NOTE 8: VARIABLE INTEREST ENTITIES

The determination of when 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. On January 1, 2016, we adopted a new accounting standard related to consolidation. Refer to NOTE 2: Summary of Significant Accounting Policies for further information. We evaluated our investments and determined that, as of June 30, 2016 and December 31, 2015, our consolidated VIEs were: RAIT I, RAIT II, our floating rate securitizations, IRT, and RAIT VIE Properties (Willow Grove, Cherry Hill, South Terrace, Cole’s Crossing, McDowell, and our ten industrial properties). Previously, we had not disclosed our floating rate securitizations as VIEs and have corrected the prior period disclosure. Also, as of June 30, 2016, the venture described in Note 5: Indebtedness was determined to be a VIE (RAIT Venture VIE).

We consolidate the securitizations that we sponsor as we have retained interests in these entities and control the significant decisions regarding the collateral in these entities, such as the approval of loan workouts. We consolidate IRT as we own 15.4% of IRT’s common stock and control the significant decisions of IRT through our advisory agreement. We consolidate the VIE properties as we own a majority of these entities and control the significant capital and operating decisions regarding the properties. We consolidate the Venture VIE (which consolidates a floating rate securitization) as we own a majority of this entity and control a majority of the significant decisions regarding the collateral in this entity, such as the approval of loan workouts.

The following table presents the assets and liabilities of our consolidated VIEs as of each respective date.

	As of June 30, 2016
	RAIT Securitizations			IRT			RAIT VIE Properties			RAIT Venture VIE		Total
Assets
Investments in mortgages and loans, at amortized cost:
Commercial mortgages, mezzanine loans, other loans and preferred equity interests	$	1,618,072		$	—		$	—		$	345,801	$	1,963,873
Allowance for losses		—			—			—			—		0
Total investments in mortgages and loans		1,618,072			—			—			345,801		1,963,873
Investments in real estate
Investments in real estate		—			1,314,115			276,396			—		1,590,511
Accumulated depreciation		—			(45,059	)		(31,194	)		—		(76,253	)
Total investments in real estate		—			1,269,056			245,202			—		1,514,258
Cash and cash equivalents		—			28,051			2,218			2		30,271
Restricted cash		11,891			6,779			4,582			5		23,257
Accrued interest receivable		71,481			—			—			1,443		72,924
Other assets		498			3,985			13,594			—		18,077
Intangible assets
Intangible assets		—			15,287			6,801			—		22,088
Accumulated amortization		—			(15,287	)		(3,351	)		—		(18,638	)
Total intangible assets		—			—			3,450			—		3,450
Total assets	$	1,701,942		$	1,307,871		$	269,046		$	347,251	$	3,626,110
Liabilities and Equity
Indebtedness, net	$	1,387,751		$	880,287		$	273,140		$	307,287	$	2,848,465
Accrued interest payable		1,367			701			17,953			662		20,683
Accounts payable and accrued expenses		2			17,807			6,031			—		23,840
Derivative liabilities		787			1,163			—			—		1,950
Deferred taxes, borrowers’ escrows and other liabilities		—			5,964			3,150			—		9,114
Total liabilities		1,389,907			905,922			300,274			307,949		2,904,052
Equity:
Shareholders’ equity:
Accumulated other comprehensive income (loss)		(789	)		(1,195	)		—			—		(1,984	)
RAIT investment		151,340			58,194			38,972			38,616		287,122
Retained earnings (deficit)		161,484			(2,600	)		(68,464	)		686		91,106
Total shareholders’ equity		312,035			54,399			(29,492	)		39,302		376,244
Noncontrolling Interests		—			347,550			(1,736	)		—		345,814
Total liabilities and equity	$	1,701,942		$	1,307,871		$	269,046		$	347,251	$	3,626,110

	As of December 31, 2015
	RAIT Securitizations			IRT			RAIT VIE Properties			Total
Assets
Investments in mortgages and loans, at amortized cost:
Commercial mortgages, mezzanine loans, other loans and preferred equity interests	$	2,242,416		$	—		$	—		$	2,242,416
Allowance for losses		—			—			—			—
Total investments in mortgages and loans		2,242,416			—			—			2,242,416
Investments in real estate
Investments in real estate		—			1,372,015			278,774			1,650,789
Accumulated depreciation		—			(39,638	)		(26,398	)		(66,036	)
Total investments in real estate		—			1,332,377			252,376			1,584,753
Cash and cash equivalents		—			38,301			1,589			39,890
Restricted cash		14,944			5,413			2,859			23,216
Accrued interest receivable		77,130			—			—			77,130
Other assets		479			3,362			13,740			17,581
Intangible assets
Intangible assets		—			15,287			5,245			20,532
Accumulated amortization		—			(11,551	)		(1,446	)		(12,997	)
Total intangible assets		—			3,736			3,799			7,535
Total assets	$	2,334,969		$	1,383,189		$	274,363		$	3,992,521
Liabilities and Equity
Indebtedness, net	$	2,090,091		$	966,611		$	273,766		$	3,330,468
Accrued interest payable		2,207			1,239			13,997			17,443
Accounts payable and accrued expenses		8			19,304			6,000			25,312
Derivative liabilities		4,672			—			—			4,672
Deferred taxes, borrowers’ escrows and other liabilities		176			6,004			3,842			10,022
Total liabilities		2,097,154			993,158			297,605			3,387,917
Equity:
Shareholders’ equity:
Accumulated other comprehensive income (loss)		(4,691	)		(8	)		—			(4,699	)
RAIT investment		86,822			68,273			35,792			190,887
Retained earnings (deficit)		155,684			(14,499	)		(59,454	)		81,731
Total shareholders’ equity		237,815			53,766			(23,662	)		267,919
Noncontrolling Interests		—			336,265			420			336,685
Total liabilities and equity	$	2,334,969		$	1,383,189		$	274,363		$	3,992,521

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 our other subsidiaries that maintain investments in the debt or equity securities issued by these entities. The amounts that eliminate in consolidation include $691,337 of total investments in mortgage loans and $157,395 of indebtedness as of June 30, 2016 and $813,455 of total investments in mortgage loans and $157,395 of indebtedness as of December 31, 2015. We do not have any contractual obligation to provide the VIEs listed above with any financial support. We have not and do not intend to provide financial support to these VIEs that we were not previously contractually required to provide.