RAIT Financial Trust (RAS, Financial) filed Quarterly Report for the period ended 2009-06-30.
RAIT Financial Trust a real estate investment trust originates secured and unsecured credit facilities including bridge and mezzanine loans preferred equity investments trust preferred securities and subordinated debt for private and corporate owners of commercial real estate REITs and real estate operating companies and their intermediaries throughout the United States. It is a leading diversified real estate finance company focused on the commercial real estate industry. RAIT originates secured and unsecured product including bridge and mezzanine loans preferred equity investments trusts preferred securities and subordinated debt for private and corporate owners of commercial real estate REIT\'s and real estate operating companies and their intermediaries throughout the United States. RAIT Financial Trust has a market cap of $95.43 million; its shares were traded at around $1.47 with a P/E ratio of 29.4 and P/S ratio of 0.38.
We expect to continue to focus our efforts on our commercial real estate portfolio, comprised of our commercial mortgages, mezzanine loans, other loans and preferred equity interests and our investments in real estate interests. This is our primary investment portfolio generating $19.1 million, or 69.9%, and $27.8 million, or 60.7%, of our gross cash flow during the quarters ended June 30, 2009 and 2008, respectively. Current economic conditions have subjected borrowers under our commercial real estate loans to financial stress, which has increased the number of loans on non-accrual and caused us to increase our allowance for losses. Where it is likely to enhance our returns, we consider restructuring loans or foreclosing on the underlying property. During the quarter ended June 30, 2009, we took title to seven properties that served as collateral on our commercial real estate loans. We expect we will continue to engage in workout activity with respect to our commercial real estate loans that may result in the conversion of the property collateralizing those loans. The effect of these workouts generally would decrease the amount of our commercial real estate loans and increase the amount of investments in real estate interests we hold. Under GAAP, we may take a non-cash charge to earnings at the time of any foreclosure to the extent the amount of our loan, reduced by any allowance for losses and certain other expenses, exceeds the fair value of the property at the time of the conversion. We plan to improve the performance of properties we convert through workout activity and we have expanded our commercial property management capabilities through Jupiter Communities, described below, to improve these efforts.
Our portfolio of TruPS generated $2.8 million, or 10.2%, and $9.2 million, or 20.1%, of our gross cash flow during the quarters ended June 30, 2009 and 2008, respectively. We expect our trust preferred securities, or TruPS, portfolio to continue to generate cash flow in the form of senior management and administrative fees. We continue to experience credit deterioration of TruPS issuers. This credit deterioration adversely affects the cash flow we receive from our securitizations and the fair value of their collateral. See Securitization Summary below for a discussion of our securitizations collateralized by TruPs that have already, or may in the near future, have an event of default occur. We continue to seek remedies and other means of restructuring our TruPS so as to improve the overall recovery in future periods. As discussed above, in June 2009, we sold all of our retained interests in Taberna III, Taberna IV, Taberna VI and Taberna VII, or the TruPS securitizations. This transaction resulted in our deconsolidation of these securitizations, recognizing the loss described above and the removal of the associated assets and liabilities from our balance sheet. We expect to continue to receive our senior management fees from these securitizations and will continue to include their underlying assets in our assets under management in future reporting periods.
Our portfolio of residential mortgages generated $4.5 million, or 16.3%, and $5.0 million, or 10.8%, of our gross cash flow during the quarters ended June 30, 2009 and 2008, respectively. We have seen the delinquency rates in our residential mortgage portfolio increase, which resulted in increases in our loan loss reserves and the number and amount of loans on non-accrual status. In July 2009, we sold all of our retained interests in six residential mortgage securitizations. These securitizations comprised our entire portfolio of residential mortgage loans. Subsequent to this sale, we deconsolidated and removed the associated assets and liabilities of the six residential mortgage securitizations from our consolidated balance sheet. We expect the deconsolidation of these securitizations in July 2009 to result in recognizing a loss of $62.0 million and the removal of the associated assets and liabilities from our consolidated balance sheet. We will not receive any further cash distributions from this portfolio and will remove these assets from our assets under management in future reporting periods.
The deconsolidation transactions described above contributed to our strategy of deleveraging RAIT by removing the associated liabilities of the relevant securitizations from our balance sheet. In July 2009, we engaged in another transaction implementing this strategy by purchasing from a noteholder, $98.3 million aggregate principal amount of RAITs 6.875% Convertible Senior Notes due 2027, or the convertible senior notes, for a purchase price of $53.0 million. The purchase price consisted of (a) a $43.0 million 12.5% Senior Secured Note due 2014 issued by RAIT, or the senior secured note, and (b) $10.0 million in cash. RAIT also paid to this noteholder approximately $2.0 million of accrued and unpaid interest on the convertible senior notes through July 31, 2009. RAIT has arranged for the cancellation of these convertible senior notes. We expect to continue to seek to acquire, redeem, restructure, refinance or otherwise enter into transactions to satisfy our debt where we believe that is in the long term interest of our shareholders which may include issuances of our debt and/or equity securities, sales or exchanges of our assets or other methods.
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RAIT Financial Trust a real estate investment trust originates secured and unsecured credit facilities including bridge and mezzanine loans preferred equity investments trust preferred securities and subordinated debt for private and corporate owners of commercial real estate REITs and real estate operating companies and their intermediaries throughout the United States. It is a leading diversified real estate finance company focused on the commercial real estate industry. RAIT originates secured and unsecured product including bridge and mezzanine loans preferred equity investments trusts preferred securities and subordinated debt for private and corporate owners of commercial real estate REIT\'s and real estate operating companies and their intermediaries throughout the United States. RAIT Financial Trust has a market cap of $95.43 million; its shares were traded at around $1.47 with a P/E ratio of 29.4 and P/S ratio of 0.38.
Highlight of Business Operations:
During the six-month periods ended June 30, 2009 and 2008, we generated adjusted earnings per diluted share of $0.46 and $1.05 respectively, total earnings (loss) per diluted share of $(6.65) and $3.94 respectively, and gross cash flow of $57.9 million and $91.7 million, respectively. A reconciliation of RAITs reported generally accepted accounting principles, or GAAP, net income (loss) allocable to common shares to adjusted earnings is set forth below. See Performance Measures-Adjusted Earnings. RAITs GAAP net losses for the three-month and six-month periods ended June 30, 2009 were primarily caused by the following:We expect to continue to focus our efforts on our commercial real estate portfolio, comprised of our commercial mortgages, mezzanine loans, other loans and preferred equity interests and our investments in real estate interests. This is our primary investment portfolio generating $19.1 million, or 69.9%, and $27.8 million, or 60.7%, of our gross cash flow during the quarters ended June 30, 2009 and 2008, respectively. Current economic conditions have subjected borrowers under our commercial real estate loans to financial stress, which has increased the number of loans on non-accrual and caused us to increase our allowance for losses. Where it is likely to enhance our returns, we consider restructuring loans or foreclosing on the underlying property. During the quarter ended June 30, 2009, we took title to seven properties that served as collateral on our commercial real estate loans. We expect we will continue to engage in workout activity with respect to our commercial real estate loans that may result in the conversion of the property collateralizing those loans. The effect of these workouts generally would decrease the amount of our commercial real estate loans and increase the amount of investments in real estate interests we hold. Under GAAP, we may take a non-cash charge to earnings at the time of any foreclosure to the extent the amount of our loan, reduced by any allowance for losses and certain other expenses, exceeds the fair value of the property at the time of the conversion. We plan to improve the performance of properties we convert through workout activity and we have expanded our commercial property management capabilities through Jupiter Communities, described below, to improve these efforts.
Our portfolio of TruPS generated $2.8 million, or 10.2%, and $9.2 million, or 20.1%, of our gross cash flow during the quarters ended June 30, 2009 and 2008, respectively. We expect our trust preferred securities, or TruPS, portfolio to continue to generate cash flow in the form of senior management and administrative fees. We continue to experience credit deterioration of TruPS issuers. This credit deterioration adversely affects the cash flow we receive from our securitizations and the fair value of their collateral. See Securitization Summary below for a discussion of our securitizations collateralized by TruPs that have already, or may in the near future, have an event of default occur. We continue to seek remedies and other means of restructuring our TruPS so as to improve the overall recovery in future periods. As discussed above, in June 2009, we sold all of our retained interests in Taberna III, Taberna IV, Taberna VI and Taberna VII, or the TruPS securitizations. This transaction resulted in our deconsolidation of these securitizations, recognizing the loss described above and the removal of the associated assets and liabilities from our balance sheet. We expect to continue to receive our senior management fees from these securitizations and will continue to include their underlying assets in our assets under management in future reporting periods.
Our portfolio of residential mortgages generated $4.5 million, or 16.3%, and $5.0 million, or 10.8%, of our gross cash flow during the quarters ended June 30, 2009 and 2008, respectively. We have seen the delinquency rates in our residential mortgage portfolio increase, which resulted in increases in our loan loss reserves and the number and amount of loans on non-accrual status. In July 2009, we sold all of our retained interests in six residential mortgage securitizations. These securitizations comprised our entire portfolio of residential mortgage loans. Subsequent to this sale, we deconsolidated and removed the associated assets and liabilities of the six residential mortgage securitizations from our consolidated balance sheet. We expect the deconsolidation of these securitizations in July 2009 to result in recognizing a loss of $62.0 million and the removal of the associated assets and liabilities from our consolidated balance sheet. We will not receive any further cash distributions from this portfolio and will remove these assets from our assets under management in future reporting periods.
The deconsolidation transactions described above contributed to our strategy of deleveraging RAIT by removing the associated liabilities of the relevant securitizations from our balance sheet. In July 2009, we engaged in another transaction implementing this strategy by purchasing from a noteholder, $98.3 million aggregate principal amount of RAITs 6.875% Convertible Senior Notes due 2027, or the convertible senior notes, for a purchase price of $53.0 million. The purchase price consisted of (a) a $43.0 million 12.5% Senior Secured Note due 2014 issued by RAIT, or the senior secured note, and (b) $10.0 million in cash. RAIT also paid to this noteholder approximately $2.0 million of accrued and unpaid interest on the convertible senior notes through July 31, 2009. RAIT has arranged for the cancellation of these convertible senior notes. We expect to continue to seek to acquire, redeem, restructure, refinance or otherwise enter into transactions to satisfy our debt where we believe that is in the long term interest of our shareholders which may include issuances of our debt and/or equity securities, sales or exchanges of our assets or other methods.
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