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JER Investors Trust Inc. Announces Second Quarter 2009 Results
Posted by: gurufocus (IP Logged)
Date: August 10, 2009 08:26PM

Press Release: JER Investors Trust Inc. Announces Second Quarter 2009 Results

MCLEAN, Va., Aug. 10 /PRNewswire-FirstCall/ -- JER Investors Trust Inc. (OTC Bulletin Board: JERT) today reported results for the quarter ended June 30, 2009:

Second Quarter Highlights:

  • Liquidity: At June 30, 2009, we had $1.8 million in unrestricted cash and net borrowings on our repurchase agreement of $11.1 million. As of August 5, 2009, unrestricted cash decreased to $1.2 million and net borrowings on our repurchase agreement declined to $10.4 million.
    • Adjusted Funds from Operations: Adjusted Funds from Operations ("AFFO"), a non-GAAP measure, was $0.8 million and $5.1 million, or $0.15 and $1.01 per Adjusted Diluted Common Share ("ADCS"), for the three and six months ended June 30, 2009, respectively. See reconciliations of net income (loss) determined in accordance with GAAP to AFFO at the end of this release.
  • Operating Results: Net loss was $8.7 million and $27.0 million, or $(1.67) and $(5.35), per ADCS, for the three and six months ended June 30, 2009, respectively.
  • Stockholders\' Equity: Stockholders\' equity at June 30, 2009 was $20.4 million, or $3.49 per common share.
  • Real Estate Loan Portfolio Credit Statistics: There were no delinquencies or loss reserves established related to real estate loans as of June 30, 2009.
  • CMBS Portfolio Credit Statistics: Outlined below are credit statistics relating to the approximately $47 billion of unpaid principal balance of commercial real estate loans as of June 30, 2009, representing approximately 3,500 loans, that serve as collateral for our "first-loss" conduit CMBS investments.
    • 60-day and greater delinquencies on loan collateral underlying our CMBS "first-loss" investments was 249 basis points at June 30, 2009 compared to 165 basis points at March 31, 2009. As of July 31, 2009, the 60-day and greater delinquency rate increased to 284 basis points.
    • Special servicing portfolio at June 30, 2009 consisted of 154 loans with an unpaid principal balance of approximately $2.8 billion. As of August 5, 2009, the number of loans in special servicing increased to 166 loans with an aggregate unpaid principal balance of approximately $3.0 billion. Of the $3.0 billion of loan balances in special servicing, 40 loans totaling $1.4 billion are current, 6 loans totaling $40.6 million have been foreclosed upon and 120 loans totaling $1.5 billion are delinquent and are in monetary default. Based on the evaluation of the collateral properties underlying the CMBS investments and giving consideration to the workout status of the respective loans, we have incorporated estimates of future loan loss projections on the underlying collateral into the cash flow projections for such CMBS investments.
  • CMBS Portfolio Loss Projections: Primarily due to the continuing increases in delinquencies and the special servicing portfolio, as well as current weakness in the real estate and credit markets, we increased our loss projections on the approximately $47 billion of commercial real estate loan collateral underlying our CMBS "first-loss" investments as of June 30, 2009 to approximately $1.4 billion (approximately 3.0% of the unpaid principal balance of such loans) from approximately $1.2 billion (approximately 2.5% of the unpaid principal balance of such loans) at March 31, 2009, as compared to 1.4% at original underwriting. In addition, we accelerated the projected timing of such losses and currently estimate that approximately 64% of the total projected losses will occur through 2011 compared to approximately 60% in our March 31, 2009 loss projections, and approximately 15% in our original underwriting. Cumulative actual realized losses and cumulative appraisal reduction amounts on the underlying loans serving as collateral for our "first-loss" conduit CMBS investments through June 30, 2009 were approximately $17.3 million and $227.4 million, respectively. As we continue to monitor developments in our portfolio and the overall macroeconomic environment, loss reserves may increase in the future in response to further deterioration in the real estate and credit markets.
  • Other Than Temporary Impairment Charges: During the three and six months ended June 30, 2009, we recorded $3.9 million and $18.4 million, respectively, of impairment charges related to our CMBS investments that are not financed by CDOs and relate to declines in the projected net present value of future cash flows related to individual CMBS investments and other than temporary impairment charges on our CMBS driven by the duration and severity of our unrealized losses on various CMBS bonds pursuant to EITF 99-20 and FSP 115-2.

Recent Events

During the quarter ended June 30, 2009, we entered into an agreement with two holders of our outstanding trust preferred securities ("TRUPs") with an aggregate liquidation amount of $56.3 million to exchange such TRUPs for the following: (i) $70.3 million aggregate principal amount of junior subordinated notes due in 2037 (the "Notes"); (ii) the issuance of 307,203 unregistered shares of our common stock; and/or (iii) certain cash payments. Additionally, we entered into an agreement with a third holder of TRUPs with an aggregate liquidation amount of $3.7 million to exchange such TRUPs for 541,906 unregistered shares of our common stock and certain cash payments.

An aggregate of $60.0 million of TRUPs have been cancelled through August 1, 2009 in conjunction with these exchanges, and all interest payment obligations on the TRUPs through the July 31, 2009 interest payment date have been satisfied.

The Notes will bear interest at a rate of 0.5% annually through April 29, 2012 or such earlier date as we elect. Thereafter, we will pay interest at a variable rate equal to LIBOR plus 2.25% annually.

On July 20, 2009, we and our manager entered into an amendment to the management agreement whereby we agreed, effective as of April 1, 2009, that during the months of April, May, June, July, August and September, 2009, (i) we shall not be required to make any payments of base management fees and/or incentive fees otherwise due and payable under the management agreement in excess of $75,000 per month and (ii) any fees accruing and otherwise payable under the management agreement in excess of $75,000 per month shall be deferred and due and payable by us to the manager on such date after September 30, 2009 as we shall mutually agree in writing.

Liquidity

As previously disclosed, the Company has undertaken or expects to commence certain efforts to reduce expenses and preserve liquidity including: (i) discontinuing payment of quarterly dividends and replacing it with payment of an annual dividend to the extent required to satisfy REIT dividend requirements, (ii) seeking to reduce operating costs, primarily our general and administrative costs, (iii) seeking to restructure terms of our recourse indebtedness including extension of scheduled maturity dates and/or modification of near-term interest payment requirements; and (iv) if necessary, pursue sales of selected assets.

During 2009, we have exchanged $56.3 million of our TRUPs into junior subordinated notes, and cancelled $3.7 million of TRUPs thereby reducing quarterly cash interest payments from approximately $1.1 million per quarter on the TRUPs to approximately $0.1 million per quarter on the junior subordinated notes through April 2012. In addition, we amended our note payable to reduce monthly payments from approximately $0.4 million to $75,000 from July through September 2009, and amended our agreement with the Manager to reduce cash basis monthly base management fees to $75,000 from April to September 2009. However, our primary source of free operating cash flow are our non-CDO CMBS investments. Cash flow from these investments have declined from approximately $6.9 million in the first quarter of 2009 to approximately $4.0 million during the second quarter of 2009 due to deteriorating macroeconomic and commercial real estate conditions evidenced by increasing delinquencies, special servicing activity and the appraisal reductions on collateral for such investments. This decline in non-CDO CMBS cash flow has adversely affected our liquidity.

Investments

JERT\'s investments as of June 30, 2009 consisted of (amounts in millions):

June 30, 2009              Weighted Average
                              -------------              ----------------
                      Face                     % of
                    Amount/                    Total
                     Cost                     Invest-   Coupon       Loss
                     Basis  Amortized    Fair  ments     Rate      Adjusted
                      (1)      Cost      Value  (2)       (3)        Yield
                    -------- ----------  ----- -------  -------    --------

    CMBS
     not
     financed
     by CDOs          $428.7      $17.3  $17.3     7.0%     5.2%     57.0% (4)
    CMBS
     financed
     by CDO I          418.7       44.9   44.9    18.2%     4.9%     41.5% (4)
    CMBS
     financed
     by CDO II         880.0       46.2   46.3    18.7%     5.2%     51.1% (4)
                       -----       ----   ----    ----      ---      ----
    Total
     CMBS (5)        1,727.4      108.4  108.5    43.9%     5.1%     47.5%
    Real
     estate
     loans,
     held
     for
     investment (6)    270.3      270.0  138.0    55.8%     3.4%      3.4%
    Investments
     in US
     Debt Fund           0.7        0.7    0.7     0.3%    N/A       N/A
                         ---        ---    ---     ---    -----     -----
    Total           $1,998.4     $379.1 $247.2   100.0%     4.9%     16.0%
                    ========     ====== ======   =====      ===      ====

    (1) For investments in unconsolidated joint ventures.
    (2) Based on fair value.
    (3) Based on face amount.
    (4) Loss adjusted yields for our CMBS investments reflect the impact of
        estimated future losses on underlying collateral and are the basis on
        which we record interest income on such investments in our GAAP
        financial statements in accordance with guidance
    (5) Amortized cost has been reduced from original cost primarily due to
        the recognition of cumulative impairments of $872.1 million.
    (6) Real estate loans are financed by CDO II.

Borrowings

With respect to liabilities, at June 30, 2009, total liabilities were $240.8 million. The individual components of our liabilities are described below:

  • $116.1 million (or 48.2% of total liabilities) represents the estimated fair value of borrowings in the form of long-term, "match-funded" notes payable issued to third parties relating to our two collateralized debt obligation offerings, CDO I and CDO II with an aggregate face amount of $964.0 million. CDO I and CDO II are not subject to "margin calls" based on mark-to-market fair value determinations of the underlying collateral and are generally non-recourse to the Company.
  • $11.1 million (or 4.6% of total liabilities) represents net borrowings under short-term repurchase facilities with JPMorgan. The facility is generally subject to "margin calls" based on mark-to-market fair value determinations of the underlying collateral and is fully recourse to us.
  • $9.0 million (or 3.7% of total liabilities) represents a note payable the Company entered into as a result of the restructuring of four interest rate swaps. We have reflected this agreement as a note payable on our consolidated balance sheets as it does not meet the definition of a derivative. In July 2009, we amended this agreement and as a result of such amendment, we will pay a fixed monthly amount of $75,000 through September 2009, then increasing to approximately $0.5 million through September 2010 and then decreasing to approximately $0.4 million through February 2017.
  • $58.3 million (or 24.2% of total liabilities) represents the cost basis of borrowings in the form of Notes with a face amount of $70.3 million. The Notes will pay interest at a rate of 0.5% through April 2012 and LIBOR plus 2.25% thereafter through maturity in April 2037. These Notes are not subject to "margin calls" based on mark-to-market fair value determinations of underlying collateral but are fully recourse to us. These Notes were issued as part of the exchange and cancellation of $56.3 million of face amount of TRUPs in May 2009.
  • $0.6 million (or 0.3% of total liabilities) represents borrowings in the form of unsecured junior subordinated debentures. These junior subordinated debentures are not subject to "margin calls" based on mark-to-market fair value determinations of underlying collateral but are fully recourse to us. These junior subordinated debentures were cancelled in connection with the exchange and cancellation of the final $0.6 million of outstanding TRUPs on July 30, 2009 for $0.1 million in cash.
  • $41.2 million (or 17.1% of total liabilities) represents the fair value of our CDO-related pay-fixed interest rate swaps with a notional balance at June 30, 2009 of $413.1 million and a weighted-average interest rate of 5.1%.
  • $4.5 million (or 1.9% of total liabilities) consists of amounts due to affiliates of $1.0 million, trade payables and other liabilities.

As of June 30, 2009, we are in compliance with all of our debt covenants with the exception of certain CDO II over-collateralization coverage tests. As previously announced, CDO II did not meet certain over-collateralization coverage tests in February 2009, resulting in approximately $5.2 million and $9.5 million of cash that would have otherwise been paid to JERT during the three and six months ended June 30, 2009, respectively, being redirected to repay principal on certain senior notes payable issued by CDO II. We expect this cash flow redirection to continue for the foreseeable future.

Non-GAAP Financial Measures

In this earnings release, we may disclose non-GAAP financial measures as defined by SEC Regulation G. In addition, we have used non-GAAP financial measures, in particular Adjusted Funds from Operations, or AFFO, as well as earnings (loss) per adjusted diluted common share, or ADCS, in this press release. A reconciliation of AFFO and earnings (loss) per ADCS and the comparable GAAP financial measure (net income, assets, liabilities and stockholders\' equity and earnings per share, as applicable) can be found at the end of this earnings release.

Generally accepted accounting principles ("GAAP") require that we retrospectively restate earnings per share for our 1-for-10 reverse stock split that occurred on February 20, 2009. However, under GAAP, we are precluded from retrospectively restating earnings per common share for our stock dividend paid on January 30, 2009 as a portion of this dividend was paid in cash. Management believes that it is meaningful to investors to disclose the retrospective effect of both the 1-for-10 reverse stock split as well as the stock dividend. Accordingly, we are presenting non-GAAP earnings per Adjusted Diluted Common Share ("ADCS"). See a reconciliation of earnings and AFFO per common share calculated under GAAP to earnings per ADCS at the end of this release.

About JER Investors Trust Inc.

JER Investors Trust Inc. is a specialty finance company quoted on the OTC Bulletin Board that invests in commercial real estate structured finance products. Our target investments include commercial mortgage backed securities, mezzanine loans and B-Note participations in mortgage loans, commercial mortgage loans and net leased real estate investments. JER Investors Trust Inc. is organized and conducts its operations so as to qualify as a real estate investment trust ("REIT") for federal income tax purposes. For more information regarding JER Investors Trust Inc. and to be added to our e-mail distribution list, please visit www.jer.com.

Forward-Looking Statements

This press release does not constitute an offer of any securities for sale. Certain items in this press release may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are based on management\'s current expectations and beliefs and are subject to a number of trends and uncertainties that could cause actual results to differ materially from those described in the forward-looking statements. JER Investors Trust can give no assurance that its expectations will be attained. Factors that could cause actual results to differ materially from JER Investors Trust\'s expectations include, but are not limited to, changes in the real estate and capital markets, our ability to source and fund new investments and other risks detailed from time to time in JER Investors Trust\'s SEC reports. Such forward-looking statements speak only as of the date of this press release. JER Investors Trust expressly disclaims any obligation to release publicly any updates or revisions to any forward-looking statements contained herein to reflect any change in JER Investors Trust\'s expectations with regard thereto or change in events, conditions or circumstances on which any statement is based.

CONTACT:
    J. Michael McGillis
    Chief Financial Officer
    JER Investors Trust Inc.
    (703) 714-8000
JER INVESTORS TRUST INC. AND SUBSIDIARIES
                          CONSOLIDATED BALANCE SHEETS
                       (In thousands, except share data)

                                                    June 30,     December 31,
                                                      2009           2008
                                                 -------------   ------------
                                                  (unaudited)      (audited)
    ASSETS
      Cash and cash equivalents                        $1,834         $8,357
      Restricted cash                                   4,714          1,149
      CMBS financed by CDOs, at fair value             91,182        180,210
      CMBS not financed by CDOs, at fair value         17,339         42,432
      Real estate loans, held for
       investment, financed
       by CDOs, at fair value                         137,993        189,980
      Investments in unconsolidated joint
       ventures                                           709            843
      Accrued interest receivable                       5,866          8,343
      Due from affiliate                                  331            157
      Deferred financing fees, net                        914            981
      Other assets                                        307          2,349

                                                     --------       --------
        Total Assets                                 $261,189       $434,801
                                                     ========       ========

    LIABILITIES AND STOCKHOLDERS\' EQUITY
    Liabilities:
      CDO notes payable, at fair value               $116,129       $211,695
      Repurchase agreements                            11,108         16,108
      Junior subordinated debentures and notes         58,941         61,860
      Notes payable                                     8,960            500
      Interest rate swap agreements related
       to CDOs, at fair value                          41,217         91,984
      Accounts payable and accrued expenses             1,528            839
      Dividends payable                                     -          2,274
      Due to affiliate                                  1,042            689
      Other liabilities                                 1,889          2,489
                                                        -----          -----
        Total Liabilities                             240,814        388,438

    Stockholders\' Equity:
      Common stock, $0.01 par value, 100,000,000
       shares authorized, 5,836,478 and 2,590,104
       shares issued and outstanding at June 30,
       2009 and December 31, 2008, respectively            58             26
      Additional paid-in capital                      413,593        392,744
      Cumulative cash dividends paid/declared        (157,705)      (157,705)
      Cumulative stock dividends paid/declared        (20,462)             -
      Cumulative deficit                             (192,662)      (165,626)
      Accumulated other comprehensive loss            (22,447)       (23,076)

                                                       ------         ------
        Total Stockholders\' Equity                     20,375         46,363
                                                       ------         ------
        Total Liabilities and
         Stockholders\' Equity                        $261,189       $434,801
                                                     ========       ========



                     JER INVESTORS TRUST INC. AND SUBSIDIARIES
                 CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)
                  (In thousands, except share and per share data)

                                    For the Three Months   For the Six Months
                                       Ended June 30,        Ended June 30,
                                   --------------------   -------------------
                                       2009       2008       2009       2008
                                       ----       ----       ----       ----
    REVENUES
      Interest income from CMBS      $6,957    $24,719    $22,197    $46,171
      Interest income from real
       estate loans                   2,341      7,447      4,669     16,333
      Interest income from cash
       and cash equivalents               5        194         16        616
      Equity in (losses) earnings,
       net, of unconsolidated joint
       ventures                         (64)        34     (1,663)       967
      Fee income                        239        156        652        253
                                        ---        ---        ---        ---
        Total Revenues                9,478     32,550     25,871     64,340

    EXPENSES
      Interest expense                7,582     13,782     14,076     29,197
      Management fees, affiliate        961      1,874      2,171      3,701
      General and administrative      1,607      1,937      4,389      3,917
                                      -----      -----      -----      -----
        Total Expenses               10,150     17,593     20,636     36,815

    INCOME BEFORE OTHER GAINS
     (LOSSES)                          (672)    14,957      5,235     27,525

    OTHER GAINS (LOSSES)
      Unrealized loss on financial
       assets financed with CDOs    (27,695)    (7,319)  (127,931)  (186,988)
      Unrealized gain, net, on CDO
       related financial
       liabilities                   26,384     29,942    121,969    276,516
      Loss on interest rate swaps    (5,527)    (5,391)   (12,180)    (8,166)
      Loss on impairment of CMBS     (3,854)      (273)   (18,366)   (99,852)
      Unrealized loss, net, on
       real estate loans held for
       sale                               -       (506)         -    (28,874)
      Unrealized gain (loss) on
       non-CDO related interest
       rate swaps                         -      8,199     13,860     (7,401)
      Gain on exchange and
       cancellation of TRUPs          2,657          -      2,657          -
      Loss on sale of real estate
       loan held for sale                 -     (9,249)         -     (9,249)
      Loss on termination of
       interest rate swaps                -     (1,370)   (12,280)    (1,370)
                                        ---     ------    -------     ------
        Total other gains (losses)   (8,035)    14,033    (32,271)   (65,384)
                                     ------     ------    -------    -------
    NET (LOSS) INCOME               $(8,707)   $28,990   $(27,036)  $(37,859)
                                    =======    =======   ========   ========

    Net (loss) income per share:
      Basic                          $(1.67)    $11.26     $(5.74)   $(14.72)
                                     ======     ======     ======    =======

      Diluted                        $(1.67)    $11.25     $(5.74)   $(14.72)
                                     ======     ======     ======    =======

    Weighted average shares
     of common stock outstanding:
      Basic                       5,216,975  2,573,889  4,711,786  2,572,348
                                  =========  =========  =========  =========

      Diluted                     5,217,794  2,576,135  4,715,575  2,576,230
                                  =========  =========  =========  =========

    Dividends declared per
     common share                        $-      $3.00         $-      $6.00
                                        ===      =====        ===      =====



                    JER INVESTORS TRUST INC. AND SUBSIDIARIES
                CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)
                                 (In thousands)

                                                             For the Six
                                                            Months Ended
                                                              June 30,
                                                         ------------------
                                                             2009      2008
                                                             ----      ----

    CASH FLOWS FROM OPERATING ACTIVITIES:
      Net loss                                           $(27,036) $(37,859)
      Adjustments to reconcile net loss to
       net cash provided by
       operating activities:
        Amortization (accretion) of CMBS                   15,273    (1,395)
        Accretion of interest on junior
         subordinated notes                                   612         -
        Amortization of debt issuance costs                    67     1,771
        Amortization of other comprehensive
         (income) loss related to CDO related
         interest rate swap agreements                      1,462     1,397
        Unrealized loss (gain) on CDO related
         financial assets and liabilities, net              5,962   (89,528)
        Unrealized and realized (gains) losses on
         interest rate swaps                               (1,580)    8,764
        Unrealized loss on impairment of CMBS              18,366    99,852
        Loss on sale of real estate loan held for sale          -     9,249
        Gain on exchange and cancellation of TRUPs         (2,657)        -
        Unrealized loss on real estate loans held
         for sale, net                                          -    28,874
        Equity in (earnings) losses, net, from
         unconsolidated joint ventures                      1,663      (967)
        Distributions from unconsolidated joint ventures        -     1,252
        Payment-in-kind ("PIK") interest on real estate
         loan held for sale                                     -    (2,099)
        Non-cash interest expense on junior subordinated
         debentures and notes                               1,432         -
        Non-cash expense related to shares issued for
         TRUPs
         exchange and cancellation                            144         -
        Stock compensation expense                             37       211
        Changes in assets and liabilities:
          Decrease (increase) in other assets                 202      (241)
          Decrease in accrued interest receivable           2,477       978
          Increase in due to/from affiliates, net             179       302
          Increase (decrease) in accounts payable and
           accrued expenses and other liabilities, net         91      (662)

                                                           ------    ------
                Net cash provided by operating
                 activities                                16,694    19,899
                                                           ------    ------

    CASH FLOWS FROM INVESTING ACTIVITIES:
      Investment in unconsolidated joint ventures          (1,529)   (2,231)
      (Increase) decrease in restricted cash, net          (3,564)    5,534
      Proceeds from sale of unconsolidated joint venture        -    39,448
      Proceeds from repayment of real estate loans          3,701     7,471
      Proceeds from sale of real estate loans held for
       sale                                                     -    36,191
                                                              ---    ------
                Net cash (used in) provided by
                 investing activities                      (1,392)   86,413
                                                           ------    ------

    CASH FLOWS FROM FINANCING ACTIVITIES:
      Dividends paid                                       (2,274)  (36,133)
      Proceeds from repurchase agreements                       -     1,556
      Repayment of repurchase agreements                   (5,000) (112,119)
      Repayment of CDO notes payable                      (10,504)        -
      Repayment of notes payable, net                        (540)        -
      Cancellation payments on TRUPs                         (227)        -
      Payment of financing costs                                -    (2,438)
      Payment of interest rate swap termination costs      (3,280)   (1,370)
                                                           ------    ------
                Net cash used in financing activities     (21,825) (150,504)
                                                          -------  --------

    Net decrease in cash and cash equivalents              (6,523)  (44,192)

    Cash and cash equivalents at beginning of period        8,357    87,556

                                                           ------   -------
    Cash and cash equivalents at end of period             $1,834   $43,364
                                                           ======   =======

    Supplemental Disclosures of Cash Flow Information
           Cash paid for interest                         $21,359   $34,878
                                                          =======   =======
           Non-cash note payable in satisfaction of
            Interest rate swap agreements                  $9,000        $-
                                                           ======       ===
           Dividends declared but not paid                     $-    $7,752
                                                              ===    ======
           Stock issued as part of exchange and
            cancellation of TRUPs                            $383        $-
                                                             ====       ===
1.  Adjusted Funds from Operations (amounts in thousands)

                                       For the              For the
                                  Three Months Ended    Six Months Ended
                                  ------------------    ----------------
                                 June 30,  June 30,   June 30,   June 30,
                                   2009      2008       2009       2008
                                 --------  ---------  ---------  ---------
                                                (unaudited)

    Net (loss) income
     available to common
     stockholders                 $(8,707)   $28,990   $(27,036)  $(37,859)
    Add:
      Unrealized gain, net, on
       CDO related financial
       assets and liabilities       1,311    (22,623)     5,962    (89,528)
      Amortization of unrealized
       loss on CDO related
       interest rate swaps            603        574      1,197      1,143
      Unrealized loss on
       impairment of CMBS           3,854        273     18,366     99,852
      Unrealized (gain) loss on
       real estate loan held for
       sale                             -        506          -     28,874
      Unrealized (gain) loss on
       non-CDO interest rate
       swap agreements                  -     (8,199)   (13,860)     7,401
      Realized loss on sale of
       real estate loan held for
       sale                             -      9,249          -      9,249
      Realized loss on swap
       terminations                     -      1,370     12,280      1,370
      Gain on exchange and
       cancellation of TRUPs       (2,657)         -     (2,657)         -
      Equity in (earnings)
       losses, net, of
       unconsolidated joint
       ventures                        64        (34)     1,663       (967)
      Redirection of CDO II
       cash flows                  (5,230)         -     (9,525)         -
      Cash distributions from
       unconsolidated joint
       ventures                         -          -          -      1,252
      Depreciation on
       unconsolidated real
       estate assets                    -          -          -        238
      CMBS amortization
       (accretion)                  9,134     (1,728)    15,273     (1,549)
      Junior subordinated note
       interest accretion             612          -        612          -
      Non-recurring equity
       offering costs                   -          -        999          -
      Non-recurring TRUPs
       exchange and cancellation
       costs                          381          -        381          -
      Non-cash interest
       expense on junior
       subordinated debentures      1,432          -      1,432          -
                                    -----          -      -----          -
    Adjusted Funds from
     Operations (AFFO)               $797     $8,378     $5,087    $19,476
                                     ====     ======     ======    =======

    AFFO per ADCS:
      Basic                         $0.15      $1.02      $1.02      $3.92
                                    =====      =====      =====      =====

      Diluted                       $0.15      $1.01      $1.01      $3.91
                                    =====      =====      =====      =====
2.  Earnings, AFFO and Book Value per Adjusted Diluted Common Share
       ("ADCS") (1)

                     JER INVESTORS TRUST INC. AND SUBSIDIARIES
             RECONCILIATION OF NON-GAAP FINANCIAL MEASURES (unaudited)

                                           EPS (Basic)          EPS (Basic)
                                           -----------          -----------
                                            For the               For the
                                          Three Months          Six Months
                                             Ended                 Ended
                                            June 30,             June 30,
                                          -------------         -----------
                                         2009       2008      2009       2008
                                         ----       ----      ----       ----
    Earnings per share (basic)
     under GAAP                        $(1.67)    $11.26    $(5.74)   $(14.72)
    Add (deduct) impact of stock
     dividend                           (0.00)     (5.43)     0.38       7.10
                                        -----      -----      ----       ----
    Earnings per adjusted share
     (basic)                           $(1.67)     $5.83    $(5.36)    $(7.62)
                                       ======      =====    ======     ======


                                          EPS (Diluted)        EPS (Diluted)
                                          -------------        -------------
                                            For the               For the
                                          Three Months          Six Months
                                             Ended                 Ended
                                            June 30,             June 30,
                                          -------------         -----------
                                         2009       2008      2009     2008
                                         ----       ----      ----     ----
    Earnings per share (diluted)
     under GAAP                        $(1.67)    $11.25    $(5.74)   $(14.72)
    Add (deduct) impact of stock
     dividend                           (0.00)     (5.43)     0.39       7.10
                                        -----      -----      ----       ----
    Earnings per ADCS                  $(1.67)     $5.82    $(5.35)    $(7.62)
                                       ======      =====    ======     ======


                                              AFFO                 AFFO
                                           per Share             per Share
                                             (Basic)              (Basic)
                                           ----------            ----------
                                            For the               For the
                                          Three Months          Six Months
                                             Ended                 Ended
                                            June 30,              June 30,
                                          -------------         -----------
                                         2009       2008      2009       2008
                                         ----       ----      ----       ----
    AFFO per share (basic) under
     GAAP                               $0.15      $3.25     $1.08      $7.57
    Add (deduct) impact of stock
     dividend                           (0.00)     (1.56)    (0.06)     (3.65)
                                        -----      -----     -----      -----
    AFFO per adjusted share (basic)     $0.15      $1.69     $1.02      $3.92
                                        =====      =====     =====      =====


                                              AFFO                 AFFO
                                           per Share             per Share
                                            (Diluted)            (Diluted)
                                           ----------            ----------
                                            For the               For the
                                          Three Months          Six Months
                                             Ended                 Ended
                                             June 30,             June 30,
                                          -------------         -----------
                                         2009       2008      2009       2008
                                         ----       ----      ----       ----
    AFFO per share (diluted) under
     GAAP                               $0.15      $3.25     $1.08      $7.56
    Add (deduct) impact of stock
     dividend                           (0.00)     (1.57)    (0.06)     (3.65)
                                        -----      -----     -----      -----
    AFFO per ADCS                       $0.15      $1.68     $1.01      $3.91
                                        =====      =====     =====      =====

                                           Book Value
                                            per Share
                                             (Basic)
                                           -----------
                                      As of        As of
                                     June 30,     December 31,
                                       2009        2008
                                     ---------   ---------
    Book value per share (basic)
     under GAAP                         $3.49     $17.90
    Add (deduct) impact of stock
     dividend                            0.00      (8.61)
                                         ----      -----
    Book value per adjusted share
     (basic)                            $3.49      $9.29
                                        =====      =====


                                           Book Value
                                            per Share
                                            (Diluted)
                                           -----------
                                       As of       As of
                                      June 30,   December 31,
                                        2009        2008
                                     ---------   ---------
    Book value per share (diluted)
     under GAAP                         $3.49     $17.90
    Add (deduct) impact of stock
     dividend                            0.00      (8.61)
                                         ----      -----
    Book value per ADCS                 $3.49      $9.29
                                        =====      =====

    (1)  GAAP requires that we retrospectively restate earnings per share for
         our 1-for-10 reverse stock split that occurred on February 20, 2009.
         However, under GAAP, we are precluded from retrospectively restating
         earnings per share for our stock dividend paid on January 30, 2009
         as a portion of this dividend was paid in cash.  Management believes
         it is meaningful to investors to disclose the retrospective effect
         of both the 1-for-10 reverse stock split as well as the stock
         dividend.  Accordingly, we are presenting the non-GAAP measure
         earnings per Adjusted Diluted Common Share ("ADCS").

Source: PRNewsWire

JERT is in the portfolios of Third Avenue Management.


Stocks Discussed: JRT, JERT,
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