RAIT Financial Trust Announces Third Quarter Results

Summary

-- Adjusted earnings per diluted share of $0.46 for the quarter ended September 30, 2008

-- Total GAAP loss per share -- diluted of $2.83 for the quarter ended September 30, 2008

-- Economic book value of $13.80 per share at September 30, 2008

-- Book value of $23.40 per share at September 30, 2008

Earnings Results

RAIT reported adjusted earnings, a non-GAAP financial measure, for the three-month period ended September 30, 2008 of $29.6 million, or $0.46 per diluted share based on 64.2 million weighted-average shares outstanding -- diluted, as compared to adjusted earnings for the three-month period ended September 30, 2007 of $40.6 million, or $0.67 per diluted share based on 60.7 million weighted-average shares outstanding -- diluted. RAIT reported adjusted earnings for the nine-month period ended September 30, 2008 of $94.9 million, or $1.52 per diluted share based on 62.5 million weighted-average shares outstanding -- diluted, as compared to adjusted earnings for the nine-month period ended September 30, 2007 of $148.6 million, or $2.45 per diluted share based on 60.6 million weighted-average shares outstanding -- diluted.

RAIT reported GAAP net loss available to common shares for the three-month period ended September 30, 2008 of $181.7 million, or total loss per share -- diluted of $2.83 based on 64.2 million weighted-average shares outstanding -- diluted, as compared to GAAP net loss available to common shares for the three-month period ended September 30, 2007 of $243.6 million, or total loss per share -- diluted of $4.02 based on 60.7 million weighted-average shares outstanding -- diluted. RAIT reported GAAP net income available to common shares for the nine-month period ended September 30, 2008 of $62.9 million, or $1.01 per diluted share based on 62.5 million weighted-average shares outstanding -- diluted, as compared to GAAP net loss available to common shares for the nine-month period ended September 30, 2007 of $195.9 million, or total loss per share -- diluted of $3.23 based on 60.6 million weighted-average shares outstanding -- diluted.

Our reported GAAP net loss available to common shares for the three-month period ended September 30, 2008 of $181.7 million was primarily due to the non-cash change in fair value of financial instruments, net of minority interest, of $183.9 million on our domestic trust preferred securities (TruPS) portfolio. The change in fair value does not impact our adjusted earnings or gross cash flow during the quarter ended September 30, 2008.

A reconciliation of RAIT's reported GAAP net income (loss) available to common shares to adjusted earnings, including management's rationale for the usefulness of this non-GAAP measure, is included as Schedule I to this release.

Assets Under Management and Gross Cash Flow Summary

RAIT's gross cash flow is comprised of net investment income, net rental income and asset management fees we received from $14.3 billion of assets under management as of September 30, 2008. Our net investment income represents the positive difference between the income we earn on our investment portfolio and the cost of financing our investment portfolio, after consideration of estimated loan loss reserve requirements.

The following chart summarizes RAIT's total assets under management at September 30, 2008 and quarterly gross cash flow by portfolio (excluding origination fees) for the three-month periods ended March 31, 2008, June 30, 2008 and September 30, 2008 and for the nine-month period ended September 30, 2008 (dollars in thousands):

Gross Cash Flow Assets Under Three-Month Three-Month Three-Month Nine-Month Management at Period Ended Period Ended Period Ended Period Ended September 30, 2008 March 31, 2008 (1) June 30, 2008 (1) September 30, 2008 (1) September 30, 2008 (1) Commercial real estate portfolio (2) $ 2,104,833 $ 25,137 $ 27,760 $ 23,137 $ 76,034 Residential mortgage portfolio 3,694,875 5,104 4,958 4,778 14,840 European portfolio (3) 1,945,487 3,461 3,606 4,264 11,331 U.S. TruPS portfolio (4) 6,512,275 11,850 9,173 11,952 32,975 Other investments 720 349 252 210 811 Total $ 14,258,190 $ 45,901 $ 45,749 $ 44,341 $ 135,991

(1) Quarterly cash flows may not be indicative of cash flows for subsequent quarterly or annual periods. See "Forward-Looking Statements" below for risks and uncertainties that could cause our gross cash flow for subsequent quarterly or annual periods to differ materially from these amounts. (2) Our commercial real estate portfolio is comprised of $1.6 billion of assets collateralizing our commercial real estate securitizations (the "CRE Securitizations"), $311.2 million of investments in real estate interests and $240.3 million of commercial mortgages and mezzanine loans all of which are included on our consolidated balance sheet as of September 30, 2008. (3) Our European portfolio is comprised of residual interests in our unconsolidated European securitizations. (4) Our U.S. TruPS portfolio is comprised of assets collateralizing our consolidated securitizations (other than CRE Securitizations) and interests in our unconsolidated securitizations (other than our European securitizations) and includes TruPS and subordinated debentures, unsecured REIT note receivables, CMBS receivables, other securities, commercial mortgages and mezzanine loans.

Liquidity

As of September 30, 2008, RAIT had $38.4 million of cash and cash equivalents, $55.6 million of unused capacity in our two CRE securitizations to invest in commercial real estate loans and $36.5 million of availability under three secured credit facilities with a total capacity of $90.0 million.

During the third quarter, RAIT repaid $47.1 million under our short-term repurchase agreements and terminated these agreements. As of September 30, 2008, RAIT had $206.0 million outstanding under our secured credit facilities and other indebtedness and $404.0 million in convertible senior notes outstanding.

Total Fees Generated

Total fees generated, a non-GAAP financial measure, were $9.6 million for the quarter ended September 30, 2008 as follows:

-- Asset management fees of $7.1 million for the quarter ended September 30, 2008 on assets under management of $14.3 billion as of September 30, 2008. A total of $4.2 million of asset management fees received from consolidated securitizations are eliminated for GAAP reporting.

-- Origination fee income of $2.2 million for the quarter ended September 30, 2008 generated in our commercial real estate and European portfolios. $1.9 million is included in fee and other income for GAAP reporting and $0.3 million is deferred and will be recognized in future income.

Reported GAAP fee and other income of $5.1 million for the quarter ended September 30, 2008.

A reconciliation of fee and other income reported in GAAP earnings to total fees generated, including management's rationale for the usefulness of this non-GAAP measure, is included as Schedule II to this release.

Economic Book Value & Book Value

RAIT's economic book value per common share outstanding, a non-GAAP financial measure, was $13.80 as of September 30, 2008 and $10.52 as of December 31, 2007. Economic book value is computed by adding or subtracting from book value unamortized intangible assets and any unrealized losses or gains recognized in shareholders' equity or through earnings that are in excess of RAIT's value at risk, or RAIT's retained investment. Under GAAP, RAIT absorbs unrealized losses or gains on investments held by certain of our consolidated entities, primarily RAIT's consolidated securitizations, even if those unrealized losses or gains are in excess of RAIT's retained investment in those securitizations.

RAIT's GAAP book value per common share outstanding was $23.40 as of September 30, 2008 and $6.78 as of December 31, 2007. GAAP book value is computed by subtracting the liquidation value of RAIT's cumulative redeemable preferred shares from total shareholders' equity and dividing the result by the number of common shares outstanding at the end of the period.

A reconciliation of RAIT's shareholders' equity to economic book value as of September 30, 2008 and December 31, 2007, including management's rationale for the usefulness of this non-GAAP financial measure, is included as Schedule III to this release.

Investment Portfolio Summary

The following chart summarizes RAIT's investment portfolio at September 30, 2008 (dollars in thousands):

Amortized Estimated Percentage Weighted- Cost(1) Fair Value(2) of Total Average Portfolio(3) Coupon(4) Investments in Mortgages and Loans Commercial mortgages, mezzanine loans and other loans $ 2,101,183 $ 2,098,058 26.9 % 8.2 % Residential mortgages and mortgage-related receivables(5) 3,680,672 2,860,373 36.8 % 5.6 % Total investments in mortgages and loans 5,781,855 4,958,431 63.7 % 6.7 % Investments in Securities TruPS and subordinated debentures 3,416,389 2,075,432 26.6 % 7.4 % Unsecured REIT note receivables 370,889 305,801 3.9 % 6.0 % CMBS receivables 213,921 104,651 1.3 % 5.8 % Other securities 118,204 38,811 0.5 % 7.1 % Total investments in securities 4,119,403 2,524,695 32.3 % 7.2 % Investments in real estate interests 311,214 311,214 4.0 % N/A Total Portfolio/Weighted Average $ 10,212,472 $ 7,794,340 100.0 % 6.9 %

(1) Amortized cost reflects the cost incurred by us to acquire or originate the asset, net of origination discount. (2) The fair value of RAIT's investments represents management's estimate of the price that a willing buyer would pay a willing seller for such assets. Management bases this estimate on the underlying interest rates and credit spreads and, to the extent available, quoted market prices. (3) Percentages based on estimated fair value. (4) Weighted average coupon is calculated on the unpaid principal amount of the underlying instruments which does not necessarily correspond to amortized cost or estimated fair value. (5) RAIT's investments in residential mortgages and mortgage-related receivables at September 30, 2008 consisted of investments in adjustable rate residential mortgages. These mortgages bear interest rates that are fixed for three, five, seven and ten year periods, respectively, and reset annually thereafter. RAIT has financed its investment in these assets through long-term securitizations.

Credit Summary

The following chart summarizes RAIT's non-accrual status investments and loan loss reserve at September 30, 2008 (dollars in thousands):

Carrying Value of # of Non- Accrual Carrying Value of Non-Accrual Percentage of Asset Class(es) Loan Loss Reserves 9/30/2008 Investments (1) Investments Investments Commercial mortgages, mezzanine loans, investments in real estate $ 2,412,397 11 $ 146,315 6.1 % $ 46,250(2) interests and other loans Residential mortgages and mortgage-related receivables 3,680,672 435 169,734(3) 4.6 % 19,515 Investments in securities (4) 2,524,695 14 37,281 1.5 % N/A(5) Total $ 8,617,764 460 $ 353,330 4.1 % $ 65,765

(1) Carrying value represents the value at which the respective asset class is recorded on our balance sheet in accordance with GAAP. (2) Pertains to 13 loans with a $182.0 million aggregate unpaid principal balance. (3) Includes loans delinquent over 60 days, in foreclosure, bankrupt or real estate owned as of September 30, 2008. (4) Investments in securities are recorded at fair value in our consolidated balance sheet in accordance with GAAP. The unpaid principal value of these investments as of September 30, 2008 is $4.3 billion. The unpaid principal balance of the non-accrual investments in this category is $475.6 million, or 11.1% of the total unpaid principal balance. (5) Loan loss reserves are not applicable for investments in securities and security related receivables, including our investments in European, U.S. TruPS or other securities, as these items are carried at fair value in our consolidated financial statements. The estimated fair value adjustment for our U.S. TruPS portfolio is recorded as a component of GAAP net income. The estimated fair value adjustments for our investments in European securitizations and other securities are recorded as a component of accumulated other comprehensive income within shareholders' equity. A charge to GAAP net income is recorded only if an other than temporary impairment is identified within our European portfolio or other investments. While RAIT believes the estimated fair values of these asset classes are affected by any related credit quality issues, under GAAP, no separate loan loss reserve is established.

Portfolio Statistics

Commercial Mortgages, Mezzanine Loans & Other Loans

The following chart summarizes RAIT's commercial mortgages, mezzanine loans & other loans at September 30, 2008 (dollars in millions):

Amortized Weighted-Average Number of % of Total Loan Cost Coupon Loans Portfolio Commercial mortgages $ 1,424 7.7 % 118 67.8 % Mezzanine loans 502 10.4 % 154 23.9 % Other loans 175 6.1 % 11 8.3 % Total $ 2,101 8.2 % 283 100.0 %

The geographic and property type breakdown is as follows (based on amortized cost):

Property Type Percent U.S. Geographic Region Percent Multi-family 51.9 % Central 32.0 % Office 23.5 % West 26.9 % Retail 18.7 % Southeast 19.9 % Industrial 0.2 % Mid-Atlantic 15.1 % Other 5.7 % Northeast 6.1 % Total 100.0 % Total 100.0 %

Residential Mortgage Loans

At September 30, 2008, RAIT's residential mortgage loan portfolio consisted of 7,737 residential mortgage loans with a weighted average coupon of 5.6%. The portfolio had an average FICO score of 738 at origination, primarily in 2005 and 2006, and has an amortized cost balance of $3.7 billion at September 30, 2008. Since the portfolio was originated, it has experienced $9.4 million in cumulative cash losses.

TruPS and Subordinated Debentures

As of September 30, 2008, RAIT maintained investments of $2.1 billion (at estimated fair value) in TruPS and subordinated debentures. RAIT's portfolio had a weighted average coupon of 7.4%. The issuers of these investments had a weighted average debt to total capitalization ratio of 77.3% and a weighted average interest coverage ratio of 1.8 times based on information available as of September 30, 2008. The following table provides a sector breakdown of these issuers as of September 30, 2008 based on estimated fair value:

TruPS and Subordinated Debt Industry Sector Percent Commercial Mortgage 31.9 % Office 20.9 % Specialty Finance 14.6 % Homebuilders 11.0 % Retail 7.0 % Residential Mortgage 6.4 % Hospitality 4.9 % Storage 3.3 % Total 100.0 %

SFAS 159 Adoption

Prior to January 1, 2008, we recorded certain of our investments in securities and derivatives at fair value. Effective January 1, 2008, RAIT adopted Statement of Financial Accounting Standards No. 159, "The Fair Value Option for Financial Assets and Liabilities" or "SFAS No. 159". Upon adoption on January 1, 2008, RAIT adjusted the carrying amounts of certain investments in securities, certain CDO notes payable, certain derivative instruments and other assets and liabilities to fair value resulting in a one-time increase in shareholders equity of $1.1 billion. Each quarter, we reflect these financial assets and liabilities at their estimated fair value in our balance sheet, with all changes in fair value recorded in earnings.

The following table summarizes the cumulative net fair value adjustments through September 30, 2008 for the specific financial assets and liabilities elected for the fair value option under SFAS No. 159 (dollars in thousands):

Fair Value SFAS No. 159 SFAS No. 159 Fair Cumulative Fair Adjustments as Fair Value Value Adjustments Value of December Adjustment on during Adjustments as of 31, 2007 January Nine-Month September 1, 2008 Period Ended 30, 2008 September 30, 2008 Assets: Investments in securities $ (494,765 ) $ (99,991 ) $ (1,152,385 ) $ (1,747,141 ) Deferred financing costs, net of accumulated amortization -- (18,047 ) -- (18,047 ) Liabilities: Trust preferred obligations -- 52,070 101,514 153,584 CDO notes payable -- 1,520,616 1,180,426 2,701,042 Derivative liabilities (155,080 ) -- (78,928 ) (234,008 ) Other liabilities -- 6,103 34 6,137 Fair value adjustments before allocation to minority interest (649,845 ) 1,460,751 50,661 861,567 Allocation of fair value adjustments to minority interest 123,881 (373,357 ) 27,748 (221,728 ) Cumulative effect on shareholders' equity $ (525,964 ) $ 1,087,394 $ 78,409 $ 639,839

Through September 30, 2008, the cumulative effect of the fair value adjustments recorded on each financial asset and liability selected for the fair value option under SFAS No. 159 had a net increase in shareholders' equity of $639.8 million. This net increase in shareholders' equity may reverse through a net charge to earnings in the future as we continue to record our financial assets and liabilities at fair value. Given the challenging market conditions, volatility in interest rates and the credit performance of our underlying collateral, we cannot assure investors that there will not be further significant fluctuations in the fair value of our assets and liabilities subject to SFAS 159, which could have a material effect on our financial performance.

Dividends

On October 10, 2008, RAIT declared a dividend of $0.35 per common share to shareholders of record on October 31, 2008 to be paid on December 5, 2008. On September 30, 2008, RAIT paid a quarterly 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 to holders of record on September 2, 2008.

Conference Call

Interested parties can listen to the LIVE audio webcast of RAIT's earnings conference call at 9:30 AM EST on Wednesday, November 5, 2008 by clicking on the Webcast link on RAIT's homepage at www.raitft.com. The conference call may also be listened to by dialing 800.510.9661 Domestic or 617.614.3452 International, using passcode 73681832. For those who are able to listen to the live broadcast, a replay of the webcast will be available following the live call on RAIT's investor relations website and telephonically until Wednesday, November 12, 2008 by dialing 888.286.8010, access code 85629845.

About RAIT Financial Trust

RAIT, a real estate investment trust ("REIT"), provides a comprehensive set of debt financing options to the real estate industry, including investors in commercial real estate, REITs and real estate operating companies and their intermediaries, throughout the United States and Europe. RAIT manages and invests in commercial mortgages, including whole and mezzanine loans, commercial real estate investments, preferred equity interests, residential mortgage loans, trust preferred securities and subordinated debentures. RAIT generates income for distribution from our portfolio of investments and assets under management. For more information, please visit www.raitft.com or call Investor Relations at 215-243-9000.

Forward-Looking Statements

Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995:

Statements in this press release regarding RAIT's business which are not historical facts are "forward-looking statements" that involve risks and uncertainties. These risks and uncertainties, which could cause actual results to differ materially from those contained in the forward looking statement, include those discussed in RAIT's filings with the Securities and Exchange Commission, including its annual report on Form 10-K for the year ended December 31, 2007.

These risks and uncertainties also include the following factors: adverse market developments and credit losses have reduced, and may continue to reduce, the value of trust preferred securities, or TruPS, subordinated debentures and other debt instruments directly or indirectly held by RAIT; adverse market developments have reduced, and may continue to reduce, the value of other assets in RAIT's investment portfolio; RAIT's liquidity may be impaired by the reduced availability of short-term and long-term financing, including a reduction in the market for securities issued in securitizations and in the availability of repurchase agreements and warehouse facilities; RAIT's liquidity may be adversely affected by margin calls; RAIT may be unable to obtain adequate capital at attractive rates or otherwise; payment delinquencies or failure to meet other collateral performance criteria in collateral underlying RAIT's securitizations have restricted, and may continue to restrict, RAIT's ability to receive cash distributions from RAIT's securitizations and have reduced, and may continue to reduce, the value of RAIT's interests in these securitizations; failure of credit rating agencies to confirm their previously issued credit ratings for debt securities issued in RAIT's securitizations seeking to go effective may restrict RAIT's ability to receive cash distributions from those securitizations; covenants in RAIT's financing arrangements may restrict RAIT's business operations; fluctuations in interest rates and related hedging activities against such interest rates may affect RAIT's earnings and the value of RAIT's assets; borrowing costs may increase relative to the interest received on RAIT's investments; RAIT may be unable to sponsor and sell securities issued in securitizations, and, even if RAIT is able to do so, RAIT may be unable to acquire eligible securities for securitization transactions on favorable economic terms; RAIT may experience unexpected results arising from litigation that is currently pending or may arise in the future; RAIT and RAIT's subsidiary, Taberna Realty Finance Trust, may fail to maintain qualification as real estate investment trusts, or REITs; RAIT may fail to maintain exemptions under the Investment Company Act of 1940; geographic concentrations in investment portfolios of residential mortgage loans could be adversely affected by economic factors unique to such concentrations; the market value of real estate that secures mortgage loans could diminish further due to factors outside of RAIT's control; adverse governmental or regulatory policies may be enacted; management and other key personnel may be lost; competition from other REITs and other specialty finance companies may increase; and general business and economic conditions could impair the credit quality of our investments and reduce our ability to originate loans.

RAIT does not undertake to update forward-looking statements in this press release or with respect to matters described herein, except as may be required by law.

RAIT Financial Trust Consolidated Statements of Operations (Dollars in thousands, except share and per share information) (unaudited) For the Three-Month For the Nine-Month Periods Ended Periods Ended September 30 September 30 2008 2007 2008 2007 Revenue: Investment interest income $ 168,387 $ 232,987 $ 530,995 $ 672,053 Investment interest expense (116,005 ) (186,926 ) (368,853 ) (526,827 ) Provision for losses (14,992 ) (6,099 ) (50,575 ) (10,662 ) Net investment income 37,390 39,962 111,567 134,564 Rental income 4,721 3,059 12,429 8,083 Fee and other income 5,128 11,325 17,131 20,889 Total revenue 47,239 54,346 141,127 163,536 Expenses: Compensation expense 7,085 10,187 23,690 24,359 Real estate operating expense 4,064 3,433 11,424 8,711 General and administrative expense 4,733 7,008 16,456 19,077 Depreciation expense 1,665 1,945 4,431 3,816 Amortization of intangible assets 2,883 17,473 16,048 46,051 Total expenses 20,430 40,046 72,049 102,014 Income before other income (expense), taxes and discontinued 26,809 14,300 69,078 61,522 operations Interest and other income (expense) (87 ) 6,004 1,085 15,360 Gains (losses) on sale of assets 912 (7,569 ) 770 (10,329 ) Gains on extinguishment of debt -- -- 8,662 -- Change in fair value of free-standing derivatives -- 1,673 (37,203 ) 6,715 Change in fair value of financial instruments (302,245 ) -- 50,661 -- Unrealized gains (losses) on interest rate hedges (290 ) (3,122 ) (275 ) (2,605 ) Equity in income (loss) of equity method investments (9 ) (49 ) 935 (57 ) Asset impairments (18,038 ) (342,954 ) (38,361 ) (342,954 ) (Income) loss allocated to minority interest 114,837 93,357 15,490 81,482 Income (loss) before taxes and discontinued operations (178,111 ) (238,360 ) 70,842 (190,866 ) Income tax benefit (provision) (173 ) (1,534 ) 2,261 3,546 Income (loss) from continuing operations (178,284 ) (239,894 ) 73,103 (187,320 ) Income (loss) from discontinued operations -- (340 ) -- (132 ) Net income (loss) (178,284 ) (240,234 ) 73,103 (187,452 ) Income allocated to preferred shares (3,406 ) (3,357 ) (10,227 ) (8,403 ) Net income (loss) available to common shares $ (181,690 ) $ (243,591 ) $ 62,876 $ (195,855 ) Earnings (loss) per share--Basic: Continuing operations $ (2.83 ) $ (4.01 ) $ 1.01 $ (3.23 ) Discontinued operations -- (0.01 ) -- -- Total earnings (loss) per share--Basic $ (2.83 ) $ (4.02 ) $ 1.01 $ (3.23 ) Weighted-average shares outstanding--Basic 64,176,083 60,664,698 62,460,319 60,581,559 Earnings (loss) per share--Diluted: Continuing operations $ (2.83 ) $ (4.01 ) $ 1.01 $ (3.23 ) Discontinued operations -- (0.01 ) -- -- Total earnings (loss) per share--Diluted $ (2.83 ) $ (4.02 ) $ 1.01 $ (3.23 ) Weighted-average shares outstanding--Diluted 64,176,083 60,664,698 62,492,475 60,581,559 Distributions declared per common share $ -- $ 0.46 $ 0.92 $ 2.10

RAIT Financial Trust Consolidated Balance Sheets (Dollars in thousands, except share and per share information) (unaudited) As of As of September 30, December 31, 2008 2007 Assets Investments in mortgages and loans, at amortized cost: Commercial mortgages, mezzanine loans and other loans $ 2,091,366 $ 2,189,939 Residential mortgages and mortgage-related receivables 3,680,672 4,065,083 Allowance for losses (65,765 ) (26,389 ) Total investments in mortgages and loans 5,706,273 6,228,633 Investments in securities and security-related receivables 2,524,695 3,827,800 ($2,524,695 and $2,776,833, respectively, at fair value) Investments in real estate interests 311,214 284,252 Cash and cash equivalents 38,389 127,987 Restricted cash 196,671 298,433 Accrued interest receivable 102,190 110,287 Other assets 39,269 70,725 Deferred financing costs, net of accumulated amortization of $5,017 32,676 53,340 and $3,800, respectively Intangible assets, net of accumulated amortization of $80,492 and 22,037 56,123 $64,444, respectively Total assets $ 8,973,414 $ 11,057,580 Liabilities and Shareholders' equity Indebtedness: Repurchase agreements $ -- $ 138,788 Secured credit facilities and other indebtedness 205,966 146,916 Mortgage-backed securities issued 3,438,431 3,801,959 Trust preferred obligations ($208,916 at fair value as of September 208,916 450,625 30, 2008) CDO notes payable ($841,546 at fair value as of September 30, 2008) 2,272,796 5,093,833 Convertible senior notes 404,000 425,000 Total indebtedness 6,530,109 10,057,121 Accrued interest payable 82,517 65,947 Accounts payable and accrued expenses 17,516 19,197 Derivative liabilities 233,513 201,581 Deferred taxes, borrowers' escrows and 66,432 104,821 other liabilities Distributions payable -- 28,068 Total liabilities 6,930,087 10,476,735 Minority interest 361,875 1,602 Shareholders' equity Preferred shares, $0.01 par value per share, 25,000,000 shares 28 28 authorized; 7.75% Series A cumulative redeemable preferred shares, liquidation preference $25.00 per share, 2,760,000 shares issued and outstanding 8.375% Series B cumulative redeemable preferred shares, liquidation 23 23 preference $25.00 per share, 2,258,300 shares issued and outstanding 8.875% Series C cumulative redeemable preferred shares, liquidation 16 16 preference $25.00 per share, 1,600,000 shares issued and outstanding Common shares, $0.01 par value per share, 200,000,000 shares 648 607 authorized, 64,783,126 and 61,018,231 issued and outstanding, including 99,721 and 225,440 unvested restricted share awards, respectively Additional paid in capital 1,610,435 1,575,979 Accumulated other comprehensive income (loss) (154,644 ) (440,039 ) Retained earnings (deficit) 224,946 (557,371 ) Total shareholders' equity 1,681,452 579,243 Total liabilities and shareholders' $ 8,973,414 $ 11,057,580 equity

Schedule I RAIT Financial Trust Reconciliation of GAAP Net Income (Loss) Available to Common Shares to Adjusted Earnings (1) (Dollars in thousands, except share and per share amounts) (unaudited) For the Three-Month For the Nine-Month Periods Ended September 30 Periods Ended September 30 2008 2007 2008 2007 Net income (loss) available to common shares, as reported $ (181,690 ) $ (243,591 ) $ 62,876 $ (195,855 ) Add (deduct): Provision for losses 14,992 6,099 50,575 10,662 Depreciation expense 1,665 1,945 4,431 3,816 Amortization of intangible assets 2,883 17,473 16,048 46,051 (Gains) losses on sale of assets (2) (770 ) 7,569 (770 ) 10,329 (Gains) losses on extinguishment of debt -- -- (8,662 ) -- Change in fair value of financial instruments, net of allocation to 183,942 -- (78,409 ) -- minority interest of $(118,303) and $(27,748) for the three-month and nine-month periods ended September 30, 2008, respectively Unrealized (gains) losses on interest rate hedges 290 3,122 275 2,605 Interest cost of hedges, net of allocation to minority interest of (11,238 ) -- (29,144 ) -- $3,850 and $10,201 for the three-month and nine-month periods ended September 30, 2008, respectively Capital losses (3) -- -- 32,059 -- Asset impairments, net of allocation to minority interest of $95,986 18,038 246,968 38,361 246,968 for the three-month and nine-month periods ended September 30, 2007 Share-based compensation 1,237 3,016 5,535 8,753 Write-off of unamortized deferred financing costs -- -- -- 2,985 Fee income deferred (recognized) 257 (5,263 ) 446 27,732 Deferred tax provision (benefit) 17 3,245 1,240 (15,445 ) Adjusted earnings $ 29,623 $ 40,583 $ 94,861 $ 148,601 Weighted-average shares outstanding--Diluted 64,176,083 60,664,698 62,492,475 60,581,559 Adjusted earnings per diluted share $ 0.46 $ 0.67 $ 1.52 $ 2.45

(1) We measure our performance using adjusted earnings in addition to GAAP net income (loss). Adjusted earnings represents net income (loss) available to common shares, computed in accordance with GAAP, before provision for losses, depreciation expense, amortization of intangible assets, (gains) losses on sale of assets, (gains) losses on extinguishment of debt, change in fair value of financial instruments, net of allocation to minority interest, unrealized (gains) losses on interest rate hedges, interest cost of hedges, net of allocation to minority interest, capital (gains) losses, asset impairments, net of allocation to minority interest, net (gains) losses on deconsolidation of VIEs, share-based compensation, write-off of unamortized deferred financing costs, fee income deferred (recognized) and our deferred tax provision (benefit). These items are recorded in accordance with GAAP and are typically non-cash items that do not impact our operating performance or dividend paying ability. Management views adjusted earnings as a useful and appropriate supplement to GAAP net income (loss) because it helps us evaluate our performance without the effects of certain GAAP adjustments that may not have a direct financial impact on our current operating performance and our dividend paying ability. We use adjusted earnings to evaluate the performance of our investment portfolios, our ability to generate fees, our ability to manage our expenses and our dividend paying ability before the impact of non-cash adjustments recorded in accordance with GAAP. We believe this is a useful performance measure for investors to evaluate these aspects of our business as well. The most significant adjustments we exclude in determining adjusted earnings are provision for losses, amortization of intangible assets, change in fair value of financial instruments, capital (gains) losses, asset impairments and share-based compensation. Management excludes all such items from its calculation of adjusted earnings because these items are not charges or losses which would impact our current operating performance or dividend paying ability. By excluding these significant items, adjusted earnings reduces an investor's understanding of our operating performance by excluding: (i) management's expectation of possible losses from our investment portfolio or non-performing assets that may impact future operating performance or dividend paying ability, (ii) the allocation of non-cash costs of generating fee revenue during the periods in which we are receiving such revenue, and (iii) share-based compensation required to retain and incentivize our management team. Adjusted earnings, as a non-GAAP financial measurement, does not purport to be an alternative to net income (loss) determined in accordance with GAAP, or a measure of operating performance or cash flows from operating activities determined in accordance with GAAP as a measure of liquidity. Instead, adjusted earnings should be reviewed in connection with net income (loss) and cash flows from operating, investing and financing activities in our consolidated financial statements to help analyze management's expectation of potential future losses from our investment portfolio and other non-cash matters that impact our financial results. Adjusted earnings and other supplemental performance measures are defined in various ways throughout the REIT industry. Investors should consider these differences when comparing our adjusted earnings to these other REITs. (2) During the nine-month period ended September 30, 2008, we revised our definition of adjusted earnings to exclude capital (gains) losses and gains (losses) on sale of assets. Capital (gains) losses and gains (losses) on sale of assets, while economic gains or losses, do not currently impact operating performance or dividend paying ability. This revision resulted in an increase of $7.6 million and $10.3 million to the computation of adjusted earnings for the three-month and nine-month periods ended September 30, 2007, respectively. (3) During the nine-month period ended September 30, 2008, certain of our warehouse arrangements were terminated. We have recorded the estimated loss of our warehouse deposits as a component of the change in fair value of free-standing derivatives in our consolidated statement of operations.

Schedule II RAIT Financial Trust Reconciliation of Fee and Other Income to Total Fees Generated (1) (Dollars in thousands, except share and per share amounts) (unaudited) For the Three-Month For the Nine-Month Periods Ended Periods Ended September 30 September 30 2008 2007 2008 2007 Fees and other income, as reported $ 5,128 $ 11,325 $ 17,131 $ 20,889 Add (deduct): Asset management fees eliminated 4,208 6,300 12,769 16,538 Deferred structuring fees -- -- -- 11,413 Deferred (recognized) origination fees, net of amortization 257 (5,263 ) 446 16,319 Total Fees Generated $ 9,593 $ 12,362 $ 30,346 $ 65,159

(1) Total Fees Generated represents the total fees generated, without consideration for the deferral of fees, as yield adjustments, in accordance with GAAP. Total fees generated, as a non-GAAP financial measurement, does not purport to be an alternative to fee and other income determined in accordance with GAAP, or a measure of operating performance or cash flows from operating activities determined in accordance with GAAP as a measure of liquidity. Instead, total fees generated is useful to management as a gauge of our cash revenue as it drives earnings at our taxable REIT subsidiaries for distribution to us and ultimately to our shareholders.

Schedule III RAIT Financial Trust Reconciliation of Shareholders' Equity to Economic Book Value (1) (Dollars in thousands, except share and per share amounts) (unaudited) As of As of September 30, 2008 December 31, 2007 Amount Per Share (2) Amount Per Share (2) Shareholders' equity, as reported $ 1,681,452 $ 25.95 $ 579,243 $ 9.49 Add (deduct): Liquidation value of preferred shares (3) (165,458 ) (2.55 ) (165,458 ) (2.71 ) Book Value 1,515,994 23.40 413,785 6.78 Unamortized intangible assets (22,037 ) (0.34 ) (56,123 ) (0.92 ) Tangible Book Value (4) 1,493,957 23.06 357,662 5.86 Unrealized (gains) losses recognized in excess of value at risk (600,032 ) (9.26 ) 284,002 4.66 Economic Book Value $ 893,925 $ 13.80 $ 641,664 $ 10.52

(1) Management views economic book value as a useful and appropriate supplement to shareholders' equity, book value and tangible book value per share. The measure serves as an additional measure of our value because it facilitates evaluation of us without the effects of realized or unrealized (gains) losses on investments in excess of our total investment in that securitization, which is our maximum value at risk. Under GAAP, we record certain of our assets, liabilities and derivatives of our consolidated entities, primarily our consolidated securitizations, at fair value. The net fair value adjustments recognized in our financial statements that reduced our total investment below zero are added back to shareholders' equity in arriving at economic book value and the net fair value adjustments recognized in our financial statements that are in excess of our total investment are deducted from shareholders' equity in arriving at economic book value. In performing these computations, we exclude the impact of unrealized fair value adjustments associated with derivatives on economic book value. Economic book value is a non-GAAP financial measurement, and does not purport to be an alternative to reported shareholders' equity, determined in accordance with GAAP, as a measure of book value. Economic book value should be reviewed in connection with shareholders' equity as set forth in our consolidated balance sheets, to help analyze our value to investors. Economic book value is defined in various ways throughout the REIT industry. Investors should consider these differences when comparing our economic book value to that of other REITs. We do not intend economic book value to represent the fair value of our retained interests in our securitizations or the fair value of our shareholders' equity available to common shareholders. (2) Based on 64,783,126 and 61,018,231 common shares outstanding as of September 30, 2008 and December 31, 2007, respectively. (3) Based on 2,760,000 Series A preferred shares, 2,258,300 Series B preferred shares, and 1,600,000 Series C preferred shares, all of which have a liquidation preference of $25.00 per share. (4) Tangible book value per share is calculated by subtracting the liquidation value of RAIT's cumulative redeemable preferred shares and net intangible assets from total shareholders' equity and dividing the result by the number of common shares outstanding at the end of the period.

SOURCE: RAIT Financial Trust

RAIT Financial Trust Andres Viroslav 215-243-9000 aviroslav@raitft.com