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. We evaluated our investments and determined that, as of December 31, 2016, our consolidated VIEs were: RAIT I, RAIT II, our floating rate securitizations, RAIT VIE Properties (Willow Grove, Cherry Hill, South Terrace, McDowell, and our ten industrial properties) and the venture described in Note 5: Indebtedness (RAIT Venture VIE). As of 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. As of October 5, 2016, we deconsolidated IRT as further discussed in Note 9: Discontinued Operations.

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. As of December 31, 2016, we consolidate the VIE properties as we own a majority of these entities and control the significant capital and operating decisions regarding the properties. As of December 31, 2016, we consolidate RAIT 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. Certain amounts included in the tables below are eliminated upon consolidation with our other subsidiaries that maintain investments in the debt or equity securities issued by these entities.

	As of December 31, 2016
	RAIT Securitizations		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	$	1,409,758	$	—		$	324,709		$	1,734,467
Allowance for losses		—		—			—			—
Total investments in mortgages and loans		1,409,758		—			324,709			1,734,467
Investments in real estate
Investments in real estate		—		223,722			—			223,722
Accumulated depreciation		—		(31,652	)		—			(31,652	)
Total investments in real estate		—		192,070			—			192,070
Cash and cash equivalents		—		2,145			1			2,146
Restricted cash		6,986		1,167			723			8,876
Accrued interest receivable		56,974		—			1,513			58,487
Other assets		480		9,591			—			10,071
Intangible assets
Intangible assets		—		5,616			—			5,616
Accumulated amortization		—		(3,740	)		—			(3,740	)
Total intangible assets		—		1,876			—			1,876
Assets of discontinued operations		—		—			—			—
Total assets	$	1,474,198	$	206,849		$	326,946		$	2,007,993
Liabilities and Equity
Indebtedness, net	$	1,244,507	$	230,510		$	323,485		$	1,798,502
Accrued interest payable		1,903		14,306			854			17,063
Accounts payable and accrued expenses		19		5,443			1			5,463
Derivative liabilities		—		—			—			—
Deferred taxes, borrowers’ escrows and other liabilities		—		2,051			920			2,971
Liabilities of discontinued operations		—		—			—			—
Total liabilities		1,246,429		252,310			325,260			1,823,999
Equity:
Shareholders’ equity:
Accumulated other comprehensive income (loss)		—		—			—			—
RAIT investment		41,790		40,962			2,885			85,637
Retained earnings (deficit)		185,979		(88,282	)		(1,199	)		96,498
Total shareholders’ equity		227,769		(47,320	)		1,686			182,135
Noncontroling Interests		—		1,859			—			1,859
Total liabilities and equity	$	1,474,198	$	206,849		$	326,946		$	2,007,993

	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		—			—		278,774			278,774
Accumulated depreciation		—			—		(26,398	)		(26,398	)
Total investments in real estate		—			—		252,376			252,376
Cash and cash equivalents		—			—		1,589			1,589
Restricted cash		14,944			—		2,859			17,803
Accrued interest receivable		77,130			—		—			77,130
Other assets		479			—		13,740			14,219
Intangible assets
Intangible assets		—			—		5,245			5,245
Accumulated amortization		—			—		(1,446	)		(1,446	)
Total intangible assets		—			—		3,799			3,799
Assets of discontinued operations		—			1,383,188		—			1,383,188
Total assets	$	2,334,969		$	1,383,188	$	274,363		$	3,992,520
Liabilities and Equity
Indebtedness, net	$	2,058,739		$	—	$	273,766		$	2,332,505
Accrued interest payable		2,207			—		13,997			16,204
Accounts payable and accrued expenses		8			—		6,000			6,008
Derivative liabilities		4,672			—		—			4,672
Deferred taxes, borrowers’ escrows and other liabilities		176			—		3,842			4,018
Liabilities of discontinued operations		—			952,406		—			952,406
Total liabilities		2,065,802			952,406		297,605			3,315,813
Equity:
Shareholders’ equity:
Accumulated other comprehensive income (loss)		(4,691	)		—		—			(4,691	)
RAIT investment		118,174			54,389		35,792			208,355
Retained earnings (deficit)		155,684			—		(59,454	)		96,230
Total shareholders’ equity		269,167			54,389		(23,662	)		299,894
Noncontroling Interests		—			376,393		420			376,813
Total liabilities and equity	$	2,334,969		$	1,383,188	$	274,363		$	3,992,520

The assets of the VIEs can only be used to settle obligations of the VIEs and are not available to our creditors. The amounts that eliminate in consolidation include $549,879 of total investments in mortgage loans and $510,244 of indebtedness as of December 31, 2016 and $813,455 of total investments in mortgage loans, $569,833 of indebtedness and $38,075 of liabilities of discontinued operations 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.