<PAGE>

   As filed with the Securities and Exchange Commission on October 25, 2002.
                              Registration No. 333-

                UNITED STATES SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM S-8
                          REGISTRATION STATEMENT UNDER
                           THE SECURITIES ACT OF 1933

                              RAIT INVESTMENT TRUST
             (Exact name of registrant as specified in its charter)


             Maryland                                   23-2919819
 ------------------------------------               -----------------
   (State or other jurisdiction                      (I.R.S. Employer
 of incorporation or organization)                  Identification No.)

  1818 Market Street, Philadelphia, PA                                19103
------------------------------------------                         ------------
(Address of Principal Executive Offices)                            (Zip Code)

                              AMENDED AND RESTATED
                  RAIT INVESTMENT TRUST 1997 STOCK OPTION PLAN
                            (Full title of the plan)

                               Ellen J. DiStefano
                              RAIT Investment Trust
                         1818 Market Street, 28th Floor
                             Philadelphia, PA 19103
                      ------------------------------------
                     (Name and address of agent for service)

                                 (215) 861-7900
          -------------------------------------------------------------
          (Telephone number, including area code, of agent for service)

                                    Copy to:
                              Anders Laren, Esquire
                            Ledgewood Law Firm, P.C.
                        1521 Locust Street - Eighth Floor
                             Philadelphia, PA 19102
                                 (215) 731-9450
<PAGE>
                         CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
                                           Proposed      Proposed
Title of                                    maximum       maximum
securities               Amount            offering      aggregate           Amount of
to be                    to be             price per     offering          registration
registered            registered (1)        share(2)       price              fee(3)
-----------           -------------        --------      ---------         ------------
<S>                   <C>                  <C>           <C>                <C>
Common shares,
par value
$.01 per
share                 800,000 shares       $19.86        $15,888,000         $1,462
</TABLE>

(1) This Registration Statement also registers additional securities to be
offered or issued upon adjustment or changes made to the registered securities
by reason of any stock splits, stock dividends or similar transactions as
permitted by Rule 416.

(2) Estimated solely for purposes of determining the registration fee in
accordance with Rule 457(h) under the Securities Act of 1933 based upon the
average of the high and low prices of the registrant's common shares as reported
on the New York Stock Exchange on October 18, 2002.

(3) Pursuant to Rule 457(p) under the Securities Act of 1933, filing fees of
$940 paid in connection with RAIT Investment Trust's Registration Statement on
Form S-11 (Registration No. 333-53067, filed May 19, 1998), filed under its
prior name (Resource Asset Investment Trust), with respect to 3,220,000 common
shares, of which 388,100 common shares were not issued, are now being carried
forward to this Registration Statement. An aggregate of $522 is currently
being paid.

                                EXPLANATORY NOTE

RAIT Investment Trust, a Maryland real estate investment trust, previously filed
its Registration Statement on Form S-8 (Registration No. 333-67452) (the
"Initial Registration Statement") with the Securities and Exchange Commission on
August 14, 2001, for the purpose of registering the registrant's common shares,
par value $0.01 per share (the "Common Shares"), issuable upon the exercise of
options granted pursuant to the registrant's Amended and Restated RAIT
Investment Trust 1997 Stock Option Plan (the "Plan"). At the time of the filing
of the Initial Registration Statement, 800,000 Common Shares were authorized for
issuance under the Plan. On July 16, 2002, the shareholders of registrant voted
to approve increasing the size of the Plan by 800,000 Common Shares. Pursuant to
General Instruction E to Form S-8, this Registration Statement incorporates by
reference the contents of the Initial Registration Statement, except as
otherwise set forth herein. This Registration Statement brings the total number
of authorized and registered shares under the Plan to 1,600,000.

As permitted by Rule 429 under the Securities Act of 1933, the resale prospectus
filed together with this Registration Statement shall be deemed to be a combined
resale prospectus which shall also relate to the Common Shares registered on the
registrant's previously filed Initial Registration Statement No. 333-67452 on
Form S-8.
<PAGE>
                                     PART I

                INFORMATION REQUIRED IN SECTION 10(A) PROSPECTUS

ITEM 1. PLAN INFORMATION.

Information required by Part I to be contained in the Section 10(a) prospectus
is omitted from this Registration Statement in accordance with the Introductory
Note to Part I of Form S-8.

ITEM 2. REGISTRANT INFORMATION AND EMPLOYEE PLAN ANNUAL INFORMATION.

Information required by Part I to be contained in the Section 10(a) prospectus
is omitted from this Registration Statement in accordance with the Introductory
Note to Part I of Form S-8.
<PAGE>
RESALE PROSPECTUS

                              RAIT INVESTMENT TRUST

              UP TO 1,600,000 COMMON SHARES OF BENEFICIAL INTEREST

This prospectus is part of a registration statement that we filed with the SEC
on Form S-8. On Form S-8 we registered the common shares of beneficial interest
issuable upon exercise of options granted to our employees and trustees under
our Amended and Restated RAIT Investment Trust 1997 Stock Option Plan. We
sometimes refer to this Stock Option Plan as the "1997 Stock Option Plan".

This prospectus may be used by certain persons who may be deemed to be our
"affiliates" under the securities laws to sell a maximum of 1,600,000 common
shares which have been or may be purchased or acquired by them pursuant to the
1997 Stock Option Plan. These persons include those of our employees and
trustees who are listed on page 28 below as "selling shareholders." We encourage
our employees and trustees to invest in our company through the exercise of
their options. We believe that this prospectus and the registration statement of
which it is a part, which permits resales of shares acquired by our employees
and trustees through option exercises, encourages these exercises by providing
liquidity for their investment. Accordingly, while the selling shareholders may
sell up to the number of common shares listed in the "Common Shares Registered
Under This Prospectus" column opposite their names at any time or from time to
time until the termination of this offering, they are not required to sell any
shares.

Our common shares are listed for trading on the New York Stock Exchange under
the symbol "RAS." For more information on how the selling shareholders may sell
these shares, please read the section of the prospectus entitled "Plan of
Distribution."

YOU SHOULD READ THE SECTION ENTITLED "RISK FACTORS" BEGINNING ON PAGE 3 FOR A
DISCUSSION OF CERTAIN FACTORS YOU SHOULD CONSIDER BEFORE BUYING OUR COMMON
SHARES.

NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE
ADEQUACY OR ACCURACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.

                   This prospectus is dated October 25, 2002.
<PAGE>
                                   OUR COMPANY

GENERAL

RAIT Investment Trust is a real estate investment trust, or REIT, formed under
Maryland law. We conduct our operations through RAIT Partnership, L.P., a
limited partnership that owns substantially all of our assets. Our wholly-owned
subsidiaries, RAIT General, Inc. and RAIT Limited, Inc., are the sole general
partner and sole limited partner, respectively, of RAIT Partnership. We
sometimes refer to RAIT Investment Trust and RAIT Partnership, along with RAIT
General and RAIT Limited, using the words "we," "our" and "us." We have three
principal business activities:

      -     we make real estate loans directly to borrowers,

      -     we acquire real estate loans from others, and

      -     we acquire real properties or interests in real properties.

We seek to generate income for distribution to our shareholders from a
combination of interest, rents, distributions in respect of rents where we own
an equity interest in a real property and proceeds from the sale of our
investments.

Our address is 1818 Market Street, 28th Floor, Philadelphia, Pennsylvania 19103.
Our telephone number is (215) 861-7900.


                                       2
<PAGE>
                                  RISK FACTORS
GENERAL

TRANSACTIONS WITH OUR AFFILIATES MAY RESULT IN CONFLICTS OF INTEREST. We have
relationships with Resource America, Inc., Brandywine Construction & Management,
Inc. and The Bancorp, Inc. which may give rise to conflicts of interest.

We have in the past purchased investments from and sold investments to Resource
America and we anticipate that we will do so in the future, subject to a
limitation contained in our declaration of trust. Our company has in the past
made loans to affiliates of Resource America and we anticipate that we and
Resource America may in the future hold various interests in the same
properties, subject to this limitation.

Jonathan Z. Cohen, our trustee and secretary, is the chief operating officer of
Resource America and currently serves as Resource America's representative on
our board of trustees. Mr. Cohen is the son of Edward E. Cohen, the chairman,
chief executive officer, president and a principal shareholder of Resource
America, and Betsy Z. Cohen, our chairman and chief executive officer. Scott F.
Schaeffer, our president and chief operating officer, is a director of Resource
America.

Brandywine Construction & Management, an affiliate of Resource America, provides
real estate management services to our company.

As part of our regular banking relationships, we place a portion of our
temporary excess cash in short-term money market instruments with The Bancorp
Bank, the wholly-owned banking subsidiary of The Bancorp, Inc. Betsy Z. Cohen is
the chief executive officer and a director of The Bancorp, Inc. and her son, D.
Gideon Cohen, is its chairman. D. Gideon Cohen is also a director of Resource
America.

                            INVESTMENT ACTIVITY RISKS

FINANCING CONSIDERATIONS

THE VALUE OF OUR LOANS DEPENDS ON CONDITIONS BEYOND OUR CONTROL. Loan defaults
will reduce our current return on investment and may require us to become
involved in expensive and time-consuming proceedings, including bankruptcy,
reorganization or foreclosure proceedings. Our primary or sole source of
recovery is typically the real property underlying our loans. Accordingly, the
value of our loans depends upon the value of the underlying real property. This
value may be affected by numerous factors outside our control, including those
described elsewhere in this "Risk Factors - Investment Activity Risks" section.

Our loans typically provide payment structures other than equal periodic
payments that retire a loan over its specified term, including structures that
defer payment of some portion of accruing interest, or defer repayment of
principal, until loan maturity. Where a borrower must pay a loan balance in a
large lump sum payment, its ability to satisfy this obligation may depend upon
its ability to obtain suitable refinancing or otherwise to raise a substantial
cash amount, which we do not control and which may be subject to the same
considerations we describe elsewhere in this "Risk Factors - Investment Activity
Risks" section. In addition, mortgage lenders can lose their lien priority in
many jurisdictions, including those in which our existing loans are located, to
persons who supply labor and materials to a property. For these and other
reasons, the total amount which we may recover from one of our loans may be less
than the total amount of a loan or our cost of acquisition.

LONGER TERM, SUBORDINATE AND NON-CONFORMING LOANS ARE ILLIQUID AND THEIR VALUE
MAY DECREASE. Our mezzanine loans generally have maturities between four and ten
years and typically do not conform to standard loan underwriting criteria. Many
of our loans are subordinate loans. As a result, our loans are relatively
illiquid investments. We may be unable to vary our portfolio promptly in
response to changing economic, financial and investment conditions. As a result,
the fair market value of our portfolio may decrease in the future.

INVESTMENT IN SUBORDINATE LOANS MAY INVOLVE INCREASED RISK OF LOSS. We emphasize
junior lien loans and other forms of subordinated financing, including
wraparound loans. Because of their subordinate position, junior lien loans carry
a greater credit risk than senior lien financing, including a substantially
greater risk of non-payment of


                                       3
<PAGE>
interest or principal. Where, as part of a financing structure, we take an
equity or other unsecured position, our risk of loss may be materially
increased. A decline in the real estate market could adversely affect the value
of the property so that the aggregate outstanding balances of senior liens may
exceed the value of the underlying property. In the event of a default on a
senior loan, we may elect to make payments, if we have the right to do so, in
order to prevent foreclosure on the senior loans. In the event of foreclosure,
as a junior lienor we will be entitled to share in foreclosure proceeds only
after satisfaction of the amounts due to senior lienors, which may result in our
being unable to recover the full amount, or any, of our investment. It is also
possible that, in some cases, a "due on sale" clause included in a senior
mortgage, which accelerates the amount due under the senior mortgage in case of
the sale of the property, may apply to the sale of the property if we foreclose,
increasing our risk of loss.

When we acquire a junior loan, we may not acquire the right to service senior
loans. The servicers of the senior loans are responsible to the holders of those
loans, whose interests will likely not coincide with ours, particularly in the
event of a default. Accordingly, the senior loans may not be serviced in a
manner advantageous to us.

Certain of our loans may not be collateralized by recorded or perfected liens.
Certain of our loans may instead be secured by deeds-in-lieu of foreclosure,
also known as "pocket deeds." A deed-in-lieu of foreclosure is a deed executed
in blank that the holder is entitled to record immediately upon a default in the
loan. Loans that are not collateralized by recorded or perfected liens are
subordinate not only to existing liens encumbering the underlying property, but
also to future judgment or other liens that may arise as well as to the claims
of general creditors of the borrower. Furthermore, in a bankruptcy, we will have
materially fewer rights than secured creditors and, if our loan is secured by
equity interests in the borrower, than the borrower's general creditors. Our
rights also will be subordinate to the lien-like rights of the bankruptcy
trustee. Moreover, enforcement of our loans against the underlying properties
will involve a longer, more complex, and likely, more expensive legal process
than enforcement of a mortgage loan.

LOANS SECURED BY INTERESTS IN ENTITIES OWNING REAL PROPERTY MAY INVOLVE
INCREASED RISK OF LOSS. We may originate or acquire loans secured by interests
in entities that own real properties rather than by a direct security interest
in the underlying properties. These loans may be illiquid or otherwise have
features that may make it difficult for us to obtain a return of our investment
in the event of a default. Loans secured by equity interests in any borrower
will be subordinated not only to existing liens encumbering the underlying
property but also to future judgment or other liens that may arise as well as to
the claims of general creditors of the borrower.

INVESTMENT IN NON-CONFORMING LOANS MAY INVOLVE INCREASED RISK OF LOSS. Loans we
acquire generally do not conform to conventional loan criteria due to past
defaults by borrowers. These defaults typically result from lack of a strong
operating history for the properties underlying the loans, the borrowers'
historical credit problems, the properties' underlying cash flow problems or
other factors. As a result, loans we acquire may have a higher risk of default
and loss than conventional loans. Any loss we incur may reduce distributions to
shareholders or adversely affect the value of our securities.

DISCOUNTED LOANS MAY HAVE HIGH RATES OF DEFAULT. We acquire loans at a discount
from both the outstanding balances of the loans and the appraised value of the
properties underlying the loans. Typically, discounted loans are in default
under the original loan terms or other requirements and subject to forbearance
agreements. A forbearance agreement typically requires a borrower to pay to the
lender all revenue from a property after payment of the property's operating
expenses in return for the lender's agreement to withhold exercising its rights
under the loan documents. Acquiring loans at a discount involves a substantially
higher degree of risk of non-collection than loans that conform to institutional
underwriting criteria. We do not acquire a loan unless material steps have been
taken toward resolving problems with the loan, or its underlying property.
However, previously existing problems may recur or other problems may arise.

FINANCING WITH HIGH LOAN-TO-VALUE RATIOS MAY INVOLVE INCREASED RISK OF LOSS. We
anticipate that most of our financings will have loan-to-value ratios in excess
of 80% and that many of our financings will have loan-to-value ratios in excess
of 90%. A loan-to-value ratio is the ratio of the amount of our financing, plus
the amount of any senior indebtedness, to the appraised value of the property
underlying the loan. By reducing the margin available to cover fluctuations in
property value, a high loan-to-value ratio increases the risk that, upon
default, the amount obtainable from sale of the underlying property may be
insufficient to repay the financing.


                                       4
<PAGE>
INTEREST RATE CHANGES MAY ADVERSELY AFFECT OUR INVESTMENTS. Changes in interest
rates affect the market value of our loan portfolio. In general, the market
value of a loan will change in inverse relation to an interest rate change where
a loan has a fixed interest rate or only limited interest rate adjustments.
Accordingly, in a period of rising interest rates, the market value of such a
loan will decrease. Moreover, in a period of declining interest rates, real
estate loans may have less value than other fixed income securities due to
possible prepayments. Interest rate changes will also affect the return we
obtain on new loans. In particular, during a period of declining rates, our
reinvestment of loan repayments may be at lower rates than we obtained in prior
investments or on the repaid loans. Also, increases in interest on debt we incur
may not be reflected in increased rates of return on the investments funded
through such debt, which would adversely affect our return on those investments.
Accordingly, interest rate changes may materially affect the total return on our
investment portfolio, which in turn will affect the amount available for
distribution to shareholders.

LACK OF GEOGRAPHIC DIVERSIFICATION EXPOSES OUR INVESTMENTS TO A HIGHER RISK OF
LOSS FROM REGIONAL ECONOMIC FACTORS. We emphasize financing properties located
in the Philadelphia, Pennsylvania metropolitan area, the Baltimore/Washington
corridor and Florida. While we have no specific geographic limitations on where
we may invest, we anticipate that our loans will continue to be concentrated in
the Philadelphia region, the Baltimore/Washington corridor and Florida for the
foreseeable future. This lack of geographic diversification may make our loan
portfolio more sensitive to economic developments of a primarily regional
nature, which may result in reduced rates of return or higher rates of default
than might be incurred with a more geographically diverse investment portfolio.

WE MAY NOT OBTAIN APPRECIATION INTERESTS AT THE RATE WE SEEK, OR AT ALL; WE MAY
NOT BENEFIT FROM APPRECIATION INTERESTS WE DO OBTAIN. In addition to an agreed
upon interest rate, we seek to obtain appreciation interests from our borrowers.
Appreciation interests require a borrower to pay us additional amounts based
upon a property's increase in value, increase in revenues or both. While we seek
appreciation interests at rates of at least 25%, we may not be able to obtain
these rates. Moreover, we may not be able to negotiate appreciation interest
provisions in any of our loans. In addition, while we have sought to structure
the interest rates on our existing loans to maximize our current yield, we may
in the future accept a lower interest rate to obtain an appreciation interest.
The value of any appreciation interest depends on the performance and value of
the property underlying the loan and, thus, is subject to real estate investment
risks. Accordingly, we may not realize any benefits from our appreciation
interests. We do not anticipate receiving significant amounts from our
appreciation interests in the early years of our loans.

APPRECIATION INTERESTS MAY CAUSE LOSS OF THE PRIORITY OF OUR LIEN. Because
appreciation interests allow us to participate in the increase in a property's
value or revenue, courts, including a court in a bankruptcy, arrangement or
similar proceeding, may determine that we should be treated as a partner of, or
joint venturer with, the borrower. If a court makes that determination, we could
lose our lien priority in the property or lose any benefit of our lien.

THE COMPETITION FOR FINANCING MAY INHIBIT OUR ABILITY TO ACHIEVE OUR OBJECTIVES.
We may encounter significant competition from banks, insurance companies,
savings and loan associations, mortgage bankers, pension funds, investment
bankers and others, including public or private real estate investment trusts,
or REITs. This competition could reduce our yields and make it more difficult to
obtain appreciation interests. It may also increase the price, and thus reduce
potential yields, on discounted loans we acquire. Most of our competitors have
substantially greater assets than we do. As such, they have the ability to make
larger loans to more creditworthy borrowers and to have a more diversified loan
portfolio, which reduces the risk of loss from any one loan. An increase in the
general availability of funds to lenders, or a decrease in the amount of
borrowing activity, may increase competition for making loans and may reduce
obtainable yields or increase the credit risk inherent in the available loans.

LENGTHY LOAN COMMITMENT PERIODS MAY REDUCE OUR RETURNS. We typically issue a
loan commitment to a borrower before making the loan. From the time the funds
are committed until the loan is closed and the funds disbursed, we hold the
funds in temporary investments, which typically do not produce substantial
investment returns. If there is a substantial period between loan commitment and
loan closing, or if a borrower determines not to use our financing, our
investment returns will be adversely affected.

USURY STATUTES MAY IMPOSE INTEREST CEILINGS AND SUBSTANTIAL PENALTIES FOR
VIOLATIONS. Interest we charge on our loans, which may include amounts received
from appreciation interests, may be subject to state usury laws. These laws
impose maximum interest rates that may be charged on loans and penalties for
violation, including repayment of excess interest and unenforceability of debt.
We seek to structure our loans so that we do not violate applicable


                                       5
<PAGE>
usury laws, but uncertainties in determining the legality of interest rates and
other borrowing charges under some statutes may result in inadvertent
violations.

REAL PROPERTY CONSIDERATIONS

THE VALUE OF OUR PROPERTY INTERESTS DEPENDS ON CONDITIONS BEYOND OUR CONTROL.
Although we emphasize originating or acquiring loans, we have acquired property
interests in the past and anticipate that we will acquire more in the future.
Real property investments are subject to varying degrees of risk. Yields from
our real properties depend on their net income and capital appreciation. Income
from, and appreciation of, our properties may be adversely affected by general
and local economic conditions, neighborhood values, competitive overbuilding,
weather, casualty losses and other factors beyond our control. The value of real
properties may also be affected by factors such as the cost of compliance with
regulations and liability under applicable environmental laws, changes in
interest rates and the availability of financing. Income from a property will be
adversely affected if a significant number of tenants are unable to pay rent or
if available space cannot be rented on favorable terms. Operating and other
expenses of our properties, particularly significant expenses such as mortgage
payments, real estate taxes and maintenance costs, generally do not decrease
when income decreases and, even if revenues increase, operating and other
expenses may increase faster than revenues.

PROPERTY INTERESTS ARE ILLIQUID AND THEIR VALUE MAY DECREASE. Real estate
investments are relatively illiquid. Therefore, we may have only a limited
ability to vary our portfolio of property interests quickly in response to
changes in economic or other conditions. As a consequence, the fair market value
of some or all of our property interests may decrease in the future. In
addition, provisions in the Internal Revenue Code and related regulations impose
a 100% tax on gain realized by a REIT like us from property held primarily for
sale to customers in the ordinary course of business. These provisions may
materially adversely affect our ability to sell property interests. For a
discussion of federal income tax considerations in selling a property interest,
you should read "Risk Factors - Legal and Tax Risks - Gain on disposition of
assets deemed held for sale in ordinary course subject to 100% tax."

UNINSURED AND UNDERINSURED LOSSES MAY AFFECT THE VALUE OF, OR OUR RETURN FROM,
OUR PROPERTY INTERESTS. Our properties, and the properties underlying our loans,
have comprehensive insurance in amounts we believe sufficient to permit the
replacement of the properties in the event of a total loss, subject to
applicable deductibles. There are, however, certain types of losses, such as
earthquakes, floods and hurricanes, that may be uninsurable or not economically
insurable. Also, inflation, changes in building codes and ordinances,
environmental considerations and other factors might make it impractical to use
insurance proceeds to replace a damaged or destroyed property. If any of these
or similar events occurs, it may reduce our return from an affected property and
the value of our investment.

WE MAY HAVE LESS CONTROL OF OUR INVESTMENT WHEN WE INVEST IN JOINT VENTURES,
PARTNERSHIPS OR SIMILAR REAL PROPERTY INTERESTS. Our acquisition of equity
interests in entities which own real property provides risks not present in real
property loans or direct property ownership. For example, the other equity
owners in the entity holding the property might have economic or business
interests or goals which are inconsistent with our business interests or goals
and may be in a position to take action contrary to our instructions or to our
policies and objectives. Moreover, if we are a limited partner in a limited
partnership and have rights allowing us control over the partnership or its
property, we may be deemed to be a general partner and liable for the debts of
the partnership beyond the amount of our investment.

REAL PROPERTIES WITH ENVIRONMENTAL PROBLEMS MAY CREATE LIABILITY FOR US. The
existence of hazardous or toxic substances on a property will adversely affect
its value and our ability to sell or borrow against the property. Contamination
of a real property by hazardous substances or toxic wastes not only may give
rise to a lien on that property to assure payment of the cost of remediation,
but also can result in liability to us, as owner, operator or lender, for that
cost. Many environmental laws can impose liability whether we know of, or are
responsible for, the contamination. In addition, if we arrange for the disposal
of hazardous or toxic substances at another site, we may be liable for the costs
of cleaning up and removing those substances from the site, even if we neither
own nor operate the disposal site. Environmental laws may require us to incur
substantial expenses, may materially limit our use of our properties and may
adversely affect our ability to make distributions to our shareholders. In
addition, future or amended laws, or more stringent interpretations or
enforcement policies with respect to existing environmental requirements, may
increase our exposure to environmental liability.


                                       6
<PAGE>
COMPLIANCE WITH AMERICANS WITH DISABILITIES ACT MAY ADVERSELY AFFECT OUR
FINANCIAL CONDITION. Under the Americans with Disabilities Act of 1990, all
public accommodations must meet federal requirements for access and use by
disabled persons. We believe that our properties, and those underlying our
loans, substantially comply with the requirements of the Americans with
Disabilities Act. However, a determination that these properties do not comply
with the Americans with Disabilities Act could result in liability for both
governmental fines and damages to private parties. If we or our borrowers were
required to make unanticipated major modifications to comply with the Americans
with Disabilities Act, it could adversely affect our ability to make
distributions to our shareholders.

OTHER INVESTMENT ACTIVITY CONSIDERATIONS

LEVERAGE CAN REDUCE INCOME AVAILABLE FOR DISTRIBUTION AND CAUSE LOSSES. Our
declaration of trust does not limit the amount of indebtedness we may incur.
Using leverage, whether with recourse to us generally or only with respect to a
particular property, to acquire investments creates an opportunity for increased
net income, but at the same time creates risks. For example, leverage can reduce
the net income available for distributions to shareholders in periods of rising
interest rates where interest rate increases are greater than increases in the
rates of return on our investments. We use leverage to acquire investments only
when we believe it will enhance our returns. However, we cannot be sure that our
use of leverage will prove to be beneficial. Moreover, when our debt is secured
by our assets, we can lose some or all or our assets through foreclosure if we
do not meet our debt service obligations.

LACK OF DIVERSIFICATION IN NUMBER OF OUR INVESTMENTS INCREASES OUR DEPENDENCE ON
INDIVIDUAL INVESTMENTS. Although we generally invest between $2.0 million and
$30.0 million in a loan or property interest, our declaration of trust does not
limit the size of our investments. If we acquire larger loans or property
interests, our portfolio will be concentrated in a smaller number of assets,
increasing the risk of loss to shareholders if a default or other problem
arises.

LEGAL AND TAX RISKS

WE WILL BE TAXED AS A REGULAR CORPORATION IF WE FAIL TO MAINTAIN OUR REIT
STATUS. We have operated and intend to continue to operate in a manner that
permits us to qualify as a REIT for federal income tax purposes. However, the
federal income tax laws governing REITs are complex, and we have not obtained a
ruling from the Internal Revenue Service about our status as a REIT. We have
received an opinion of counsel that we qualify as a REIT based on our current
operations and on certain assumptions and representations concerning future
operations. Opinions of counsel are not binding on the Internal Revenue Service
or any court. The opinion only represents the view of counsel based on counsel's
review and analysis of existing law. Furthermore, our continued qualification as
a REIT will depend on our satisfaction of the asset, income, organizational,
distribution and shareholder ownership requirements of the Internal Revenue Code
on a continuing basis.

If we fail to qualify as a REIT in any taxable year, we will be subject to
federal income tax, including any applicable alternative minimum tax, on our
taxable income at regular corporate rates, and distributions to shareholders
would not be deductible in computing our taxable income. Corporate tax liability
will reduce the amount of cash available for distribution to our shareholders
which, in turn, may reduce the trading prices of our common shares. Unless
entitled to relief under certain Internal Revenue Code provisions, we also would
be disqualified from taxation as a REIT for the four taxable years following the
year during which we ceased to qualify as a REIT.

"PHANTOM INCOME" MAY REQUIRE US TO BORROW OR SELL ASSETS TO MEET REIT
DISTRIBUTION REQUIREMENTS. We must distribute at least 90% of our annual net
taxable income, excluding any net capital gain or retained capital gain, in
order to maintain our REIT status. For years before 2001, we were required to
distribute 95% of this income. In addition, we will be subject to a 4%
nondeductible excise tax on the amount, if any, by which our distributions in
any calendar year are less than the sum of:

      -     85% of our ordinary income for that year,

      -     95% of our capital gain net income for that year, and

      -     100% of our undistributed taxable income from prior years.


                                       7
<PAGE>
We have complied and intend to continue to comply with these distribution
requirements. However, in some instances, the structure of our loans may require
us to recognize income for federal income tax purposes even though we do not
receive corresponding cash payments. This income recognition, in turn, increases
the amount that we must distribute in order to avoid corporate income tax for
that year unless there is an equivalent amount of deductions that do not require
expenditures of cash, such as depreciation on owned real estate. The four
principal ways in which this "phantom income" may arise for us are:

      -     Origination or acquisition of loans, including loans with
            appreciation interests, that may be deemed to have original issue
            discount for federal income tax purposes. Original issue discount is
            generally equal to the difference between an obligation's issue
            price and its stated redemption price at maturity. We must recognize
            as income in each year the portion of the original issue discount
            that accrues during that year, even though we do not receive cash in
            that year in the amount of the original issue discount.

      -     Accruing interest with respect to a loan at a rate greater than the
            rate at which we receive interest. In particular, this may happen
            where the rate at which interest is paid on a loan is less than the
            stated rate.

      -     Origination or acquisition of wraparound loans under which we
            receive payments of principal and interest that do not coincide with
            the payments of principal and interest on underlying senior loans.
            Even if, as expected, we obtain positive cash flow from the
            transaction, the amount of principal we pay on the senior
            obligations may exceed the amount of principal we receive from the
            obligor on the wraparound loan, and the amount of interest we may
            receive from the obligor may exceed the amount of interest we pay on
            the senior obligations. This could create a situation where our
            taxable income exceeds our cash flow from the wraparound loan.

      -     REIT taxable income in excess of cash received may also arise in
            connection with some property sales and where a significant
            modification is made to a loan. In addition, we may purchase loans
            relating to our property interests. To the extent we purchase these
            loans at a discount, the purchase may give rise to phantom income
            without any related receipt of cash.

If any of the above circumstances occur, it could require us, in order to avoid
corporate income tax and the nondeductible excise tax, to borrow funds, sell
assets at times which may not be advantageous to us, distribute amounts that
represent a return of capital, or distribute amounts that would otherwise be
spent on future acquisitions, unanticipated capital expenditures or repayment of
debt. To offset these risks, we have invested and intend to continue to invest,
as appropriate, in property interests so that the non-cash depreciation
deductions associated with these investments may help offset our non-cash
income.

ORIGINATION FEES WE RECEIVE WILL NOT BE REIT QUALIFYING INCOME. Any origination
fees we receive will not be qualifying income for purposes of the 75% or 95%
gross income tests applicable to REITs under the Internal Revenue Code. For a
description of these tests, you should read the prospectus section "Federal
Income Tax Consequences of Our Status as a REIT - Income Tests." We typically
receive initial payments, or "points," from borrowers as commitment fees or
additional interest. So long as the payment is for the use of money, rather than
for services provided by us, we believe that this income should not be
classified as non-qualifying origination fees. However, the Internal Revenue
Service may seek to reclassify this income as origination fees instead of
commitment fees or interest. If we cannot satisfy the Internal Revenue Code's
income tests as a result of a successful challenge of our classification of this
income, we may not qualify as a REIT.

INCOME FROM CERTAIN LOANS MAY NOT BE REIT QUALIFYING INCOME. Certain of our
loans may only be indirectly secured by real property. We may acquire or
originate similar loans in the future. We may also originate junior loans where
a senior loan does not permit us to record a mortgage against the underlying
property or substantially restricts our rights as a junior secured lender. In
these situations, the Internal Revenue Service may conclude that interest on our
loans does not constitute interest from obligations "secured by mortgages on
real property or on interests in real property." As a result, interest from
these sources would not in those circumstances qualify for purposes of the 75%
gross income test. For a description of this test, you should read the
prospectus section "Federal Income Tax Consequences of Our Status as a REIT -
Income Tests."


                                       8
<PAGE>
GAIN ON DISPOSITION OF ASSETS DEEMED HELD FOR SALE IN ORDINARY COURSE SUBJECT TO
100% TAX. If we sell any of our assets, the Internal Revenue Service may
determine that the sale is a disposition of an asset held primarily for sale to
customers in the ordinary course of a trade or business. Gain from this kind of
sale generally will be subject to a 100% tax. Whether an asset is held
"primarily for sale to customers in the ordinary course of a trade or business"
depends on the particular facts and circumstances of the sale. Although we will
attempt to comply with the terms of safe-harbor provisions in the Internal
Revenue Code prescribing when asset sales will not be so characterized, we
cannot assure you that we will be able to do so.

LOSS OF OUR INVESTMENT COMPANY ACT EXEMPTION WOULD AFFECT US ADVERSELY. We
believe that we are not an investment company under the Investment Company Act
and intend to conduct our operations so that we do not become an investment
company. The Investment Company Act exempts from its registration requirements
entities that, directly or through majority-owned subsidiaries, are "primarily
engaged in the business of purchasing or otherwise acquiring mortgages and other
liens on and interests in real estate." Under current SEC interpretations, in
order to qualify for a "no-action" position from the SEC with respect to the
availability of this exemption, at least 55% of our assets must be invested in
these liens and interests and we may be required to invest an additional 25% in
these types of liens and interests or in other "real estate type" assets.

We believe that, generally, a loan will be considered to be a mortgage or other
lien on real estate if we obtain foreclosure rights. We typically seek to obtain
these rights in our loans. We have not, however, obtained an exemptive order,
no-action letter or other form of interpretive guidance from the SEC on this
position. If the SEC takes a different position, our portfolio may not have a
composition that allows us to qualify under the exemption we claim. If we do not
qualify, we must either change our operations and our asset composition to claim
the exemption or register as an investment company. Either alternative could
adversely affect us and the market price of our shares.

OUR BOARD OF TRUSTEES MAY CHANGE OUR POLICIES WITHOUT SHAREHOLDER CONSENT. Our
board of trustees determines our policies and, in particular, our investment
policies. Our board of trustees may amend or revise our policies or approve
transactions that deviate from these policies without a vote of or notice to the
shareholders. Policy changes could adversely affect the market price of our
shares and our ability to make distributions. Our board of trustees cannot take
any action to disqualify us as a REIT or to otherwise revoke our election to be
taxed as a REIT without the approval of a majority of the number of our shares
of beneficial interest entitled to vote on such matter.

OUR OWNERSHIP LIMITATION MAY RESTRICT BUSINESS COMBINATION OPPORTUNITIES. To
qualify as a REIT under the Internal Revenue Code, no more than 50% in value of
our outstanding capital shares may be owned, directly or indirectly, by five or
fewer individuals during the last half of each taxable year. To preserve our
REIT qualification, our declaration of trust generally prohibits any person from
owning more than 8.3% or, with respect to Resource America, 15%, of our
outstanding common shares and provides that:

      -     A transfer that violates the limitation is void.

      -     A transferee gets no rights to the shares that violate the
            limitation.

      -     Shares acquired that violate the limitation transfer automatically
            to a trust whose trustee has all voting and other rights.

      -     Shares in the trust will be sold and the record holder will receive
            the net proceeds of the sale.

The ownership limitation may discourage a takeover or other transaction that our
shareholders believe to be desirable.

PREFERRED SHARES MAY PREVENT CHANGE IN CONTROL. Our declaration of trust
authorizes our board of trustees to issue preferred shares, to establish the
preferences and rights of any preferred shares issued, to classify any unissued
preferred shares and reclassify any previously classified but unissued preferred
shares, without shareholder approval. The issuance of preferred shares could
delay or prevent a change in control, apart from the ownership limitation, even
if a majority of our shareholders want control to change.


                                       9
<PAGE>
MARYLAND ANTI-TAKEOVER STATUTES MAY RESTRICT BUSINESS COMBINATION OPPORTUNITIES.
As a Maryland REIT, we are subject to various provisions of Maryland law which
impose restrictions and require that specified procedures be followed with
respect to the acquisition of "control shares" representing at least ten percent
of our aggregate voting power and certain takeover offers and business
combinations, including, but not limited to, combinations with persons who own
one-tenth or more of our outstanding shares. While we have elected to "opt out"
of the control share acquisition statute, our board of trustees has the right to
rescind the election at any time without notice to the shareholders.


                                       10
<PAGE>
                    CERTAIN PROVISIONS OF MARYLAND LAW AND OF
                       OUR DECLARATION OF TRUST AND BYLAWS

BOARD OF TRUSTEES

Our declaration of trust requires that we have no fewer than three nor more than
nine trustees. A majority of our trustees must be "independent trustees." The
declaration of trust defines an independent trustee as one who, during the
preceding two years, has not

      -     been an affiliate of Resource America, Brandywine Construction &
            Management or their affiliates,

      -     been one of our officers, or

      -     had a material business or professional relationship with us,
            Resource America, Brandywine Construction & Management or their
            affiliates.

We currently have seven trustees, of whom four are independent trustees. The
trustees may increase or decrease the number of trustees by a majority vote;
however, the number of trustees may be increased above nine or decreased below
three only by a vote of at least 75% of the trustees then in office, and the
term of office of a trustee may not be affected by a decrease in the authorized
number of trustees. Any vacancy, including one created by an increase in the
number of trustees, may be filled by a majority of the remaining trustees,
except that independent trustees must nominate replacements for vacancies in
independent trustee positions.

Our declaration of trust provides that a trustee may be removed by a two-thirds
vote of our outstanding voting shares. This provision may operate to make it
impractical for shareholders to remove incumbent trustees and fill the vacancies
created by such removal with their own nominees.

BUSINESS COMBINATIONS

Under Maryland law, certain "business combinations" between us and any person
who beneficially owns, directly or indirectly, 10% or more of the voting power
of our shares, an affiliate of ours who, at any time within the previous two
years was the beneficial owner of 10% or more of the voting power of our shares,
whom the statute terms an "interested shareholder," or an affiliate of an
interested shareholder, are prohibited for five years after the most recent date
on which an "interested shareholder" became an interested shareholder. The
business combinations subject to this law include principally mergers,
consolidations, share exchanges or, in certain circumstances, asset transfers or
issuances or reclassifications of equity securities. After the five year period
has elapsed, a proposed business combination must be recommended by the board of
trustees and approved by the affirmative vote of at least

      -     80% of our outstanding voting shares, and

      -     two-thirds of our outstanding voting shares, excluding shares held
            by the interested shareholder

unless, among other conditions, the shareholders receive a minimum price, as
defined by Maryland law, for their shares and the consideration is received in
cash or in the same form as previously paid by the interested shareholder for
its shares. These provisions do not apply, however, to business combinations
that are approved or exempted by the board of trustees prior to the time that
the interested shareholder becomes an interested shareholder.

CONTROL SHARE ACQUISITIONS

Maryland law provides that "control shares" acquired in a "control share
acquisition" have no voting rights unless approved by a vote of two-thirds of
our outstanding voting shares, excluding shares owned by the acquiror or by
officers or trustees who are employees of ours. "Control shares" are voting
shares which, if aggregated with all other shares previously acquired by the
acquiring person, or in respect of which the acquiring person is able to
exercise or direct the exercise of voting power, except solely by virtue of a
revocable proxy, would entitle the acquiring person to exercise voting power in
electing trustees within one of the following ranges of voting power:


                                       11
<PAGE>
      -     one-tenth or more but less than one-third;

      -     one-third or more but less than a majority; or

      -     a majority of all voting power.

Control shares do not include shares the acquiring person is then entitled to
vote as a result of having previously obtained shareholder approval. A "control
share acquisition" means the acquisition of control shares, subject to certain
exceptions.

A person who has made or proposes to make a control share acquisition, upon
satisfaction of certain conditions, including an undertaking to pay expenses,
may compel our board of trustees to call a special meeting of shareholders to be
held within 50 days of demand to consider the voting rights of the shares. If no
request for a meeting is made, we may present the question at any shareholders'
meeting.

If voting rights are not approved at the shareholders' meeting or if the
acquiring person does not deliver an acquiring person statement as required by
Maryland law, then, subject to certain conditions and limitations, we may redeem
any or all of the control shares, except those for which voting rights have
previously been approved, for fair value. Fair value is determined without
regard to the absence of voting rights for the control shares and as of the date
of the last control share acquisition or of any meeting of shareholders at which
the voting rights of such shares were considered and not approved. If voting
rights for control shares are approved at a shareholders' meeting, and the
acquiror may then vote a majority of the shares entitled to vote, all other
shareholders may exercise appraisal rights. The fair value of the shares for
purposes of these appraisal rights may not be less than the highest price per
share paid by the acquiror in the control share acquisition. The control share
acquisition statute does not apply to shares acquired in a merger, consolidation
or share exchange if we are a party to the transaction, nor does it apply to
acquisitions approved or exempted by our declaration of trust or bylaws from the
Maryland control share acquisition statute.

Our bylaws exempt from the Maryland control share acquisition statute any and
all acquisitions of our common or preferred shares by any person. The board of
trustees has the right, however, to amend or eliminate this exemption at any
time in the future.

AMENDMENT OF OUR DECLARATION OF TRUST AND BYLAWS

Our declaration of trust may be amended by a majority vote of our outstanding
voting shares except that provisions relating to the trustees, the ownership
limitation, amendments to the declaration of trust and our dissolution and
termination may only be amended by a two-thirds vote of our outstanding voting
shares. The board of trustees may amend the declaration of trust by a two-thirds
vote, without any action by our shareholders, to allow us to qualify, or
continue our qualification, as a REIT and, by a majority vote, to increase or
decrease the aggregate number of our authorized shares, to establish any series
of our shares or to decrease or increase the number of shares in any class that
we have authority to issue. Our bylaws may be amended only by the board of
trustees.

MEETINGS OF SHAREHOLDERS

Our declaration of trust provides for annual shareholder meetings to elect
trustees. Special shareholder meetings may be called by our chairman, chief
executive officer, president or board of trustees and must be called at the
written request of persons holding 50% or more of our outstanding voting shares.

ADVANCE NOTICE OF NOMINATIONS OF TRUSTEES AND NEW BUSINESS

At any annual meeting of shareholders, the nomination of trustees for election
and business proposed to be considered may be made only by the board of trustees
or by a shareholder who has complied with the advance notice procedures set
forth in the bylaws. At any special meeting of shareholders, only the business
specified in the notice of meeting may be brought before the meeting.


                                       12
<PAGE>
DISSOLUTION

Shareholders may elect to dissolve our company by a vote of two-thirds of our
outstanding voting shares.

INDEMNIFICATION; LIMITATIONS OF TRUSTEES' AND OFFICERS' LIABILITY

Our declaration of trust limits the liability of our trustees and officers for
money damages, except for liability resulting from

      -     actual receipt of an improper benefit or profit in money, property
            or services; or

      -     a final judgment based upon a finding of active and deliberate
            dishonesty by the trustee that was material to the cause of action
            adjudicated.

Our declaration of trust authorizes us, to the maximum extent permitted by
Maryland law, to indemnify, and to pay or reimburse reasonable expenses to, any
of our present or former shareholders, trustees or officers or any individual
who, while a trustee, and at our request, serves or has served another
corporation, partnership, joint venture, trust, employee benefit plan or any
other enterprise as a trustee, director, officer, partner or otherwise. The
indemnification covers any claim or liability against the person.

Maryland law permits a Maryland REIT to indemnify and advance expenses to its
trustees, officers, employees and agents to the same extent Maryland law permits
corporations to indemnify and reimburse the expenses of their directors and
officers. Maryland law permits a corporation to indemnify its present and former
directors and officers against liabilities and reasonable expenses actually
incurred by them in any proceeding unless

      -     the act or omission of the director or officer was material to the
            matter giving rise to the proceeding, and

      -     was committed in bad faith or

      -     was the result of active and deliberate dishonesty; or

      -     in a criminal proceeding, the director or officer had reasonable
            cause to believe that the act or omission was unlawful.

However, a Maryland corporation may not indemnify for an adverse judgment in a
derivative action. Our bylaws require us, as a condition to advancing expenses,
to obtain

      -     a written affirmation by the trustee or officer of his or her good
            faith belief that he or she has met the standard of conduct
            necessary for indemnification, and

      -     a written undertaking to repay the amount reimbursed if the standard
            of conduct was not met.

INDEMNIFICATION AGREEMENTS

We have indemnification agreements with each of our executive officers and
trustees. The indemnification agreements require us to indemnify our executive
officers and trustees to the fullest extent permitted by law and to advance all
related expenses, subject to reimbursement if it is subsequently determined that
indemnification is not permitted. Under the agreements, we must also indemnify
and advance all expenses incurred by executive officers and trustees seeking to
enforce their rights under the indemnification agreements and may cover
executive officers and trustees under any trustees' and officers' liability
insurance. Although the form of indemnification agreement offers substantially
the same scope of coverage afforded by the declaration of trust, bylaws and
Maryland law, it provides greater assurance to trustees and executive officers
that indemnification will be available because, as a contract, it cannot be
modified unilaterally in the future by the board of trustees or the
shareholders to eliminate the rights it provides.


                                       13
<PAGE>
POSSIBLE ANTI-TAKEOVER EFFECT OF CERTAIN PROVISIONS OF MARYLAND LAW AND OF OUR
DECLARATION OF TRUST AND BYLAWS

The provisions of our declaration of trust regarding the removal of trustees and
the restrictions on the transfer of shares, the advance notice provisions of the
bylaws and the business combination provisions of Maryland law, could have the
effect of delaying, deferring or preventing a transaction or a change in control
that might involve a premium price for shareholders or that they otherwise may
believe to be desirable. Also, if the board of trustees rescinds the provisions
of the bylaws electing not to be governed by the control share acquisition
statute, that statute could have a similar effect.

             FEDERAL INCOME TAX CONSEQUENCES OF OUR STATUS AS A REIT

This section summarizes the federal income tax issues that an investor in our
common shares may consider relevant. Because this section is a summary, it does
not address all of the tax issues that may be important to you. In addition,
except to the extent discussed in "--Taxation of Tax-Exempt Shareholders," and
"--Taxation of Non-U.S. Shareholders," below, this section does not address tax
issues that may be important to certain types of investors that are subject to
special treatment under the federal income tax laws, such as insurance
companies, tax-exempt organizations, financial institutions or broker-dealers,
and non-U.S. individuals and foreign corporations.

The statements in this section are based on current federal income tax laws
governing qualification as a REIT. We cannot assure you that new laws,
interpretations of law or court decisions, any of which may take effect
retroactively, will not cause any statement in this section to be inaccurate.

We urge you to consult your own tax advisor regarding the specific tax
consequences to you of investing in our common shares and of our election to be
taxed as a REIT. Specifically, you should consult your own tax advisor regarding
the federal, state, local, foreign, and other tax consequences of an investment
and our election, and regarding potential changes in applicable tax laws.

TAXATION

We elected to be taxed as a REIT under the federal income tax laws commencing
with our short taxable year ended December 31, 1998. We believe that we have
operated in a manner qualifying us as a REIT since our election to be a REIT and
we intend to continue so to operate. This section discusses the laws governing
the federal income tax treatment of a REIT and its shareholders. These laws are
highly technical and complex.

Our qualification as a REIT depends on our ability to meet on a continuing basis
qualification tests set forth in the federal tax laws. Those qualification tests
involve the percentage of income that we earn from specified sources, the
percentages of our assets that fall within specified categories, the diversity
of our share ownership, and the percentage of our earnings that we distribute.
We describe the REIT qualification tests in more detail below. For a discussion
of our tax treatment and the tax treatment of our shareholders if we fail to
qualify as a REIT, see "--Failure to Qualify."

If we qualify as a REIT, we generally will not be subject to federal income tax
on the taxable income that we distribute to our shareholders. The benefit of
that tax treatment is that it avoids the "double taxation," or taxation at both
the corporate and stockholder levels, that generally results from owning stock
in a corporation. However, we will be subject to federal tax in the following
circumstances:

      -     We will pay federal income tax on taxable income, including net
            capital gain, that we do not distribute to our shareholders during,
            or within a specified time period after, the calendar year in which
            the income is earned.

      -     We may be subject to the "alternative minimum tax" on any items of
            tax preference that we do not distribute or allocate to our
            shareholders.

      -     We will pay income tax at the highest corporate rate on


                                       14
<PAGE>
            --    net income from the sale or other disposition of property
                  acquired through foreclosure ("foreclosure property") that we
                  hold primarily for sale to customers in the ordinary course of
                  business, and

            --    other non-qualifying income from foreclosure property.

      -     We will pay a 100% tax on net income from sales or other
            dispositions of property, other than foreclosure property, that we
            hold primarily for sale to customers in the ordinary course of
            business.

      -     If we fail to satisfy the 75% gross income test or the 95% gross
            income test, as described below under "--Requirements for
            Qualification--Income Tests," and nonetheless continue to qualify as
            a REIT because we meet other requirements, we will pay a 100% tax
            on:

            --    the gross income attributable to the greater of the amounts by
                  which we fail the 75% and 95% gross income tests, multiplied
                  by

            --    a fraction intended to reflect our profitability.

      -     If we fail to distribute during a calendar year at least the sum of

            --    85% of our REIT ordinary income for such year,

            --    95% of our REIT capital gain net income for such year, and

            --    any undistributed taxable income from prior periods,

we will pay a 4% excise tax on the excess of such required distribution over the
amount we actually distributed.

      -     We may elect to retain and pay income tax on our net long-term
            capital gain.

      -     If we acquire any asset from a C corporation, or a corporation that
            generally is subject to full corporate-level tax, in a merger or
            other transaction in which we acquire a basis in the asset that is
            determined by reference either to the C corporation's basis in the
            asset or to another asset, we will pay tax at the highest regular
            corporate rate applicable if we recognize gain on the sale or
            disposition of the asset during the 10-year period after we acquire
            the asset. The amount of gain on which we will pay tax is the lesser
            of:

            --    the amount of gain that we recognize at the time of the sale
                  or disposition, and

            --    the amount of gain that we would have recognized if we had
                  sold the asset at the time we acquired it.

REQUIREMENTS FOR QUALIFICATION

A REIT is a corporation, trust or association that meets the following
requirements:

      -     It is managed by one or more trustees or directors.

      -     Its beneficial ownership is evidenced by transferable shares, or by
            transferable certificates of beneficial interest.

      -     It would be taxable as a domestic corporation, but for the REIT
            provisions of the federal income tax laws.

      -     It is neither a financial institution nor an insurance company
            subject to special provisions of the federal income tax laws.

      -     At least 100 persons are beneficial owners of its shares or
            ownership certificates.


                                       15
<PAGE>
      -     Not more than 50% in value of its outstanding shares or ownership
            certificates is owned, directly or indirectly, by five or fewer
            individuals, which the federal income tax laws define to include
            certain entities, during the last half of any taxable year.

      -     It elects to be a REIT, or has made such election for a previous
            taxable year, and satisfies all relevant filing and other
            administrative requirements established by the Internal Revenue
            Service that must be met to elect and maintain REIT status.

      -     It uses a calendar year for federal income tax purposes and complies
            with the record keeping requirements of the federal income tax laws.

      -     It meets certain other qualification tests, described below,
            regarding the nature of its income and assets.

We must meet the first four requirements during our entire taxable year and must
meet the fifth requirement during at least 335 days of a taxable year of 12
months, or during a proportionate part of a taxable year of less than 12 months.
If we comply with all the requirements for ascertaining the ownership of our
outstanding shares in a taxable year and have no reason to know that we violated
the sixth requirement, we will be deemed to have satisfied the sixth requirement
for that taxable year. For purposes of determining share ownership under the
sixth requirement, an "individual" generally includes a supplemental
unemployment compensation benefits plan, a private foundation, or a portion of a
trust permanently set aside or used exclusively for charitable purposes. An
"individual," however, generally does not include a trust that is a qualified
employee pension or profit sharing trust under the federal income tax laws, and
beneficiaries of such a trust will be treated as holding our shares in
proportion to their actuarial interests in the trust for purposes of the sixth
requirement.

We have issued sufficient common shares with sufficient diversity of ownership
to satisfy the fifth and sixth requirements. In addition, our declaration of
trust restricts the ownership and transfer of our common shares so that we
should continue to satisfy the fifth and sixth requirements.

A corporation that is a "qualified REIT subsidiary" is not treated as a
corporation separate from its parent REIT. All assets, liabilities and items of
income, deduction and credit of a "qualified REIT subsidiary" are treated as
assets, liabilities, and items of income, deduction and credit of the REIT. A
"qualified REIT subsidiary" is a corporation, all of the capital stock of which
is owned by the REIT. We have two direct subsidiaries, RAIT General and RAIT
Limited, and we own all of their capital stock. RAIT General is the sole general
partner of RAIT Partnership and RAIT Limited is the sole limited partner of RAIT
Partnership. RAIT Partnership owns all of the capital stock in 16 other
corporations involved in the ownership of certain of our portfolio assets. Thus,
RAIT General, RAIT Limited and the other 16 subsidiaries will be ignored as
separate entities, and all of their assets, liabilities, and items of income,
deduction, and credit will be treated as our assets, liabilities and items of
income, deduction and credit.

An unincorporated entity that is beneficially owned by a single parent entity is
not treated as an entity separate from its parent. We own all of RAIT General
and RAIT Limited which, in turn, own all of RAIT Partnership, the entity that
holds all of our investment assets. RAIT Partnership beneficially owns all of
the membership interests in four limited liability companies and five limited
partnerships involved in the ownership of certain of our portfolio assets. These
limited liability companies are treated as partnerships for federal income tax
purposes. Thus, RAIT Partnership and the limited liability companies and limited
partnerships it owns will not be treated as entities separate from us for so
long as RAIT Partnership's only partners are RAIT General and RAIT Limited, we
own all of their capital stock, and RAIT Partnership beneficially owns all of
the membership interests and partnership interests of these limited liability
companies and limited partnerships.

In the case of a REIT that is a partner in a partnership that has other
partners, the REIT is treated as owning its proportionate share of the assets of
the partnership and as earning its allocable share of the gross income of the
partnership for purposes of the applicable REIT qualification tests. Thus, when
RAIT Partnership admits a partner other than us, or a qualified REIT subsidiary
of us, our proportionate share of the assets, liabilities and items of income of
RAIT Partnership, and those of any other partnership, joint venture or limited
liability company that is treated as a partnership for federal income tax
purposes in which we have acquired or will acquire an interest, directly or
indirectly (a "subsidiary partnership") will be treated as our assets and gross
income for purposes of applying the various REIT qualification requirements.


                                       16
<PAGE>
A REIT is allowed to own up to 100% of the stock of a "taxable REIT subsidiary,"
or TRS. A TRS may earn income that would not be qualifying income if earned
directly by the parent REIT. Both the subsidiary and the REIT must jointly elect
to treat the subsidiary as a TRS. A TRS will pay income tax at regular corporate
rates on any income that it earns. In addition, the new rules limit the
deductibility of interest paid or accrued by a TRS to its parent REIT to assure
that the TRS is subject to an appropriate level of corporate taxation. Further,
the rules impose a 100% excise tax on transactions between a TRS and its parent
REIT or the REIT's tenants that are not conducted on an arm's-length basis. We
do not currently have any TRSs, but may form one or more TRSs in the future.

INCOME TESTS

We must satisfy two gross income tests annually to maintain qualification as a
REIT. First, at least 75% of our gross income for each taxable year must consist
of defined types of income that we derive, directly or indirectly, from
investments relating to real property or mortgages on real property or temporary
investment income. Qualifying income for purposes of that 75% gross income test
generally includes:

      -     rents from real property,

      -     interest on debt secured by mortgages on real property or on
            interests in real property, and

      -     dividends or other distributions on and gain from the sale of shares
            in other REITs.

Second, in general, at least 95% of our gross income for each taxable year must
consist of income that is qualifying income for purposes of the 75% gross income
test, dividends, other types of interest, gain from the sale or disposition of
stock or securities, income from certain interest rate hedging contracts, or any
combination of the foregoing. Gross income from any origination fees we obtain
or from our sale of property that we hold primarily for sale to customers in the
ordinary course of business is excluded from both income tests. The following
paragraphs discuss the specific application of the gross income tests to us.

Where the principal amount of mortgages on a property exceeds the property's
fair market value, the Internal Revenue Service may contend that the lender is
actually the owner of the property for tax purposes. Since we have acquired and
may continue to acquire loans whose principal amount exceeds the fair market
value of the underlying property, a recharacterization may occur although the
existence of forbearance or other workout arrangements would make it less
likely. If we are found to be the owner of real property rather than a
mortgagee, our income would consist of the rent from the property rather than
interest on our loan. We would generally be entitled to deductions for operating
expenses of the property as well as for depreciation. Consequently, as long as
the rent qualifies as "rents from real property," it is unlikely that such
recharacterization would adversely affect our qualification under the asset
tests, income tests or distribution requirements, except as discussed below.

The term "interest," generally does not include any amount that depends in whole
or in part on the income or profits of any person. However, an amount generally
will not be excluded from the term "interest" solely because it is based on a
fixed percentage or percentages of receipts or sales. In addition, an amount
generally will not be excluded from the term "interest" solely because it is
based on the income or profits of a debtor if substantially all of the debtor's
gross income from the property qualifies as rents from real property if received
by a REIT. Furthermore, interest from an appreciation interest based on the sale
price of a property will be treated as gain from the sale of the property, which
generally is qualifying income for purposes of the 75% and 95% gross income
tests.

Interest, original issue discount and market discount income from our loans
generally will be qualifying interest income for purposes of both the 75% and
95% gross income tests. However, if the highest principal amount of a loan
outstanding during a taxable year exceeds the value of the property securing the
loan on the date we originated or acquired the loan, the portion of the income
from the loan derived from the excess principal amount will be qualifying income
for purposes of the 95% gross income test, but not for purposes of the 75% gross
income test. In addition, if interest income from a loan is based in part on the
borrower's profits or net income, it generally will be disqualified for purposes
of both the 75% and 95% gross income tests.


                                       17
<PAGE>
We have purchased and originated loans that are only indirectly secured by real
property and may do so in the future. If a senior loan prevents us from
recording a mortgage against the property, the junior note held by us may be
collateralized by an unrecorded mortgage, a deed-in-lieu of foreclosure, a
pledge of equity interests of the borrower, a purchase option or some other
arrangement. Interest as well as any original issue discount and market discount
income derived from such loans should be qualifying interest income for purposes
of both the 75% and 95% gross income tests. It is possible, however, that the
Internal Revenue Service would conclude that interest on these loans does not
constitute interest from a loan "secured by mortgages on real property or on
interests in real property," so that such interest would not qualify for
purposes of the 75% gross income test. In that event, we believe that the amount
of our income from these loans is currently a low enough percentage of our gross
income so that compliance with the 75% gross income test would nevertheless be
maintained.

In the case of wraparound loans, there is authority for the position that only
the interest attributable to the amounts advanced by the REIT or a person from
whom it acquired the loan will constitute income to the REIT. Under this
interpretation, amounts we receive from the borrower that are used to pay debt
service on the underlying senior debt would be treated as having been paid
directly by the borrower to the senior lender and thus excluded from our gross
income. We believe that we have satisfied the income tests regardless of whether
all of the interest on our wraparound loans is treated as income or only the
interest attributable to the amounts advanced by us is treated as income.

We may originate or acquire mortgage loans that have appreciation interests. We
may be required to recognize income from an appreciation interest over the term
of the related loan using a method that generally will result in our recognizing
at least some taxable income in advance of the related cash flow.

A REIT will incur a 100% tax on the net income derived from any sale or other
disposition of property, other than foreclosure property, that the REIT holds
primarily for sale to customers in the ordinary course of a trade or business.
We believe that none of our assets is held for sale to customers and that a sale
of any of our assets would not be in the ordinary course of our business.
Whether a REIT holds an asset "primarily for sale to customers in the ordinary
course of a trade or business" depends, however, on the facts and circumstances
in effect from time to time, including those related to a particular asset.
Nevertheless, we will attempt to comply with the terms of safe-harbor provisions
in the federal income tax laws prescribing when an asset sale will not be
characterized as a prohibited transaction. We cannot assure you, however, that
we can comply with the safe-harbor provisions or that we will avoid owning
property that may be characterized as property that we hold "primarily for sale
to customers in the ordinary course of a trade or business."

We will be subject to tax at the maximum corporate rate on any income from
foreclosure property, other than income that would be qualifying income for
purposes of the 75% gross income test, less expenses directly connected with the
production of such income. However, gross income from a foreclosure property
will qualify under the 75% and 95% gross income tests. "Foreclosure property" is
any real property, including interests in real property, and any personal
property incident to such real property:

      -     that is acquired by a REIT as the result of the REIT having bid in
            such property at foreclosure, or having otherwise reduced such
            property to ownership or possession by agreement or process of law,
            after there was a default or default was imminent on a lease of such
            property or on an indebtedness that such property secured;

      -     for which the related loan was acquired by the REIT at a time when
            the default was not imminent or anticipated; and

      -     for which such REIT makes a proper election to treat such property
            as foreclosure property.

      We have no foreclosure property as of the date of this prospectus.

However, a REIT will not be considered to have foreclosed on a property where
the REIT takes control of the property as a mortgagee-in-possession and cannot
receive any profit or sustain any loss except as a creditor of the mortgagor.
Property generally ceases to be foreclosure property with respect to a REIT at
the end of the third taxable year following the taxable year in which the REIT
acquired such property, or longer if an extension is granted by the


                                       18
<PAGE>
Secretary of the Treasury. The foregoing grace period is terminated and
foreclosure property ceases to be foreclosure property on the first day:

      -     on which a lease is entered into with respect to the property that,
            by its terms, will give rise to income that does not qualify for
            purposes of the 75% gross income test or any amount is received or
            accrued, directly or indirectly, pursuant to a lease entered into on
            or after such day that will give rise to income that does not
            qualify for purposes of the 75% gross income test;

      -     on which any construction takes place on the property, other than
            completion of a building or other improvement, where more than 10%
            of the construction of such building or other improvement was
            completed before default became imminent; or

      -     which is more than 90 days after the day on which such property was
            acquired by the REIT and the property is used in a trade or business
            which is conducted by the REIT, other than through an independent
            contractor from whom the REIT itself does not derive or receive any
            income.

Rent that we receive from real property that we own and lease to tenants will
qualify as "rents from real property," which is qualifying income for purposes
of the 75% and 95% gross income tests, only if we meet each of the following
conditions:

      -     The rent must not be based, in whole or in part, on the income or
            profits of any person, but may be based on a fixed percentage or
            percentages of receipts or sales.

      -     Neither we nor a direct or indirect owner of 10% or more of our
            shares may own, actually or constructively, 10% or more of a tenant
            from whom we receive rent, other than a TRS. Rent we receive from a
            TRS will qualify as "rents from real property" if at least 90% of
            the leased space of the property is rented to persons other than
            TRSs and 10%-owned tenants and the amount of rent paid by the TRS is
            substantially comparable to rent paid by the other tenants of the
            property for comparable space.

      -     All of the rent received under a lease of real property will not
            qualify as "rents from real property" unless the rent attributable
            to the personal property leased in connection with such lease is no
            more than 15% of the total rent received under the lease. The
            allocation of rent between real and personal property is based on
            the relative fair market values of the real and personal property.

      -     We generally must not operate or manage our real property or furnish
            or render services to our tenants other than through an independent
            contractor who is adequately compensated and from whom we do not
            derive revenue. However, we need not provide services through an
            independent contractor, but instead may provide services directly,
            if the services are "usually or customarily rendered" in connection
            with the rental of space for occupancy only and are not considered
            to be provided for the tenants' convenience. In addition, we may
            provide a minimal amount of "non-customary" services to the tenants
            of a property, other than through an independent contractor, as long
            as our income from the services does not exceed 1% of our income
            from the related property. Further, a TRS can provide customary and
            noncustomary services to our tenants without tainting our rental
            income.

We believe that the rents we receive meet all of these conditions.

If we fail to satisfy one or both of the gross income tests for any taxable
year, we nevertheless may qualify as a REIT for such year if we qualify for
relief under certain provisions of the federal income tax laws. Those relief
provisions generally will be available if:

      -     our failure to meet such tests is due to reasonable cause and not
            due to willful neglect,

      -     we attach a schedule of the sources of our income to our tax return,
            and

      -     any incorrect information on the schedule was not due to fraud with
            intent to evade tax.


                                       19
<PAGE>
We cannot predict, however, whether in all circumstances we would qualify for
the relief provisions. In addition, as discussed above in "--Taxation" even if
the relief provisions apply, we would incur a 100% tax on the gross income
attributable to the greater of the amounts by which we fail the 75% and 95%
gross income tests, multiplied by a fraction intended to reflect our
profitability.

ASSET TESTS

To maintain our qualification as a REIT, we also must satisfy two asset tests at
the end of each quarter of each taxable year. First, at least 75% of the value
of our total assets must consist of:

    -      cash or cash items, including certain receivables;

    -      government securities;

    -      interests in real property, including leaseholds and options to
           acquire real property and leaseholds;

    -      interests in mortgages on real property;

    -      stock in other REITs; and

    -      investments in stock or debt instruments during the one-year period
           following our receipt of new capital that we raise through equity
           offerings or offerings of debt with at least a five-year term.

Under the second asset test, except for securities in the 75% asset class,
securities in a TRS or qualified REIT subsidiary, and certain partnership
interests and debt obligations:

    -      not more than 5% of the value of our total assets may be represented
           by the securities of any one issuer,

    -      we may not own securities that possess more than 10% of the total
           voting power of outstanding voting securities of any one issuer, and

    -      we may not own securities that have a value of more than 10% of the
           total value of the outstanding securities of any one issuer (the "10%
           value test").

In addition, not more than 20% of the value of our total assets may be
represented by securities of one or more TRSs.

Under a special transaction provision, the 10% value test described above will
not apply to securities we held on July 12, 1999, provided that the issuer of
those securities does not engage in a substantial new line of business or
acquire substantial new assets after that date, and provided that we do not
acquire additional securities of the issuer after that date. Existing taxable
subsidiaries can be converted into TRSs on a tax-free basis at any time before
January 1, 2004.

If the fair market value of the real property securing a mortgage loan equals or
exceeds the outstanding principal balance of the loan, the loan will be a
qualifying asset. However, if the outstanding principal balance of a mortgage
loan exceeds the fair market value of the real property securing the loan, the
excess amount may not be a qualifying asset, although the matter is not free
from doubt. An "interest" in real property also generally includes an interest
in mortgage loans secured by controlling equity interests in partnerships or
limited liability companies that are taxed as partnerships that own real
property, to the extent that the principal balance of the mortgage does not
exceed the fair market value of the real property that is allocable to the
equity interest. We have purchased and originated loans that are only indirectly
secured by real estate, and we may continue to do so in the future.

We expect that any loans, real properties and temporary investments that we
acquire generally will be qualifying assets for purposes of the 75% asset test,
except to the extent that the principal balance of any loan exceeds the value of
the associated real property, or to the extent the asset is a loan that is not
deemed to be an interest in real property. In the case of wraparound loans, it
is uncertain whether the entire wraparound mortgage amount or only the amount


                                       20
<PAGE>
of our investment that is in excess of the principal amount of the underlying
loans will be considered our asset. We will monitor the status of our acquired
assets for purposes of the various asset tests and will manage our portfolio in
order to comply at all times with such tests. If we fail to satisfy the asset
tests at the end of a calendar quarter, we would not lose our REIT status if:

    -      we satisfied the asset tests at the close of the preceding calendar
           quarter and

    -      the discrepancy between the value of our assets and the asset test
           requirements arose from changes in the market values of our assets
           and was not wholly or partly caused by the acquisition of one or more
           non-qualifying assets.

If we did not satisfy the condition described in the first item, above, we still
may avoid disqualification by eliminating any discrepancy within 30 days after
the close of the calendar quarter in which it arose.

As described above, we may own up to 100% of the stock of TRSs. TRSs can perform
activities unrelated to our tenants, such as third-party management,
development, and other independent business activities, as well as provide
services to our tenants. We and a taxable subsidiary must elect for the
subsidiary to be treated as a TRS. A corporation of which a TRS directly or
indirectly owns more than 35% of the voting power or value of the stock will
automatically be treated as a TRS. The deductibility of interest paid or accrued
by a TRS to us is limited to assure that the TRS is subject to an appropriate
level of corporate taxation. Further, there is a 100% excise tax on transactions
between a TRS and us or our tenants that are not conducted on an arm's-length
basis. We may not own more than 10% of the voting power or value of the stock of
a taxable subsidiary that is not treated as a TRS. Overall, no more than 20% of
our assets can consist of securities of TRSs. We do not currently have any TRSs,
but may form one or more TRSs in the future.

DISTRIBUTION REQUIREMENTS

Each taxable year, we must distribute dividends, other than capital gain
dividends and deemed distributions of retained capital gain, to our shareholders
in an aggregate amount at least equal to:

    -      the sum of

            --    90% of our "REIT taxable income," computed without regard to
                  the dividends paid deduction and our net capital gain or loss,
                  and

            --    90% of our after-tax net income, if any, from foreclosure
                  property; minus

    -      the sum of certain items of non-cash income.

We must pay such distributions in the taxable year to which they relate, or in
the following taxable year if we declare the distribution before we timely file
our federal income tax return for the year and pay the distribution on or before
the first regular dividend payment date after such declaration. Although the
distribution requirement was reduced from 95% to 90% for taxable years beginning
after December 31, 2000, we intend to continue to attempt to distribute 100% of
our REIT taxable income.

We will pay federal income tax on taxable income, including net capital gain,
that we do not distribute to shareholders. Furthermore, if we fail to distribute
during a calendar year, or by the end of January following such calendar year in
the case of distributions with declaration and record dates falling in the last
three months of the calendar year, at least the sum of:

    -      85% of our REIT ordinary income for such year,

    -      95% of our REIT capital gain income for such year, and

    -      any undistributed taxable income from prior periods,


                                       21
<PAGE>
we will incur a 4% nondeductible excise tax on the excess of such required
distribution over the amounts we actually distribute. We may elect to retain and
pay income tax on the net long-term capital gain we receive in a taxable year.
See "--Taxation of Taxable U.S. Shareholders." If we so elect, we will be
treated as having distributed any such retained amount for purposes of the 4%
excise tax described above. We have made, and we intend to continue to make,
timely distributions sufficient to satisfy the annual distribution requirements.

It is possible that, from time to time, we may experience timing differences
between:

    -      the actual receipt of income and actual payment of deductible
           expenses, and

    -      the inclusion of that income and deduction of those expenses in
           arriving at our REIT taxable income.

For example, we will recognize taxable income in excess of our cash receipts
when original issue discount accrues with respect to a loan. Original issue
discount generally will accrue taking into account projected prepayments, such
as those arising from appreciation interests, but not allowing credit losses to
be reflected until they are actually incurred. Also, we may recognize as income
taxable market discount income from the proceeds of the sale of, or principal
payments from, loans that are "market discount bonds," although such proceeds
often will be used to make non-deductible principal payments on related
borrowings. "Market discount bonds" are obligations with a stated redemption
price at maturity that is greater than our tax basis in such obligations. We
also may recognize income in excess of cash receipts if we make wraparound loans
where the payments of nondeductible principal we must make on the underlying
loans exceed the amount of nontaxable principal we receive from the borrower.
There is authority, however, for the position that only the interest on the
amount advanced by the wraparound lender is included in the income of a REIT
making such a loan; this would reduce or limit the possibility of mismatching.
In addition, we may recognize net capital gain attributable to the sale of
depreciated property that exceeds our cash receipts from the sale. We also may
recognize taxable income without receiving a corresponding cash distribution if
we foreclose on or make a "significant modification" to a loan, to the extent
that the fair market value of the underlying property or the principal amount of
the modified loan, as applicable, exceeds our basis in the original loan.
Finally, we cannot deduct from our REIT taxable income capital losses recognized
by us. As a result of these considerations, we may have less cash than is
necessary to distribute all of our taxable income and thereby avoid corporate
income tax and the excise tax imposed on certain undistributed income. In such a
situation, we may need to borrow funds or issue preferred stock or additional
common shares.

Under certain circumstances, we may be able to correct a failure to meet the
distribution requirement for a year by paying "deficiency dividends" to our
shareholders in a later year. We may include such deficiency dividends in our
deduction for dividends paid for the earlier year. Although we may be able to
avoid income tax on amounts distributed as deficiency dividends, we will be
required to pay interest to the Internal Revenue Service based upon the amount
of any deduction we take for deficiency dividends.

RECORDKEEPING REQUIREMENTS

We must maintain certain records in order to qualify as a REIT. In addition, to
avoid a monetary penalty, we must request on an annual basis information from
our shareholders designed to disclose the actual ownership of our outstanding
shares. We have complied, and we intend to continue to comply, with such
requirements.

FAILURE TO QUALIFY

If we fail to qualify as a REIT in any taxable year, and no relief provision
applies, we will be subject to federal income tax and any applicable alternative
minimum tax on our taxable income at regular corporate rates. In calculating our
taxable income in a year in which we failed to qualify as a REIT, we would not
be able to deduct amounts paid out to shareholders. In fact, we would not be
required to distribute any amounts to shareholders in such year. In such event,
to the extent of our current and accumulated earnings and profits, all
distributions to shareholders would be taxable as ordinary income. Subject to
certain limitations of the federal income tax laws, corporate shareholders might
be eligible for the dividends received deduction. Unless we qualified for relief
under specific statutory provisions, we also would be disqualified from taxation
as a REIT for the four taxable years following the year during which we ceased
to qualify as a REIT. We cannot predict whether in all circumstances we would
qualify for such statutory relief.


                                       22
<PAGE>
TAXATION OF TAXABLE U.S. SHAREHOLDERS

As long as we qualify as a REIT, a taxable "U.S. shareholder" must take into
account as ordinary income distributions made out of our current or accumulated
earnings and profits that we do not designate as capital gain dividends or
retained long-term capital gain. A U.S. shareholder will not qualify for the
dividends received deduction generally available to corporations. The term "U.S.
shareholder" means a holder of common shares that for United States federal
income tax purposes is:

    -      a citizen or resident of the United States;

    -      a corporation, partnership, or other entity created or organized in
           or under the laws of the United States or of any political
           subdivision thereof;

    -      an estate whose income from sources without the United States is
           includible in gross income for United States federal income tax
           purposes regardless of its connection with the conduct of a trade or
           business within the United States; or

    -      any trust with respect to which

            --    a United States court is able to exercise primary supervision
                  over its administration, and

            --    one or more United States persons have the authority to
                  control all of its substantial decisions.

A U.S. shareholder generally will recognize distributions that we designate as
capital gain dividends as long-term capital gain without regard to the period
for which the U.S. shareholder has held our common shares. A corporate U.S.
shareholder, however, may be required to treat up to 20% of certain capital gain
dividends as ordinary income.

We may elect to retain and pay income tax on the net long-term capital gain that
we receive in a taxable year. In that case, a U.S. shareholder would be taxed on
his or her proportionate share of our undistributed long-term capital gain. The
U.S. shareholder would receive a credit or refund for his or her proportionate
share of the tax we paid. The U.S. shareholder would increase his or her basis
in our shares by the amount of his or her proportionate share of our
undistributed long-term capital gain, minus his or her share of the tax we paid.

A U.S. shareholder will not incur tax on a distribution in excess of our current
and accumulated earnings and profits if such distribution does not exceed the
adjusted basis of the U.S. shareholder's common shares. Instead, such
distribution will reduce the adjusted basis of such common shares. A U.S.
shareholder will recognize a distribution in excess of both our current and
accumulated earnings and profits and the U.S. shareholder's adjusted basis in
his or her common shares as long-term capital gain, or short-term capital gain
if the common shares have been held for one year or less, assuming the common
shares are a capital asset in the hands of the U.S. shareholder. In addition, if
we declare a distribution in October, November, or December of any year that is
payable to a U.S. shareholder of record on a specified date in any of these
months, the distribution will be treated as both paid by us and received by the
U.S. shareholder on December 31 of such year, provided that we actually pay the
distribution during January of the following calendar year.

Shareholders may not include in their individual income tax returns any of our
net operating losses or capital losses. Instead, these losses are generally
carried over by us for potential offset against our future income. Taxable
distributions from us and gain from the disposition of the common shares will
not be treated as passive activity income and, therefore, shareholders generally
will not be able to apply any "passive activity losses," such as losses from
certain types of limited partnerships in which the shareholder is a limited
partner, against such income. In addition, taxable distributions from us and
gain from the disposition of common shares generally will be treated as
investment income for purposes of the investment interest limitations. We will
notify shareholders after the close of our taxable year as to the portions of
the distributions attributable to that year that constitute ordinary income,
return of capital, and capital gain.


                                       23
<PAGE>
We may recognize taxable income in excess of our economic income, known as
"phantom income," in the first years we hold certain investments, and experience
an offsetting excess of economic income over our taxable income in later years.
As a result, shareholders at times may pay federal income tax on distributions
that economically represent a return of capital, rather than a dividend. These
distributions would be offset in later years by distributions representing
economic income that would be treated as returns of capital for federal income
tax purposes. Taking into account the time value of money, this acceleration of
federal income tax liabilities may reduce a shareholder's after-tax return on
his or her investment in us to an amount less than the after-tax return on an
investment with an identical before-tax rate of return that did not generate
phantom income. For example, if an investor with a 30% tax rate purchases a
taxable bond with an annual interest rate of 10% on its face value, the
investor's before-tax return on the investment would be 10% and the investor's
after-tax return would be 7%. However, if the same investor purchased our shares
at a time when the before-tax rate of return was 10%, the investor's after-tax
rate of return on the shares might be somewhat less than 7% as a result of our
phantom income. In general, as the ratio of our phantom income to our total
income increases, the after-tax rate of return received by a taxable shareholder
will decrease. We will consider the potential effects of phantom income on our
taxable shareholders in managing our investments.

TAXATION OF U.S. SHAREHOLDERS ON THE DISPOSITION OF SHARES

In general, a U.S. shareholder who is not a dealer in securities must treat any
gain or loss realized upon a taxable disposition of his or her common shares as
long-term capital gain or loss if the U.S. shareholder has held the common
shares for more than one year. However, a U.S. shareholder must treat any loss
upon a sale or exchange of common shares held by such shareholder for six months
or less as a long-term capital loss to the extent of capital gain dividends and
other distributions from us that such U.S. shareholder treats as long-term
capital gain. All or a portion of any loss that a U.S. shareholder realizes upon
a taxable disposition of the common shares may be disallowed if the U.S.
shareholder purchases other common shares within 30 days before or after the
disposition.

CAPITAL GAINS AND LOSSES

The tax rate differential between capital gain and ordinary income for
non-corporate taxpayers may be significant. A taxpayer generally must hold a
capital asset for more than one year for gain or loss derived from its sale or
exchange to be treated as long-term capital gain or loss. Under the Economic
Growth and Tax Relief Reconciliation Act of 2001(the "2001 Act"), the maximum
marginal individual income tax rate is 38.6% for all of 2002 and 2003, 37.6% for
2004 and 2005, and 35% for 2006 to 2011. The maximum tax rate on long-term
capital gain applicable to non-corporate taxpayers, which was not affected by
the 2001 Act, is 20% for sales and exchanges of assets held for more than one
year. The maximum tax rate on long-term capital gain from the sale or exchange
of "section 1250 property," or depreciable real property, is 25% to the extent
that such gain would have been treated as ordinary income if the property were
"section 1245 property." With respect to distributions that we designate as
capital gain dividends and any retained capital gain that we are deemed to
distribute, we generally may designate whether such a distribution is taxable to
our non-corporate shareholders at a 20% or 25% rate. In addition, the
characterization of income as capital gain or ordinary income may affect the
deductibility of capital losses. A non-corporate taxpayer may deduct capital
losses not offset by capital gains against its ordinary income only up to a
maximum annual amount of $3,000. A non-corporate taxpayer may carry forward
unused capital losses indefinitely. A corporate taxpayer must pay tax on its net
capital gain at ordinary corporate rates. A corporate taxpayer can deduct
capital losses only to the extent of capital gains, with unused losses being
carried back three years and forward five years.

INFORMATION REPORTING REQUIREMENTS AND BACKUP WITHHOLDING

We will report to our shareholders and to the Internal Revenue Service the
amount of distributions we pay during each calendar year, and the amount of tax
we withhold, if any. Under the backup withholding rules, a shareholder may be
subject to backup withholding at the rate of 27.5% with respect to distributions
unless the holder:

    -      is a corporation or comes within certain other exempt categories and,
           when required, demonstrates this fact, or

    -      provides a taxpayer identification number, certifies as to no loss of
           exemption from backup withholding and otherwise complies with the
           applicable requirements of the backup withholding rules.


                                       24
<PAGE>
A shareholder who does not provide us with his or her correct taxpayer
identification number also may be subject to penalties imposed by the Internal
Revenue Service. Any amount paid as backup withholding will be creditable
against the shareholder's income tax liability. In addition, we may be required
to withhold a portion of capital gain distributions to any shareholders who fail
to certify their non-foreign status to us. For a discussion of the backup
withholding rules as applied to non-U.S. shareholders, see "--Taxation of
Non-U.S. Shareholders."

TAXATION OF TAX-EXEMPT SHAREHOLDERS

Tax-exempt entities, including qualified employee pension and profit sharing
trusts and individual retirement accounts, generally are exempt from federal
income taxation. However, they are subject to taxation on their unrelated
business taxable income. While many investments in real estate generate
unrelated business taxable income, the Internal Revenue Service has issued a
published ruling that dividend distributions from a REIT to an exempt employee
pension trust do not constitute unrelated business taxable income, so long as
the exempt employee pension trust does not otherwise use the shares of the REIT
in an unrelated trade or business of the pension trust. Based on that ruling,
amounts that we distribute to tax-exempt shareholders generally should not
constitute unrelated business taxable income. However, if a tax-exempt
shareholder were to finance its acquisition of our common shares with debt, a
portion of the income that it receives from us would constitute unrelated
business taxable income pursuant to the "debt-financed property" rules.
Furthermore, social clubs, voluntary employee benefit associations, supplemental
unemployment benefit trusts, and qualified group legal services plans that are
exempt from taxation under special provisions of the federal income tax laws are
subject to different unrelated business taxable income rules, which generally
will require them to characterize distributions that they receive from us as
unrelated business taxable income. Finally, in certain circumstances, a
qualified employee pension or profit sharing trust that owns more than 10% of
our shares must treat a percentage of the dividends that it receives from us as
unrelated business taxable income. Such percentage is equal to the gross income
we derive from an unrelated trade or business, determined as if we were a
pension trust, divided by our total gross income for the year in which we pay
the dividends. That rule applies to a pension trust holding more than 10% of our
shares only if:

    -      the percentage of our dividends that the tax-exempt trust must treat
           as unrelated business taxable income is at least 5%;

    -      we qualify as a REIT by reason of the modification of the rule
           requiring that no more than 50% of our shares be owned by five or
           fewer individuals that allows the beneficiaries of the pension trust
           to be treated as holding our shares in proportion to their actuarial
           interests in the pension trust; and either:

            --    one pension trust owns more than 25% of the value of our
                  shares or

            --    a group of pension trusts individually holding more than 10%
                  of the value of our shares collectively owns more than 50% of
                  the value of our shares.

TAXATION OF NON-U.S. SHAREHOLDERS

The rules governing U.S. federal income taxation of nonresident alien
individuals, foreign corporations, foreign partnerships, and other foreign
shareholders are complex. This section is only a summary of such rules. We urge
non-U.S. shareholders to consult their own tax advisors to determine the impact
of federal, state and local income tax laws on ownership of our common shares,
including any reporting requirements.

A non-U.S. shareholder that receives a distribution that is not attributable to
gain from our sale or exchange of U.S. real property interests, as defined
below, and that we do not designate as a capital gain dividend or retained
capital gain will recognize ordinary income to the extent that we pay such
distribution out of our current or accumulated earnings and profits. A
withholding tax equal to 30% of the gross amount of the distribution ordinarily
will apply to such distribution unless an applicable tax treaty reduces or
eliminates the tax. However, if a distribution is treated as effectively
connected with the non-U.S. shareholder's conduct of a U.S. trade or business,
the non-U.S. shareholder generally will be subject to federal income tax on the
distribution at graduated rates, in the same manner as U.S. shareholders are
taxed with respect to such distributions and also may be subject to the 30%
branch profits tax in the


                                       25
<PAGE>
case of a non-U.S. shareholder that is a non-U.S. corporation. We plan to
withhold U.S. income tax at the rate of 30% on the gross amount of any such
distribution paid to a non-U.S. shareholder unless either:

    -      a lower treaty rate applies and the non-U.S. shareholder files the
           required form evidencing eligibility for that reduced rate with us;
           or

    -      the non-U.S. shareholder files an IRS Form W-8ECI with us claiming
           that the distribution is effectively connected income.

A non-U.S. shareholder will not incur tax on a distribution in excess of our
current and accumulated earnings and profits if such distribution does not
exceed the adjusted basis of our common shares. Instead, such a distribution
will reduce the adjusted basis of those common shares. A non-U.S. shareholder
will be subject to tax on a distribution that exceeds both our current and
accumulated earnings and profits and the adjusted basis of our common shares, if
the non-U.S. shareholder otherwise would be subject to tax on gain from the sale
or disposition of our common shares, as described below. Because we generally
cannot determine at the time we make a distribution whether or not the
distribution will exceed our current and accumulated earnings and profits, we
normally will withhold tax on the entire amount of any distribution at the same
rate as we would withhold on a dividend. However, a non-U.S. shareholder may
obtain a refund of amounts that we withhold if we later determine that a
distribution in fact exceeded our current and accumulated earnings and profits.

We must withhold 10% of any distribution that exceeds our current and
accumulated earnings and profits. Consequently, although we intend to withhold
at a rate of 30% on the entire amount of any distribution, to the extent that we
do not do so, we will withhold at a rate of 10% on any portion of a distribution
not subject to withholding at a rate of 30%.

For any year in which we qualify as a REIT, a non-U.S. shareholder will incur
tax on distributions that are attributable to gain from the sale or exchange of
"U.S. real property interests" under special provisions of the federal income
tax laws known as "FIRPTA." The term "U.S. real property interests" includes
certain interests in real property and shares in corporations at least 50% of
whose assets consist of interests in real property. Under those rules, a
non-U.S. shareholder is taxed on distributions attributable to gain from sales
of U.S. real property interests as if such gain were effectively connected with
a U.S. business of the non-U.S. shareholder. A non-U.S. shareholder thus would
be taxed on such a distribution at the normal capital gain rates applicable to
U.S. shareholders, subject to applicable alternative minimum tax and a special
alternative minimum tax in the case of a nonresident alien individual. A
non-U.S. corporate shareholder not entitled to treaty relief or exemption also
may be subject to the 30% branch profits tax on such a distribution. We must
withhold 35% of any distribution that we could designate as a capital gain
dividend. A non-U.S. shareholder may receive a credit against its tax liability
for the amount we withhold.

A non-U.S. shareholder generally will not incur tax under FIRPTA as long as at
all times non-U.S. persons hold, directly or indirectly, less than 50% in value
of our shares. We cannot assure you that this test will be met. However, a
non-U.S. shareholder that owned, actually or constructively, 5% or less of the
common shares at all times during a specified testing period will not incur tax
under FIRPTA if the common shares are "regularly traded" on an established
securities market. If the gain on the sale of the shares were taxed under
FIRPTA, a non-U.S. shareholder would be taxed in the same manner as U.S.
shareholders with respect to such gain, subject to applicable alternative
minimum tax, a special alternative minimum tax in the case of nonresident alien
individuals, and the possible application of the 30% branch profits tax in the
case of non-U.S. corporations. Furthermore, a non-U.S. shareholder will incur
tax on gain not subject to FIRPTA if:

    -      the gain is effectively connected with the non-U.S. shareholder's
           U.S. trade or business, in which case the non-U.S. shareholder will
           be subject to the same treatment as U.S. shareholders with respect to
           such gain, or

    -      the non-U.S. shareholder is a nonresident alien individual who was
           present in the U.S. for 183 days or more during the taxable year and
           has a "tax home" in the United States, in which case the non-U.S.
           shareholder will incur a 30% tax on his capital gains.


                                       26
<PAGE>
STATE AND LOCAL TAXES

We and/or our shareholders may be subject to taxation by various states and
localities, including those in which we or such shareholders transact business,
own property or reside. The state and local tax treatment may differ from the
federal income tax treatment described above. Consequently, shareholders should
consult their own tax advisors regarding the effect of state and local tax laws
upon an investment in our common shares.


                                       27
<PAGE>
                              SELLING SHAREHOLDERS

The selling shareholders listed below acquired or may acquire the shares listed
in the column "Common Shares Registered Under This Prospectus" upon the exercise
of options granted under the 1997 Stock Option Plan. The table shows, as of
October 24, 2002, certain information regarding the selling shareholders'
ownership of our common shares. We encourage our employees and trustees to
invest in our company through the exercise of their options. We believe that
this prospectus and the registration statement of which it is a part, which
permits resales of shares acquired by our employees and trustees through option
exercises, encourages these exercises by providing liquidity for their
investment. Accordingly, while the number of shares set forth in the column
"Common Shares To Be Owned After The Offering" assumes that all common shares
acquired by a selling shareholder through exercise of his or her options will be
offered or sold, the selling shareholders are not required to sell any shares.
Employees and trustees, their family members, trusts for their benefit, or
entities that they own, that acquire common shares under the 1997 Stock Option
Plan may be added to the selling shareholder list below by a prospectus
supplement filed with the SEC. The number of common shares to be sold by any
selling shareholder under this prospectus also may be increased or decreased by
a prospectus supplement. Although a person's name is included in the table
below, neither that person nor we are making an admission that the named person
is our "affiliate."

Betsy Z. Cohen has served as our Chairman, Chief Executive Officer and one of
our trustees since our founding in August 1997. S. Peter Albert has served as
one of our trustees since May 2000. Edward S. Brown has served as one of our
trustees since June 1999. Jonathan Z. Cohen has served as our Secretary since
February 1998 and as one of our trustees since September 1997. Arthur Makadon
has served as one of our trustees since July 2002. Joel R. Mesznik has served as
one of our trustees since our founding in August 1997. Daniel Promislo has
served as one of our trustees since our founding in August 1997. Scott F.
Schaeffer was elected in September 2000 to serve as our President and Chief
Operating Officer. Jay R. Cohen was elected in October 1997 to serve as one of
our Executive Vice Presidents. Ellen J. DiStefano was elected in October 1997 to
serve as our Chief Financial Officer and also has served as one of our Executive
Vice Presidents since December 1998. Kenneth Frappier was elected in April 2002
to serve as our Senior Vice President-Portfolio and Risk Management.

<TABLE>
<CAPTION>
                                Amount and Nature        Common Shares          Common Shares           Percentage of Class to be
                                 Of Shares Owned        Registered Under      To be Owned After            Beneficially Owned
Name                          Prior to Offering(1)    This Prospectus (1)      The Offering (2)             After Offering(3)
----                          --------------------    -------------------      ----------------             -----------------
<S>                           <C>                     <C>                     <C>                       <C>
Betsy Z. Cohen                     471,185(4)                 321,526                149,659                         *

S. Peter Albert                     22,000                     12,000                 10,000                         *

Edward S. Brown                     13,000                     13,000                      0                         *

Jonathan Z. Cohen                   33,606(5)                   7,913                 25,693                         *

Arthur Makadon                      11,000(6)                  11,000                      0                         *

Joel R. Mesznik                     17,500(7)                  14,500                  3,000                         *

Daniel Promislo                     15,500                     14,500                  1,000                         *

Scott F. Schaeffer                  92,572(8)                  80,000                 12,572                         *

Jay R. Cohen                       101,416(9)                  65,271                 36,145                         *

Ellen J. DiStefano                  73,549(10)                 66,682                  6,867                         *

Kenneth R. Frappier                 27,370(11)                 27,000                    370                         *
</TABLE>


----------------------

* Less than 1%.

(1)   Includes all common shares acquired and not previously sold by the
      relevant selling shareholder pursuant to the exercise of options granted
      under the 1997 Stock Option Plan and all common shares which the relevant
      selling shareholder has the right to acquire through the exercise of
      options granted under the 1997 Stock Option Plan, whether or not such
      right has yet become exercisable or will become exercisable within 60 days


                                       28
<PAGE>
      after the date hereof.

(2)   Assumes all common shares registered pursuant hereto will be sold,
      although there can be no assurance that any of the selling shareholders
      will offer for sale or sell any or all of the common shares offered by
      them pursuant to this prospectus. Also assumes that no other common shares
      are acquired or transferred by the relevant selling shareholder.

(3)   Based on 18,180,611 common shares outstanding as of October 24, 2002.
      Common shares issuable upon the exercise of options exercisable by the
      relevant selling shareholder within 60 days are deemed to be  outstanding
      with respect to the calculation of that selling shareholder's percent of
      class.

(4)   Includes 96,626 common shares directly held by Mrs. Cohen; 5,022 common
      shares held in our Cash and Deferred Savings Plan (the "401(k) Plan") for
      the benefit of Mrs. Cohen; 40,446 common shares held by an individual
      retirement account ("IRA") for the benefit of Mrs. Cohen; 66,801 common
      shares held as trustee of a charitable foundation; 37,290 common shares
      held in an IRA account for the benefit of Mrs. Cohen's spouse, Edward E.
      Cohen and 225,000 common shares issuable upon exercise of options granted
      under the 1997 Stock Option Plan (the options exercisable for all these
      225,000 common shares are vested). Excludes 57,432 common shares to be
      deposited in the RAIT Investment Trust Pension Plan established in
      connection with the supplemental executive retirement plan established
      pursuant to Mrs. Cohen's employment agreement with us (no rights to which
      are vested as of the date of this prospectus or will vest within sixty
      days). Excludes common shares held by Resource America, of which Edward
      E. Cohen is Chairman, Chief Executive Officer and President.

(5)   Includes 32,440 common shares held directly by Mr. Cohen, 666 common
      shares held in a 401(k) Plan account for his benefit and 500 common shares
      issuable upon exercise of options granted under the 1997 Stock Option Plan
      (the options exercisable for all these 500 common shares are vested).
      Excludes common shares held by Resource America of which Mr. Cohen is
      Chief Operating Officer.

(6)   Including 11,000 common shares issuable upon exercise of options granted
      under the 1997 Stock Option Plan (of the options exercisable for these
      11,000 common shares, 1,000 are subject to early exercise rights as of
      the date of this prospectus and none will vest within 60 days).

(7)   Includes 7,000 common shares held directly by Mr. Mesznik and 10,500
      Common Shares issuable upon exercise of options granted under the 1997
      Stock Option Plan (the options exercisable for all these 10,500 common
      shares are vested.

(8)   Includes 50,000 common shares directly held by Mr. Schaeffer, 2,072 common
      shares held in a 401(k) Plan account for the benefit of Mr. Schaeffer,
      3,000 common shares held by an IRA for the benefit of Mr. Schaeffer and
      37,500 common shares issuable upon exercise of options granted under the
      1997 Stock Option Plan (of the options exercisable for these 37,500
      commons shares, none are vested as of the date of this prospectus and
      18,750 will vest within sixty days).

(9)   Includes 4,208 common shares held in an IRA account for the benefit of Mr.
      Cohen; 32,271 common shares held jointly by Mr. Cohen and his spouse;
      8,341 common shares held in an IRA account for the benefit of Mr. Cohen's
      spouse; 6,596 common shares held in Mr. Cohen's 401(k) Plan account; and
      50,000 common shares issuable upon exercise of options granted under the
      1997 Stock Option Plan (the options exercisable for all these 50,000
      common shares are vested).

(10)  Includes 6,000 common shares directly held by Mrs. DiStefano, 1,002 common
      shares held by Mrs. DiStefano jointly with her spouse; 1,000 common shares
      held in an IRA account for the benefit of Mrs. DiStefano, 1,000 common
      shares held in an IRA account for the benefit of Mrs. DiStefano's spouse,
      64 common shares held in an Education IRA for the benefit of Mrs.
      DiStefano's children, 3,801 common shares held in a 401(k) Plan account
      for the benefit of Mrs. DiStefano; and 60,682 common shares issuable upon
      exercise of options granted under the 1997 Stock Option Plan (the options
      exercisable for all these 60,682 common shares are vested).


                                       29
<PAGE>
(11)  Includes 370 common shares held in a 401(k) Plan account for the benefit
      of Mr. Frappier, 12,000 common shares directly held by Mr. Frappier and
      15,000 common shares issuable upon exercise of options granted under the
      1997 Stock Option Plan (of the options exercisable for these 15,000 common
      shares, 2,500 are subject to early exercise rights as of the date of this
      prospectus and none will vest within sixty days).

                              PLAN OF DISTRIBUTION

The selling shareholders may sell the common shares for their own accounts from
time to time, in one or more transactions on the New York Stock Exchange or
otherwise, in special offerings, secondary distributions pursuant to and in
accordance with applicable rules and regulations of the SEC and the New York
Stock Exchange, in negotiated transactions or otherwise, at market prices
prevailing at the time of the sale, at prices related to such market prices or
at negotiated prices. The selling shareholders may effect such transactions by
selling shares to or through broker-dealers, and such broker-dealers may receive
compensation in the form of underwriting discounts, concessions or commissions
from the selling shareholders and/or purchasers of the common shares for whom
they may act as agent, which broker-dealer compensation may be in excess of
customary commissions.

We have no basis for estimating either the number of common shares, if any, that
will ultimately be sold by the selling shareholders or the prices at which the
selling shareholders may sell shares. All selling and other expenses incurred by
individual selling shareholders will be borne by those selling shareholders.

                                 USE OF PROCEEDS

We will not realize any proceeds from the sale of the common shares which may be
sold pursuant to this prospectus for the respective accounts of the selling
shareholders. We, however, may derive proceeds upon the exercise of the options
granted to selling stockholders pursuant to the 1997 Stock Option Plan. All such
proceeds will be available to us for working capital and general corporate
purposes. We cannot predict the timing or the amount of any option exercises.

                                     EXPERTS

Our consolidated financial statements as of December 31, 2001 and 2000 and for
each of the three years ended December 31, 2001 appearing in our Annual Report
on Form 10-K, as amended, for the year ended December 31, 2001, which are
incorporated by reference in this prospectus, have been audited by Grant
Thornton LLP, whose report is incorporated by such reference in this prospectus
and given upon their authority as experts in accounting and auditing.

                                 LEGAL OPINIONS

Certain matters of Maryland law will be passed upon for us by Ballard Spahr
Andrews & Ingersoll, LLP, Baltimore, Maryland. In addition, the description of
federal income tax consequences in "Federal Income Tax Consequences of Our
Status as a REIT" is based upon an opinion of Ledgewood Law Firm, P.C.

                       WHERE YOU CAN FIND MORE INFORMATION

We file annual, quarterly and current reports, proxy statements and other
information with the SEC. You may read and copy any reports, statements or other
information that we filed with the SEC at the SEC's Public Reference Room at 450
Fifth Street, N.W., Washington, D.C. 20549. You may request copies of these
documents, upon payment of a copying fee, by writing to the SEC. Please call the
SEC at 1-800-SEC-0330 for information on the operation of the Public Reference
Room. Our SEC filings are also available to the public on the SEC internet site
at http://www.sec.gov.

The SEC allows us to "incorporate by reference" the information we file with it,
which means that we can disclose important information to you by referring you
to documents we have filed with the SEC which are not included in this
prospectus. The information incorporated by reference is considered part of this
prospectus, and later information that we file with the SEC will automatically
update and replace this information. We incorporate by


                                       30
<PAGE>
reference the documents listed below and any future filings made with the SEC
under Sections 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934:

-     Annual Report on Form 10-K, as amended, for the year ended December 31,
      2001.

-     Quarterly Reports on Form 10-Q for the quarters ended March 31, 2002 and
      June 30, 2002.

-     Current Reports on Form 8-K filed January 4, 2002, March 7, 2002, March
      15, 2002, April 25, 2002 and May 2, 2002.

-     The description of our common shares contained in Form 8-A/A dated January
      2, 1998.

-     You may request a copy of these filings, at no cost, by writing or
      telephoning us at the following address:

                              RAIT Investment Trust
                            ATTN: Ellen J. DiStefano
              Executive Vice President and Chief Financial Officer
                         1818 Marker Street, 28th Floor
                        Philadelphia, Pennsylvania 19103
                            Telephone: (215) 861-7900

You should rely only on the information incorporated by reference or provided in
this prospectus or any supplement to this prospectus. We have not authorized
anyone else to provide you with different information. We are not making an
offer of our securities in any state where the offer or solicitation is not
authorized. You should not assume that the information in this prospectus or any
supplement is accurate as of any date other than the date on the front of those
documents.

The statements that we make in this prospectus about the contents of any other
documents are not necessarily complete, and are qualified in their entirety by
referring you to the copy of that document, which is filed as an exhibit to the
registration statement. You can obtain copies of these documents from the SEC or
from us, as described above.

                           FORWARD-LOOKING STATEMENTS

This prospectus and any prospectus supplement accompanying this prospectus
contain or incorporate by reference certain forward-looking statements. When
used, statements which are not historical in nature, including those prefaced by
the words "anticipate," "estimate," "should," "expect," "believe," "intend" and
similar expressions, are intended to identify forward-looking statements. These
forward-looking statements are subject to certain risks and uncertainties,
including, among other things:

      -     business conditions and the general economy, especially as they
            affect interest rates;

      -     defaults by borrowers in paying debt service on our loans,
            particularly our subordinated and discounted loans;

      -     illiquidity of our portfolio of loans and property interests;

      -     our inability to originate or acquire loans or property interests on
            favorable terms; and

      -     our inability to maintain our REIT qualification.

Other risks, uncertainties, and factors that could cause actual results to
differ materially from those projected are discussed in the "Risk Factors"
section of the prospectus, as well as in reports filed by us from time to time
with the SEC, including Forms 10-K, 10-Q and 8-K. We undertake no obligation to
publicly update or revise any forward-looking statements, whether as a result of
new information, future events or otherwise, except as required by law. In


                                       31
<PAGE>
light of these risks, uncertainties, and assumptions, the forward-looking events
discussed in or incorporated by reference into this prospectus and any
prospectus supplement accompanying this prospectus might not occur.


                                       32
<PAGE>
No person is authorized to give any information or to represent anything not
contained in this prospectus. You must not rely on any unauthorized
representations or information. This prospectus is an offer to sell only the
common shares offered hereby, and only under circumstances and in jurisdictions
where it is lawful to do so. The information contained in this prospectus is
current only as of its date.

TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                      Page
                                                      ----
<S>                                                   <C>
Our Company.........................................   2


Risk Factors........................................   3

Certain Provisions of Maryland
   Law and of our Declaration of
   Trust and Bylaws.................................  11


Federal Income Tax Consequences
   of our Status as a REIT..........................  14

Selling Shareholders................................  28

Plan of Distribution................................  30

Use of Proceeds.....................................  30

Experts.............................................  30

Legal Opinions......................................  30

Where You Can Find More
   Information......................................  30

Forward Looking Statements..........................  30
</TABLE>


                                1,600,000 Shares








                                 COMMON SHARES

                             ---------------------

                               RESALE PROSPECTUS

                             ---------------------








                                October 25, 2002


                                       33
<PAGE>
                                     PART II

               INFORMATION REQUIRED IN THE REGISTRATION STATEMENT

ITEM 3. INCORPORATION OF DOCUMENTS BY REFERENCE.

The registrant hereby files this Registration Statement on Form S-8 for the
purpose of registering an additional 800,000 of the registrant's common shares,
par value $0.01 per share, issuable upon the exercise of options granted
pursuant to the registrant's Amended and Restated RAIT Investment Trust 1997
Stock Option and Awards Plan. In accordance with General Instruction E to Form
S-8, the registrant incorporates by reference the contents of the registrant's
Registration Statement on Form S-8, Registration No. 333-67452, filed on August
14, 2001, including the information incorporated therein by reference.

The following documents of the registrant filed with the Securities and Exchange
Commission (the "SEC"), are also incorporated by reference in this Registration
Statement:

      -     Annual Report on Form 10-K, as amended, for the year ended December
            31, 2001.

      -     Quarterly Reports on Form 10-Q for the quarters ended March 31, 2002
            and June 30, 2002.

      -     Current Reports on Form 8-K filed January 4, 2002, March 7, 2002,
            March 15, 2002, April 25, 2002, May 2, 2002 and July 9, 2002

      -     The description of the registrant's common shares contained in Form
            8-A/A dated January 2, 1998.

All documents subsequently filed by the registrant pursuant to Sections 13(a),
13(c), 14 and 15(d) of the Securities Exchange Act of 1934, prior to the filing
of a post-effective amendment to this registration statement which indicates
that all securities offered pursuant to this registration statement have been
sold or which deregisters all securities then remaining unsold, shall be deemed
to be incorporated by reference herein and to be part hereof from the date of
filing of such documents.

ITEM 4. DESCRIPTION OF SECURITIES.

Not applicable.

ITEM 5. INTERESTS OF NAMED EXPERTS AND COUNSEL.

Not applicable.

ITEM 6. INDEMNIFICATION OF TRUSTEES AND OFFICERS.

Maryland law permits a Maryland REIT to include in its trust agreement a
provision limiting the liability of its trustees and officers to the trust and
its shareholders for money damages except for liability resulting from (a)
actual receipt of an improper benefit or profit in money, property or services
or (b) active and deliberate dishonesty established by a final judgment as being
material to the cause of action. The Declaration of Trust of RAIT Investment
Trust ("RAIT") contains such a provision which eliminates such liability to the
maximum extent permitted by Maryland law.

The Declaration of Trust of RAIT authorizes RAIT, to the maximum extent
permitted by Maryland law, to obligate itself to indemnify and to pay or
reimburse reasonable expenses in advance of final disposition of a proceeding to
(1) any present or former trustee or officer or (2) any individual who, while a
trustee of RAIT and at the request of RAIT, serves or has served as a director,
officer, partner, trustee, employee or agent of another corporation,
partnership, joint venture, trust, employee benefit plan or other enterprise
from and against any claim or liability to which such person may become subject
or which such person may incur by reason of his status as a present or


                                       34
<PAGE>
former trustee or officer of RAIT. RAIT's Declaration of Trust permits RAIT, to
the maximum extent permitted by Maryland law, to indemnify and to pay or
reimburse reasonable expenses in advance of final disposition of a proceeding to
(1) any present or former trustee or officer who is made a party to the
proceeding by reason of his service in that capacity or (2) any individual who,
while a trustee of RAIT, and at the request of RAIT, serves or has served as a
director, officer, partner, trustee, employee or agent of another corporation,
partnership, joint venture, trust, employee benefit plan or other enterprise and
who is made a party to the proceeding by reason of his service in that capacity.

Maryland law permits a Maryland REIT to indemnify its present and former
trustees and officers, among others, against judgments, penalties, fines,
settlements and reasonable expenses actually incurred by them in connection with
any proceeding to which they may be made a party by reason of their service in
those or other capacities unless it is established that (1) the act or omission
of the trustee or officer was material to the matter giving rise to the
proceeding and (i) was committed in bad faith or (ii) was the result of active
and deliberate dishonesty, (2) the trustee or officer actually received an
improper personal benefit in money, property or services, or (3) in the case of
any criminal proceeding, the trustee or officer had reasonable cause to believe
that the act or omission was unlawful. However, a Maryland REIT may not
indemnify for an adverse judgment in a suit by or in the right of the trust or
for a judgment of liability on the basis that personal benefit was improperly
received, unless in either case a court orders indemnification and then only for
expenses. In addition, Maryland law requires a Maryland REIT, as a condition to
advancing expenses, to obtain (1) a written affirmation by the trustee or
officer of his good faith belief that he has met the standard of conduct
necessary for indemnification by a Maryland REIT, and (2) a written statement by
or on his behalf to repay the amount paid or reimbursed by a Maryland REIT if it
shall ultimately be determined that the standard of conduct was not met. In
addition, RAIT has entered into Indemnity Agreements with its executive officers
and trustees.

ITEM 7. EXEMPTION FROM REGISTRATION CLAIMED.

Not applicable.

ITEM 8. EXHIBITS.

The Exhibits furnished as part of this registration statement on Form S-8 are
identified in the Exhibit Index immediately following the signature pages of
this registration statement. Such Exhibit Index is incorporated herein by
reference.

ITEM 9. UNDERTAKINGS.

Undertakings required by Item 512(a)of Regulation S-K

The undersigned registrant hereby undertakes:

(1) to file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement;

(i) to include any prospectus required by section 10(a)(3) of the Securities Act
of 1933;

(ii) to reflect in the prospectus any facts or events arising after the
effective date of the registration statement (or the most recent post-effective
amendment thereof) which, individually or in the aggregate, represent a
fundamental change in information set forth in the Registration Statement.
Notwithstanding the foregoing, any increase or decrease in volume of securities
offered (if the total dollar value of securities offered would not exceed that
which was registered) and any deviation from the low or high end of the
estimated maximum offering range may be reflected in the form of prospectus
filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than a 20% change in the maximum
aggregate offering price set forth in the "Calculation of Registration Fee"
table in the effective registration statement;


                                       35
<PAGE>
(iii) to include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement;

provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) do not apply if the
information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed with or furnished to the
Commission by the registrant pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 that are incorporated by reference in the registration
statement.

(2) that, for the purpose of determining any liability under the Securities Act
of 1933, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.

(3) to remove from registration by means of a post-effective amendment any of
the securities being registered which remain unsold at the termination of the
offering.

Undertakings required by Item 512(b) of Regulation S-K

The undersigned registrant hereby undertakes that, for purposes of determining
any liability under the Securities Act of 1933, each filing of the registrant's
annual report pursuant to Section 13(a) or 15(d) of the Securities Exchange Act
of 1934 (and, where applicable, each filing of an employee benefit plan's annual
report pursuant to Section 15(d) of the Securities Exchange Act of 1934) that is
incorporated by reference in the registration statement shall be deemed to be a
new registration statement relating to the securities offered therein and the
offering of such securities at that time shall be deemed to the initial bona
fide offering thereof.

Undertakings required by Item 512(h) of Regulation S-K

Insofar as indemnification for liabilities arising under the Securities Act of
1933 may be permitted for trustees, officers and controlling persons of the
registrant, the registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public policy
as expressed in the Act and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by
the registrant of expenses incurred or paid by a trustee, officer or controlling
person of the registrant in the successful defense of an action, suit or
proceeding) is asserted by such trustee, officer or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.


                                       36
<PAGE>
                                   SIGNATURES

THE REGISTRANT. Pursuant to the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-8 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Philadelphia, Commonwealth of Pennsylvania, on
October 24, 2002.

                                         RAIT INVESTMENT TRUST

                                         By:   Betsy Z. Cohen
                                               ---------------------------------
                                               Betsy Z. Cohen
                                               Chairman, Chief Executive Officer
                                               And Trustee(Chief Executive
                                               Officer)


                                POWER OF ATTORNEY

KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Betsy Z. Cohen, Scott F. Schaeffer and Ellen J.
DiStefano, or any of them, as his or her true and lawful attorney-in-fact and
agent, with full power of substitution and resubstitution, for him or her and in
his or her name, place, and stead, in any and all capacities, to sign any and
all amendments (including post-effective amendments) to this Registration
Statement, and to file the same, with all exhibits thereto, and other documents
in connection therewith, with the Securities and Exchange Commission, granting
unto said attorney-in-fact and agent full power and authority to do and perform
each and every act and thing requisite and necessary to be done in connection
therewith as fully to all intents and purposes as he or she might or could do in
person, hereby ratifying and confirming all that said attorney-in-fact and
agent, or of his or her substitute or substitutes, may lawfully do or cause to
be done by virtue hereof.


                                       37
<PAGE>
                                   SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, this registration
statement has been signed by the following persons in the capacities and on the
date indicated.

<TABLE>
<S>                                            <C>
/s/ Betsy Z. Cohen                             Date: October 24, 2002
--------------------------------------
BETSY Z., COHEN, Chairman, Chief
Executive Officer and Trustee

/s/ Scott F. Schaeffer                         Date: October 24, 2002
---------------------------------------
SCOTT F. SCHAEFFER, President and
Chief Operating Officer

s/ Ellen J. DiStefano                          Date: October 24, 2002
---------------------------------------
ELLEN J. DISTEFANO, Executive Vice
President and Chief Financial Officer

/s/ Jonathan Z. Cohen                          Date: October 24, 2002
---------------------------------------
JONATHAN Z. COHEN, Secretary and
Trustee

s/  S. Peter Albert                            Date: October 24, 2002
---------------------------------------
S. PETER ALBERT, Trustee

/s/  Edward Brown                              Date: October 24, 2002
---------------------------------------
EDWARD BROWN, Trustee

/s/  Arthur Makadon                            Date: October 24, 2002
---------------------------------------
ARTHUR MAKADON, Trustee

/s/ Joel R. Mesznik                            Date: October 24, 2002
--------------------------------------
JOEL R. MESZNIK, Trustee

/s/ Daniel Promislo                            Date: October 24, 2002
--------------------------------------
DANIEL PROMISLO, Trustee
</TABLE>




                                       38
<PAGE>
                                  EXHIBIT INDEX

The following exhibits are filed herewith:


<TABLE>
<CAPTION>
Exhibit                             Document
-------                             ---------
<S>                                 <C>
4.1 (1)                             Amended and Restated Declaration of Trust
4.2(2)                              Articles of Amendment to Amended and Restated Declaration of Trust
4.3(3)                              Articles of Amendment of Amended and Restated Declaration of Trust
4.4(4)                              Certificate of Correction to the Amended and Restated Declaration
                                    of Trust
4.5(1)                              Bylaws, as amended
4.6(1)                              Form of specimen certificate representing common shares
4.7                                 Amended and Restated RAIT Investment Trust 1997 Stock Option Plan
                                    (as amended through July 16, 2002)
5                                   Opinion of Ballard Spahr Andrews & Ingersoll, LLP as to the
                                    legality of Securities being registered (including consent)
8                                   Opinion of Ledgewood Law Firm, P.C., regarding tax matters
                                    (including consent).
23.1                                Consent of Grant Thornton LLP
23.2                                Consent of Ballard Spahr Andrews & Ingersoll, LLP (included in Exhibit 5)
23.3                                Consent of Ledgewood Law Firm, P.C. (included in Exhibit 8)
24                                  Power of Attorney (included as part of signature pages to this
                                    registration statement)
</TABLE>


(1)   Incorporated herein by reference to RAIT Investment Trust's Registration
      Statement on Form S-11 (File No. 333-35077), as amended.

(2)   Incorporated herein by reference to RAIT Investment Trust's Registration
      Statement on Form S-11 (File No. 333-53067), as amended.

(3)   Incorporated herein by reference to RAIT Investment Trust's Registration
      Statement on Form S-2 (File No. 333-55518), as amended.

(4)   Incorporated herein by reference to RAIT Investment Trust's Form 10-Q for
      the Quarterly Period ended March 31, 2002 (File No. 1-14760).
[{"type": "S-8", "sequence": "1", "filename": "w64578sv8.txt", "description": "RAIT INVESTMENT TRUST FORM S-8", "secsgml_size_bytes": 152015}]
{"company-data": {"conformed-name": "RAIT INVESTMENT TRUST", "cik": "0001045425", "assigned-sic": "6798", "irs-number": "232919819", "state-of-incorporation": "MD", "fiscal-year-end": "1231"}, "filing-values": {"form-type": "S-8", "act": "33", "file-number": "333-100766", "film-number": "02799135"}, "business-address": {"street1": "1818 MARKET ST", "street2": "28TH FL", "city": "PHILADELPHIA", "state": "PA", "zip": "19103", "phone": "2155465119"}, "mail-address": {"street1": "1521 LOCUST ST", "street2": "6TH FL", "city": "PHILADELPHIA", "state": "PA", "zip": "19102"}, "former-company": {"former-conformed-name": "RESOURCE ASSET INVESTMENT TRUST", "date-changed": "19970904"}}
As filed with the Securities and Exchange Commission on October 25, 2002.
                              Registration No. 333-

                UNITED STATES SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM S-8
                          REGISTRATION STATEMENT UNDER
                           THE SECURITIES ACT OF 1933

                              RAIT INVESTMENT TRUST
             (Exact name of registrant as specified in its charter)

             Maryland                                   23-2919819
 ------------------------------------               -----------------
   (State or other jurisdiction                      (I.R.S. Employer
 of incorporation or organization)                  Identification No.)

  1818 Market Street, Philadelphia, PA                                19103
------------------------------------------                         ------------
(Address of Principal Executive Offices)                            (Zip Code)

                              AMENDED AND RESTATED
                  RAIT INVESTMENT TRUST 1997 STOCK OPTION PLAN
                            (Full title of the plan)

                               Ellen J. DiStefano
                              RAIT Investment Trust
                         1818 Market Street, 28th Floor
                             Philadelphia, PA 19103
                      ------------------------------------
                     (Name and address of agent for service)

                                 (215) 861-7900
          -------------------------------------------------------------
          (Telephone number, including area code, of agent for service)

                                    Copy to:
                              Anders Laren, Esquire
                            Ledgewood Law Firm, P.C.
                        1521 Locust Street - Eighth Floor
                             Philadelphia, PA 19102
                                 (215) 731-9450
CALCULATION OF REGISTRATION FEE
Proposed      Proposed
Title of                                    maximum       maximum
securities               Amount            offering      aggregate           Amount of
to be                    to be             price per     offering          registration
registered            registered (1)        share(2)       price              fee(3)
-----------           -------------        --------      ---------         ------------
Common shares,
par value
$.01 per
share                 800,000 shares       $19.86        $15,888,000         $1,462
(1) This Registration Statement also registers additional securities to be
offered or issued upon adjustment or changes made to the registered securities
by reason of any stock splits, stock dividends or similar transactions as
permitted by Rule 416.

(2) Estimated solely for purposes of determining the registration fee in
accordance with Rule 457(h) under the Securities Act of 1933 based upon the
average of the high and low prices of the registrant's common shares as reported
on the New York Stock Exchange on October 18, 2002.

(3) Pursuant to Rule 457(p) under the Securities Act of 1933, filing fees of
$940 paid in connection with RAIT Investment Trust's Registration Statement on
Form S-11 (Registration No. 333-53067, filed May 19, 1998), filed under its
prior name (Resource Asset Investment Trust), with respect to 3,220,000 common
shares, of which 388,100 common shares were not issued, are now being carried
forward to this Registration Statement. An aggregate of $522 is currently
being paid.

                                EXPLANATORY NOTE

RAIT Investment Trust, a Maryland real estate investment trust, previously filed
its Registration Statement on Form S-8 (Registration No. 333-67452) (the
"Initial Registration Statement") with the Securities and Exchange Commission on
August 14, 2001, for the purpose of registering the registrant's common shares,
par value $0.01 per share (the "Common Shares"), issuable upon the exercise of
options granted pursuant to the registrant's Amended and Restated RAIT
Investment Trust 1997 Stock Option Plan (the "Plan"). At the time of the filing
of the Initial Registration Statement, 800,000 Common Shares were authorized for
issuance under the Plan. On July 16, 2002, the shareholders of registrant voted
to approve increasing the size of the Plan by 800,000 Common Shares. Pursuant to
General Instruction E to Form S-8, this Registration Statement incorporates by
reference the contents of the Initial Registration Statement, except as
otherwise set forth herein. This Registration Statement brings the total number
of authorized and registered shares under the Plan to 1,600,000.

As permitted by Rule 429 under the Securities Act of 1933, the resale prospectus
filed together with this Registration Statement shall be deemed to be a combined
resale prospectus which shall also relate to the Common Shares registered on the
registrant's previously filed Initial Registration Statement No. 333-67452 on
Form S-8.
PART I

                INFORMATION REQUIRED IN SECTION 10(A) PROSPECTUS

ITEM 1. PLAN INFORMATION.

Information required by Part I to be contained in the Section 10(a) prospectus
is omitted from this Registration Statement in accordance with the Introductory
Note to Part I of Form S-8.

ITEM 2. REGISTRANT INFORMATION AND EMPLOYEE PLAN ANNUAL INFORMATION.

Information required by Part I to be contained in the Section 10(a) prospectus
is omitted from this Registration Statement in accordance with the Introductory
Note to Part I of Form S-8.
RESALE PROSPECTUS

                              RAIT INVESTMENT TRUST

              UP TO 1,600,000 COMMON SHARES OF BENEFICIAL INTEREST

This prospectus is part of a registration statement that we filed with the SEC
on Form S-8. On Form S-8 we registered the common shares of beneficial interest
issuable upon exercise of options granted to our employees and trustees under
our Amended and Restated RAIT Investment Trust 1997 Stock Option Plan. We
sometimes refer to this Stock Option Plan as the "1997 Stock Option Plan".

This prospectus may be used by certain persons who may be deemed to be our
"affiliates" under the securities laws to sell a maximum of 1,600,000 common
shares which have been or may be purchased or acquired by them pursuant to the
1997 Stock Option Plan. These persons include those of our employees and
trustees who are listed on page 28 below as "selling shareholders." We encourage
our employees and trustees to invest in our company through the exercise of
their options. We believe that this prospectus and the registration statement of
which it is a part, which permits resales of shares acquired by our employees
and trustees through option exercises, encourages these exercises by providing
liquidity for their investment. Accordingly, while the selling shareholders may
sell up to the number of common shares listed in the "Common Shares Registered
Under This Prospectus" column opposite their names at any time or from time to
time until the termination of this offering, they are not required to sell any
shares.

Our common shares are listed for trading on the New York Stock Exchange under
the symbol "RAS." For more information on how the selling shareholders may sell
these shares, please read the section of the prospectus entitled "Plan of
Distribution."

YOU SHOULD READ THE SECTION ENTITLED "RISK FACTORS" BEGINNING ON PAGE 3 FOR A
DISCUSSION OF CERTAIN FACTORS YOU SHOULD CONSIDER BEFORE BUYING OUR COMMON
SHARES.

NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE
ADEQUACY OR ACCURACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.

                   This prospectus is dated October 25, 2002.
OUR COMPANY

GENERAL

RAIT Investment Trust is a real estate investment trust, or REIT, formed under
Maryland law. We conduct our operations through RAIT Partnership, L.P., a
limited partnership that owns substantially all of our assets. Our wholly-owned
subsidiaries, RAIT General, Inc. and RAIT Limited, Inc., are the sole general
partner and sole limited partner, respectively, of RAIT Partnership. We
sometimes refer to RAIT Investment Trust and RAIT Partnership, along with RAIT
General and RAIT Limited, using the words "we," "our" and "us." We have three
principal business activities:

      -     we make real estate loans directly to borrowers,

      -     we acquire real estate loans from others, and

      -     we acquire real properties or interests in real properties.

We seek to generate income for distribution to our shareholders from a
combination of interest, rents, distributions in respect of rents where we own
an equity interest in a real property and proceeds from the sale of our
investments.

Our address is 1818 Market Street, 28th Floor, Philadelphia, Pennsylvania 19103.
Our telephone number is (215) 861-7900.

                                       2
RISK FACTORS
GENERAL

TRANSACTIONS WITH OUR AFFILIATES MAY RESULT IN CONFLICTS OF INTEREST. We have
relationships with Resource America, Inc., Brandywine Construction & Management,
Inc. and The Bancorp, Inc. which may give rise to conflicts of interest.

We have in the past purchased investments from and sold investments to Resource
America and we anticipate that we will do so in the future, subject to a
limitation contained in our declaration of trust. Our company has in the past
made loans to affiliates of Resource America and we anticipate that we and
Resource America may in the future hold various interests in the same
properties, subject to this limitation.

Jonathan Z. Cohen, our trustee and secretary, is the chief operating officer of
Resource America and currently serves as Resource America's representative on
our board of trustees. Mr. Cohen is the son of Edward E. Cohen, the chairman,
chief executive officer, president and a principal shareholder of Resource
America, and Betsy Z. Cohen, our chairman and chief executive officer. Scott F.
Schaeffer, our president and chief operating officer, is a director of Resource
America.

Brandywine Construction & Management, an affiliate of Resource America, provides
real estate management services to our company.

As part of our regular banking relationships, we place a portion of our
temporary excess cash in short-term money market instruments with The Bancorp
Bank, the wholly-owned banking subsidiary of The Bancorp, Inc. Betsy Z. Cohen is
the chief executive officer and a director of The Bancorp, Inc. and her son, D.
Gideon Cohen, is its chairman. D. Gideon Cohen is also a director of Resource
America.

                            INVESTMENT ACTIVITY RISKS

FINANCING CONSIDERATIONS

THE VALUE OF OUR LOANS DEPENDS ON CONDITIONS BEYOND OUR CONTROL. Loan defaults
will reduce our current return on investment and may require us to become
involved in expensive and time-consuming proceedings, including bankruptcy,
reorganization or foreclosure proceedings. Our primary or sole source of
recovery is typically the real property underlying our loans. Accordingly, the
value of our loans depends upon the value of the underlying real property. This
value may be affected by numerous factors outside our control, including those
described elsewhere in this "Risk Factors - Investment Activity Risks" section.

Our loans typically provide payment structures other than equal periodic
payments that retire a loan over its specified term, including structures that
defer payment of some portion of accruing interest, or defer repayment of
principal, until loan maturity. Where a borrower must pay a loan balance in a
large lump sum payment, its ability to satisfy this obligation may depend upon
its ability to obtain suitable refinancing or otherwise to raise a substantial
cash amount, which we do not control and which may be subject to the same
considerations we describe elsewhere in this "Risk Factors - Investment Activity
Risks" section. In addition, mortgage lenders can lose their lien priority in
many jurisdictions, including those in which our existing loans are located, to
persons who supply labor and materials to a property. For these and other
reasons, the total amount which we may recover from one of our loans may be less
than the total amount of a loan or our cost of acquisition.

LONGER TERM, SUBORDINATE AND NON-CONFORMING LOANS ARE ILLIQUID AND THEIR VALUE
MAY DECREASE. Our mezzanine loans generally have maturities between four and ten
years and typically do not conform to standard loan underwriting criteria. Many
of our loans are subordinate loans. As a result, our loans are relatively
illiquid investments. We may be unable to vary our portfolio promptly in
response to changing economic, financial and investment conditions. As a result,
the fair market value of our portfolio may decrease in the future.

INVESTMENT IN SUBORDINATE LOANS MAY INVOLVE INCREASED RISK OF LOSS. We emphasize
junior lien loans and other forms of subordinated financing, including
wraparound loans. Because of their subordinate position, junior lien loans carry
a greater credit risk than senior lien financing, including a substantially
greater risk of non-payment of

                                       3
interest or principal. Where, as part of a financing structure, we take an
equity or other unsecured position, our risk of loss may be materially
increased. A decline in the real estate market could adversely affect the value
of the property so that the aggregate outstanding balances of senior liens may
exceed the value of the underlying property. In the event of a default on a
senior loan, we may elect to make payments, if we have the right to do so, in
order to prevent foreclosure on the senior loans. In the event of foreclosure,
as a junior lienor we will be entitled to share in foreclosure proceeds only
after satisfaction of the amounts due to senior lienors, which may result in our
being unable to recover the full amount, or any, of our investment. It is also
possible that, in some cases, a "due on sale" clause included in a senior
mortgage, which accelerates the amount due under the senior mortgage in case of
the sale of the property, may apply to the sale of the property if we foreclose,
increasing our risk of loss.

When we acquire a junior loan, we may not acquire the right to service senior
loans. The servicers of the senior loans are responsible to the holders of those
loans, whose interests will likely not coincide with ours, particularly in the
event of a default. Accordingly, the senior loans may not be serviced in a
manner advantageous to us.

Certain of our loans may not be collateralized by recorded or perfected liens.
Certain of our loans may instead be secured by deeds-in-lieu of foreclosure,
also known as "pocket deeds." A deed-in-lieu of foreclosure is a deed executed
in blank that the holder is entitled to record immediately upon a default in the
loan. Loans that are not collateralized by recorded or perfected liens are
subordinate not only to existing liens encumbering the underlying property, but
also to future judgment or other liens that may arise as well as to the claims
of general creditors of the borrower. Furthermore, in a bankruptcy, we will have
materially fewer rights than secured creditors and, if our loan is secured by
equity interests in the borrower, than the borrower's general creditors. Our
rights also will be subordinate to the lien-like rights of the bankruptcy
trustee. Moreover, enforcement of our loans against the underlying properties
will involve a longer, more complex, and likely, more expensive legal process
than enforcement of a mortgage loan.

LOANS SECURED BY INTERESTS IN ENTITIES OWNING REAL PROPERTY MAY INVOLVE
INCREASED RISK OF LOSS. We may originate or acquire loans secured by interests
in entities that own real properties rather than by a direct security interest
in the underlying properties. These loans may be illiquid or otherwise have
features that may make it difficult for us to obtain a return of our investment
in the event of a default. Loans secured by equity interests in any borrower
will be subordinated not only to existing liens encumbering the underlying
property but also to future judgment or other liens that may arise as well as to
the claims of general creditors of the borrower.

INVESTMENT IN NON-CONFORMING LOANS MAY INVOLVE INCREASED RISK OF LOSS. Loans we
acquire generally do not conform to conventional loan criteria due to past
defaults by borrowers. These defaults typically result from lack of a strong
operating history for the properties underlying the loans, the borrowers'
historical credit problems, the properties' underlying cash flow problems or
other factors. As a result, loans we acquire may have a higher risk of default
and loss than conventional loans. Any loss we incur may reduce distributions to
shareholders or adversely affect the value of our securities.

DISCOUNTED LOANS MAY HAVE HIGH RATES OF DEFAULT. We acquire loans at a discount
from both the outstanding balances of the loans and the appraised value of the
properties underlying the loans. Typically, discounted loans are in default
under the original loan terms or other requirements and subject to forbearance
agreements. A forbearance agreement typically requires a borrower to pay to the
lender all revenue from a property after payment of the property's operating
expenses in return for the lender's agreement to withhold exercising its rights
under the loan documents. Acquiring loans at a discount involves a substantially
higher degree of risk of non-collection than loans that conform to institutional
underwriting criteria. We do not acquire a loan unless material steps have been
taken toward resolving problems with the loan, or its underlying property.
However, previously existing problems may recur or other problems may arise.

FINANCING WITH HIGH LOAN-TO-VALUE RATIOS MAY INVOLVE INCREASED RISK OF LOSS. We
anticipate that most of our financings will have loan-to-value ratios in excess
of 80% and that many of our financings will have loan-to-value ratios in excess
of 90%. A loan-to-value ratio is the ratio of the amount of our financing, plus
the amount of any senior indebtedness, to the appraised value of the property
underlying the loan. By reducing the margin available to cover fluctuations in
property value, a high loan-to-value ratio increases the risk that, upon
default, the amount obtainable from sale of the underlying property may be
insufficient to repay the financing.

                                       4
INTEREST RATE CHANGES MAY ADVERSELY AFFECT OUR INVESTMENTS. Changes in interest
rates affect the market value of our loan portfolio. In general, the market
value of a loan will change in inverse relation to an interest rate change where
a loan has a fixed interest rate or only limited interest rate adjustments.
Accordingly, in a period of rising interest rates, the market value of such a
loan will decrease. Moreover, in a period of declining interest rates, real
estate loans may have less value than other fixed income securities due to
possible prepayments. Interest rate changes will also affect the return we
obtain on new loans. In particular, during a period of declining rates, our
reinvestment of loan repayments may be at lower rates than we obtained in prior
investments or on the repaid loans. Also, increases in interest on debt we incur
may not be reflected in increased rates of return on the investments funded
through such debt, which would adversely affect our return on those investments.
Accordingly, interest rate changes may materially affect the total return on our
investment portfolio, which in turn will affect the amount available for
distribution to shareholders.

LACK OF GEOGRAPHIC DIVERSIFICATION EXPOSES OUR INVESTMENTS TO A HIGHER RISK OF
LOSS FROM REGIONAL ECONOMIC FACTORS. We emphasize financing properties located
in the Philadelphia, Pennsylvania metropolitan area, the Baltimore/Washington
corridor and Florida. While we have no specific geographic limitations on where
we may invest, we anticipate that our loans will continue to be concentrated in
the Philadelphia region, the Baltimore/Washington corridor and Florida for the
foreseeable future. This lack of geographic diversification may make our loan
portfolio more sensitive to economic developments of a primarily regional
nature, which may result in reduced rates of return or higher rates of default
than might be incurred with a more geographically diverse investment portfolio.

WE MAY NOT OBTAIN APPRECIATION INTERESTS AT THE RATE WE SEEK, OR AT ALL; WE MAY
NOT BENEFIT FROM APPRECIATION INTERESTS WE DO OBTAIN. In addition to an agreed
upon interest rate, we seek to obtain appreciation interests from our borrowers.
Appreciation interests require a borrower to pay us additional amounts based
upon a property's increase in value, increase in revenues or both. While we seek
appreciation interests at rates of at least 25%, we may not be able to obtain
these rates. Moreover, we may not be able to negotiate appreciation interest
provisions in any of our loans. In addition, while we have sought to structure
the interest rates on our existing loans to maximize our current yield, we may
in the future accept a lower interest rate to obtain an appreciation interest.
The value of any appreciation interest depends on the performance and value of
the property underlying the loan and, thus, is subject to real estate investment
risks. Accordingly, we may not realize any benefits from our appreciation
interests. We do not anticipate receiving significant amounts from our
appreciation interests in the early years of our loans.

APPRECIATION INTERESTS MAY CAUSE LOSS OF THE PRIORITY OF OUR LIEN. Because
appreciation interests allow us to participate in the increase in a property's
value or revenue, courts, including a court in a bankruptcy, arrangement or
similar proceeding, may determine that we should be treated as a partner of, or
joint venturer with, the borrower. If a court makes that determination, we could
lose our lien priority in the property or lose any benefit of our lien.

THE COMPETITION FOR FINANCING MAY INHIBIT OUR ABILITY TO ACHIEVE OUR OBJECTIVES.
We may encounter significant competition from banks, insurance companies,
savings and loan associations, mortgage bankers, pension funds, investment
bankers and others, including public or private real estate investment trusts,
or REITs. This competition could reduce our yields and make it more difficult to
obtain appreciation interests. It may also increase the price, and thus reduce
potential yields, on discounted loans we acquire. Most of our competitors have
substantially greater assets than we do. As such, they have the ability to make
larger loans to more creditworthy borrowers and to have a more diversified loan
portfolio, which reduces the risk of loss from any one loan. An increase in the
general availability of funds to lenders, or a decrease in the amount of
borrowing activity, may increase competition for making loans and may reduce
obtainable yields or increase the credit risk inherent in the available loans.

LENGTHY LOAN COMMITMENT PERIODS MAY REDUCE OUR RETURNS. We typically issue a
loan commitment to a borrower before making the loan. From the time the funds
are committed until the loan is closed and the funds disbursed, we hold the
funds in temporary investments, which typically do not produce substantial
investment returns. If there is a substantial period between loan commitment and
loan closing, or if a borrower determines not to use our financing, our
investment returns will be adversely affected.

USURY STATUTES MAY IMPOSE INTEREST CEILINGS AND SUBSTANTIAL PENALTIES FOR
VIOLATIONS. Interest we charge on our loans, which may include amounts received
from appreciation interests, may be subject to state usury laws. These laws
impose maximum interest rates that may be charged on loans and penalties for
violation, including repayment of excess interest and unenforceability of debt.
We seek to structure our loans so that we do not violate applicable

                                       5
usury laws, but uncertainties in determining the legality of interest rates and
other borrowing charges under some statutes may result in inadvertent
violations.

REAL PROPERTY CONSIDERATIONS

THE VALUE OF OUR PROPERTY INTERESTS DEPENDS ON CONDITIONS BEYOND OUR CONTROL.
Although we emphasize originating or acquiring loans, we have acquired property
interests in the past and anticipate that we will acquire more in the future.
Real property investments are subject to varying degrees of risk. Yields from
our real properties depend on their net income and capital appreciation. Income
from, and appreciation of, our properties may be adversely affected by general
and local economic conditions, neighborhood values, competitive overbuilding,
weather, casualty losses and other factors beyond our control. The value of real
properties may also be affected by factors such as the cost of compliance with
regulations and liability under applicable environmental laws, changes in
interest rates and the availability of financing. Income from a property will be
adversely affected if a significant number of tenants are unable to pay rent or
if available space cannot be rented on favorable terms. Operating and other
expenses of our properties, particularly significant expenses such as mortgage
payments, real estate taxes and maintenance costs, generally do not decrease
when income decreases and, even if revenues increase, operating and other
expenses may increase faster than revenues.

PROPERTY INTERESTS ARE ILLIQUID AND THEIR VALUE MAY DECREASE. Real estate
investments are relatively illiquid. Therefore, we may have only a limited
ability to vary our portfolio of property interests quickly in response to
changes in economic or other conditions. As a consequence, the fair market value
of some or all of our property interests may decrease in the future. In
addition, provisions in the Internal Revenue Code and related regulations impose
a 100% tax on gain realized by a REIT like us from property held primarily for
sale to customers in the ordinary course of business. These provisions may
materially adversely affect our ability to sell property interests. For a
discussion of federal income tax considerations in selling a property interest,
you should read "Risk Factors - Legal and Tax Risks - Gain on disposition of
assets deemed held for sale in ordinary course subject to 100% tax."

UNINSURED AND UNDERINSURED LOSSES MAY AFFECT THE VALUE OF, OR OUR RETURN FROM,
OUR PROPERTY INTERESTS. Our properties, and the properties underlying our loans,
have comprehensive insurance in amounts we believe sufficient to permit the
replacement of the properties in the event of a total loss, subject to
applicable deductibles. There are, however, certain types of losses, such as
earthquakes, floods and hurricanes, that may be uninsurable or not economically
insurable. Also, inflation, changes in building codes and ordinances,
environmental considerations and other factors might make it impractical to use
insurance proceeds to replace a damaged or destroyed property. If any of these
or similar events occurs, it may reduce our return from an affected property and
the value of our investment.

WE MAY HAVE LESS CONTROL OF OUR INVESTMENT WHEN WE INVEST IN JOINT VENTURES,
PARTNERSHIPS OR SIMILAR REAL PROPERTY INTERESTS. Our acquisition of equity
interests in entities which own real property provides risks not present in real
property loans or direct property ownership. For example, the other equity
owners in the entity holding the property might have economic or business
interests or goals which are inconsistent with our business interests or goals
and may be in a position to take action contrary to our instructions or to our
policies and objectives. Moreover, if we are a limited partner in a limited
partnership and have rights allowing us control over the partnership or its
property, we may be deemed to be a general partner and liable for the debts of
the partnership beyond the amount of our investment.

REAL PROPERTIES WITH ENVIRONMENTAL PROBLEMS MAY CREATE LIABILITY FOR US. The
existence of hazardous or toxic substances on a property will adversely affect
its value and our ability to sell or borrow against the property. Contamination
of a real property by hazardous substances or toxic wastes not only may give
rise to a lien on that property to assure payment of the cost of remediation,
but also can result in liability to us, as owner, operator or lender, for that
cost. Many environmental laws can impose liability whether we know of, or are
responsible for, the contamination. In addition, if we arrange for the disposal
of hazardous or toxic substances at another site, we may be liable for the costs
of cleaning up and removing those substances from the site, even if we neither
own nor operate the disposal site. Environmental laws may require us to incur
substantial expenses, may materially limit our use of our properties and may
adversely affect our ability to make distributions to our shareholders. In
addition, future or amended laws, or more stringent interpretations or
enforcement policies with respect to existing environmental requirements, may
increase our exposure to environmental liability.

                                       6
COMPLIANCE WITH AMERICANS WITH DISABILITIES ACT MAY ADVERSELY AFFECT OUR
FINANCIAL CONDITION. Under the Americans with Disabilities Act of 1990, all
public accommodations must meet federal requirements for access and use by
disabled persons. We believe that our properties, and those underlying our
loans, substantially comply with the requirements of the Americans with
Disabilities Act. However, a determination that these properties do not comply
with the Americans with Disabilities Act could result in liability for both
governmental fines and damages to private parties. If we or our borrowers were
required to make unanticipated major modifications to comply with the Americans
with Disabilities Act, it could adversely affect our ability to make
distributions to our shareholders.

OTHER INVESTMENT ACTIVITY CONSIDERATIONS

LEVERAGE CAN REDUCE INCOME AVAILABLE FOR DISTRIBUTION AND CAUSE LOSSES. Our
declaration of trust does not limit the amount of indebtedness we may incur.
Using leverage, whether with recourse to us generally or only with respect to a
particular property, to acquire investments creates an opportunity for increased
net income, but at the same time creates risks. For example, leverage can reduce
the net income available for distributions to shareholders in periods of rising
interest rates where interest rate increases are greater than increases in the
rates of return on our investments. We use leverage to acquire investments only
when we believe it will enhance our returns. However, we cannot be sure that our
use of leverage will prove to be beneficial. Moreover, when our debt is secured
by our assets, we can lose some or all or our assets through foreclosure if we
do not meet our debt service obligations.

LACK OF DIVERSIFICATION IN NUMBER OF OUR INVESTMENTS INCREASES OUR DEPENDENCE ON
INDIVIDUAL INVESTMENTS. Although we generally invest between $2.0 million and
$30.0 million in a loan or property interest, our declaration of trust does not
limit the size of our investments. If we acquire larger loans or property
interests, our portfolio will be concentrated in a smaller number of assets,
increasing the risk of loss to shareholders if a default or other problem
arises.

LEGAL AND TAX RISKS

WE WILL BE TAXED AS A REGULAR CORPORATION IF WE FAIL TO MAINTAIN OUR REIT
STATUS. We have operated and intend to continue to operate in a manner that
permits us to qualify as a REIT for federal income tax purposes. However, the
federal income tax laws governing REITs are complex, and we have not obtained a
ruling from the Internal Revenue Service about our status as a REIT. We have
received an opinion of counsel that we qualify as a REIT based on our current
operations and on certain assumptions and representations concerning future
operations. Opinions of counsel are not binding on the Internal Revenue Service
or any court. The opinion only represents the view of counsel based on counsel's
review and analysis of existing law. Furthermore, our continued qualification as
a REIT will depend on our satisfaction of the asset, income, organizational,
distribution and shareholder ownership requirements of the Internal Revenue Code
on a continuing basis.

If we fail to qualify as a REIT in any taxable year, we will be subject to
federal income tax, including any applicable alternative minimum tax, on our
taxable income at regular corporate rates, and distributions to shareholders
would not be deductible in computing our taxable income. Corporate tax liability
will reduce the amount of cash available for distribution to our shareholders
which, in turn, may reduce the trading prices of our common shares. Unless
entitled to relief under certain Internal Revenue Code provisions, we also would
be disqualified from taxation as a REIT for the four taxable years following the
year during which we ceased to qualify as a REIT.

"PHANTOM INCOME" MAY REQUIRE US TO BORROW OR SELL ASSETS TO MEET REIT
DISTRIBUTION REQUIREMENTS. We must distribute at least 90% of our annual net
taxable income, excluding any net capital gain or retained capital gain, in
order to maintain our REIT status. For years before 2001, we were required to
distribute 95% of this income. In addition, we will be subject to a 4%
nondeductible excise tax on the amount, if any, by which our distributions in
any calendar year are less than the sum of:

      -     85% of our ordinary income for that year,

      -     95% of our capital gain net income for that year, and

      -     100% of our undistributed taxable income from prior years.

                                       7
We have complied and intend to continue to comply with these distribution
requirements. However, in some instances, the structure of our loans may require
us to recognize income for federal income tax purposes even though we do not
receive corresponding cash payments. This income recognition, in turn, increases
the amount that we must distribute in order to avoid corporate income tax for
that year unless there is an equivalent amount of deductions that do not require
expenditures of cash, such as depreciation on owned real estate. The four
principal ways in which this "phantom income" may arise for us are:

      -     Origination or acquisition of loans, including loans with
            appreciation interests, that may be deemed to have original issue
            discount for federal income tax purposes. Original issue discount is
            generally equal to the difference between an obligation's issue
            price and its stated redemption price at maturity. We must recognize
            as income in each year the portion of the original issue discount
            that accrues during that year, even though we do not receive cash in
            that year in the amount of the original issue discount.

      -     Accruing interest with respect to a loan at a rate greater than the
            rate at which we receive interest. In particular, this may happen
            where the rate at which interest is paid on a loan is less than the
            stated rate.

      -     Origination or acquisition of wraparound loans under which we
            receive payments of principal and interest that do not coincide with
            the payments of principal and interest on underlying senior loans.
            Even if, as expected, we obtain positive cash flow from the
            transaction, the amount of principal we pay on the senior
            obligations may exceed the amount of principal we receive from the
            obligor on the wraparound loan, and the amount of interest we may
            receive from the obligor may exceed the amount of interest we pay on
            the senior obligations. This could create a situation where our
            taxable income exceeds our cash flow from the wraparound loan.

      -     REIT taxable income in excess of cash received may also arise in
            connection with some property sales and where a significant
            modification is made to a loan. In addition, we may purchase loans
            relating to our property interests. To the extent we purchase these
            loans at a discount, the purchase may give rise to phantom income
            without any related receipt of cash.

If any of the above circumstances occur, it could require us, in order to avoid
corporate income tax and the nondeductible excise tax, to borrow funds, sell
assets at times which may not be advantageous to us, distribute amounts that
represent a return of capital, or distribute amounts that would otherwise be
spent on future acquisitions, unanticipated capital expenditures or repayment of
debt. To offset these risks, we have invested and intend to continue to invest,
as appropriate, in property interests so that the non-cash depreciation
deductions associated with these investments may help offset our non-cash
income.

ORIGINATION FEES WE RECEIVE WILL NOT BE REIT QUALIFYING INCOME. Any origination
fees we receive will not be qualifying income for purposes of the 75% or 95%
gross income tests applicable to REITs under the Internal Revenue Code. For a
description of these tests, you should read the prospectus section "Federal
Income Tax Consequences of Our Status as a REIT - Income Tests." We typically
receive initial payments, or "points," from borrowers as commitment fees or
additional interest. So long as the payment is for the use of money, rather than
for services provided by us, we believe that this income should not be
classified as non-qualifying origination fees. However, the Internal Revenue
Service may seek to reclassify this income as origination fees instead of
commitment fees or interest. If we cannot satisfy the Internal Revenue Code's
income tests as a result of a successful challenge of our classification of this
income, we may not qualify as a REIT.

INCOME FROM CERTAIN LOANS MAY NOT BE REIT QUALIFYING INCOME. Certain of our
loans may only be indirectly secured by real property. We may acquire or
originate similar loans in the future. We may also originate junior loans where
a senior loan does not permit us to record a mortgage against the underlying
property or substantially restricts our rights as a junior secured lender. In
these situations, the Internal Revenue Service may conclude that interest on our
loans does not constitute interest from obligations "secured by mortgages on
real property or on interests in real property." As a result, interest from
these sources would not in those circumstances qualify for purposes of the 75%
gross income test. For a description of this test, you should read the
prospectus section "Federal Income Tax Consequences of Our Status as a REIT -
Income Tests."

                                       8
GAIN ON DISPOSITION OF ASSETS DEEMED HELD FOR SALE IN ORDINARY COURSE SUBJECT TO
100% TAX. If we sell any of our assets, the Internal Revenue Service may
determine that the sale is a disposition of an asset held primarily for sale to
customers in the ordinary course of a trade or business. Gain from this kind of
sale generally will be subject to a 100% tax. Whether an asset is held
"primarily for sale to customers in the ordinary course of a trade or business"
depends on the particular facts and circumstances of the sale. Although we will
attempt to comply with the terms of safe-harbor provisions in the Internal
Revenue Code prescribing when asset sales will not be so characterized, we
cannot assure you that we will be able to do so.

LOSS OF OUR INVESTMENT COMPANY ACT EXEMPTION WOULD AFFECT US ADVERSELY. We
believe that we are not an investment company under the Investment Company Act
and intend to conduct our operations so that we do not become an investment
company. The Investment Company Act exempts from its registration requirements
entities that, directly or through majority-owned subsidiaries, are "primarily
engaged in the business of purchasing or otherwise acquiring mortgages and other
liens on and interests in real estate." Under current SEC interpretations, in
order to qualify for a "no-action" position from the SEC with respect to the
availability of this exemption, at least 55% of our assets must be invested in
these liens and interests and we may be required to invest an additional 25% in
these types of liens and interests or in other "real estate type" assets.

We believe that, generally, a loan will be considered to be a mortgage or other
lien on real estate if we obtain foreclosure rights. We typically seek to obtain
these rights in our loans. We have not, however, obtained an exemptive order,
no-action letter or other form of interpretive guidance from the SEC on this
position. If the SEC takes a different position, our portfolio may not have a
composition that allows us to qualify under the exemption we claim. If we do not
qualify, we must either change our operations and our asset composition to claim
the exemption or register as an investment company. Either alternative could
adversely affect us and the market price of our shares.

OUR BOARD OF TRUSTEES MAY CHANGE OUR POLICIES WITHOUT SHAREHOLDER CONSENT. Our
board of trustees determines our policies and, in particular, our investment
policies. Our board of trustees may amend or revise our policies or approve
transactions that deviate from these policies without a vote of or notice to the
shareholders. Policy changes could adversely affect the market price of our
shares and our ability to make distributions. Our board of trustees cannot take
any action to disqualify us as a REIT or to otherwise revoke our election to be
taxed as a REIT without the approval of a majority of the number of our shares
of beneficial interest entitled to vote on such matter.

OUR OWNERSHIP LIMITATION MAY RESTRICT BUSINESS COMBINATION OPPORTUNITIES. To
qualify as a REIT under the Internal Revenue Code, no more than 50% in value of
our outstanding capital shares may be owned, directly or indirectly, by five or
fewer individuals during the last half of each taxable year. To preserve our
REIT qualification, our declaration of trust generally prohibits any person from
owning more than 8.3% or, with respect to Resource America, 15%, of our
outstanding common shares and provides that:

      -     A transfer that violates the limitation is void.

      -     A transferee gets no rights to the shares that violate the
            limitation.

      -     Shares acquired that violate the limitation transfer automatically
            to a trust whose trustee has all voting and other rights.

      -     Shares in the trust will be sold and the record holder will receive
            the net proceeds of the sale.

The ownership limitation may discourage a takeover or other transaction that our
shareholders believe to be desirable.

PREFERRED SHARES MAY PREVENT CHANGE IN CONTROL. Our declaration of trust
authorizes our board of trustees to issue preferred shares, to establish the
preferences and rights of any preferred shares issued, to classify any unissued
preferred shares and reclassify any previously classified but unissued preferred
shares, without shareholder approval. The issuance of preferred shares could
delay or prevent a change in control, apart from the ownership limitation, even
if a majority of our shareholders want control to change.

                                       9
MARYLAND ANTI-TAKEOVER STATUTES MAY RESTRICT BUSINESS COMBINATION OPPORTUNITIES.
As a Maryland REIT, we are subject to various provisions of Maryland law which
impose restrictions and require that specified procedures be followed with
respect to the acquisition of "control shares" representing at least ten percent
of our aggregate voting power and certain takeover offers and business
combinations, including, but not limited to, combinations with persons who own
one-tenth or more of our outstanding shares. While we have elected to "opt out"
of the control share acquisition statute, our board of trustees has the right to
rescind the election at any time without notice to the shareholders.

                                       10
CERTAIN PROVISIONS OF MARYLAND LAW AND OF
                       OUR DECLARATION OF TRUST AND BYLAWS

BOARD OF TRUSTEES

Our declaration of trust requires that we have no fewer than three nor more than
nine trustees. A majority of our trustees must be "independent trustees." The
declaration of trust defines an independent trustee as one who, during the
preceding two years, has not

      -     been an affiliate of Resource America, Brandywine Construction &
            Management or their affiliates,

      -     been one of our officers, or

      -     had a material business or professional relationship with us,
            Resource America, Brandywine Construction & Management or their
            affiliates.

We currently have seven trustees, of whom four are independent trustees. The
trustees may increase or decrease the number of trustees by a majority vote;
however, the number of trustees may be increased above nine or decreased below
three only by a vote of at least 75% of the trustees then in office, and the
term of office of a trustee may not be affected by a decrease in the authorized
number of trustees. Any vacancy, including one created by an increase in the
number of trustees, may be filled by a majority of the remaining trustees,
except that independent trustees must nominate replacements for vacancies in
independent trustee positions.

Our declaration of trust provides that a trustee may be removed by a two-thirds
vote of our outstanding voting shares. This provision may operate to make it
impractical for shareholders to remove incumbent trustees and fill the vacancies
created by such removal with their own nominees.

BUSINESS COMBINATIONS

Under Maryland law, certain "business combinations" between us and any person
who beneficially owns, directly or indirectly, 10% or more of the voting power
of our shares, an affiliate of ours who, at any time within the previous two
years was the beneficial owner of 10% or more of the voting power of our shares,
whom the statute terms an "interested shareholder," or an affiliate of an
interested shareholder, are prohibited for five years after the most recent date
on which an "interested shareholder" became an interested shareholder. The
business combinations subject to this law include principally mergers,
consolidations, share exchanges or, in certain circumstances, asset transfers or
issuances or reclassifications of equity securities. After the five year period
has elapsed, a proposed business combination must be recommended by the board of
trustees and approved by the affirmative vote of at least

      -     80% of our outstanding voting shares, and

      -     two-thirds of our outstanding voting shares, excluding shares held
            by the interested shareholder

unless, among other conditions, the shareholders receive a minimum price, as
defined by Maryland law, for their shares and the consideration is received in
cash or in the same form as previously paid by the interested shareholder for
its shares. These provisions do not apply, however, to business combinations
that are approved or exempted by the board of trustees prior to the time that
the interested shareholder becomes an interested shareholder.

CONTROL SHARE ACQUISITIONS

Maryland law provides that "control shares" acquired in a "control share
acquisition" have no voting rights unless approved by a vote of two-thirds of
our outstanding voting shares, excluding shares owned by the acquiror or by
officers or trustees who are employees of ours. "Control shares" are voting
shares which, if aggregated with all other shares previously acquired by the
acquiring person, or in respect of which the acquiring person is able to
exercise or direct the exercise of voting power, except solely by virtue of a
revocable proxy, would entitle the acquiring person to exercise voting power in
electing trustees within one of the following ranges of voting power:

                                       11
-     one-tenth or more but less than one-third;

      -     one-third or more but less than a majority; or

      -     a majority of all voting power.

Control shares do not include shares the acquiring person is then entitled to
vote as a result of having previously obtained shareholder approval. A "control
share acquisition" means the acquisition of control shares, subject to certain
exceptions.

A person who has made or proposes to make a control share acquisition, upon
satisfaction of certain conditions, including an undertaking to pay expenses,
may compel our board of trustees to call a special meeting of shareholders to be
held within 50 days of demand to consider the voting rights of the shares. If no
request for a meeting is made, we may present the question at any shareholders'
meeting.

If voting rights are not approved at the shareholders' meeting or if the
acquiring person does not deliver an acquiring person statement as required by
Maryland law, then, subject to certain conditions and limitations, we may redeem
any or all of the control shares, except those for which voting rights have
previously been approved, for fair value. Fair value is determined without
regard to the absence of voting rights for the control shares and as of the date
of the last control share acquisition or of any meeting of shareholders at which
the voting rights of such shares were considered and not approved. If voting
rights for control shares are approved at a shareholders' meeting, and the
acquiror may then vote a majority of the shares entitled to vote, all other
shareholders may exercise appraisal rights. The fair value of the shares for
purposes of these appraisal rights may not be less than the highest price per
share paid by the acquiror in the control share acquisition. The control share
acquisition statute does not apply to shares acquired in a merger, consolidation
or share exchange if we are a party to the transaction, nor does it apply to
acquisitions approved or exempted by our declaration of trust or bylaws from the
Maryland control share acquisition statute.

Our bylaws exempt from the Maryland control share acquisition statute any and
all acquisitions of our common or preferred shares by any person. The board of
trustees has the right, however, to amend or eliminate this exemption at any
time in the future.

AMENDMENT OF OUR DECLARATION OF TRUST AND BYLAWS

Our declaration of trust may be amended by a majority vote of our outstanding
voting shares except that provisions relating to the trustees, the ownership
limitation, amendments to the declaration of trust and our dissolution and
termination may only be amended by a two-thirds vote of our outstanding voting
shares. The board of trustees may amend the declaration of trust by a two-thirds
vote, without any action by our shareholders, to allow us to qualify, or
continue our qualification, as a REIT and, by a majority vote, to increase or
decrease the aggregate number of our authorized shares, to establish any series
of our shares or to decrease or increase the number of shares in any class that
we have authority to issue. Our bylaws may be amended only by the board of
trustees.

MEETINGS OF SHAREHOLDERS

Our declaration of trust provides for annual shareholder meetings to elect
trustees. Special shareholder meetings may be called by our chairman, chief
executive officer, president or board of trustees and must be called at the
written request of persons holding 50% or more of our outstanding voting shares.

ADVANCE NOTICE OF NOMINATIONS OF TRUSTEES AND NEW BUSINESS

At any annual meeting of shareholders, the nomination of trustees for election
and business proposed to be considered may be made only by the board of trustees
or by a shareholder who has complied with the advance notice procedures set
forth in the bylaws. At any special meeting of shareholders, only the business
specified in the notice of meeting may be brought before the meeting.

                                       12
DISSOLUTION

Shareholders may elect to dissolve our company by a vote of two-thirds of our
outstanding voting shares.

INDEMNIFICATION; LIMITATIONS OF TRUSTEES' AND OFFICERS' LIABILITY

Our declaration of trust limits the liability of our trustees and officers for
money damages, except for liability resulting from

      -     actual receipt of an improper benefit or profit in money, property
            or services; or

      -     a final judgment based upon a finding of active and deliberate
            dishonesty by the trustee that was material to the cause of action
            adjudicated.

Our declaration of trust authorizes us, to the maximum extent permitted by
Maryland law, to indemnify, and to pay or reimburse reasonable expenses to, any
of our present or former shareholders, trustees or officers or any individual
who, while a trustee, and at our request, serves or has served another
corporation, partnership, joint venture, trust, employee benefit plan or any
other enterprise as a trustee, director, officer, partner or otherwise. The
indemnification covers any claim or liability against the person.

Maryland law permits a Maryland REIT to indemnify and advance expenses to its
trustees, officers, employees and agents to the same extent Maryland law permits
corporations to indemnify and reimburse the expenses of their directors and
officers. Maryland law permits a corporation to indemnify its present and former
directors and officers against liabilities and reasonable expenses actually
incurred by them in any proceeding unless

      -     the act or omission of the director or officer was material to the
            matter giving rise to the proceeding, and

      -     was committed in bad faith or

      -     was the result of active and deliberate dishonesty; or

      -     in a criminal proceeding, the director or officer had reasonable
            cause to believe that the act or omission was unlawful.

However, a Maryland corporation may not indemnify for an adverse judgment in a
derivative action. Our bylaws require us, as a condition to advancing expenses,
to obtain

      -     a written affirmation by the trustee or officer of his or her good
            faith belief that he or she has met the standard of conduct
            necessary for indemnification, and

      -     a written undertaking to repay the amount reimbursed if the standard
            of conduct was not met.

INDEMNIFICATION AGREEMENTS

We have indemnification agreements with each of our executive officers and
trustees. The indemnification agreements require us to indemnify our executive
officers and trustees to the fullest extent permitted by law and to advance all
related expenses, subject to reimbursement if it is subsequently determined that
indemnification is not permitted. Under the agreements, we must also indemnify
and advance all expenses incurred by executive officers and trustees seeking to
enforce their rights under the indemnification agreements and may cover
executive officers and trustees under any trustees' and officers' liability
insurance. Although the form of indemnification agreement offers substantially
the same scope of coverage afforded by the declaration of trust, bylaws and
Maryland law, it provides greater assurance to trustees and executive officers
that indemnification will be available because, as a contract, it cannot be
modified unilaterally in the future by the board of trustees or the
shareholders to eliminate the rights it provides.

                                       13
POSSIBLE ANTI-TAKEOVER EFFECT OF CERTAIN PROVISIONS OF MARYLAND LAW AND OF OUR
DECLARATION OF TRUST AND BYLAWS

The provisions of our declaration of trust regarding the removal of trustees and
the restrictions on the transfer of shares, the advance notice provisions of the
bylaws and the business combination provisions of Maryland law, could have the
effect of delaying, deferring or preventing a transaction or a change in control
that might involve a premium price for shareholders or that they otherwise may
believe to be desirable. Also, if the board of trustees rescinds the provisions
of the bylaws electing not to be governed by the control share acquisition
statute, that statute could have a similar effect.

             FEDERAL INCOME TAX CONSEQUENCES OF OUR STATUS AS A REIT

This section summarizes the federal income tax issues that an investor in our
common shares may consider relevant. Because this section is a summary, it does
not address all of the tax issues that may be important to you. In addition,
except to the extent discussed in "--Taxation of Tax-Exempt Shareholders," and
"--Taxation of Non-U.S. Shareholders," below, this section does not address tax
issues that may be important to certain types of investors that are subject to
special treatment under the federal income tax laws, such as insurance
companies, tax-exempt organizations, financial institutions or broker-dealers,
and non-U.S. individuals and foreign corporations.

The statements in this section are based on current federal income tax laws
governing qualification as a REIT. We cannot assure you that new laws,
interpretations of law or court decisions, any of which may take effect
retroactively, will not cause any statement in this section to be inaccurate.

We urge you to consult your own tax advisor regarding the specific tax
consequences to you of investing in our common shares and of our election to be
taxed as a REIT. Specifically, you should consult your own tax advisor regarding
the federal, state, local, foreign, and other tax consequences of an investment
and our election, and regarding potential changes in applicable tax laws.

TAXATION

We elected to be taxed as a REIT under the federal income tax laws commencing
with our short taxable year ended December 31, 1998. We believe that we have
operated in a manner qualifying us as a REIT since our election to be a REIT and
we intend to continue so to operate. This section discusses the laws governing
the federal income tax treatment of a REIT and its shareholders. These laws are
highly technical and complex.

Our qualification as a REIT depends on our ability to meet on a continuing basis
qualification tests set forth in the federal tax laws. Those qualification tests
involve the percentage of income that we earn from specified sources, the
percentages of our assets that fall within specified categories, the diversity
of our share ownership, and the percentage of our earnings that we distribute.
We describe the REIT qualification tests in more detail below. For a discussion
of our tax treatment and the tax treatment of our shareholders if we fail to
qualify as a REIT, see "--Failure to Qualify."

If we qualify as a REIT, we generally will not be subject to federal income tax
on the taxable income that we distribute to our shareholders. The benefit of
that tax treatment is that it avoids the "double taxation," or taxation at both
the corporate and stockholder levels, that generally results from owning stock
in a corporation. However, we will be subject to federal tax in the following
circumstances:

      -     We will pay federal income tax on taxable income, including net
            capital gain, that we do not distribute to our shareholders during,
            or within a specified time period after, the calendar year in which
            the income is earned.

      -     We may be subject to the "alternative minimum tax" on any items of
            tax preference that we do not distribute or allocate to our
            shareholders.

      -     We will pay income tax at the highest corporate rate on

                                       14
--    net income from the sale or other disposition of property
                  acquired through foreclosure ("foreclosure property") that we
                  hold primarily for sale to customers in the ordinary course of
                  business, and

            --    other non-qualifying income from foreclosure property.

      -     We will pay a 100% tax on net income from sales or other
            dispositions of property, other than foreclosure property, that we
            hold primarily for sale to customers in the ordinary course of
            business.

      -     If we fail to satisfy the 75% gross income test or the 95% gross
            income test, as described below under "--Requirements for
            Qualification--Income Tests," and nonetheless continue to qualify as
            a REIT because we meet other requirements, we will pay a 100% tax
            on:

            --    the gross income attributable to the greater of the amounts by
                  which we fail the 75% and 95% gross income tests, multiplied
                  by

            --    a fraction intended to reflect our profitability.

      -     If we fail to distribute during a calendar year at least the sum of

            --    85% of our REIT ordinary income for such year,

            --    95% of our REIT capital gain net income for such year, and

            --    any undistributed taxable income from prior periods,

we will pay a 4% excise tax on the excess of such required distribution over the
amount we actually distributed.

      -     We may elect to retain and pay income tax on our net long-term
            capital gain.

      -     If we acquire any asset from a C corporation, or a corporation that
            generally is subject to full corporate-level tax, in a merger or
            other transaction in which we acquire a basis in the asset that is
            determined by reference either to the C corporation's basis in the
            asset or to another asset, we will pay tax at the highest regular
            corporate rate applicable if we recognize gain on the sale or
            disposition of the asset during the 10-year period after we acquire
            the asset. The amount of gain on which we will pay tax is the lesser
            of:

            --    the amount of gain that we recognize at the time of the sale
                  or disposition, and

            --    the amount of gain that we would have recognized if we had
                  sold the asset at the time we acquired it.

REQUIREMENTS FOR QUALIFICATION

A REIT is a corporation, trust or association that meets the following
requirements:

      -     It is managed by one or more trustees or directors.

      -     Its beneficial ownership is evidenced by transferable shares, or by
            transferable certificates of beneficial interest.

      -     It would be taxable as a domestic corporation, but for the REIT
            provisions of the federal income tax laws.

      -     It is neither a financial institution nor an insurance company
            subject to special provisions of the federal income tax laws.

      -     At least 100 persons are beneficial owners of its shares or
            ownership certificates.

                                       15
-     Not more than 50% in value of its outstanding shares or ownership
            certificates is owned, directly or indirectly, by five or fewer
            individuals, which the federal income tax laws define to include
            certain entities, during the last half of any taxable year.

      -     It elects to be a REIT, or has made such election for a previous
            taxable year, and satisfies all relevant filing and other
            administrative requirements established by the Internal Revenue
            Service that must be met to elect and maintain REIT status.

      -     It uses a calendar year for federal income tax purposes and complies
            with the record keeping requirements of the federal income tax laws.

      -     It meets certain other qualification tests, described below,
            regarding the nature of its income and assets.

We must meet the first four requirements during our entire taxable year and must
meet the fifth requirement during at least 335 days of a taxable year of 12
months, or during a proportionate part of a taxable year of less than 12 months.
If we comply with all the requirements for ascertaining the ownership of our
outstanding shares in a taxable year and have no reason to know that we violated
the sixth requirement, we will be deemed to have satisfied the sixth requirement
for that taxable year. For purposes of determining share ownership under the
sixth requirement, an "individual" generally includes a supplemental
unemployment compensation benefits plan, a private foundation, or a portion of a
trust permanently set aside or used exclusively for charitable purposes. An
"individual," however, generally does not include a trust that is a qualified
employee pension or profit sharing trust under the federal income tax laws, and
beneficiaries of such a trust will be treated as holding our shares in
proportion to their actuarial interests in the trust for purposes of the sixth
requirement.

We have issued sufficient common shares with sufficient diversity of ownership
to satisfy the fifth and sixth requirements. In addition, our declaration of
trust restricts the ownership and transfer of our common shares so that we
should continue to satisfy the fifth and sixth requirements.

A corporation that is a "qualified REIT subsidiary" is not treated as a
corporation separate from its parent REIT. All assets, liabilities and items of
income, deduction and credit of a "qualified REIT subsidiary" are treated as
assets, liabilities, and items of income, deduction and credit of the REIT. A
"qualified REIT subsidiary" is a corporation, all of the capital stock of which
is owned by the REIT. We have two direct subsidiaries, RAIT General and RAIT
Limited, and we own all of their capital stock. RAIT General is the sole general
partner of RAIT Partnership and RAIT Limited is the sole limited partner of RAIT
Partnership. RAIT Partnership owns all of the capital stock in 16 other
corporations involved in the ownership of certain of our portfolio assets. Thus,
RAIT General, RAIT Limited and the other 16 subsidiaries will be ignored as
separate entities, and all of their assets, liabilities, and items of income,
deduction, and credit will be treated as our assets, liabilities and items of
income, deduction and credit.

An unincorporated entity that is beneficially owned by a single parent entity is
not treated as an entity separate from its parent. We own all of RAIT General
and RAIT Limited which, in turn, own all of RAIT Partnership, the entity that
holds all of our investment assets. RAIT Partnership beneficially owns all of
the membership interests in four limited liability companies and five limited
partnerships involved in the ownership of certain of our portfolio assets. These
limited liability companies are treated as partnerships for federal income tax
purposes. Thus, RAIT Partnership and the limited liability companies and limited
partnerships it owns will not be treated as entities separate from us for so
long as RAIT Partnership's only partners are RAIT General and RAIT Limited, we
own all of their capital stock, and RAIT Partnership beneficially owns all of
the membership interests and partnership interests of these limited liability
companies and limited partnerships.

In the case of a REIT that is a partner in a partnership that has other
partners, the REIT is treated as owning its proportionate share of the assets of
the partnership and as earning its allocable share of the gross income of the
partnership for purposes of the applicable REIT qualification tests. Thus, when
RAIT Partnership admits a partner other than us, or a qualified REIT subsidiary
of us, our proportionate share of the assets, liabilities and items of income of
RAIT Partnership, and those of any other partnership, joint venture or limited
liability company that is treated as a partnership for federal income tax
purposes in which we have acquired or will acquire an interest, directly or
indirectly (a "subsidiary partnership") will be treated as our assets and gross
income for purposes of applying the various REIT qualification requirements.

                                       16
A REIT is allowed to own up to 100% of the stock of a "taxable REIT subsidiary,"
or TRS. A TRS may earn income that would not be qualifying income if earned
directly by the parent REIT. Both the subsidiary and the REIT must jointly elect
to treat the subsidiary as a TRS. A TRS will pay income tax at regular corporate
rates on any income that it earns. In addition, the new rules limit the
deductibility of interest paid or accrued by a TRS to its parent REIT to assure
that the TRS is subject to an appropriate level of corporate taxation. Further,
the rules impose a 100% excise tax on transactions between a TRS and its parent
REIT or the REIT's tenants that are not conducted on an arm's-length basis. We
do not currently have any TRSs, but may form one or more TRSs in the future.

INCOME TESTS

We must satisfy two gross income tests annually to maintain qualification as a
REIT. First, at least 75% of our gross income for each taxable year must consist
of defined types of income that we derive, directly or indirectly, from
investments relating to real property or mortgages on real property or temporary
investment income. Qualifying income for purposes of that 75% gross income test
generally includes:

      -     rents from real property,

      -     interest on debt secured by mortgages on real property or on
            interests in real property, and

      -     dividends or other distributions on and gain from the sale of shares
            in other REITs.

Second, in general, at least 95% of our gross income for each taxable year must
consist of income that is qualifying income for purposes of the 75% gross income
test, dividends, other types of interest, gain from the sale or disposition of
stock or securities, income from certain interest rate hedging contracts, or any
combination of the foregoing. Gross income from any origination fees we obtain
or from our sale of property that we hold primarily for sale to customers in the
ordinary course of business is excluded from both income tests. The following
paragraphs discuss the specific application of the gross income tests to us.

Where the principal amount of mortgages on a property exceeds the property's
fair market value, the Internal Revenue Service may contend that the lender is
actually the owner of the property for tax purposes. Since we have acquired and
may continue to acquire loans whose principal amount exceeds the fair market
value of the underlying property, a recharacterization may occur although the
existence of forbearance or other workout arrangements would make it less
likely. If we are found to be the owner of real property rather than a
mortgagee, our income would consist of the rent from the property rather than
interest on our loan. We would generally be entitled to deductions for operating
expenses of the property as well as for depreciation. Consequently, as long as
the rent qualifies as "rents from real property," it is unlikely that such
recharacterization would adversely affect our qualification under the asset
tests, income tests or distribution requirements, except as discussed below.

The term "interest," generally does not include any amount that depends in whole
or in part on the income or profits of any person. However, an amount generally
will not be excluded from the term "interest" solely because it is based on a
fixed percentage or percentages of receipts or sales. In addition, an amount
generally will not be excluded from the term "interest" solely because it is
based on the income or profits of a debtor if substantially all of the debtor's
gross income from the property qualifies as rents from real property if received
by a REIT. Furthermore, interest from an appreciation interest based on the sale
price of a property will be treated as gain from the sale of the property, which
generally is qualifying income for purposes of the 75% and 95% gross income
tests.

Interest, original issue discount and market discount income from our loans
generally will be qualifying interest income for purposes of both the 75% and
95% gross income tests. However, if the highest principal amount of a loan
outstanding during a taxable year exceeds the value of the property securing the
loan on the date we originated or acquired the loan, the portion of the income
from the loan derived from the excess principal amount will be qualifying income
for purposes of the 95% gross income test, but not for purposes of the 75% gross
income test. In addition, if interest income from a loan is based in part on the
borrower's profits or net income, it generally will be disqualified for purposes
of both the 75% and 95% gross income tests.

                                       17
We have purchased and originated loans that are only indirectly secured by real
property and may do so in the future. If a senior loan prevents us from
recording a mortgage against the property, the junior note held by us may be
collateralized by an unrecorded mortgage, a deed-in-lieu of foreclosure, a
pledge of equity interests of the borrower, a purchase option or some other
arrangement. Interest as well as any original issue discount and market discount
income derived from such loans should be qualifying interest income for purposes
of both the 75% and 95% gross income tests. It is possible, however, that the
Internal Revenue Service would conclude that interest on these loans does not
constitute interest from a loan "secured by mortgages on real property or on
interests in real property," so that such interest would not qualify for
purposes of the 75% gross income test. In that event, we believe that the amount
of our income from these loans is currently a low enough percentage of our gross
income so that compliance with the 75% gross income test would nevertheless be
maintained.

In the case of wraparound loans, there is authority for the position that only
the interest attributable to the amounts advanced by the REIT or a person from
whom it acquired the loan will constitute income to the REIT. Under this
interpretation, amounts we receive from the borrower that are used to pay debt
service on the underlying senior debt would be treated as having been paid
directly by the borrower to the senior lender and thus excluded from our gross
income. We believe that we have satisfied the income tests regardless of whether
all of the interest on our wraparound loans is treated as income or only the
interest attributable to the amounts advanced by us is treated as income.

We may originate or acquire mortgage loans that have appreciation interests. We
may be required to recognize income from an appreciation interest over the term
of the related loan using a method that generally will result in our recognizing
at least some taxable income in advance of the related cash flow.

A REIT will incur a 100% tax on the net income derived from any sale or other
disposition of property, other than foreclosure property, that the REIT holds
primarily for sale to customers in the ordinary course of a trade or business.
We believe that none of our assets is held for sale to customers and that a sale
of any of our assets would not be in the ordinary course of our business.
Whether a REIT holds an asset "primarily for sale to customers in the ordinary
course of a trade or business" depends, however, on the facts and circumstances
in effect from time to time, including those related to a particular asset.
Nevertheless, we will attempt to comply with the terms of safe-harbor provisions
in the federal income tax laws prescribing when an asset sale will not be
characterized as a prohibited transaction. We cannot assure you, however, that
we can comply with the safe-harbor provisions or that we will avoid owning
property that may be characterized as property that we hold "primarily for sale
to customers in the ordinary course of a trade or business."

We will be subject to tax at the maximum corporate rate on any income from
foreclosure property, other than income that would be qualifying income for
purposes of the 75% gross income test, less expenses directly connected with the
production of such income. However, gross income from a foreclosure property
will qualify under the 75% and 95% gross income tests. "Foreclosure property" is
any real property, including interests in real property, and any personal
property incident to such real property:

      -     that is acquired by a REIT as the result of the REIT having bid in
            such property at foreclosure, or having otherwise reduced such
            property to ownership or possession by agreement or process of law,
            after there was a default or default was imminent on a lease of such
            property or on an indebtedness that such property secured;

      -     for which the related loan was acquired by the REIT at a time when
            the default was not imminent or anticipated; and

      -     for which such REIT makes a proper election to treat such property
            as foreclosure property.

      We have no foreclosure property as of the date of this prospectus.

However, a REIT will not be considered to have foreclosed on a property where
the REIT takes control of the property as a mortgagee-in-possession and cannot
receive any profit or sustain any loss except as a creditor of the mortgagor.
Property generally ceases to be foreclosure property with respect to a REIT at
the end of the third taxable year following the taxable year in which the REIT
acquired such property, or longer if an extension is granted by the

                                       18
Secretary of the Treasury. The foregoing grace period is terminated and
foreclosure property ceases to be foreclosure property on the first day:

      -     on which a lease is entered into with respect to the property that,
            by its terms, will give rise to income that does not qualify for
            purposes of the 75% gross income test or any amount is received or
            accrued, directly or indirectly, pursuant to a lease entered into on
            or after such day that will give rise to income that does not
            qualify for purposes of the 75% gross income test;

      -     on which any construction takes place on the property, other than
            completion of a building or other improvement, where more than 10%
            of the construction of such building or other improvement was
            completed before default became imminent; or

      -     which is more than 90 days after the day on which such property was
            acquired by the REIT and the property is used in a trade or business
            which is conducted by the REIT, other than through an independent
            contractor from whom the REIT itself does not derive or receive any
            income.

Rent that we receive from real property that we own and lease to tenants will
qualify as "rents from real property," which is qualifying income for purposes
of the 75% and 95% gross income tests, only if we meet each of the following
conditions:

      -     The rent must not be based, in whole or in part, on the income or
            profits of any person, but may be based on a fixed percentage or
            percentages of receipts or sales.

      -     Neither we nor a direct or indirect owner of 10% or more of our
            shares may own, actually or constructively, 10% or more of a tenant
            from whom we receive rent, other than a TRS. Rent we receive from a
            TRS will qualify as "rents from real property" if at least 90% of
            the leased space of the property is rented to persons other than
            TRSs and 10%-owned tenants and the amount of rent paid by the TRS is
            substantially comparable to rent paid by the other tenants of the
            property for comparable space.

      -     All of the rent received under a lease of real property will not
            qualify as "rents from real property" unless the rent attributable
            to the personal property leased in connection with such lease is no
            more than 15% of the total rent received under the lease. The
            allocation of rent between real and personal property is based on
            the relative fair market values of the real and personal property.

      -     We generally must not operate or manage our real property or furnish
            or render services to our tenants other than through an independent
            contractor who is adequately compensated and from whom we do not
            derive revenue. However, we need not provide services through an
            independent contractor, but instead may provide services directly,
            if the services are "usually or customarily rendered" in connection
            with the rental of space for occupancy only and are not considered
            to be provided for the tenants' convenience. In addition, we may
            provide a minimal amount of "non-customary" services to the tenants
            of a property, other than through an independent contractor, as long
            as our income from the services does not exceed 1% of our income
            from the related property. Further, a TRS can provide customary and
            noncustomary services to our tenants without tainting our rental
            income.

We believe that the rents we receive meet all of these conditions.

If we fail to satisfy one or both of the gross income tests for any taxable
year, we nevertheless may qualify as a REIT for such year if we qualify for
relief under certain provisions of the federal income tax laws. Those relief
provisions generally will be available if:

      -     our failure to meet such tests is due to reasonable cause and not
            due to willful neglect,

      -     we attach a schedule of the sources of our income to our tax return,
            and

      -     any incorrect information on the schedule was not due to fraud with
            intent to evade tax.

                                       19
We cannot predict, however, whether in all circumstances we would qualify for
the relief provisions. In addition, as discussed above in "--Taxation" even if
the relief provisions apply, we would incur a 100% tax on the gross income
attributable to the greater of the amounts by which we fail the 75% and 95%
gross income tests, multiplied by a fraction intended to reflect our
profitability.

ASSET TESTS

To maintain our qualification as a REIT, we also must satisfy two asset tests at
the end of each quarter of each taxable year. First, at least 75% of the value
of our total assets must consist of:

    -      cash or cash items, including certain receivables;

    -      government securities;

    -      interests in real property, including leaseholds and options to
           acquire real property and leaseholds;

    -      interests in mortgages on real property;

    -      stock in other REITs; and

    -      investments in stock or debt instruments during the one-year period
           following our receipt of new capital that we raise through equity
           offerings or offerings of debt with at least a five-year term.

Under the second asset test, except for securities in the 75% asset class,
securities in a TRS or qualified REIT subsidiary, and certain partnership
interests and debt obligations:

    -      not more than 5% of the value of our total assets may be represented
           by the securities of any one issuer,

    -      we may not own securities that possess more than 10% of the total
           voting power of outstanding voting securities of any one issuer, and

    -      we may not own securities that have a value of more than 10% of the
           total value of the outstanding securities of any one issuer (the "10%
           value test").

In addition, not more than 20% of the value of our total assets may be
represented by securities of one or more TRSs.

Under a special transaction provision, the 10% value test described above will
not apply to securities we held on July 12, 1999, provided that the issuer of
those securities does not engage in a substantial new line of business or
acquire substantial new assets after that date, and provided that we do not
acquire additional securities of the issuer after that date. Existing taxable
subsidiaries can be converted into TRSs on a tax-free basis at any time before
January 1, 2004.

If the fair market value of the real property securing a mortgage loan equals or
exceeds the outstanding principal balance of the loan, the loan will be a
qualifying asset. However, if the outstanding principal balance of a mortgage
loan exceeds the fair market value of the real property securing the loan, the
excess amount may not be a qualifying asset, although the matter is not free
from doubt. An "interest" in real property also generally includes an interest
in mortgage loans secured by controlling equity interests in partnerships or
limited liability companies that are taxed as partnerships that own real
property, to the extent that the principal balance of the mortgage does not
exceed the fair market value of the real property that is allocable to the
equity interest. We have purchased and originated loans that are only indirectly
secured by real estate, and we may continue to do so in the future.

We expect that any loans, real properties and temporary investments that we
acquire generally will be qualifying assets for purposes of the 75% asset test,
except to the extent that the principal balance of any loan exceeds the value of
the associated real property, or to the extent the asset is a loan that is not
deemed to be an interest in real property. In the case of wraparound loans, it
is uncertain whether the entire wraparound mortgage amount or only the amount

                                       20
of our investment that is in excess of the principal amount of the underlying
loans will be considered our asset. We will monitor the status of our acquired
assets for purposes of the various asset tests and will manage our portfolio in
order to comply at all times with such tests. If we fail to satisfy the asset
tests at the end of a calendar quarter, we would not lose our REIT status if:

    -      we satisfied the asset tests at the close of the preceding calendar
           quarter and

    -      the discrepancy between the value of our assets and the asset test
           requirements arose from changes in the market values of our assets
           and was not wholly or partly caused by the acquisition of one or more
           non-qualifying assets.

If we did not satisfy the condition described in the first item, above, we still
may avoid disqualification by eliminating any discrepancy within 30 days after
the close of the calendar quarter in which it arose.

As described above, we may own up to 100% of the stock of TRSs. TRSs can perform
activities unrelated to our tenants, such as third-party management,
development, and other independent business activities, as well as provide
services to our tenants. We and a taxable subsidiary must elect for the
subsidiary to be treated as a TRS. A corporation of which a TRS directly or
indirectly owns more than 35% of the voting power or value of the stock will
automatically be treated as a TRS. The deductibility of interest paid or accrued
by a TRS to us is limited to assure that the TRS is subject to an appropriate
level of corporate taxation. Further, there is a 100% excise tax on transactions
between a TRS and us or our tenants that are not conducted on an arm's-length
basis. We may not own more than 10% of the voting power or value of the stock of
a taxable subsidiary that is not treated as a TRS. Overall, no more than 20% of
our assets can consist of securities of TRSs. We do not currently have any TRSs,
but may form one or more TRSs in the future.

DISTRIBUTION REQUIREMENTS

Each taxable year, we must distribute dividends, other than capital gain
dividends and deemed distributions of retained capital gain, to our shareholders
in an aggregate amount at least equal to:

    -      the sum of

            --    90% of our "REIT taxable income," computed without regard to
                  the dividends paid deduction and our net capital gain or loss,
                  and

            --    90% of our after-tax net income, if any, from foreclosure
                  property; minus

    -      the sum of certain items of non-cash income.

We must pay such distributions in the taxable year to which they relate, or in
the following taxable year if we declare the distribution before we timely file
our federal income tax return for the year and pay the distribution on or before
the first regular dividend payment date after such declaration. Although the
distribution requirement was reduced from 95% to 90% for taxable years beginning
after December 31, 2000, we intend to continue to attempt to distribute 100% of
our REIT taxable income.

We will pay federal income tax on taxable income, including net capital gain,
that we do not distribute to shareholders. Furthermore, if we fail to distribute
during a calendar year, or by the end of January following such calendar year in
the case of distributions with declaration and record dates falling in the last
three months of the calendar year, at least the sum of:

    -      85% of our REIT ordinary income for such year,

    -      95% of our REIT capital gain income for such year, and

    -      any undistributed taxable income from prior periods,

                                       21
we will incur a 4% nondeductible excise tax on the excess of such required
distribution over the amounts we actually distribute. We may elect to retain and
pay income tax on the net long-term capital gain we receive in a taxable year.
See "--Taxation of Taxable U.S. Shareholders." If we so elect, we will be
treated as having distributed any such retained amount for purposes of the 4%
excise tax described above. We have made, and we intend to continue to make,
timely distributions sufficient to satisfy the annual distribution requirements.

It is possible that, from time to time, we may experience timing differences
between:

    -      the actual receipt of income and actual payment of deductible
           expenses, and

    -      the inclusion of that income and deduction of those expenses in
           arriving at our REIT taxable income.

For example, we will recognize taxable income in excess of our cash receipts
when original issue discount accrues with respect to a loan. Original issue
discount generally will accrue taking into account projected prepayments, such
as those arising from appreciation interests, but not allowing credit losses to
be reflected until they are actually incurred. Also, we may recognize as income
taxable market discount income from the proceeds of the sale of, or principal
payments from, loans that are "market discount bonds," although such proceeds
often will be used to make non-deductible principal payments on related
borrowings. "Market discount bonds" are obligations with a stated redemption
price at maturity that is greater than our tax basis in such obligations. We
also may recognize income in excess of cash receipts if we make wraparound loans
where the payments of nondeductible principal we must make on the underlying
loans exceed the amount of nontaxable principal we receive from the borrower.
There is authority, however, for the position that only the interest on the
amount advanced by the wraparound lender is included in the income of a REIT
making such a loan; this would reduce or limit the possibility of mismatching.
In addition, we may recognize net capital gain attributable to the sale of
depreciated property that exceeds our cash receipts from the sale. We also may
recognize taxable income without receiving a corresponding cash distribution if
we foreclose on or make a "significant modification" to a loan, to the extent
that the fair market value of the underlying property or the principal amount of
the modified loan, as applicable, exceeds our basis in the original loan.
Finally, we cannot deduct from our REIT taxable income capital losses recognized
by us. As a result of these considerations, we may have less cash than is
necessary to distribute all of our taxable income and thereby avoid corporate
income tax and the excise tax imposed on certain undistributed income. In such a
situation, we may need to borrow funds or issue preferred stock or additional
common shares.

Under certain circumstances, we may be able to correct a failure to meet the
distribution requirement for a year by paying "deficiency dividends" to our
shareholders in a later year. We may include such deficiency dividends in our
deduction for dividends paid for the earlier year. Although we may be able to
avoid income tax on amounts distributed as deficiency dividends, we will be
required to pay interest to the Internal Revenue Service based upon the amount
of any deduction we take for deficiency dividends.

RECORDKEEPING REQUIREMENTS

We must maintain certain records in order to qualify as a REIT. In addition, to
avoid a monetary penalty, we must request on an annual basis information from
our shareholders designed to disclose the actual ownership of our outstanding
shares. We have complied, and we intend to continue to comply, with such
requirements.

FAILURE TO QUALIFY

If we fail to qualify as a REIT in any taxable year, and no relief provision
applies, we will be subject to federal income tax and any applicable alternative
minimum tax on our taxable income at regular corporate rates. In calculating our
taxable income in a year in which we failed to qualify as a REIT, we would not
be able to deduct amounts paid out to shareholders. In fact, we would not be
required to distribute any amounts to shareholders in such year. In such event,
to the extent of our current and accumulated earnings and profits, all
distributions to shareholders would be taxable as ordinary income. Subject to
certain limitations of the federal income tax laws, corporate shareholders might
be eligible for the dividends received deduction. Unless we qualified for relief
under specific statutory provisions, we also would be disqualified from taxation
as a REIT for the four taxable years following the year during which we ceased
to qualify as a REIT. We cannot predict whether in all circumstances we would
qualify for such statutory relief.

                                       22
TAXATION OF TAXABLE U.S. SHAREHOLDERS

As long as we qualify as a REIT, a taxable "U.S. shareholder" must take into
account as ordinary income distributions made out of our current or accumulated
earnings and profits that we do not designate as capital gain dividends or
retained long-term capital gain. A U.S. shareholder will not qualify for the
dividends received deduction generally available to corporations. The term "U.S.
shareholder" means a holder of common shares that for United States federal
income tax purposes is:

    -      a citizen or resident of the United States;

    -      a corporation, partnership, or other entity created or organized in
           or under the laws of the United States or of any political
           subdivision thereof;

    -      an estate whose income from sources without the United States is
           includible in gross income for United States federal income tax
           purposes regardless of its connection with the conduct of a trade or
           business within the United States; or

    -      any trust with respect to which

            --    a United States court is able to exercise primary supervision
                  over its administration, and

            --    one or more United States persons have the authority to
                  control all of its substantial decisions.

A U.S. shareholder generally will recognize distributions that we designate as
capital gain dividends as long-term capital gain without regard to the period
for which the U.S. shareholder has held our common shares. A corporate U.S.
shareholder, however, may be required to treat up to 20% of certain capital gain
dividends as ordinary income.

We may elect to retain and pay income tax on the net long-term capital gain that
we receive in a taxable year. In that case, a U.S. shareholder would be taxed on
his or her proportionate share of our undistributed long-term capital gain. The
U.S. shareholder would receive a credit or refund for his or her proportionate
share of the tax we paid. The U.S. shareholder would increase his or her basis
in our shares by the amount of his or her proportionate share of our
undistributed long-term capital gain, minus his or her share of the tax we paid.

A U.S. shareholder will not incur tax on a distribution in excess of our current
and accumulated earnings and profits if such distribution does not exceed the
adjusted basis of the U.S. shareholder's common shares. Instead, such
distribution will reduce the adjusted basis of such common shares. A U.S.
shareholder will recognize a distribution in excess of both our current and
accumulated earnings and profits and the U.S. shareholder's adjusted basis in
his or her common shares as long-term capital gain, or short-term capital gain
if the common shares have been held for one year or less, assuming the common
shares are a capital asset in the hands of the U.S. shareholder. In addition, if
we declare a distribution in October, November, or December of any year that is
payable to a U.S. shareholder of record on a specified date in any of these
months, the distribution will be treated as both paid by us and received by the
U.S. shareholder on December 31 of such year, provided that we actually pay the
distribution during January of the following calendar year.

Shareholders may not include in their individual income tax returns any of our
net operating losses or capital losses. Instead, these losses are generally
carried over by us for potential offset against our future income. Taxable
distributions from us and gain from the disposition of the common shares will
not be treated as passive activity income and, therefore, shareholders generally
will not be able to apply any "passive activity losses," such as losses from
certain types of limited partnerships in which the shareholder is a limited
partner, against such income. In addition, taxable distributions from us and
gain from the disposition of common shares generally will be treated as
investment income for purposes of the investment interest limitations. We will
notify shareholders after the close of our taxable year as to the portions of
the distributions attributable to that year that constitute ordinary income,
return of capital, and capital gain.

                                       23
We may recognize taxable income in excess of our economic income, known as
"phantom income," in the first years we hold certain investments, and experience
an offsetting excess of economic income over our taxable income in later years.
As a result, shareholders at times may pay federal income tax on distributions
that economically represent a return of capital, rather than a dividend. These
distributions would be offset in later years by distributions representing
economic income that would be treated as returns of capital for federal income
tax purposes. Taking into account the time value of money, this acceleration of
federal income tax liabilities may reduce a shareholder's after-tax return on
his or her investment in us to an amount less than the after-tax return on an
investment with an identical before-tax rate of return that did not generate
phantom income. For example, if an investor with a 30% tax rate purchases a
taxable bond with an annual interest rate of 10% on its face value, the
investor's before-tax return on the investment would be 10% and the investor's
after-tax return would be 7%. However, if the same investor purchased our shares
at a time when the before-tax rate of return was 10%, the investor's after-tax
rate of return on the shares might be somewhat less than 7% as a result of our
phantom income. In general, as the ratio of our phantom income to our total
income increases, the after-tax rate of return received by a taxable shareholder
will decrease. We will consider the potential effects of phantom income on our
taxable shareholders in managing our investments.

TAXATION OF U.S. SHAREHOLDERS ON THE DISPOSITION OF SHARES

In general, a U.S. shareholder who is not a dealer in securities must treat any
gain or loss realized upon a taxable disposition of his or her common shares as
long-term capital gain or loss if the U.S. shareholder has held the common
shares for more than one year. However, a U.S. shareholder must treat any loss
upon a sale or exchange of common shares held by such shareholder for six months
or less as a long-term capital loss to the extent of capital gain dividends and
other distributions from us that such U.S. shareholder treats as long-term
capital gain. All or a portion of any loss that a U.S. shareholder realizes upon
a taxable disposition of the common shares may be disallowed if the U.S.
shareholder purchases other common shares within 30 days before or after the
disposition.

CAPITAL GAINS AND LOSSES

The tax rate differential between capital gain and ordinary income for
non-corporate taxpayers may be significant. A taxpayer generally must hold a
capital asset for more than one year for gain or loss derived from its sale or
exchange to be treated as long-term capital gain or loss. Under the Economic
Growth and Tax Relief Reconciliation Act of 2001(the "2001 Act"), the maximum
marginal individual income tax rate is 38.6% for all of 2002 and 2003, 37.6% for
2004 and 2005, and 35% for 2006 to 2011. The maximum tax rate on long-term
capital gain applicable to non-corporate taxpayers, which was not affected by
the 2001 Act, is 20% for sales and exchanges of assets held for more than one
year. The maximum tax rate on long-term capital gain from the sale or exchange
of "section 1250 property," or depreciable real property, is 25% to the extent
that such gain would have been treated as ordinary income if the property were
"section 1245 property." With respect to distributions that we designate as
capital gain dividends and any retained capital gain that we are deemed to
distribute, we generally may designate whether such a distribution is taxable to
our non-corporate shareholders at a 20% or 25% rate. In addition, the
characterization of income as capital gain or ordinary income may affect the
deductibility of capital losses. A non-corporate taxpayer may deduct capital
losses not offset by capital gains against its ordinary income only up to a
maximum annual amount of $3,000. A non-corporate taxpayer may carry forward
unused capital losses indefinitely. A corporate taxpayer must pay tax on its net
capital gain at ordinary corporate rates. A corporate taxpayer can deduct
capital losses only to the extent of capital gains, with unused losses being
carried back three years and forward five years.

INFORMATION REPORTING REQUIREMENTS AND BACKUP WITHHOLDING

We will report to our shareholders and to the Internal Revenue Service the
amount of distributions we pay during each calendar year, and the amount of tax
we withhold, if any. Under the backup withholding rules, a shareholder may be
subject to backup withholding at the rate of 27.5% with respect to distributions
unless the holder:

    -      is a corporation or comes within certain other exempt categories and,
           when required, demonstrates this fact, or

    -      provides a taxpayer identification number, certifies as to no loss of
           exemption from backup withholding and otherwise complies with the
           applicable requirements of the backup withholding rules.

                                       24
A shareholder who does not provide us with his or her correct taxpayer
identification number also may be subject to penalties imposed by the Internal
Revenue Service. Any amount paid as backup withholding will be creditable
against the shareholder's income tax liability. In addition, we may be required
to withhold a portion of capital gain distributions to any shareholders who fail
to certify their non-foreign status to us. For a discussion of the backup
withholding rules as applied to non-U.S. shareholders, see "--Taxation of
Non-U.S. Shareholders."

TAXATION OF TAX-EXEMPT SHAREHOLDERS

Tax-exempt entities, including qualified employee pension and profit sharing
trusts and individual retirement accounts, generally are exempt from federal
income taxation. However, they are subject to taxation on their unrelated
business taxable income. While many investments in real estate generate
unrelated business taxable income, the Internal Revenue Service has issued a
published ruling that dividend distributions from a REIT to an exempt employee
pension trust do not constitute unrelated business taxable income, so long as
the exempt employee pension trust does not otherwise use the shares of the REIT
in an unrelated trade or business of the pension trust. Based on that ruling,
amounts that we distribute to tax-exempt shareholders generally should not
constitute unrelated business taxable income. However, if a tax-exempt
shareholder were to finance its acquisition of our common shares with debt, a
portion of the income that it receives from us would constitute unrelated
business taxable income pursuant to the "debt-financed property" rules.
Furthermore, social clubs, voluntary employee benefit associations, supplemental
unemployment benefit trusts, and qualified group legal services plans that are
exempt from taxation under special provisions of the federal income tax laws are
subject to different unrelated business taxable income rules, which generally
will require them to characterize distributions that they receive from us as
unrelated business taxable income. Finally, in certain circumstances, a
qualified employee pension or profit sharing trust that owns more than 10% of
our shares must treat a percentage of the dividends that it receives from us as
unrelated business taxable income. Such percentage is equal to the gross income
we derive from an unrelated trade or business, determined as if we were a
pension trust, divided by our total gross income for the year in which we pay
the dividends. That rule applies to a pension trust holding more than 10% of our
shares only if:

    -      the percentage of our dividends that the tax-exempt trust must treat
           as unrelated business taxable income is at least 5%;

    -      we qualify as a REIT by reason of the modification of the rule
           requiring that no more than 50% of our shares be owned by five or
           fewer individuals that allows the beneficiaries of the pension trust
           to be treated as holding our shares in proportion to their actuarial
           interests in the pension trust; and either:

            --    one pension trust owns more than 25% of the value of our
                  shares or

            --    a group of pension trusts individually holding more than 10%
                  of the value of our shares collectively owns more than 50% of
                  the value of our shares.

TAXATION OF NON-U.S. SHAREHOLDERS

The rules governing U.S. federal income taxation of nonresident alien
individuals, foreign corporations, foreign partnerships, and other foreign
shareholders are complex. This section is only a summary of such rules. We urge
non-U.S. shareholders to consult their own tax advisors to determine the impact
of federal, state and local income tax laws on ownership of our common shares,
including any reporting requirements.

A non-U.S. shareholder that receives a distribution that is not attributable to
gain from our sale or exchange of U.S. real property interests, as defined
below, and that we do not designate as a capital gain dividend or retained
capital gain will recognize ordinary income to the extent that we pay such
distribution out of our current or accumulated earnings and profits. A
withholding tax equal to 30% of the gross amount of the distribution ordinarily
will apply to such distribution unless an applicable tax treaty reduces or
eliminates the tax. However, if a distribution is treated as effectively
connected with the non-U.S. shareholder's conduct of a U.S. trade or business,
the non-U.S. shareholder generally will be subject to federal income tax on the
distribution at graduated rates, in the same manner as U.S. shareholders are
taxed with respect to such distributions and also may be subject to the 30%
branch profits tax in the

                                       25
case of a non-U.S. shareholder that is a non-U.S. corporation. We plan to
withhold U.S. income tax at the rate of 30% on the gross amount of any such
distribution paid to a non-U.S. shareholder unless either:

    -      a lower treaty rate applies and the non-U.S. shareholder files the
           required form evidencing eligibility for that reduced rate with us;
           or

    -      the non-U.S. shareholder files an IRS Form W-8ECI with us claiming
           that the distribution is effectively connected income.

A non-U.S. shareholder will not incur tax on a distribution in excess of our
current and accumulated earnings and profits if such distribution does not
exceed the adjusted basis of our common shares. Instead, such a distribution
will reduce the adjusted basis of those common shares. A non-U.S. shareholder
will be subject to tax on a distribution that exceeds both our current and
accumulated earnings and profits and the adjusted basis of our common shares, if
the non-U.S. shareholder otherwise would be subject to tax on gain from the sale
or disposition of our common shares, as described below. Because we generally
cannot determine at the time we make a distribution whether or not the
distribution will exceed our current and accumulated earnings and profits, we
normally will withhold tax on the entire amount of any distribution at the same
rate as we would withhold on a dividend. However, a non-U.S. shareholder may
obtain a refund of amounts that we withhold if we later determine that a
distribution in fact exceeded our current and accumulated earnings and profits.

We must withhold 10% of any distribution that exceeds our current and
accumulated earnings and profits. Consequently, although we intend to withhold
at a rate of 30% on the entire amount of any distribution, to the extent that we
do not do so, we will withhold at a rate of 10% on any portion of a distribution
not subject to withholding at a rate of 30%.

For any year in which we qualify as a REIT, a non-U.S. shareholder will incur
tax on distributions that are attributable to gain from the sale or exchange of
"U.S. real property interests" under special provisions of the federal income
tax laws known as "FIRPTA." The term "U.S. real property interests" includes
certain interests in real property and shares in corporations at least 50% of
whose assets consist of interests in real property. Under those rules, a
non-U.S. shareholder is taxed on distributions attributable to gain from sales
of U.S. real property interests as if such gain were effectively connected with
a U.S. business of the non-U.S. shareholder. A non-U.S. shareholder thus would
be taxed on such a distribution at the normal capital gain rates applicable to
U.S. shareholders, subject to applicable alternative minimum tax and a special
alternative minimum tax in the case of a nonresident alien individual. A
non-U.S. corporate shareholder not entitled to treaty relief or exemption also
may be subject to the 30% branch profits tax on such a distribution. We must
withhold 35% of any distribution that we could designate as a capital gain
dividend. A non-U.S. shareholder may receive a credit against its tax liability
for the amount we withhold.

A non-U.S. shareholder generally will not incur tax under FIRPTA as long as at
all times non-U.S. persons hold, directly or indirectly, less than 50% in value
of our shares. We cannot assure you that this test will be met. However, a
non-U.S. shareholder that owned, actually or constructively, 5% or less of the
common shares at all times during a specified testing period will not incur tax
under FIRPTA if the common shares are "regularly traded" on an established
securities market. If the gain on the sale of the shares were taxed under
FIRPTA, a non-U.S. shareholder would be taxed in the same manner as U.S.
shareholders with respect to such gain, subject to applicable alternative
minimum tax, a special alternative minimum tax in the case of nonresident alien
individuals, and the possible application of the 30% branch profits tax in the
case of non-U.S. corporations. Furthermore, a non-U.S. shareholder will incur
tax on gain not subject to FIRPTA if:

    -      the gain is effectively connected with the non-U.S. shareholder's
           U.S. trade or business, in which case the non-U.S. shareholder will
           be subject to the same treatment as U.S. shareholders with respect to
           such gain, or

    -      the non-U.S. shareholder is a nonresident alien individual who was
           present in the U.S. for 183 days or more during the taxable year and
           has a "tax home" in the United States, in which case the non-U.S.
           shareholder will incur a 30% tax on his capital gains.

                                       26
STATE AND LOCAL TAXES

We and/or our shareholders may be subject to taxation by various states and
localities, including those in which we or such shareholders transact business,
own property or reside. The state and local tax treatment may differ from the
federal income tax treatment described above. Consequently, shareholders should
consult their own tax advisors regarding the effect of state and local tax laws
upon an investment in our common shares.

                                       27
SELLING SHAREHOLDERS

The selling shareholders listed below acquired or may acquire the shares listed
in the column "Common Shares Registered Under This Prospectus" upon the exercise
of options granted under the 1997 Stock Option Plan. The table shows, as of
October 24, 2002, certain information regarding the selling shareholders'
ownership of our common shares. We encourage our employees and trustees to
invest in our company through the exercise of their options. We believe that
this prospectus and the registration statement of which it is a part, which
permits resales of shares acquired by our employees and trustees through option
exercises, encourages these exercises by providing liquidity for their
investment. Accordingly, while the number of shares set forth in the column
"Common Shares To Be Owned After The Offering" assumes that all common shares
acquired by a selling shareholder through exercise of his or her options will be
offered or sold, the selling shareholders are not required to sell any shares.
Employees and trustees, their family members, trusts for their benefit, or
entities that they own, that acquire common shares under the 1997 Stock Option
Plan may be added to the selling shareholder list below by a prospectus
supplement filed with the SEC. The number of common shares to be sold by any
selling shareholder under this prospectus also may be increased or decreased by
a prospectus supplement. Although a person's name is included in the table
below, neither that person nor we are making an admission that the named person
is our "affiliate."

Betsy Z. Cohen has served as our Chairman, Chief Executive Officer and one of
our trustees since our founding in August 1997. S. Peter Albert has served as
one of our trustees since May 2000. Edward S. Brown has served as one of our
trustees since June 1999. Jonathan Z. Cohen has served as our Secretary since
February 1998 and as one of our trustees since September 1997. Arthur Makadon
has served as one of our trustees since July 2002. Joel R. Mesznik has served as
one of our trustees since our founding in August 1997. Daniel Promislo has
served as one of our trustees since our founding in August 1997. Scott F.
Schaeffer was elected in September 2000 to serve as our President and Chief
Operating Officer. Jay R. Cohen was elected in October 1997 to serve as one of
our Executive Vice Presidents. Ellen J. DiStefano was elected in October 1997 to
serve as our Chief Financial Officer and also has served as one of our Executive
Vice Presidents since December 1998. Kenneth Frappier was elected in April 2002
to serve as our Senior Vice President-Portfolio and Risk Management.
Amount and Nature        Common Shares          Common Shares           Percentage of Class to be
                                 Of Shares Owned        Registered Under      To be Owned After            Beneficially Owned
Name                          Prior to Offering(1)    This Prospectus (1)      The Offering (2)             After Offering(3)
----                          --------------------    -------------------      ----------------             -----------------
Betsy Z. Cohen                     471,185(4)                 321,526                149,659                         *

S. Peter Albert                     22,000                     12,000                 10,000                         *

Edward S. Brown                     13,000                     13,000                      0                         *

Jonathan Z. Cohen                   33,606(5)                   7,913                 25,693                         *

Arthur Makadon                      11,000(6)                  11,000                      0                         *

Joel R. Mesznik                     17,500(7)                  14,500                  3,000                         *

Daniel Promislo                     15,500                     14,500                  1,000                         *

Scott F. Schaeffer                  92,572(8)                  80,000                 12,572                         *

Jay R. Cohen                       101,416(9)                  65,271                 36,145                         *

Ellen J. DiStefano                  73,549(10)                 66,682                  6,867                         *

Kenneth R. Frappier                 27,370(11)                 27,000                    370                         *
----------------------

* Less than 1%.

(1)   Includes all common shares acquired and not previously sold by the
      relevant selling shareholder pursuant to the exercise of options granted
      under the 1997 Stock Option Plan and all common shares which the relevant
      selling shareholder has the right to acquire through the exercise of
      options granted under the 1997 Stock Option Plan, whether or not such
      right has yet become exercisable or will become exercisable within 60 days

                                       28
after the date hereof.

(2)   Assumes all common shares registered pursuant hereto will be sold,
      although there can be no assurance that any of the selling shareholders
      will offer for sale or sell any or all of the common shares offered by
      them pursuant to this prospectus. Also assumes that no other common shares
      are acquired or transferred by the relevant selling shareholder.

(3)   Based on 18,180,611 common shares outstanding as of October 24, 2002.
      Common shares issuable upon the exercise of options exercisable by the
      relevant selling shareholder within 60 days are deemed to be  outstanding
      with respect to the calculation of that selling shareholder's percent of
      class.

(4)   Includes 96,626 common shares directly held by Mrs. Cohen; 5,022 common
      shares held in our Cash and Deferred Savings Plan (the "401(k) Plan") for
      the benefit of Mrs. Cohen; 40,446 common shares held by an individual
      retirement account ("IRA") for the benefit of Mrs. Cohen; 66,801 common
      shares held as trustee of a charitable foundation; 37,290 common shares
      held in an IRA account for the benefit of Mrs. Cohen's spouse, Edward E.
      Cohen and 225,000 common shares issuable upon exercise of options granted
      under the 1997 Stock Option Plan (the options exercisable for all these
      225,000 common shares are vested). Excludes 57,432 common shares to be
      deposited in the RAIT Investment Trust Pension Plan established in
      connection with the supplemental executive retirement plan established
      pursuant to Mrs. Cohen's employment agreement with us (no rights to which
      are vested as of the date of this prospectus or will vest within sixty
      days). Excludes common shares held by Resource America, of which Edward
      E. Cohen is Chairman, Chief Executive Officer and President.

(5)   Includes 32,440 common shares held directly by Mr. Cohen, 666 common
      shares held in a 401(k) Plan account for his benefit and 500 common shares
      issuable upon exercise of options granted under the 1997 Stock Option Plan
      (the options exercisable for all these 500 common shares are vested).
      Excludes common shares held by Resource America of which Mr. Cohen is
      Chief Operating Officer.

(6)   Including 11,000 common shares issuable upon exercise of options granted
      under the 1997 Stock Option Plan (of the options exercisable for these
      11,000 common shares, 1,000 are subject to early exercise rights as of
      the date of this prospectus and none will vest within 60 days).

(7)   Includes 7,000 common shares held directly by Mr. Mesznik and 10,500
      Common Shares issuable upon exercise of options granted under the 1997
      Stock Option Plan (the options exercisable for all these 10,500 common
      shares are vested.

(8)   Includes 50,000 common shares directly held by Mr. Schaeffer, 2,072 common
      shares held in a 401(k) Plan account for the benefit of Mr. Schaeffer,
      3,000 common shares held by an IRA for the benefit of Mr. Schaeffer and
      37,500 common shares issuable upon exercise of options granted under the
      1997 Stock Option Plan (of the options exercisable for these 37,500
      commons shares, none are vested as of the date of this prospectus and
      18,750 will vest within sixty days).

(9)   Includes 4,208 common shares held in an IRA account for the benefit of Mr.
      Cohen; 32,271 common shares held jointly by Mr. Cohen and his spouse;
      8,341 common shares held in an IRA account for the benefit of Mr. Cohen's
      spouse; 6,596 common shares held in Mr. Cohen's 401(k) Plan account; and
      50,000 common shares issuable upon exercise of options granted under the
      1997 Stock Option Plan (the options exercisable for all these 50,000
      common shares are vested).

(10)  Includes 6,000 common shares directly held by Mrs. DiStefano, 1,002 common
      shares held by Mrs. DiStefano jointly with her spouse; 1,000 common shares
      held in an IRA account for the benefit of Mrs. DiStefano, 1,000 common
      shares held in an IRA account for the benefit of Mrs. DiStefano's spouse,
      64 common shares held in an Education IRA for the benefit of Mrs.
      DiStefano's children, 3,801 common shares held in a 401(k) Plan account
      for the benefit of Mrs. DiStefano; and 60,682 common shares issuable upon
      exercise of options granted under the 1997 Stock Option Plan (the options
      exercisable for all these 60,682 common shares are vested).

                                       29
(11)  Includes 370 common shares held in a 401(k) Plan account for the benefit
      of Mr. Frappier, 12,000 common shares directly held by Mr. Frappier and
      15,000 common shares issuable upon exercise of options granted under the
      1997 Stock Option Plan (of the options exercisable for these 15,000 common
      shares, 2,500 are subject to early exercise rights as of the date of this
      prospectus and none will vest within sixty days).

                              PLAN OF DISTRIBUTION

The selling shareholders may sell the common shares for their own accounts from
time to time, in one or more transactions on the New York Stock Exchange or
otherwise, in special offerings, secondary distributions pursuant to and in
accordance with applicable rules and regulations of the SEC and the New York
Stock Exchange, in negotiated transactions or otherwise, at market prices
prevailing at the time of the sale, at prices related to such market prices or
at negotiated prices. The selling shareholders may effect such transactions by
selling shares to or through broker-dealers, and such broker-dealers may receive
compensation in the form of underwriting discounts, concessions or commissions
from the selling shareholders and/or purchasers of the common shares for whom
they may act as agent, which broker-dealer compensation may be in excess of
customary commissions.

We have no basis for estimating either the number of common shares, if any, that
will ultimately be sold by the selling shareholders or the prices at which the
selling shareholders may sell shares. All selling and other expenses incurred by
individual selling shareholders will be borne by those selling shareholders.

                                 USE OF PROCEEDS

We will not realize any proceeds from the sale of the common shares which may be
sold pursuant to this prospectus for the respective accounts of the selling
shareholders. We, however, may derive proceeds upon the exercise of the options
granted to selling stockholders pursuant to the 1997 Stock Option Plan. All such
proceeds will be available to us for working capital and general corporate
purposes. We cannot predict the timing or the amount of any option exercises.

                                     EXPERTS

Our consolidated financial statements as of December 31, 2001 and 2000 and for
each of the three years ended December 31, 2001 appearing in our Annual Report
on Form 10-K, as amended, for the year ended December 31, 2001, which are
incorporated by reference in this prospectus, have been audited by Grant
Thornton LLP, whose report is incorporated by such reference in this prospectus
and given upon their authority as experts in accounting and auditing.

                                 LEGAL OPINIONS

Certain matters of Maryland law will be passed upon for us by Ballard Spahr
Andrews & Ingersoll, LLP, Baltimore, Maryland. In addition, the description of
federal income tax consequences in "Federal Income Tax Consequences of Our
Status as a REIT" is based upon an opinion of Ledgewood Law Firm, P.C.

                       WHERE YOU CAN FIND MORE INFORMATION

We file annual, quarterly and current reports, proxy statements and other
information with the SEC. You may read and copy any reports, statements or other
information that we filed with the SEC at the SEC's Public Reference Room at 450
Fifth Street, N.W., Washington, D.C. 20549. You may request copies of these
documents, upon payment of a copying fee, by writing to the SEC. Please call the
SEC at 1-800-SEC-0330 for information on the operation of the Public Reference
Room. Our SEC filings are also available to the public on the SEC internet site
at http://www.sec.gov.

The SEC allows us to "incorporate by reference" the information we file with it,
which means that we can disclose important information to you by referring you
to documents we have filed with the SEC which are not included in this
prospectus. The information incorporated by reference is considered part of this
prospectus, and later information that we file with the SEC will automatically
update and replace this information. We incorporate by

                                       30
reference the documents listed below and any future filings made with the SEC
under Sections 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934:

-     Annual Report on Form 10-K, as amended, for the year ended December 31,
      2001.

-     Quarterly Reports on Form 10-Q for the quarters ended March 31, 2002 and
      June 30, 2002.

-     Current Reports on Form 8-K filed January 4, 2002, March 7, 2002, March
      15, 2002, April 25, 2002 and May 2, 2002.

-     The description of our common shares contained in Form 8-A/A dated January
      2, 1998.

-     You may request a copy of these filings, at no cost, by writing or
      telephoning us at the following address:

                              RAIT Investment Trust
                            ATTN: Ellen J. DiStefano
              Executive Vice President and Chief Financial Officer
                         1818 Marker Street, 28th Floor
                        Philadelphia, Pennsylvania 19103
                            Telephone: (215) 861-7900

You should rely only on the information incorporated by reference or provided in
this prospectus or any supplement to this prospectus. We have not authorized
anyone else to provide you with different information. We are not making an
offer of our securities in any state where the offer or solicitation is not
authorized. You should not assume that the information in this prospectus or any
supplement is accurate as of any date other than the date on the front of those
documents.

The statements that we make in this prospectus about the contents of any other
documents are not necessarily complete, and are qualified in their entirety by
referring you to the copy of that document, which is filed as an exhibit to the
registration statement. You can obtain copies of these documents from the SEC or
from us, as described above.

                           FORWARD-LOOKING STATEMENTS

This prospectus and any prospectus supplement accompanying this prospectus
contain or incorporate by reference certain forward-looking statements. When
used, statements which are not historical in nature, including those prefaced by
the words "anticipate," "estimate," "should," "expect," "believe," "intend" and
similar expressions, are intended to identify forward-looking statements. These
forward-looking statements are subject to certain risks and uncertainties,
including, among other things:

      -     business conditions and the general economy, especially as they
            affect interest rates;

      -     defaults by borrowers in paying debt service on our loans,
            particularly our subordinated and discounted loans;

      -     illiquidity of our portfolio of loans and property interests;

      -     our inability to originate or acquire loans or property interests on
            favorable terms; and

      -     our inability to maintain our REIT qualification.

Other risks, uncertainties, and factors that could cause actual results to
differ materially from those projected are discussed in the "Risk Factors"
section of the prospectus, as well as in reports filed by us from time to time
with the SEC, including Forms 10-K, 10-Q and 8-K. We undertake no obligation to
publicly update or revise any forward-looking statements, whether as a result of
new information, future events or otherwise, except as required by law. In

                                       31
light of these risks, uncertainties, and assumptions, the forward-looking events
discussed in or incorporated by reference into this prospectus and any
prospectus supplement accompanying this prospectus might not occur.

                                       32
No person is authorized to give any information or to represent anything not
contained in this prospectus. You must not rely on any unauthorized
representations or information. This prospectus is an offer to sell only the
common shares offered hereby, and only under circumstances and in jurisdictions
where it is lawful to do so. The information contained in this prospectus is
current only as of its date.

TABLE OF CONTENTS
Page
                                                      ----
Our Company.........................................   2

Risk Factors........................................   3

Certain Provisions of Maryland
   Law and of our Declaration of
   Trust and Bylaws.................................  11

Federal Income Tax Consequences
   of our Status as a REIT..........................  14

Selling Shareholders................................  28

Plan of Distribution................................  30

Use of Proceeds.....................................  30

Experts.............................................  30

Legal Opinions......................................  30

Where You Can Find More
   Information......................................  30

Forward Looking Statements..........................  30
1,600,000 Shares

                                 COMMON SHARES

                             ---------------------

                               RESALE PROSPECTUS

                             ---------------------

                                October 25, 2002

                                       33
PART II

               INFORMATION REQUIRED IN THE REGISTRATION STATEMENT

ITEM 3. INCORPORATION OF DOCUMENTS BY REFERENCE.

The registrant hereby files this Registration Statement on Form S-8 for the
purpose of registering an additional 800,000 of the registrant's common shares,
par value $0.01 per share, issuable upon the exercise of options granted
pursuant to the registrant's Amended and Restated RAIT Investment Trust 1997
Stock Option and Awards Plan. In accordance with General Instruction E to Form
S-8, the registrant incorporates by reference the contents of the registrant's
Registration Statement on Form S-8, Registration No. 333-67452, filed on August
14, 2001, including the information incorporated therein by reference.

The following documents of the registrant filed with the Securities and Exchange
Commission (the "SEC"), are also incorporated by reference in this Registration
Statement:

      -     Annual Report on Form 10-K, as amended, for the year ended December
            31, 2001.

      -     Quarterly Reports on Form 10-Q for the quarters ended March 31, 2002
            and June 30, 2002.

      -     Current Reports on Form 8-K filed January 4, 2002, March 7, 2002,
            March 15, 2002, April 25, 2002, May 2, 2002 and July 9, 2002

      -     The description of the registrant's common shares contained in Form
            8-A/A dated January 2, 1998.

All documents subsequently filed by the registrant pursuant to Sections 13(a),
13(c), 14 and 15(d) of the Securities Exchange Act of 1934, prior to the filing
of a post-effective amendment to this registration statement which indicates
that all securities offered pursuant to this registration statement have been
sold or which deregisters all securities then remaining unsold, shall be deemed
to be incorporated by reference herein and to be part hereof from the date of
filing of such documents.

ITEM 4. DESCRIPTION OF SECURITIES.

Not applicable.

ITEM 5. INTERESTS OF NAMED EXPERTS AND COUNSEL.

Not applicable.

ITEM 6. INDEMNIFICATION OF TRUSTEES AND OFFICERS.

Maryland law permits a Maryland REIT to include in its trust agreement a
provision limiting the liability of its trustees and officers to the trust and
its shareholders for money damages except for liability resulting from (a)
actual receipt of an improper benefit or profit in money, property or services
or (b) active and deliberate dishonesty established by a final judgment as being
material to the cause of action. The Declaration of Trust of RAIT Investment
Trust ("RAIT") contains such a provision which eliminates such liability to the
maximum extent permitted by Maryland law.

The Declaration of Trust of RAIT authorizes RAIT, to the maximum extent
permitted by Maryland law, to obligate itself to indemnify and to pay or
reimburse reasonable expenses in advance of final disposition of a proceeding to
(1) any present or former trustee or officer or (2) any individual who, while a
trustee of RAIT and at the request of RAIT, serves or has served as a director,
officer, partner, trustee, employee or agent of another corporation,
partnership, joint venture, trust, employee benefit plan or other enterprise
from and against any claim or liability to which such person may become subject
or which such person may incur by reason of his status as a present or

                                       34
former trustee or officer of RAIT. RAIT's Declaration of Trust permits RAIT, to
the maximum extent permitted by Maryland law, to indemnify and to pay or
reimburse reasonable expenses in advance of final disposition of a proceeding to
(1) any present or former trustee or officer who is made a party to the
proceeding by reason of his service in that capacity or (2) any individual who,
while a trustee of RAIT, and at the request of RAIT, serves or has served as a
director, officer, partner, trustee, employee or agent of another corporation,
partnership, joint venture, trust, employee benefit plan or other enterprise and
who is made a party to the proceeding by reason of his service in that capacity.

Maryland law permits a Maryland REIT to indemnify its present and former
trustees and officers, among others, against judgments, penalties, fines,
settlements and reasonable expenses actually incurred by them in connection with
any proceeding to which they may be made a party by reason of their service in
those or other capacities unless it is established that (1) the act or omission
of the trustee or officer was material to the matter giving rise to the
proceeding and (i) was committed in bad faith or (ii) was the result of active
and deliberate dishonesty, (2) the trustee or officer actually received an
improper personal benefit in money, property or services, or (3) in the case of
any criminal proceeding, the trustee or officer had reasonable cause to believe
that the act or omission was unlawful. However, a Maryland REIT may not
indemnify for an adverse judgment in a suit by or in the right of the trust or
for a judgment of liability on the basis that personal benefit was improperly
received, unless in either case a court orders indemnification and then only for
expenses. In addition, Maryland law requires a Maryland REIT, as a condition to
advancing expenses, to obtain (1) a written affirmation by the trustee or
officer of his good faith belief that he has met the standard of conduct
necessary for indemnification by a Maryland REIT, and (2) a written statement by
or on his behalf to repay the amount paid or reimbursed by a Maryland REIT if it
shall ultimately be determined that the standard of conduct was not met. In
addition, RAIT has entered into Indemnity Agreements with its executive officers
and trustees.

ITEM 7. EXEMPTION FROM REGISTRATION CLAIMED.

Not applicable.

ITEM 8. EXHIBITS.

The Exhibits furnished as part of this registration statement on Form S-8 are
identified in the Exhibit Index immediately following the signature pages of
this registration statement. Such Exhibit Index is incorporated herein by
reference.

ITEM 9. UNDERTAKINGS.

Undertakings required by Item 512(a)of Regulation S-K

The undersigned registrant hereby undertakes:

(1) to file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement;

(i) to include any prospectus required by section 10(a)(3) of the Securities Act
of 1933;

(ii) to reflect in the prospectus any facts or events arising after the
effective date of the registration statement (or the most recent post-effective
amendment thereof) which, individually or in the aggregate, represent a
fundamental change in information set forth in the Registration Statement.
Notwithstanding the foregoing, any increase or decrease in volume of securities
offered (if the total dollar value of securities offered would not exceed that
which was registered) and any deviation from the low or high end of the
estimated maximum offering range may be reflected in the form of prospectus
filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than a 20% change in the maximum
aggregate offering price set forth in the "Calculation of Registration Fee"
table in the effective registration statement;

                                       35
(iii) to include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement;

provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) do not apply if the
information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed with or furnished to the
Commission by the registrant pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 that are incorporated by reference in the registration
statement.

(2) that, for the purpose of determining any liability under the Securities Act
of 1933, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.

(3) to remove from registration by means of a post-effective amendment any of
the securities being registered which remain unsold at the termination of the
offering.

Undertakings required by Item 512(b) of Regulation S-K

The undersigned registrant hereby undertakes that, for purposes of determining
any liability under the Securities Act of 1933, each filing of the registrant's
annual report pursuant to Section 13(a) or 15(d) of the Securities Exchange Act
of 1934 (and, where applicable, each filing of an employee benefit plan's annual
report pursuant to Section 15(d) of the Securities Exchange Act of 1934) that is
incorporated by reference in the registration statement shall be deemed to be a
new registration statement relating to the securities offered therein and the
offering of such securities at that time shall be deemed to the initial bona
fide offering thereof.

Undertakings required by Item 512(h) of Regulation S-K

Insofar as indemnification for liabilities arising under the Securities Act of
1933 may be permitted for trustees, officers and controlling persons of the
registrant, the registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public policy
as expressed in the Act and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by
the registrant of expenses incurred or paid by a trustee, officer or controlling
person of the registrant in the successful defense of an action, suit or
proceeding) is asserted by such trustee, officer or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.

                                       36
SIGNATURES

THE REGISTRANT. Pursuant to the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-8 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Philadelphia, Commonwealth of Pennsylvania, on
October 24, 2002.

                                         RAIT INVESTMENT TRUST

                                         By:   Betsy Z. Cohen
                                               ---------------------------------
                                               Betsy Z. Cohen
                                               Chairman, Chief Executive Officer
                                               And Trustee(Chief Executive
                                               Officer)

                                POWER OF ATTORNEY

KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Betsy Z. Cohen, Scott F. Schaeffer and Ellen J.
DiStefano, or any of them, as his or her true and lawful attorney-in-fact and
agent, with full power of substitution and resubstitution, for him or her and in
his or her name, place, and stead, in any and all capacities, to sign any and
all amendments (including post-effective amendments) to this Registration
Statement, and to file the same, with all exhibits thereto, and other documents
in connection therewith, with the Securities and Exchange Commission, granting
unto said attorney-in-fact and agent full power and authority to do and perform
each and every act and thing requisite and necessary to be done in connection
therewith as fully to all intents and purposes as he or she might or could do in
person, hereby ratifying and confirming all that said attorney-in-fact and
agent, or of his or her substitute or substitutes, may lawfully do or cause to
be done by virtue hereof.

                                       37
SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, this registration
statement has been signed by the following persons in the capacities and on the
date indicated.
/s/ Betsy Z. Cohen                             Date: October 24, 2002
--------------------------------------
BETSY Z., COHEN, Chairman, Chief
Executive Officer and Trustee

/s/ Scott F. Schaeffer                         Date: October 24, 2002
---------------------------------------
SCOTT F. SCHAEFFER, President and
Chief Operating Officer

s/ Ellen J. DiStefano                          Date: October 24, 2002
---------------------------------------
ELLEN J. DISTEFANO, Executive Vice
President and Chief Financial Officer

/s/ Jonathan Z. Cohen                          Date: October 24, 2002
---------------------------------------
JONATHAN Z. COHEN, Secretary and
Trustee

s/  S. Peter Albert                            Date: October 24, 2002
---------------------------------------
S. PETER ALBERT, Trustee

/s/  Edward Brown                              Date: October 24, 2002
---------------------------------------
EDWARD BROWN, Trustee

/s/  Arthur Makadon                            Date: October 24, 2002
---------------------------------------
ARTHUR MAKADON, Trustee

/s/ Joel R. Mesznik                            Date: October 24, 2002
--------------------------------------
JOEL R. MESZNIK, Trustee

/s/ Daniel Promislo                            Date: October 24, 2002
--------------------------------------
DANIEL PROMISLO, Trustee
38
EXHIBIT INDEX

The following exhibits are filed herewith:
Exhibit                             Document
-------                             ---------
4.1 (1)                             Amended and Restated Declaration of Trust
4.2(2)                              Articles of Amendment to Amended and Restated Declaration of Trust
4.3(3)                              Articles of Amendment of Amended and Restated Declaration of Trust
4.4(4)                              Certificate of Correction to the Amended and Restated Declaration
                                    of Trust
4.5(1)                              Bylaws, as amended
4.6(1)                              Form of specimen certificate representing common shares
4.7                                 Amended and Restated RAIT Investment Trust 1997 Stock Option Plan
                                    (as amended through July 16, 2002)
5                                   Opinion of Ballard Spahr Andrews & Ingersoll, LLP as to the
                                    legality of Securities being registered (including consent)
8                                   Opinion of Ledgewood Law Firm, P.C., regarding tax matters
                                    (including consent).
23.1                                Consent of Grant Thornton LLP
23.2                                Consent of Ballard Spahr Andrews & Ingersoll, LLP (included in Exhibit 5)
23.3                                Consent of Ledgewood Law Firm, P.C. (included in Exhibit 8)
24                                  Power of Attorney (included as part of signature pages to this
                                    registration statement)
(1)   Incorporated herein by reference to RAIT Investment Trust's Registration
      Statement on Form S-11 (File No. 333-35077), as amended.

(2)   Incorporated herein by reference to RAIT Investment Trust's Registration
      Statement on Form S-11 (File No. 333-53067), as amended.

(3)   Incorporated herein by reference to RAIT Investment Trust's Registration
      Statement on Form S-2 (File No. 333-55518), as amended.

(4)   Incorporated herein by reference to RAIT Investment Trust's Form 10-Q for
      the Quarterly Period ended March 31, 2002 (File No. 1-14760).