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 March 31, 2017 and 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 five of our industrial properties) and the two ventures described in Note 5: Indebtedness (RAIT Venture VIEs).

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 March 31, 2017, 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 March 31, 2017, we consolidate our two RAIT Venture VIEs (each of which consolidates a floating rate securitization) as we own a majority of these entities and control a majority of the significant decisions regarding the collateral in these entities, such as the approval of loan workouts.

The following tables present 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 March 31, 2017
	RAIT Securitizations		RAIT VIE Properties			RAIT Venture VIEs			Total
Assets
Investments in mortgages and loans, at amortized cost:
Commercial mortgages, mezzanine loans, other loans and preferred equity interests	$	1,018,535	$	—		$	551,719		$	1,570,254
Allowance for losses		—		—			—			0
Total investments in mortgages and loans		1,018,535		—			551,719			1,570,254
Investments in real estate
Investments in real estate		—		172,722			—			172,722
Accumulated depreciation		—		(31,543	)		—			(31,543	)
Total investments in real estate		—		141,179			—			141,179
Cash and cash equivalents		—		1,046			92			1,138
Restricted cash		6,187		1,451			31			7,669
Accrued interest receivable		53,661		—			3,575			57,236
Other assets		122		9,174			—			9,296
Intangible assets
Intangible assets		—		2,095			—			2,095
Accumulated amortization		—		(1,498	)		—			(1,498	)
Total intangible assets		—		597			—			597
Total assets	$	1,078,505	$	153,447		$	555,417		$	1,787,369
Liabilities and Equity
Indebtedness, net	$	851,729	$	203,036		$	546,858		$	1,601,623
Accrued interest payable		896		15,689			1,581			18,166
Accounts payable and accrued expenses		29		5,172			—			5,201
Derivative liabilities		—		—			—			—
Deferred taxes, borrowers’ escrows and other liabilities		—		951			1,210			2,161
Total liabilities		852,654		224,848			549,649			1,627,151
Equity:
Shareholders’ equity:
Preferred shares		—		—			—			—
Additional paid in capital		—		—			55			55
RAIT investment		26,234		40,494			7,791			74,519
Retained earnings (deficit)		199,617		(113,754	)		(2,078	)		83,785
Total shareholders’ equity		225,851		(73,260	)		5,768			158,359
Noncontrolling Interests		—		1,859			—			1,859
Total liabilities and equity	$	1,078,505	$	153,447		$	555,417		$	1,787,369

	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
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
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
Noncontrolling Interests		—		1,859			—			1,859
Total liabilities and equity	$	1,474,198	$	206,849		$	326,946		$	2,007,993

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 $472,349 of total investments in mortgage loans and $492,220 of indebtedness as of March 31, 2017 and $549,879 of total investments in mortgage loans and $510,244 of indebtedness as of December 31, 2016. 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.