of March 31, 2016, our subsidiary, RAIT 2015-FL4 Trust, or RAIT FL4, had $219,284 of total collateral at par value, none of which is defaulted. RAIT FL4 had classes of investment grade senior notes with an aggregate principal balance outstanding of approximately $177,894 to investors. We currently own the unrated classes of junior notes, including a class with an aggregate principal balance of $41,390, and the equity, or the retained interests, of RAIT FL4. RAIT FL4 does not have OC triggers or IC triggers.

As of March 31, 2016, our subsidiary, RAIT 2015-FL5 Trust, or RAIT FL5, has $347,446 of total collateral at par value, none of which is defaulted. RAIT FL5 had classes of investment grade senior notes with an aggregate principal balance outstanding of approximately $263,624 to investors. Upon closing we retained $23,019 of investment grade notes and all of the unrated classes of junior notes and equity. In February 2016, we contributed the unrated classes of junior notes and equity of RAIT FL5 to a venture. We retained a 60% interest in the venture, and, as a result of our control, we consolidate the venture. We received approximately $24.8 million of proceeds as a result of this contribution. RAIT FL5 does not have OC triggers or IC triggers. In April 2016, we sold the $23,019 of investment grade notes.

Loans payable on real estate. As of March 30, 2016 and December 31, 2015, we had $761,767 and $815,746, respectively, of other indebtedness outstanding relating to loans payable on consolidated real estate. These loans are secured by specific consolidated real estate and commercial loans included in our consolidated balance sheets.

Maturity of Indebtedness

Generally, the majority of our indebtedness is payable in full upon the maturity or termination date of the underlying indebtedness. The following table displays the aggregate contractual maturities of our indebtedness on or before December 31 by year:

	Recourse indebtedness		Non-recourse indebtedness
2016	$	82,622	$	182,762
2017		34,000		18,470
2018		57,179		370,299
2019		88,905		5,347
2020		-		43,309
Thereafter (1)		275,569		2,141,445
Total	$	538,275	$	2,761,632

(1)

Includes $30,048 of our 7.0% convertible senior notes which are redeemable at par at the option of the holder in April 2016, April 2021, and April 2026. Includes $141,750 of our 4.0% convertible senior notes which are redeemable at par at the option of the holder in October 2018, October 2023, and October 2028.