RAIT Financial Trust Announces Fourth Quarter and Fiscal 2015 Financial Results

RAIT Financial Trust (“RAIT”) (NYSE:RAS) today announced fourth quarter and fiscal 2015 financial results. All per share results are reported on a diluted basis.

Highlights

• Cash Available for Distribution (“CAD”) per share of $0.28 for the quarter ended December 31, 2015 and $1.11 for the year ended December 31, 2015. CAD per share, without real estate gains, of $0.19 for the quarter ended December 31, 2015 and $0.78 for the year ended December 31, 2015.
• Earnings per share of $0.02 for the quarter ended December 31, 2015 and $0.08 for the year ended December 31, 2015.
• Investments in mortgages and loans, at cost, increased 16.5% to $1.62 billion at December 31, 2015 from $1.39 billion at December 31, 2014.
• RAIT originated $321.8 million of loans during the quarter ended December 31, 2015 and $996.9 million of loans for the year ended December 31, 2015.
• RAIT paid a fourth quarter dividend of $0.09 per common share on January 29, 2016.

Scott Schaeffer, RAIT’s Chairman and CEO, said, “Our platform generated just under $1 billion of loan originations in 2015 including more than $600 million of bridge loans. We completed two floating-rate securitizations and sold $425 million of fixed-rate conduit loans during the year. We continue to execute on our capital recycling strategy through property sales given the volatile state of the capital and securitization markets.”

Commercial Real Estate (“CRE”) Business

• RAIT originated $321.8 million of loans during the quarter ended December 31, 2015 consisting of $71.9 million of fixed-rate conduit loans and $249.9 million of floating-rate bridge loans. RAIT originated $996.9 million of loans during the year ended December 31, 2015 consisting of $384.1 million of fixed-rate conduit loans, $607.8 million of floating-rate bridge loans and a $5.0 million mezzanine loan.
• RAIT sold $85.4 million of conduit loans during the quarter ended December 31, 2015 which generated fee income of $1.1 million. RAIT sold $425.0 million of conduit loans during the year ended December 31, 2015 which generated fee income of $7.2 million.
• In December, RAIT closed its fifth non-recourse, floating-rate CMBS transaction totaling $347.4 million collateralized by floating rate commercial real estate first lien mortgage loans and pari passu participation interests in such mortgage loans. The transaction involved the sale by a RAIT subsidiary of investment grade notes totaling approximately $263.6 million with a weighted average cost of LIBOR plus 2.62%. RAIT affiliates retained certain investment grade notes and all of the below investment grade and un-rated subordinated interests totaling approximately $83.8 million.
• CRE loan repayments were $121.6 million for the quarter ended December 31, 2015 and $291.2 million during the year ended December 31, 2015

CRE Property Portfolio & Property Sales

• As of December 31, 2015, RAIT’s investments in real estate were $2.5 billion which includes $1.4 billion of multi-family properties owned by Independence Realty Trust, Inc. (“IRT”) (NYSE MKT: IRT). IRT is externally advised by RAIT and is a consolidated RAIT entity. IRT is a REIT focused on owning multifamily properties. At December 31, 2015, RAIT owned 15.5% of IRT’s outstanding common stock.
• During the quarter ended December 31, 2015, RAIT sold three properties, consisting of two apartment communities and an office property, for $52.9 million and generated net proceeds of approximately $8.4 million after costs and full repayment of the underlying debt. IRT sold one apartment community for $33.6 million and generated net proceeds of approximately $14.2 million after costs and full repayment of the underlying debt. During the year ended December 31, 2015, RAIT sold eight properties, six apartment communities and one office property, and one parcel of land for $141.4 million and generated net proceeds of approximately $27.5 million after costs and full repayment of the underlying debt.
• During the three-months ended December 31, 2015, RAIT converted two loans secured by ten industrial properties and by one office property, respectively, into ownership of those properties. Those properties had an aggregate carrying value of $73.1 million.
• RAIT reported a $0.9 million asset impairment for the quarter ended December 31, 2015 on an office property in Denver, Colorado and a parcel of land in Daytona Beach, FL. Both of these properties are currently under contract to be sold.
• On September 17, 2015, IRT completed the acquisition of Trade Street Residential, Inc. adding nineteen high-quality properties with 4,989 units to its portfolio. RAIT expects the acquisition to benefit RAIT through RAIT’s ownership of IRT common stock and increased fees paid to RAIT by IRT.

Asset & Property Management

• Total assets under management increased 33.3% to $6.0 billion at December 31, 2015 from $4.5 billion at December 31, 2014.

• RAIT’s property management companies managed 19,639 apartment units and 22.8 million square feet of office and retail space at December 31, 2015.
• RAIT generated $9.3 million in asset and property management fees and incentive fees through its external management of IRT during the year ended December 31, 2015.
• RAIT generated $12.8 million of property management and leasing fees primarily through its retail property manager subsidiary and through services provided by its multi-family property manager subsidiary to unaffiliated properties during the year ended December 31, 2015.

Dividends

• On December 7, 2015, RAIT’s Board of Trustees (the “Board”) declared a fourth quarter 2015 cash dividend on RAIT’s common shares of $0.09 per common share. The dividend was paid on January 29, 2016 to holders of record on January 8, 2016.
• On November 4, 2015, the Board declared a fourth quarter 2015 cash dividend of $0.484375 per share on RAIT’s 7.75% Series A Cumulative Redeemable Preferred Shares, $0.5234375 per share on RAIT’s 8.375% Series B Cumulative Redeemable Preferred Shares and $0.5546875 per share on RAIT’s 8.875% Series C Cumulative Redeemable Preferred Shares. The dividends were paid on December 31, 2015 to holders of record on December 1, 2015.

2016 CAD Guidance

RAIT estimates that its 2016 full year CAD per diluted share will be in a range of $0.85-$0.95 per common share. 2016 full year CAD guidance includes $0.35 per share of gains on property sales. A reconciliation of RAIT's projected net income (loss) allocable to common shares to its projected CAD, a non-GAAP financial measure, is included below. The assumptions underlying this estimate are also included below.

Selected Financial Information

See Schedule I to this Release for selected financial information for RAIT.

Non-GAAP Financial Measures and Definitions

RAIT discloses the following non-GAAP financial measures in this release: funds from operations (“FFO”), CAD and net operating income (“NOI”). A reconciliation of RAIT’s reported net income (loss) allocable to common shares to its FFO and CAD is included as Schedule IV to this release. A reconciliation of RAIT’s NOI to its reported net income (loss) is included as Schedule V to this release. See Schedule VI to this release for management’s respective definitions and rationales for the usefulness of each of these non-GAAP financial measures and other definitions used in this release.

Supplemental Information

RAIT produces supplemental information that includes details regarding the performance of the portfolio, financial information, non-GAAP financial measures and other useful information for investors. The supplemental also contains deconsolidating financial information. The supplemental information is available via the Company's website, www.rait.com, through the "Investor Relations" section.

Conference Call

All interested parties can listen to the live conference call webcast at 9:00 AM ET on Thursday, February 25, 2016 from the home page of the RAIT Financial Trust website at www.rait.com or by dialing 877.787.4169, access code 38442508. For those who are not available to listen to the live call, the replay will be available shortly following the live call on RAIT’s website and telephonically until Thursday, March 3, 2016, by dialing 855.859.2056, access code 38442508.

About RAIT Financial Trust

RAIT Financial Trust is an internally-managed real estate investment trust that provides debt financing options to owners of commercial real estate and invests directly into commercial real estate properties located throughout the United States. In addition, RAIT is an asset and property manager of real estate-related assets. For more information, please visit www.rait.com or call Investor Relations at 215.243.9000.

Forward-Looking Statements

This press release may contain certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Such forward-looking statements can generally be identified by our use of forward-looking terminology such as “guidance,” "may," “plan”, "will," "should," "expect," "intend," "anticipate," "estimate," "believe," “seek,” “opportunities” or other similar words or terms. Because such statements include risks, uncertainties and contingencies, actual results may differ materially from the expectations, intentions, beliefs, plans or predictions of the future expressed or implied by such forward-looking statements. These risks, uncertainties and contingencies include, but are not limited to: overall conditions in commercial real estate and the economy generally; whether the timing and amount of investments, repayments, any capital raised and our use of leverage will vary from those underlying our assumptions; changes in the expected yield of our investments; changes in financial markets and interest rates, or to the business or financial condition of RAIT or its business; whether RAIT will be able to originate loans in the amounts and generating the returns assumed; the availability of financing and capital, including through the capital and securitization markets; whether RAIT will be able to complete sales of RAIT owned properties, whether identified for sale or under contract, in the amounts and generating the gains assumed; and those disclosed in RAIT’s filings with the Securities and Exchange Commission. RAIT undertakes no obligation to update these forward-looking statements to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events, except as may be required by law.

(a) Includes Independence Realty Trust.

Assets Under Management

Assets under management, or AUM, is an operating measure representing the total assets that we own or are managing for third parties. While not all AUM generates fee income, it is an important operating measure to gauge our asset growth, volume of originations, size and scale of our operations and our performance. AUM includes our total investment portfolio, assets associated with unconsolidated securitizations for which we derive asset management fees and real estate properties we manage on behalf of third parties.

Cash Available for Distribution

Cash available for distribution, or CAD, is a non-GAAP financial measure. We believe that CAD provides investors and management with a meaningful indicator of operating performance. Management also uses CAD, among other measures, to evaluate profitability and our board of trustees considers CAD in determining our quarterly cash distributions. We also believe that CAD is useful because it adjusts for a variety of noncash items (such as depreciation and amortization, equity-based compensation, realized non-cash gain (loss) on assets, provision for loan losses and non-cash interest income and expense items). Furthermore, CAD removes the effect of our previous consolidation of the legacy securitizations, T8 and T9, which we deconsolidated as part of our exit of the Taberna business in December 2014.

We calculate CAD by subtracting from or adding to net income (loss) attributable to common shareholders the following items: depreciation and amortization items including depreciation and amortization, straight-line rental income or expense, amortization of in place leases, amortization of deferred financing costs, amortization of discount on financings and equity-based compensation; changes in the fair value of our financial instruments; realized non-cash gain (loss) on assets and other; provision for loan losses; impairment on depreciable property; acquisition gains or losses and transaction costs; certain fee income eliminated in consolidation that is attributable to third parties; and one-time events pursuant to changes in U.S. GAAP and certain other non-routine items.

CAD should not be considered as an alternative to net income (loss) or cash generated from operating activities, determined in accordance with U.S. GAAP, as an indicator of operating performance. For example, CAD does not adjust for the accrual of income and expenses that may not be received or paid in cash during the associated periods. Please refer to our consolidated financial statements prepared in accordance with U.S. GAAP in Part I, Item 1. In addition, our methodology for calculating CAD may differ from the methodologies used by other comparable companies, including other REITs, when calculating the same or similar supplemental financial measures and may not be comparable with these companies.

Funds from Operations

We believe that funds from operations, or FFO, which is a non-GAAP measure, is an additional appropriate measure of the operating performance of a REIT. We compute FFO in accordance with the standards established by the National Association of Real Estate Investment Trusts, or NAREIT, as net income or loss allocated to common shares (computed in accordance with GAAP), excluding real estate-related depreciation and amortization expense, gains or losses on sales of real estate and the cumulative effect of changes in accounting principles. Our management utilizes FFO as a measure of our operating performance. FFO is not an equivalent to net income or cash generated from operating activities determined in accordance with U.S. GAAP. Furthermore, FFO does not represent amounts available for management’s discretionary use because of needed capital replacement or expansion, debt service obligations or other commitments or uncertainties. FFO should not be considered as an alternative to net income as an indicator of our operating performance or as an alternative to cash flow from operating activities as a measure of our liquidity.

Net Operating Income

Net Operating Income (“NOI”), a non-GAAP measure, is a useful measure of the operating performance of its real estate portfolio. NOI is defined as total property revenue less total property operating expenses, excluding depreciation and amortization and interest expense. Other REITs may use different methodologies for calculating NOI, and accordingly, our NOI may not be comparable to other REITs. We believe that this measure provides an operating perspective not immediately apparent from GAAP operating income or net income. We use NOI to evaluate our real estate portfolio performance on a same store and non-same store basis because NOI measures the core operations of property performance by excluding corporate level expenses and other items not related to property operating performance and captures trends in rental rates and property operating expenses.

Same Store Properties and Same Store Portfolio

Same Store is defined as properties which were owned and operational for the entire periods presented, including each comparative period. Properties included in the redevelopment portfolio are not part of the same store properties.

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