<PAGE>

     As filed with the Securities and Exchange Commission on June 3, 2005.
                              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.)

          c/o RAIT Partnership, L.P.
        1818 Market Street, 28th Floor
               Philadelphia, PA                               19103
   ----------------------------------------                 ----------
   (Address of Principal Executive Offices)                 (Zip Code)

               RAIT INVESTMENT TRUST 2005 EQUITY COMPENSATION PLAN
               ---------------------------------------------------
                            (Full title of the plan)

                               Ellen J. DiStefano
                              RAIT Investment Trust
                           c/o RAIT Partnership, L.P.
                         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, a professional corporation
                        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
-------------     --------------      --------   -----------     ------------
<S>               <C>                <C>         <C>             <C>
Common shares
of beneficial
interest,
par value
$.01 per
share             900,000 shares      $28.49     $25,641,000         $3,018
</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 May 26, 2005.

                                EXPLANATORY NOTE

      RAIT Investment Trust, a Maryland real estate investment trust, previously
filed a Registration Statement on Form S-8 (Registration No. 333-67452) (the
"First Registration Statement") with the Securities and Exchange Commission
("SEC") 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 "Equity Plan"). At
the time of the filing of the First Registration Statement, 800,000 Common
Shares were authorized for issuance under the Equity Plan. On July 16, 2002, the
shareholders of registrant voted to approve increasing the size of the Equity
Plan by 800,000 Common Shares. On October 25, 2002, the registrant filed a
Registration Statement on Form S-8 (Registration No. 333-100766) (the "Second
Registration Statement") registering these 800,000 Common Shares. On May 18,
2005, the shareholders of registrant voted to amend and restate the Equity Plan,
including renaming the Equity Plan the "RAIT Investment Trust 2005 Equity
Compensation Plan" and increasing the total number of Common Shares authorized
for issuance under the Equity Plan by 900,000 Common Shares, to 2,500,000 Common
Shares. Pursuant to General Instruction E to Form S-8, this Registration
Statement incorporates by reference the contents of the First Registration
Statement and the Second Registration Statement, except as otherwise set forth
herein. This Registration Statement brings the total number of authorized and
registered shares under the Equity Plan to 2,500,000.

      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 First Registration Statement and
Second Registration Statement.

                                        ii
<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.

                                      iii
<PAGE>

RESALE PROSPECTUS

                              RAIT INVESTMENT TRUST

              UP TO 2,500,000 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 pursuant to equity compensation granted under our RAIT
Investment Trust 2005 Equity Compensation Plan to persons eligible to use Form
S-8, including our employees, trustees and certain consultants. We sometimes
refer to this plan as the 2005 equity compensation plan or the equity plan. The
types of equity compensation issuable under the equity plan include options,
share appreciation rights (or SARs), phantom units (or units), share awards,
dividend equivalents or other share-based awards.

      This prospectus may be used by certain persons who may be deemed to be our
"affiliates" under federal securities laws to sell a maximum of 2,500,000 common
shares which have been or may be granted or otherwise acquired by them pursuant
to equity compensation granted under the 2005 equity compensation plan. These
persons include those of our employees and trustees who are listed on page 29
below as "selling shareholders." We encourage our employees and trustees to
acquire common shares pursuant to this equity compensation. We believe that this
prospectus and the registration statement of which it is a part, which permits
resales of shares so acquired by our employees and trustees, encourages
acquisition of common shares by our employees and trustees by providing
liquidity for their investment. Accordingly, while these selling shareholders
may sell up to the number of common shares listed in the "Common Shares
Registered Under This Prospectus" column opposite their respective 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."

      Our address is c/o RAIT Partnership, L.P., 1818 Market Street, 28th Floor,
Philadelphia, Pennsylvania 19103. Our telephone number is (215) 861-7900.

      YOU SHOULD READ THE SECTION ENTITLED "RISK FACTORS" BEGINNING ON PAGE 4
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 June 3, 2005.


<PAGE>

                           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 and economic conditions, especially as they affect interest
            rates and the value of real property;

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

         -  illiquidity of our portfolio of loans and property interests;

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

         -  our possible inability to maintain our qualification as a real
            estate investment trust or our exemption from registration under the
            Investment Company Act.

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 Securities and Exchange Commission, 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 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.

                                        2
<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 make investments in real estate primarily by:

         -  making real estate loans;

         -  acquiring real estate loans; and

         -  acquiring interests in real estate.

      We seek to generate income for distribution to our shareholders from a
combination of interest and fees on loans, rents and other income from our
interests in real estate and proceeds from the sale of our investments.

                                        3
<PAGE>

                                  RISK FACTORS

      This section describes material risks of purchasing our securities. You
should carefully consider these risks, in addition to the other information
contained in this prospectus or incorporated in this prospectus by reference or
any supplement to this prospectus, before purchasing any of the securities
offered by this prospectus. In connection with the forward-looking statements
that appear in this prospectus, you should carefully review the factors
discussed below and the cautionary statements referred to in "Forward-Looking
Statements."

                            INVESTMENT ACTIVITY RISKS

   The value of our investments depends on conditions beyond our control. Our
investments are primarily loans secured directly or indirectly by real estate,
interests in entities whose principal or sole assets are real estate or direct
ownership of real estate. As a result, the value of our investments depends
primarily upon the value of the real estate underlying our investments which is
affected by numerous factors beyond our control including general and local
economic conditions, neighborhood values, competitive overbuilding, weather,
casualty losses, occupancy rates and other factors beyond our control. The value
of this underlying real estate may also be affected by factors such as the costs
of compliance with use, occupancy and similar regulations, potential or actual
liabilities 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 this
underlying real estate, particularly significant expenses such as mortgage
payments, insurance, 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.

   Any investment may also be affected by a borrower's failure to comply with
the terms of our investment, borrower's bankruptcy, insolvency, reorganization
or foreclosure proceedings, all of which may require us to become involved in
expensive and time-consuming litigation. Some of our investments defer some
portion of our return to loan maturity or the mandatory redemption date. The
borrower's ability to satisfy these deferred obligations may depend upon its
ability to obtain suitable refinancing or to otherwise raise a substantial
amount of cash. These risks may be subject to the same considerations we
describe in this "Investment Activity Risks" section.

   Longer term, subordinate and non-traditional loans may be illiquid and their
value may decrease. Our loans generally have maturities between two and five
years, are subordinated and typically do not conform to traditional loan
underwriting criteria. Our loans are relatively illiquid investments and 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.

   Our real estate interests are illiquid and their value may decrease. Real
estate interests are relatively illiquid. Therefore, we may have only a limited
ability to vary our portfolio of real estate interests quickly in response to
changes in economic or other conditions. As a consequence, the fair market value
of some or all of our real estate interests may decrease in the future.
Provisions in the Internal Revenue Code and related regulations impose a 100%
tax on gains realized by a REIT from property held as a dealer primarily for
sale to customers in the ordinary course of business. These provisions may limit
our ability to sell our real estate interests. For a discussion of federal
income tax considerations in selling a real estate 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."

   Our subordinated investments may involve increased risk of loss. We emphasize
mezzanine loans and other forms of subordinated financing, such as investments
consisting of unconsolidated real estate interests. Because of their subordinate
position, these subordinated investments carry a greater credit risk than senior
lien financing, including a substantially greater risk of non-payment. If a
borrower defaults on our subordinated investment or on debt senior to us, our
subordinated investment will be satisfied only after the senior debt is paid
off, which may result in our being unable to recover the full amount, or any, of
our investment. 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.

   Where debt senior to our investment exists, the presence of intercreditor
arrangements may limit our ability to amend our loan documents, assign our
loans, accept prepayments, exercise our remedies (through "standstill" periods)
and control decisions made in bankruptcy proceedings relating to borrowers.
Bankruptcy and borrower litigation can significantly increase the time needed
for us to acquire underlying collateral in the event of a default, during which
time the collateral may decline in value. In addition, there are significant
costs and delays associated with the foreclosure process. 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. When we originate or
acquire a

                                        4
<PAGE>

subordinated investment, we may not have 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. 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.

   We have loans that are not collateralized by recorded or perfected liens on
the real estate underlying our loans. Some of the loans not collateralized by
liens are secured instead 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
judgments or other liens that may arise as well as to the claims of general
creditors of the borrower. Moreover, filing a deed-in-lieu of foreclosure with
respect to these loans will usually constitute an event of default under any
related senior debt. Any such default would require us to assume or pay off the
senior debt in order to protect our investment. Furthermore, in a borrower's
bankruptcy, we will have materially fewer rights than secured creditors and, if
our loan is secured by equity interests in the borrower, fewer rights 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. In
addition, we may lose lien priority in many jurisdictions, to persons who supply
labor and materials to a property. For these and other reasons, the total amount
that we may recover from one of our investments may be less than the total
amount of that investment or our cost of an acquisition of an investment.

   Our investments in unconsolidated real estate interests may involve increased
risk of loss. We may originate or acquire investments consisting of
unconsolidated real estate interests. These investments 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 default. These investments will be subordinate
not only to existing liens encumbering the underlying property but also to
future judgment or other liens that may arise and to the claims of general
creditors of the owner of the underlying properties.

   Loans secured by equity interests in entities owning real estate may involve
increased risk of loss. We may originate or acquire loans secured by direct
and/or indirect interests in entities owning real estate 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 these interests will
be subordinate not only to existing liens encumbering the underlying property
but also to future judgments or other liens that may arise and to the claims of
general creditors of the owner of the underlying properties.

   Acquisitions of loans may involve increased risk of loss. When we acquire
existing loans, we generally do so 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 are 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.
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. Most of our financings have loan-to-value ratios in excess
of 80% and many have loan-to-value ratios in excess of 90%. We expect to
continue making loans with high loan-to-value ratios. 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 the sale of
the underlying property may be insufficient to repay the financing.

   Interest rate changes may adversely affect our investments. Changes in
interest rates affect the market value of our investment 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 with rates that are fixed or variable only to a limited extent
may have less value than other income-producing 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 rates on debt we incur may not
be

                                        5
<PAGE>

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.

   We may not obtain appreciation interests at the rate we seek, or at all, and
we may not benefit from appreciation interests we do obtain. In addition to an
agreed upon interest rate, we occasionally obtain appreciation interests from
our borrowers. Appreciation interests require a borrower to pay us a percentage
of the property's excess cash flow from operations , or of the net proceeds
resulting from the property's sale or refinance. The appreciation interests we
have historically obtained have ranged from 5-30%. However, in the future we may
not be able to obtain appreciation interests in this range or at all. 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.

   Appreciation interests may cause us to lose our lien priority. Because
appreciation interests allow us to participate in the increase in a property's
value or revenue, courts, including a court in a borrower's bankruptcy
arrangement or similar proceeding, could 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 making investments in real estate may limit our ability
to achieve our objectives. We may encounter significant competition from public
and private companies, including other finance companies, mortgage banks,
pension funds, savings and loan associations, insurance companies, institutional
investors, investment banking firms and other lenders and industry participants,
as well as individual investors. 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.
Many of our competitors have substantially greater assets than we do. As such,
they have the ability to make larger loans and to reduce the risk of loss from
any one loan by having a more diversified loan portfolio. 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.

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

   Lease expirations, lease defaults and lease terminations may adversely affect
our revenue. Lease expirations, lease defaults and lease terminations may result
in reduced revenues from our real estate interests if the lease payments
received from replacement tenants are less than the lease payments received from
the expiring, defaulting or terminating tenants. In addition, lease defaults by
one or more significant tenants, lease terminations by tenants following events
causing significant damage to the property or takings by eminent domain, or the
failure of tenants under expiring leases to elect to renew their leases, could
cause us to experience long periods with reduced or no revenue from a facility
and to incur substantial capital expenditures in order to obtain replacement
tenants.

   We may need to make significant capital improvements to our properties in
order to remain competitive. The properties underlying our consolidated real
estate interests may face competition from newer, more updated properties. In
order to remain competitive, we may need to make significant capital
improvements to these properties. In addition, in the event we need to re-lease
a property, we may need to make significant tenant improvements. The costs of
these improvements could adversely affect our financial performance.

   Uninsured and underinsured losses may affect the value of, or our return
from, our real estate interests. Our properties, and the properties underlying
our loans, have comprehensive insurance in amounts we believe are 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, hurricanes and terrorism 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.

                                        6
<PAGE>

   Real estate 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 real estate 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, and 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.

   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. In spite of our investment procedures, it is possible that
real estate relating to one of our investments could be found not to fully
comply with the Americans with Disabilities Act. Such a finding could result in
liability for both governmental fines and damages to private parties. This could
reduce the revenues from that real estate that otherwise would be available to
our borrower to pay interest on our loans or reduce the income to us from our
interest in that real estate. As a result, if we or our borrowers were required
to make unanticipated major modifications to comply with the Americans with
Disabilities Act, the resulting expense could adversely affect our ability to
make distributions to our shareholders.

   Because we must distribute a substantial portion of our income to our
shareholders, we will continue to need additional debt and/or equity capital to
grow. We generally must distribute at least 90% of our taxable income to our
shareholders to maintain our REIT status. As a result, those earnings will not
be available to fund our activities. We have historically funded our operations
by borrowing from financial institutions and raising capital in the public
capital markets. We expect to continue to fund our operations this way. If we
fail to obtain funds from these sources, it could limit our ability to grow,
which could have a material adverse effect on the value of our common shares.

   Lack of geographic diversification exposes our investments to a higher risk
of loss from regional economic factors. We generally invest in real estate
located in mature markets in the Mid-Atlantic, Southeast and Mid-West regions of
the United States. We have also invested in real estate located in mature
markets in the West and Northeast regions of the United States. Although we
anticipate that we will continue to focus on these regions for the foreseeable
future, we are not subject to any geographic limitations within our
organizational documents regarding where we may invest and, accordingly, we may
make investments in other areas as appropriate opportunities are identified.
This lack of geographic diversification may make our investment portfolio more
sensitive to economic developments within a regional area, which may result in
reduced rates of return or higher rates of default than might be incurred with a
more geographically diverse investment portfolio.

   Our use of debt to fund our investments can reduce income available for
distribution and cause losses. Our organizational documents do 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. Therefore, we cannot be sure that our use of debt to fund our
investments will prove to be beneficial. Moreover, when our assets secure our
debt, we can lose some or all of our assets through foreclosure if we do not
meet our debt service obligations.

   We use variable rate lines of credit to leverage fixed rate lending assets
which may adversely affect our returns if interest rates rise. We often use
amounts borrowed under our lines of credit to leverage investments we make. Our
lines of credit bear interest at variable rates. Our investments usually have a
fixed rate of return. In the event the interest rate on amounts borrowed under
these lines of credit to leverage our investments rises, the return on these
investments may be adversely affected.

   Concentration of our investments increases our dependence on individual
investments. Although we generally invest between $2.0 million and $50.0 million
in a loan or real estate interest, our organizational documents do not limit the
size of our investments. If we make larger investments, 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 with respect to any one
investment. If we make material investments in any single borrower or group of
affiliated borrowers, the failure of that borrower or group to perform their
obligations to us could increase the risk of loss to our shareholders.

                                       7
<PAGE>

   Adverse developments in any arrangement with a third party that was the
source of a material amount of our investments could adversely impact our
growth. Our growth is dependent on our ability to continue to generate
sufficient attractive investment opportunities. We have initiated numerous
arrangements with third parties intended to increase our sources for originating
investments in real estate. In our "seamless mezzanine" program, we initiated
arrangements with several first-lien conduit lenders establishing the terms on
which we would provide mezzanine loans in conjunction with first lien loans made
by these lenders. We also started a "correspondent" program seeking to establish
arrangements with potential referral sources. In the event any arrangement with
a particular third party, whether through these programs or otherwise, became
the source of a large percentage of our investments, any adverse developments in
such an arrangement could adversely impact our growth. Failure of that
arrangement could reduce our ability to maintain and build our portfolio.

   Quarterly results may fluctuate and may not be indicative of future quarterly
performance. Our quarterly operating results could fluctuate; therefore, you
should not rely on past quarterly results to be indicative of our performance in
future quarters. Factors that could cause quarterly operating results to
fluctuate include, among others, variations in our investment origination
volume, variations in the timing of repayments, variations in the amount of time
between our receipt of the proceeds of a securities offering and our investment
of those proceeds in loans or real estate interests, market conditions that
result in increased cost of funds, the degree to which we encounter competition
in our markets and general economic conditions.

                               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
will not be deductible in computing our taxable income. Corporate tax liability
would 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. 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.

   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. This "phantom
income" may arise for us in the following ways:

   -  Origination of loans with appreciation interests 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. This "discount"
      must be recognized as income over the life of the loan even though the
      corresponding cash will not be received until maturity.

                                       8
<PAGE>

   -  Our loan terms may provide for both an interest "pay" rate and "accrual"
      rate. When this occurs, we recognize interest based on the sum of the pay
      rate and the accrual rate, but only receive cash at the pay rate until
      maturity of the loan, at which time all accrued interest is due and
      payable.

   -  Our loans or unconsolidated real estate interests may contain provisions
      whereby the benefit of any principal amortization of the underlying senior
      debt inures to us. We recognize this benefit as income as the amortization
      occurs, with no related cash receipts until repayment of our loan.

   -  Sales or other dispositions of consolidated real estate interests, as well
      as significant modifications to loan terms may result in timing
      differences between income recognition and cash receipts.

   If any of the above circumstances occurs, 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 consolidated real estate 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. 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.

   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. 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 other 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. 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. 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 qualify for purposes of the 75% gross income test described
above.

   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.

                                       9
<PAGE>

   A portion of the dividends we distribute may be deemed a return of capital
for federal income tax purposes. The amount of dividends we distribute to our
common shareholders in a given quarter may not correspond to our taxable income
for such quarter. Consequently, a portion of the dividends we distribute may be
deemed a return of capital for federal income tax purposes, and will not be
taxable but will reduce shareholders' basis in the underlying common shares.

   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 our policies or approve transactions
that deviate from these policies without a vote of or notice to our
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 our outstanding voting
shares.

   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 (a) 8.3% or, with respect to our original promoter, Resource
America, Inc., 15%, of our outstanding common shares or (b) 9.8% of the number
of outstanding shares of any series of our preferred 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.

   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 our
shareholders.

                                       10
<PAGE>

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

BOARD OF TRUSTEES

      Our declaration of trust requires us to 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.

      As of the date of this prospectus, we have seven trustees, of whom five
have been determined by our board of trustees to be 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, with or
without cause, 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 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 our board
of trustees approves or exempts prior to the time that the interested
shareholder becomes an interested shareholder.

                                       11
<PAGE>

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:

         -  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.

                                       12
<PAGE>

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 our bylaws. At any special meeting of shareholders, only the
business specified in the notice of meeting may be brought before the meeting.

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 to the fullest extent permitted by Maryland law. Maryland law
permits limiting the liability of trustees and officers, 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

         -  the director actually received an improper personal benefit in
            money, property, or services, 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

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

                                       13
<PAGE>

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.

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.

      Maryland law provides that Maryland statutory real estate investment
trusts that have a class of equity securities registered under the Securities
Exchange Act of 1934 and have at least three outside trustees can elect by
resolution of the board of trustees to be subject to some corporate governance
provisions that may be inconsistent with the trust's declaration of trust and
bylaws. For example, the board of trustees may, by electing into the applicable
statutory provisions and notwithstanding the trust's declaration of trust or
bylaws:

         -  classify our board of trustees,

         -  provide that a special meeting of shareholders will be called only
            at the request of shareholders entitled to cast at least a majority
            of the votes entitled to be cast at the meeting,

         -  reserve for itself the right to fix the number of trustees,

         -  provide that a trustee may be removed only by the vote of the
            holders of two-thirds of the shares entitled to vote, and

         -  retain for itself sole authority to fill vacancies created by an
            increase in the size of the board or by the death, removal or
            resignation of a trustee and permit a trustee to serve for the
            balance of the unexpired term instead of until the next annual
            meeting of shareholders.

      Our board has not elected into the foregoing provisions. A board of
trustees may implement all or any of these provisions without amending the
trust's declaration of trust or bylaws and without shareholder approval. A
Maryland statutory real estate investment trust may be prohibited by its
declaration of trust or by resolution of its board of trustees from electing any
of the provisions of the statute; however, we are not prohibited from
implementing any or all of the statute, except to the extent such implementation
would conflict with certain voting rights of our outstanding series of preferred
shares. If implemented, these provisions could discourage offers to acquire our
shares and could increase the difficulty of completing an unsolicited takeover
offer.

                                       14
<PAGE>

                       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 securities 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.

      Our counsel, Ledgewood, a professional corporation, has opined that the
discussion contained in the section "Federal Income Tax Consequences of Our
Status as a REIT" identifies and fairly summarizes the federal income tax
consequences that are likely to be material to a holder of our common shares,
and to the extent such summaries involve matters of law, such statement s of law
are correct under the Internal Revenue Code. The opinions of tax counsel, and
the discussions in this prospectus, are based upon existing law and
interpretations of existing law, all of which may be changed either
prospectively and retroactively.

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.

      Based on factual representations made by us regarding our operations, in
the opinion of Ledgewood, a professional corporation, our counsel, with respect
to our taxable years ended through December 31, 2004, we qualified as a REIT
under Sections 856 through 859 of the Internal Revenue Code, and our current and
proposed method of operating has enabled us, and will enable us, to meet the
requirements for qualification and taxation as a REIT for the current taxable
year and for future taxable years. Our qualification as a REIT depends upon our
ability to meet the various requirements imposed under the Internal Revenue Code
through actual operations. Ledgewood, a professional corporation, will not
review our operations on an ongoing basis, and our actual operations may not
enable us to meet these requirements in a particular year. The opinion of
Ledgewood, a professional corporation, is not binding on the Internal Revenue
Service or any court. The opinion of Ledgewood, a professional corporation, is
based upon existing law, Internal Revenue Service regulations, currently
published administrative positions of the Internal Revenue Service and judicial
decisions, all of which are subject to change either prospectively or
retroactively.

   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.

                                       15
<PAGE>

   -  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

      - 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 satisfy one of the asset tests, as described below under " -
      Requirements for Qualification - Asset Tests," and nonetheless qualify as
      a REIT because we meet other requirements, we will pay a tax equal to the
      greater of (1) $50,000 or (2) the amount determined by multiplying the net
      income earned by us on the assets that caused us to fail one of the asset
      tests multiplied by the highest rate of corporate income tax.

   -  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.

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<PAGE>

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.

   -  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. As of the date of this prospectus, RAIT Partnership owns all of the
capital stock in 15 other corporations involved in the ownership of certain of
our portfolio assets. Thus, RAIT General, RAIT Limited and the other 15
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. As of the date of this
prospectus, 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. As of
the date of this prospectus, RAIT Partnership beneficially owns all of the
membership interests in 14 limited liability companies and all of the
partnership interests in 2 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

                                       17

<PAGE>

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.

   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. As of the date of this prospectus, we have one TRS.

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

                                       18
<PAGE>

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.

   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 such case the loan itself may not
qualify as a qualified asset for purposes of the 75% asset test discussed
below.) In Revenue Procedure 2003-65, the Internal Revenue Service established a
safe harbor under which interest from loans secured by a first priority security
interest in ownership interests in a partnership or limited liability company
owning real property will be treated as qualifying income for both the 75% and
95% gross income tests, and the loans will be treated as qualifying assets for
purposes of the 75% asset test, provided several requirements are satisfied.
Revenue Procedure 2003-65 was effective August 4, 2003. While many of the loans
we made after the effective date of this Revenue Procedure that are not secured
by a direct interest in real property qualify for the safe harbor in Revenue
Procedure 2003-65, some loans do not qualify, and some loans made in the future
may not qualify, for the safe harbor. In addition, since the specific
requirements of Revenue Procedure 2003-65 were not known at the time we entered
into some of our existing loans, not all of these loans meet each of the safe
harbor tests. In those cases, the interest income from the loan will be
qualifying income for purposes of the 95% gross income test, but potentially
will not be qualifying income for purposes of the 75% gross income test and the
loans may not be qualifying assets for the 75% asset test discussed below.

   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

                                       19
<PAGE>

   -  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 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.

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<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 (including all interests in subsidiary partnerships) 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.

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

   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 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.

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<PAGE>

   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. Moreover, as a result
of recently enacted legislation, our failure to meet the 5% or either of the 10%
tests described above will not necessarily result in our disqualification as a
REIT. So long as the overage is the result of reasonable cause, disqualification
is replaced by a two part process. First, we have the opportunity to dispose
without penalty (within six months of identifying the failure to meet the
requirements) interests comprising up to the lesser of $10,000,000 or 1% of our
total assets to meet the 5% and 10% tests. Second, assets in excess of the 1%
amount would be subject to a tax of the greater of $50,000 or the highest
corporate tax rate multiplied by the net income from those assets.

   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. As of the date of this prospectus,
we have one TRS, the value of which is less than 1% of our assets.

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,

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:

                                       22
<PAGE>

   -  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.

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. On May 28, 2003, President Bush signed into law
the Jobs and Growth Tax Relief Reconciliation Act of 2003, which we refer to as
the 2003 tax act. Under the 2003 tax act, the highest federal income tax rate on
capital gains and dividends was lowered to 15% for 2003-08, with taxpayers in
lower income brackets paying 5% on capital gains and dividends in 2003-07 and no
taxes on such income in 2008. However, dividends received from a REIT generally
do not qualify as dividends for this purpose. Instead, they are taxable as
ordinary income subject to a maximum rate of 35% (reduced pursuant to the 2003
tax act from the previous maximum rate of 38.6%). REIT dividends would qualify
for the reduced rate only to the extent the REIT makes a capital gains
distribution, distributes dividends received from a taxable REIT subsidiary or
other corporation or, to the extent permitted, a REIT pays corporate income
taxes and retains earnings. None of the dividends we have paid in the past would
have qualified for the reduced rate. In addition, a U.S.

                                       23
<PAGE>

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.

   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%

                                       24
<PAGE>

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 2003 tax
act, the maximum marginal individual income tax rate is 35% for 2003 and all
subsequent years. The maximum tax rate on long-term capital gain applicable to
non-corporate taxpayers was reduced by the 2003 tax act from 20% to 15%, with
taxpayers in lower income brackets paying 5%, 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 15% 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.

   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

                                       25
<PAGE>

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.

      The Internal Revenue Service has issued a revenue ruling in which it held
that amounts distributed by a REIT to a tax-exempt employees' pension trust do
not constitute unrelated business taxable income, or UBTI. In general, subject
to the discussion below regarding a "pension-held REIT" and subject to the
following sentence, based upon such ruling and the statutory framework of the
Internal Revenue Code, distributions to a stockholder of a real estate
investment trust that is a tax-exempt entity should not constitute UBTI,
provided that:

         -  The tax-exempt entity has not financed the acquisition of its shares
            of common stock with "acquisition indebtedness" within the meaning
            of the Internal Revenue Code.

         -  The shares of common stock are not otherwise used in an unrelated
            trade or business of the tax-exempt entity.

         -  The real estate investment trust does not hold a residual interest
            in a real estate mortgage investment conduit ("REMIC") within the
            meaning of Section 860D of the Internal Revenue Code.

         -  All or a portion of our Company is not considered a taxable mortgage
            pool.

      Although we do not intend to invest a material amount of assets in REMICS,
certain taxable income produced by REMIC residual interests may cause our
stockholders to suffer certain adverse tax consequences. In addition, we have
entered into certain financing transactions which are treated as taxable
mortgage pools, and with respect to which we are treated as owning residual
interests. See "Certain Federal Income Tax Consequences."

      If any pension or other retirement trust that qualifies under Section
401(a) of the Internal Revenue Code holds more than 10% by value of the
interests in a pension-held REIT at any time during a taxable year, a portion of
the dividends paid to the qualified pension trust by such REIT may constitute
UBTI. For these purposes, a "pension-held REIT" is defined as a REIT: (1) that
would not have qualified as a REIT but for the provisions of the Internal
Revenue Code which look through such a qualified pension trust in determining
ownership of securities of the REIT; and (2) as to which at least one qualified
pension trust holds more than 25% by value of the interests of such REIT or one
or more qualified pension trusts (each owning more than a 10% interest by value
in the REIT) hold in the aggregate more than 50% by value of the interests in
such REIT.

      We do not expect that we will be a pension-held REIT. However,
notwithstanding our current belief that we will not be a "pension-held REIT," no
assurance can be given that we will not become a pension-held REIT in the
future.

      If we were to become a pension-held REIT in the future and were to
originate investments using debt, or otherwise were to engage in a transaction
resulting in UBTI, determined as though we were a qualified pension plan, any
qualified pension plan owning

                                       26
<PAGE>

10% or more of our shares, by value, would have a portion of its dividend income
from us taxed as UBTI. Even if we were not a pension-held REIT, certain amounts
received by a stockholder that is a tax-exempt entity may be treated as UBTI.

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 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. Under recently enacted legislation, for our taxable
years beginning January 1, 2005 and thereafter, as long as our shares are traded
on an established U.S. securities market and the non-U.S. shareholder does not
own more than 5% of the class of shares with respect to which the distribution
is made, the distribution will not be treated as gain recognized from the sale
or exchange of a United States real property interest, and it will not be taxed
as a capital gain and no branch profits tax will be applicable. Instead, such
distributions will be taxed as ordinary dividends.

   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

                                       27
<PAGE>

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.

STATE AND LOCAL TAXES

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

                                       28
<PAGE>

                              SELLING SHAREHOLDERS

      The selling shareholders listed below acquired or may acquire the shares
listed in the column "Common Shares Registered Under This Prospectus" pursuant
to equity compensation granted under the 2005 equity compensation plan. The
table shows, as of May 31, 2005, certain information regarding the selling
shareholders' ownership of our common shares. We encourage our employees and
trustees to acquire common shares pursuant to this equity compensation. We
believe that this prospectus and the registration statement of which it is a
part, which permits resales of shares so acquired by our employees and trustees,
encourages acquisition of common shares by our employees and trustees 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 pursuant to
this equity compensation will be offered or sold, the selling shareholders are
not required to sell any shares. Employees and trustees, their family members,
trusts in which these persons have more than a 50% of the beneficial interest, a
foundation in which these persons (or the employee or trustee) control the
management of assets or any other entity in which these persons (or the employee
or trustee) own more than 50% of the voting interests, that acquire common
shares under the equity 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. Edward S. Brown has served as
one of our trustees since June 1999. Jonathan Z. Cohen has served as our Vice
Chairman of the Board of Trustees since October 2003, as our Secretary since
February 1998 and as one of our trustees since September 1997. S. Kristin Kim
has served as one of our trustees since October 2003. 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               520,391 (4)              366,526               153,865                      *
Edward S. Brown               13,448 (5)               13,448                     0                      *
Jonathan Z. Cohen             33,716 (6)               14,500                19,216                      *
S. Kristin Kim                11,396 (7)               11,396                     0                      *
Arthur Makadon                12,396 (8)               12,396                     0                      *
Joel R. Mesznik               17,948 (9)               14,948                 3,000                      *
Daniel Promislo               15,948 (10)              14,948                 1,000                      *
Scott F. Schaeffer           133,594 (11)             117,500                16,094                      *
Jay R. Cohen                 110,822 (12)              89,117                21,705                      *
Ellen J. DiStefano            79,362 (13)              70,182                 9,180                      *
Kenneth R. Frappier           30,815 (14)              29,500                 1,315                      *
</TABLE>

----------

* Less than 1%.

(1)   Includes all common shares acquired and not previously sold by the
      relevant selling shareholder pursuant to the equity compensation granted
      under the 2005 equity compensation plan and all common shares which the
      relevant selling shareholder has the right to acquire through equity
      compensation granted under the equity plan, whether or not such right has
      yet vested or will become vested within 60 days after the date hereof.
      Includes common shares which may become issuable under phantom shares
      issued under the RAIT Investment Trust Phantom Share Plan, or the phantom
      share plan. The phantom share plan provides that phantom shares issued
      under the phantom share plan will be redeemed in cash, unless our
      shareholders authorize the issuance of common shares under the phantom
      share plan, and, if such shareholder approval is received, the
      compensation committee of our board of trustees may determine, in its sole
      discretion, that the redemption paid to the grantees for their phantom
      shares will be paid in common shares rather than cash. Our shareholders
      did authorize such issuance at our annual meeting of shareholders on May
      18, 2005. In the event the compensation committee made such a
      determination, any common

                                       29
<PAGE>

      shares so paid will be issued under the equity plan as an "other
      share-based award." As of the date of this prospectus, the compensation
      committee has not made any such determination. See "Proposal 2. Amendment
      and Restatement of the RAIT Investment Trust 1997 Stock Option Plan --
      Phantom Share Plan" in our definitive proxy statement filed with the U.S.
      Securities and Exchange Commission on April 11, 2005 for a discussion of
      the phantom share plan.

(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 25,592,077 common shares outstanding as of May 6, 2005. Common
      shares issuable pursuant to equity compensation granted to 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 5,100 common shares directly held by Mrs. Cohen; 9,228 common
      shares held in the Company's Cash and Deferred Savings Plan, or 401(k)
      plan, for the benefit of Mrs. Cohen; 30,446 common shares held by an
      individual retirement account, or IRA, for the benefit of Mrs. Cohen;
      126,801 common shares held by a charitable foundation of which Mrs. Cohen
      serves as trustee; 37,290 common shares held in an IRA account for the
      benefit of Mrs. Cohen's spouse, Edward E. Cohen; 68,190 common shares held
      by Solomon Investment Partnership, L.P., a limited partnership of which
      Mrs. Cohen and her spouse are the sole shareholders, officers and
      directors of the corporate general partner and are the sole limited
      partners; and 243,336 common shares issuable upon exercise of options
      granted under the equity plan. Of these options, 209,586 are fully vested
      and 33,750 will not vest within sixty days. Excludes 58,912 common shares
      deposited in a "rabbi" trust established in connection with the SERP
      established pursuant to Mrs. Cohen's employment agreement with the
      Company. Excludes common shares held by Resource America, Inc. Mrs. Cohen
      is (i) the spouse of Edward E. Cohen, the Chairman of the Board of
      Resource America, and (ii) the parent of Jonathan Z. Cohen, the Chief
      Executive Officer, President and a director of Resource America.

(5)   Includes 448 common shares that may become issuable upon the redemption of
      phantom shares granted pursuant to the phantom share plan. See footnote 1
      above.

(6)   Includes 32,420 common shares held directly by Mr. Jonathan Z. Cohen, 776
      common shares held in a 401(k) plan account for his benefit and 500 common
      shares issuable upon exercise of options granted under the equity plan.
      All of these options are fully vested Excludes common shares held by
      Resource America. See footnote 4 above.

(7)   Includes 10,000 common shares issuable upon exercise of options granted
      under the equity plan. Of these options, 2,500 are fully vested, 750 are
      subject to early exercise rights, but will not vest within sixty days and
      6,750 will not vest within sixty days. Includes 1,396 common shares that
      may become issuable upon the redemption of phantom shares granted pursuant
      to the phantom share plan. See footnote 1 above.

(8)   Includes 11,000 common shares issuable upon exercise of options granted
      under the equity plan. Of these options, 5,500 are fully vested, 2,750
      will vest within sixty days, 250 are subject to early exercise rights but
      will not vest within sixty days and 2,500 will not vest within sixty days.
      Includes 1,396 common shares that may become issuable upon the redemption
      of phantom shares granted pursuant to the phantom share plan. See footnote
      1 above.

(9)   Includes 448 common shares that may become issuable upon the redemption of
      phantom shares granted pursuant to the phantom share plan. See footnote 1
      above.

(10)  Includes 448 common shares that may become issuable upon the redemption of
      phantom shares granted pursuant to the phantom share plan. See footnote 1
      above.

(11)  Includes 87,500 common shares directly held by Mr. Schaeffer, 5,594 common
      shares held in a 401(k) plan account for the benefit of Mr. Schaeffer,
      3,000 common shares held in an IRA account for the benefit of Mr.
      Schaeffer and 37,500 common shares issuable upon exercise of options
      granted under the equity plan. Of these options, 9,375 are fully vested
      and 28,125 will not vest within sixty days.

                                       30
<PAGE>

(12)  Includes 4,500 common shares held directly by Mr. Jay R. Cohen; 4,208
      common shares held in an IRA account for the benefit of Mr. Cohen; 27,771
      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;
      11,002 common shares held in Mr. Cohen's 401(k) plan account; and 55,000
      common shares issuable upon exercise of options granted under the equity
      plan. Of these options, 51,250 are fully vested and 3,750 will not vest
      within sixty days.

(13)  Includes 3,000 common shares directly held by Mrs. DiStefano, 2,502 common
      shares held by Mrs. DiStefano jointly with her spouse; 1,295 common shares
      held in an IRA account for the benefit of Mrs. DiStefano, 1,190 common
      shares held in an IRA account for the benefit of Mrs. DiStefano's spouse,
      64 common shares held in education IRA's for the benefit of Mrs.
      DiStefano's children, 5,629 common shares held in a 401(k) plan account
      for the benefit of Mrs. DiStefano, and 65,682 common shares issuable upon
      exercise of options granted under the equity plan. Of these options,
      61,932 are fully vested and 3,750 will not vest within sixty days.

(14)  Includes 9,000 common shares directly held by Mr. Frappier, 3,000 shares
      held by Mr. Frappier's spouse, 1,315 common shares held in a 401(k) plan
      account for the benefit of Mr. Frappier, and 17,500 common shares issuable
      upon exercise of options granted under the equity plan. Of these options,
      13,750 are fully vested, 625 are subject to early exercise rights but will
      not vest within sixty days and 3,125 will not vest within sixty days.

                                       31
<PAGE>

                              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 or pursuant to any payment that may be required pursuant to equity
compensation granted to selling shareholders pursuant to the 2005 equity
compensation 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 or other such payment.

                                     EXPERTS

      Our consolidated financial statements as of December 31, 2004 and 2003 and
for each of the three years ended December 31, 2004 appearing in our Annual
Report on Form 10-K for the year ended December 31, 2004, which are incorporated
by reference in this prospectus, have been audited by Grant Thornton LLP,
independent registered public accountants, whose report is incorporated by such
reference in this prospectus and given upon their authority as experts in
accounting and auditing.

      With respect to the unaudited interim financial information for the
periods ended March 31, 2005 and 2004 incorporated by reference in this
prospectus, Grant Thornton LLP has reported that they have applied limited
procedures in accordance with professional standards for a review of such
information. However, the report of Grant Thornton LLP included in our quarterly
report on Form 10-Q for the quarter ended March 31, 2005 and incorporated by
reference herein, states that Grant Thornton LLP did not audit and does not
express any opinion on that interim financial information. Accordingly, the
degree of your reliance on this report on such information should be restricted
in light of the limited nature of the review procedures applied. Grant Thornton
LLP is not subject to the liability provisions of Section 11 of the Securities
Act for their report on the unaudited interim financial information because that
report is not a "report" or a "part" of the registration statement prepared or
certified by the accountants within the meaning of Sections 7 and 11 of the
Securities Act.

                                 LEGAL OPINIONS

      The legality of the securities will be passed upon for us by DLA Piper
Rudnick Gray Cary US LLP. 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, a professional corporation.

                                       32
<PAGE>

                       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, but which we do not
include 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
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:

-  Annual Report on Form 10-K for the year ended December 31, 2004.

-  Quarterly Report on Form 10-Q for the quarter ended March 31, 2005.

-  Current Reports on Form 8-K filed January 31, 2005 and May 24, 2005.

-  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
                           c/o RAIT Partnership, L.P.
                         1818 Market 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.

                                       33
<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>
Forward Looking Statements.............................         2
Our Company............................................         3
Risk Factors...........................................         4
Certain Provisions of Maryland
   Law and of our Declaration of
   Trust and Bylaws....................................        11
Federal Income Tax Consequences
   of our Status as a REIT.............................        15
Selling Shareholders...................................        29
Plan of Distribution...................................        32
Use of Proceeds........................................        32
Experts................................................        32
Legal Opinions.........................................        32
Where You Can Find More
   Information.........................................        33
</TABLE>

                                2,500,000 Shares

                                  COMMON SHARES

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

                                RESALE PROSPECTUS

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

                                  June 3, 2005


<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 900,000 of the registrant's common
shares of beneficial interest, par value $0.01 per share, issuable pursuant to
equity compensation granted pursuant to the registrant's RAIT Investment Trust
2005 Equity Compensation Plan. In accordance with General Instruction E to Form
S-8, the registrant incorporates by reference the contents of the registrant's
Registration Statements on Form S-8, Registration No. 333-67452, filed on August
14, 2001, and Registration No. 333-100766, filed on October 25, 2002, 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 for the year ended December 31, 2004.

   -  Quarterly Report on Form 10-Q for the quarter ended March 31, 2005.

   -  Current Reports on Form 8-K filed January 31, 2005 and May 24, 2005.

   -  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, or an act or omission committed in bad
faith 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 former
trustee or officer of RAIT.

      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

                                     II-1
<PAGE>

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 undertaking
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. See "Certain Provisions of Maryland Law and of Our Declaration of
Trust and By laws -- Indemnification; Limitation of Trustees' and Officers'
Liability" and "--Indemnification Agreements" in the Resale Prospectus included
in this registration statement on Form S-8.

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 the 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;

(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

                                     II-2
<PAGE>

      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 to trustees, officers and controlling persons of
the registrant pursuant to the foregoing provisions, or otherwise, 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 any 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.

                                     II-3
<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
June 3, 2005.

                                      RAIT INVESTMENT TRUST

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

                                     II-4
<PAGE>

                                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.

                                   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>                                              <C>
/s/   BETSY Z. COHEN                               Chairman, Chief Executive                  June 3, 2005
---------------------------------
          Betsy Z. Cohen                              Officer and Trustee
                                                 (Principal Executive Officer)

/s/   SCOTT F. SCHAEFFER                     President and Chief Operating Officer            June 3, 2005
---------------------------------
        Scott F. Schaeffer

/s/   ELLEN J. DISTEFANO                          Executive Vice President and                June 3, 2005
---------------------------------
        Ellen J. DiStefano                          Chief Financial Officer
                                                (Principal Financial Officer and
                                                 Principal Accounting Officer)

/s/   JONATHAN Z. COHEN                       Secretary, Vice-Chairman and Trustee            June 3, 2005
---------------------------------
         Jonathan Z. Cohen

/s/   EDWARD S. BROWN                                       Trustee                           June 3, 2005
---------------------------------
          Edward S. Brown

/s/   S. KRISTIN KIM                                        Trustee                           June 3, 2005
---------------------------------
          S. Kristin Kim

/s/   ARTHUR MAKADON                                        Trustee                           June 3, 2005
---------------------------------
          Arthur Makadon

/s/   JOEL R. MESZNIK                                       Trustee                           June 3, 2005
---------------------------------
          Joel R. Mesznik

/s/   DANIEL PROMISLO                                       Trustee                           June 3, 2005
---------------------------------
          Daniel Promislo
</TABLE>

                                     II-5
<PAGE>

                                  EXHIBIT INDEX

The following exhibits are filed herewith:

<TABLE>
<CAPTION>
EXHIBIT       DOCUMENT
-------       --------
<S>           <C>
4.1           Amended and Restated Declaration of Trust of RAIT Investment
              Trust(1).

4.2           Articles of Amendment to Amended and Restated Declaration of Trust
              of RAIT Investment Trust(2).

4.3           Articles of Amendment to Amended and Restated Declaration of Trust
              of RAIT Investment Trust(3).

4.4           Certificate of Correction to the Amended and Restated Declaration
              of Trust of RAIT Investment Trust(4).

4.5           Articles Supplementary relating to the 7.75% Series A Cumulative
              Redeemable Preferred Shares of Beneficial Interest (the "Series A
              Articles Supplementary") (5).

4.6           Certificate of Correction to the Series A Articles
              Supplementary(5).

4.7           Articles Supplementary relating to the 8.375% Series B Cumulative
              Redeemable Preferred Shares of Beneficial Interest(6).

4.8           By-laws of RAIT Investment Trust, as amended(1).

4.9           Articles of Incorporation of RAIT General, Inc.(1).

4.10          By-laws of RAIT General, Inc.(1).

4.11          Articles of Incorporation of RAIT Limited, Inc.(1).

4.12          By-laws of RAIT Limited, Inc.(1).

4.13          Certificate of Limited Partnership of RAIT Partnership, L.P.(1).

4.14          Limited Partnership Agreement of RAIT Partnership, L.P.(1).

4.15          Form of Certificate for Common Shares of Beneficial Interest(3).

4.16          Form of Certificate for 7.75% Series A Cumulative Redeemable
              Preferred Shares of Beneficial Interest (7).

4.17          Form of Certificate for 8.375% Series B Cumulative Redeemable
              Preferred Shares of Beneficial Interest (6).

4.18          RAIT Investment Trust 2005 Equity Compensation Plan (8).

5             Opinion of DLA Piper Rudnick Gray Cary US LLP as to the legality
              of securities being registered (including consent).

8             Opinion of Ledgewood, a professional corporation, regarding tax
              matters (including consent).

15.1          Awareness Letter from Independent Accountants.

23.1          Consent of Grant Thornton LLP.

23.2          Consent of DLA Piper Rudnick Gray Cary US LLP (included in Exhibit
              5).

23.3          Consent of Ledgewood, a professional corporation (included in
              Exhibit 8).

24            Power of Attorney (included as part of signature pages to this
              registration statement).
</TABLE>

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

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

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

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

(5)   Incorporated herein by reference to RAIT Investment Trust's Form 8-K as
      filed with the Securities and Exchange Commission on March 18, 2004 (File
      No. 1-14760).

(6)   Incorporated herein by reference to RAIT Investment Trust's Form 8-K as
      filed with the Securities and Exchange Commission on October 1, 2004 (File
      No. 1-14760).

                                     II-6
<PAGE>

(7)   Incorporated herein by reference to RAIT Investment Trust's Form 8-K as
      filed with the Securities and Exchange Commission on March 22, 2004 (File
      No. 1-14760).

(8)   Incorporated by reference to RAIT Investment Trust's Form 8-K as filed
      with the Securities and Exchange Commission on May 24, 2005.

                                     II-7
[{"type": "S-8", "sequence": "1", "filename": "w09505sv8.txt", "description": "FORM S-8", "secsgml_size_bytes": 172247}]
{"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": "333-125480", "film-number": "05876850"}, "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 June 3, 2005.
                              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.)

          c/o RAIT Partnership, L.P.
        1818 Market Street, 28th Floor
               Philadelphia, PA                               19103
   ----------------------------------------                 ----------
   (Address of Principal Executive Offices)                 (Zip Code)

               RAIT INVESTMENT TRUST 2005 EQUITY COMPENSATION PLAN
               ---------------------------------------------------
                            (Full title of the plan)

                               Ellen J. DiStefano
                              RAIT Investment Trust
                           c/o RAIT Partnership, L.P.
                         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, a professional corporation
                        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
-------------     --------------      --------   -----------     ------------
Common shares
of beneficial
interest,
par value
$.01 per
share             900,000 shares      $28.49     $25,641,000         $3,018
(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 May 26, 2005.

                                EXPLANATORY NOTE

      RAIT Investment Trust, a Maryland real estate investment trust, previously
filed a Registration Statement on Form S-8 (Registration No. 333-67452) (the
"First Registration Statement") with the Securities and Exchange Commission
("SEC") 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 "Equity Plan"). At
the time of the filing of the First Registration Statement, 800,000 Common
Shares were authorized for issuance under the Equity Plan. On July 16, 2002, the
shareholders of registrant voted to approve increasing the size of the Equity
Plan by 800,000 Common Shares. On October 25, 2002, the registrant filed a
Registration Statement on Form S-8 (Registration No. 333-100766) (the "Second
Registration Statement") registering these 800,000 Common Shares. On May 18,
2005, the shareholders of registrant voted to amend and restate the Equity Plan,
including renaming the Equity Plan the "RAIT Investment Trust 2005 Equity
Compensation Plan" and increasing the total number of Common Shares authorized
for issuance under the Equity Plan by 900,000 Common Shares, to 2,500,000 Common
Shares. Pursuant to General Instruction E to Form S-8, this Registration
Statement incorporates by reference the contents of the First Registration
Statement and the Second Registration Statement, except as otherwise set forth
herein. This Registration Statement brings the total number of authorized and
registered shares under the Equity Plan to 2,500,000.

      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 First Registration Statement and
Second Registration Statement.

                                        ii
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.

                                      iii
RESALE PROSPECTUS

                              RAIT INVESTMENT TRUST

              UP TO 2,500,000 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 pursuant to equity compensation granted under our RAIT
Investment Trust 2005 Equity Compensation Plan to persons eligible to use Form
S-8, including our employees, trustees and certain consultants. We sometimes
refer to this plan as the 2005 equity compensation plan or the equity plan. The
types of equity compensation issuable under the equity plan include options,
share appreciation rights (or SARs), phantom units (or units), share awards,
dividend equivalents or other share-based awards.

      This prospectus may be used by certain persons who may be deemed to be our
"affiliates" under federal securities laws to sell a maximum of 2,500,000 common
shares which have been or may be granted or otherwise acquired by them pursuant
to equity compensation granted under the 2005 equity compensation plan. These
persons include those of our employees and trustees who are listed on page 29
below as "selling shareholders." We encourage our employees and trustees to
acquire common shares pursuant to this equity compensation. We believe that this
prospectus and the registration statement of which it is a part, which permits
resales of shares so acquired by our employees and trustees, encourages
acquisition of common shares by our employees and trustees by providing
liquidity for their investment. Accordingly, while these selling shareholders
may sell up to the number of common shares listed in the "Common Shares
Registered Under This Prospectus" column opposite their respective 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."

      Our address is c/o RAIT Partnership, L.P., 1818 Market Street, 28th Floor,
Philadelphia, Pennsylvania 19103. Our telephone number is (215) 861-7900.

      YOU SHOULD READ THE SECTION ENTITLED "RISK FACTORS" BEGINNING ON PAGE 4
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 June 3, 2005.
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 and economic conditions, especially as they affect interest
            rates and the value of real property;

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

         -  illiquidity of our portfolio of loans and property interests;

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

         -  our possible inability to maintain our qualification as a real
            estate investment trust or our exemption from registration under the
            Investment Company Act.

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 Securities and Exchange Commission, 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 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.

                                        2
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 make investments in real estate primarily by:

         -  making real estate loans;

         -  acquiring real estate loans; and

         -  acquiring interests in real estate.

      We seek to generate income for distribution to our shareholders from a
combination of interest and fees on loans, rents and other income from our
interests in real estate and proceeds from the sale of our investments.

                                        3
RISK FACTORS

      This section describes material risks of purchasing our securities. You
should carefully consider these risks, in addition to the other information
contained in this prospectus or incorporated in this prospectus by reference or
any supplement to this prospectus, before purchasing any of the securities
offered by this prospectus. In connection with the forward-looking statements
that appear in this prospectus, you should carefully review the factors
discussed below and the cautionary statements referred to in "Forward-Looking
Statements."

                            INVESTMENT ACTIVITY RISKS

   The value of our investments depends on conditions beyond our control. Our
investments are primarily loans secured directly or indirectly by real estate,
interests in entities whose principal or sole assets are real estate or direct
ownership of real estate. As a result, the value of our investments depends
primarily upon the value of the real estate underlying our investments which is
affected by numerous factors beyond our control including general and local
economic conditions, neighborhood values, competitive overbuilding, weather,
casualty losses, occupancy rates and other factors beyond our control. The value
of this underlying real estate may also be affected by factors such as the costs
of compliance with use, occupancy and similar regulations, potential or actual
liabilities 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 this
underlying real estate, particularly significant expenses such as mortgage
payments, insurance, 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.

   Any investment may also be affected by a borrower's failure to comply with
the terms of our investment, borrower's bankruptcy, insolvency, reorganization
or foreclosure proceedings, all of which may require us to become involved in
expensive and time-consuming litigation. Some of our investments defer some
portion of our return to loan maturity or the mandatory redemption date. The
borrower's ability to satisfy these deferred obligations may depend upon its
ability to obtain suitable refinancing or to otherwise raise a substantial
amount of cash. These risks may be subject to the same considerations we
describe in this "Investment Activity Risks" section.

   Longer term, subordinate and non-traditional loans may be illiquid and their
value may decrease. Our loans generally have maturities between two and five
years, are subordinated and typically do not conform to traditional loan
underwriting criteria. Our loans are relatively illiquid investments and 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.

   Our real estate interests are illiquid and their value may decrease. Real
estate interests are relatively illiquid. Therefore, we may have only a limited
ability to vary our portfolio of real estate interests quickly in response to
changes in economic or other conditions. As a consequence, the fair market value
of some or all of our real estate interests may decrease in the future.
Provisions in the Internal Revenue Code and related regulations impose a 100%
tax on gains realized by a REIT from property held as a dealer primarily for
sale to customers in the ordinary course of business. These provisions may limit
our ability to sell our real estate interests. For a discussion of federal
income tax considerations in selling a real estate 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."

   Our subordinated investments may involve increased risk of loss. We emphasize
mezzanine loans and other forms of subordinated financing, such as investments
consisting of unconsolidated real estate interests. Because of their subordinate
position, these subordinated investments carry a greater credit risk than senior
lien financing, including a substantially greater risk of non-payment. If a
borrower defaults on our subordinated investment or on debt senior to us, our
subordinated investment will be satisfied only after the senior debt is paid
off, which may result in our being unable to recover the full amount, or any, of
our investment. 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.

   Where debt senior to our investment exists, the presence of intercreditor
arrangements may limit our ability to amend our loan documents, assign our
loans, accept prepayments, exercise our remedies (through "standstill" periods)
and control decisions made in bankruptcy proceedings relating to borrowers.
Bankruptcy and borrower litigation can significantly increase the time needed
for us to acquire underlying collateral in the event of a default, during which
time the collateral may decline in value. In addition, there are significant
costs and delays associated with the foreclosure process. 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. When we originate or
acquire a

                                        4
subordinated investment, we may not have 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. 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.

   We have loans that are not collateralized by recorded or perfected liens on
the real estate underlying our loans. Some of the loans not collateralized by
liens are secured instead 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
judgments or other liens that may arise as well as to the claims of general
creditors of the borrower. Moreover, filing a deed-in-lieu of foreclosure with
respect to these loans will usually constitute an event of default under any
related senior debt. Any such default would require us to assume or pay off the
senior debt in order to protect our investment. Furthermore, in a borrower's
bankruptcy, we will have materially fewer rights than secured creditors and, if
our loan is secured by equity interests in the borrower, fewer rights 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. In
addition, we may lose lien priority in many jurisdictions, to persons who supply
labor and materials to a property. For these and other reasons, the total amount
that we may recover from one of our investments may be less than the total
amount of that investment or our cost of an acquisition of an investment.

   Our investments in unconsolidated real estate interests may involve increased
risk of loss. We may originate or acquire investments consisting of
unconsolidated real estate interests. These investments 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 default. These investments will be subordinate
not only to existing liens encumbering the underlying property but also to
future judgment or other liens that may arise and to the claims of general
creditors of the owner of the underlying properties.

   Loans secured by equity interests in entities owning real estate may involve
increased risk of loss. We may originate or acquire loans secured by direct
and/or indirect interests in entities owning real estate 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 these interests will
be subordinate not only to existing liens encumbering the underlying property
but also to future judgments or other liens that may arise and to the claims of
general creditors of the owner of the underlying properties.

   Acquisitions of loans may involve increased risk of loss. When we acquire
existing loans, we generally do so 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 are 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.
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. Most of our financings have loan-to-value ratios in excess
of 80% and many have loan-to-value ratios in excess of 90%. We expect to
continue making loans with high loan-to-value ratios. 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 the sale of
the underlying property may be insufficient to repay the financing.

   Interest rate changes may adversely affect our investments. Changes in
interest rates affect the market value of our investment 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 with rates that are fixed or variable only to a limited extent
may have less value than other income-producing 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 rates on debt we incur may not
be

                                        5
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.

   We may not obtain appreciation interests at the rate we seek, or at all, and
we may not benefit from appreciation interests we do obtain. In addition to an
agreed upon interest rate, we occasionally obtain appreciation interests from
our borrowers. Appreciation interests require a borrower to pay us a percentage
of the property's excess cash flow from operations , or of the net proceeds
resulting from the property's sale or refinance. The appreciation interests we
have historically obtained have ranged from 5-30%. However, in the future we may
not be able to obtain appreciation interests in this range or at all. 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.

   Appreciation interests may cause us to lose our lien priority. Because
appreciation interests allow us to participate in the increase in a property's
value or revenue, courts, including a court in a borrower's bankruptcy
arrangement or similar proceeding, could 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 making investments in real estate may limit our ability
to achieve our objectives. We may encounter significant competition from public
and private companies, including other finance companies, mortgage banks,
pension funds, savings and loan associations, insurance companies, institutional
investors, investment banking firms and other lenders and industry participants,
as well as individual investors. 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.
Many of our competitors have substantially greater assets than we do. As such,
they have the ability to make larger loans and to reduce the risk of loss from
any one loan by having a more diversified loan portfolio. 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.

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

   Lease expirations, lease defaults and lease terminations may adversely affect
our revenue. Lease expirations, lease defaults and lease terminations may result
in reduced revenues from our real estate interests if the lease payments
received from replacement tenants are less than the lease payments received from
the expiring, defaulting or terminating tenants. In addition, lease defaults by
one or more significant tenants, lease terminations by tenants following events
causing significant damage to the property or takings by eminent domain, or the
failure of tenants under expiring leases to elect to renew their leases, could
cause us to experience long periods with reduced or no revenue from a facility
and to incur substantial capital expenditures in order to obtain replacement
tenants.

   We may need to make significant capital improvements to our properties in
order to remain competitive. The properties underlying our consolidated real
estate interests may face competition from newer, more updated properties. In
order to remain competitive, we may need to make significant capital
improvements to these properties. In addition, in the event we need to re-lease
a property, we may need to make significant tenant improvements. The costs of
these improvements could adversely affect our financial performance.

   Uninsured and underinsured losses may affect the value of, or our return
from, our real estate interests. Our properties, and the properties underlying
our loans, have comprehensive insurance in amounts we believe are 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, hurricanes and terrorism 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.

                                        6
Real estate 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 real estate 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, and 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.

   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. In spite of our investment procedures, it is possible that
real estate relating to one of our investments could be found not to fully
comply with the Americans with Disabilities Act. Such a finding could result in
liability for both governmental fines and damages to private parties. This could
reduce the revenues from that real estate that otherwise would be available to
our borrower to pay interest on our loans or reduce the income to us from our
interest in that real estate. As a result, if we or our borrowers were required
to make unanticipated major modifications to comply with the Americans with
Disabilities Act, the resulting expense could adversely affect our ability to
make distributions to our shareholders.

   Because we must distribute a substantial portion of our income to our
shareholders, we will continue to need additional debt and/or equity capital to
grow. We generally must distribute at least 90% of our taxable income to our
shareholders to maintain our REIT status. As a result, those earnings will not
be available to fund our activities. We have historically funded our operations
by borrowing from financial institutions and raising capital in the public
capital markets. We expect to continue to fund our operations this way. If we
fail to obtain funds from these sources, it could limit our ability to grow,
which could have a material adverse effect on the value of our common shares.

   Lack of geographic diversification exposes our investments to a higher risk
of loss from regional economic factors. We generally invest in real estate
located in mature markets in the Mid-Atlantic, Southeast and Mid-West regions of
the United States. We have also invested in real estate located in mature
markets in the West and Northeast regions of the United States. Although we
anticipate that we will continue to focus on these regions for the foreseeable
future, we are not subject to any geographic limitations within our
organizational documents regarding where we may invest and, accordingly, we may
make investments in other areas as appropriate opportunities are identified.
This lack of geographic diversification may make our investment portfolio more
sensitive to economic developments within a regional area, which may result in
reduced rates of return or higher rates of default than might be incurred with a
more geographically diverse investment portfolio.

   Our use of debt to fund our investments can reduce income available for
distribution and cause losses. Our organizational documents do 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. Therefore, we cannot be sure that our use of debt to fund our
investments will prove to be beneficial. Moreover, when our assets secure our
debt, we can lose some or all of our assets through foreclosure if we do not
meet our debt service obligations.

   We use variable rate lines of credit to leverage fixed rate lending assets
which may adversely affect our returns if interest rates rise. We often use
amounts borrowed under our lines of credit to leverage investments we make. Our
lines of credit bear interest at variable rates. Our investments usually have a
fixed rate of return. In the event the interest rate on amounts borrowed under
these lines of credit to leverage our investments rises, the return on these
investments may be adversely affected.

   Concentration of our investments increases our dependence on individual
investments. Although we generally invest between $2.0 million and $50.0 million
in a loan or real estate interest, our organizational documents do not limit the
size of our investments. If we make larger investments, 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 with respect to any one
investment. If we make material investments in any single borrower or group of
affiliated borrowers, the failure of that borrower or group to perform their
obligations to us could increase the risk of loss to our shareholders.

                                       7
Adverse developments in any arrangement with a third party that was the
source of a material amount of our investments could adversely impact our
growth. Our growth is dependent on our ability to continue to generate
sufficient attractive investment opportunities. We have initiated numerous
arrangements with third parties intended to increase our sources for originating
investments in real estate. In our "seamless mezzanine" program, we initiated
arrangements with several first-lien conduit lenders establishing the terms on
which we would provide mezzanine loans in conjunction with first lien loans made
by these lenders. We also started a "correspondent" program seeking to establish
arrangements with potential referral sources. In the event any arrangement with
a particular third party, whether through these programs or otherwise, became
the source of a large percentage of our investments, any adverse developments in
such an arrangement could adversely impact our growth. Failure of that
arrangement could reduce our ability to maintain and build our portfolio.

   Quarterly results may fluctuate and may not be indicative of future quarterly
performance. Our quarterly operating results could fluctuate; therefore, you
should not rely on past quarterly results to be indicative of our performance in
future quarters. Factors that could cause quarterly operating results to
fluctuate include, among others, variations in our investment origination
volume, variations in the timing of repayments, variations in the amount of time
between our receipt of the proceeds of a securities offering and our investment
of those proceeds in loans or real estate interests, market conditions that
result in increased cost of funds, the degree to which we encounter competition
in our markets and general economic conditions.

                               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
will not be deductible in computing our taxable income. Corporate tax liability
would 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. 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.

   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. This "phantom
income" may arise for us in the following ways:

   -  Origination of loans with appreciation interests 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. This "discount"
      must be recognized as income over the life of the loan even though the
      corresponding cash will not be received until maturity.

                                       8
-  Our loan terms may provide for both an interest "pay" rate and "accrual"
      rate. When this occurs, we recognize interest based on the sum of the pay
      rate and the accrual rate, but only receive cash at the pay rate until
      maturity of the loan, at which time all accrued interest is due and
      payable.

   -  Our loans or unconsolidated real estate interests may contain provisions
      whereby the benefit of any principal amortization of the underlying senior
      debt inures to us. We recognize this benefit as income as the amortization
      occurs, with no related cash receipts until repayment of our loan.

   -  Sales or other dispositions of consolidated real estate interests, as well
      as significant modifications to loan terms may result in timing
      differences between income recognition and cash receipts.

   If any of the above circumstances occurs, 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 consolidated real estate 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. 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.

   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. 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 other 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. 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. 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 qualify for purposes of the 75% gross income test described
above.

   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.

                                       9
A portion of the dividends we distribute may be deemed a return of capital
for federal income tax purposes. The amount of dividends we distribute to our
common shareholders in a given quarter may not correspond to our taxable income
for such quarter. Consequently, a portion of the dividends we distribute may be
deemed a return of capital for federal income tax purposes, and will not be
taxable but will reduce shareholders' basis in the underlying common shares.

   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 our policies or approve transactions
that deviate from these policies without a vote of or notice to our
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 our outstanding voting
shares.

   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 (a) 8.3% or, with respect to our original promoter, Resource
America, Inc., 15%, of our outstanding common shares or (b) 9.8% of the number
of outstanding shares of any series of our preferred 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.

   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 our
shareholders.

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

BOARD OF TRUSTEES

      Our declaration of trust requires us to 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.

      As of the date of this prospectus, we have seven trustees, of whom five
have been determined by our board of trustees to be 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, with or
without cause, 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 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 our board
of trustees approves or exempts prior to the time that the interested
shareholder becomes an interested shareholder.

                                       11
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:

         -  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.

                                       12
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 our bylaws. At any special meeting of shareholders, only the
business specified in the notice of meeting may be brought before the meeting.

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 to the fullest extent permitted by Maryland law. Maryland law
permits limiting the liability of trustees and officers, 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

         -  the director actually received an improper personal benefit in
            money, property, or services, 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

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

                                       13
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.

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.

      Maryland law provides that Maryland statutory real estate investment
trusts that have a class of equity securities registered under the Securities
Exchange Act of 1934 and have at least three outside trustees can elect by
resolution of the board of trustees to be subject to some corporate governance
provisions that may be inconsistent with the trust's declaration of trust and
bylaws. For example, the board of trustees may, by electing into the applicable
statutory provisions and notwithstanding the trust's declaration of trust or
bylaws:

         -  classify our board of trustees,

         -  provide that a special meeting of shareholders will be called only
            at the request of shareholders entitled to cast at least a majority
            of the votes entitled to be cast at the meeting,

         -  reserve for itself the right to fix the number of trustees,

         -  provide that a trustee may be removed only by the vote of the
            holders of two-thirds of the shares entitled to vote, and

         -  retain for itself sole authority to fill vacancies created by an
            increase in the size of the board or by the death, removal or
            resignation of a trustee and permit a trustee to serve for the
            balance of the unexpired term instead of until the next annual
            meeting of shareholders.

      Our board has not elected into the foregoing provisions. A board of
trustees may implement all or any of these provisions without amending the
trust's declaration of trust or bylaws and without shareholder approval. A
Maryland statutory real estate investment trust may be prohibited by its
declaration of trust or by resolution of its board of trustees from electing any
of the provisions of the statute; however, we are not prohibited from
implementing any or all of the statute, except to the extent such implementation
would conflict with certain voting rights of our outstanding series of preferred
shares. If implemented, these provisions could discourage offers to acquire our
shares and could increase the difficulty of completing an unsolicited takeover
offer.

                                       14
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 securities 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.

      Our counsel, Ledgewood, a professional corporation, has opined that the
discussion contained in the section "Federal Income Tax Consequences of Our
Status as a REIT" identifies and fairly summarizes the federal income tax
consequences that are likely to be material to a holder of our common shares,
and to the extent such summaries involve matters of law, such statement s of law
are correct under the Internal Revenue Code. The opinions of tax counsel, and
the discussions in this prospectus, are based upon existing law and
interpretations of existing law, all of which may be changed either
prospectively and retroactively.

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.

      Based on factual representations made by us regarding our operations, in
the opinion of Ledgewood, a professional corporation, our counsel, with respect
to our taxable years ended through December 31, 2004, we qualified as a REIT
under Sections 856 through 859 of the Internal Revenue Code, and our current and
proposed method of operating has enabled us, and will enable us, to meet the
requirements for qualification and taxation as a REIT for the current taxable
year and for future taxable years. Our qualification as a REIT depends upon our
ability to meet the various requirements imposed under the Internal Revenue Code
through actual operations. Ledgewood, a professional corporation, will not
review our operations on an ongoing basis, and our actual operations may not
enable us to meet these requirements in a particular year. The opinion of
Ledgewood, a professional corporation, is not binding on the Internal Revenue
Service or any court. The opinion of Ledgewood, a professional corporation, is
based upon existing law, Internal Revenue Service regulations, currently
published administrative positions of the Internal Revenue Service and judicial
decisions, all of which are subject to change either prospectively or
retroactively.

   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.

                                       15
-  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

      - 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 satisfy one of the asset tests, as described below under " -
      Requirements for Qualification - Asset Tests," and nonetheless qualify as
      a REIT because we meet other requirements, we will pay a tax equal to the
      greater of (1) $50,000 or (2) the amount determined by multiplying the net
      income earned by us on the assets that caused us to fail one of the asset
      tests multiplied by the highest rate of corporate income tax.

   -  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.

                                       16
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.

   -  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. As of the date of this prospectus, RAIT Partnership owns all of the
capital stock in 15 other corporations involved in the ownership of certain of
our portfolio assets. Thus, RAIT General, RAIT Limited and the other 15
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. As of the date of this
prospectus, 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. As of
the date of this prospectus, RAIT Partnership beneficially owns all of the
membership interests in 14 limited liability companies and all of the
partnership interests in 2 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

                                       17
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.

   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. As of the date of this prospectus, we have one TRS.

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

                                       18
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.

   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 such case the loan itself may not
qualify as a qualified asset for purposes of the 75% asset test discussed
below.) In Revenue Procedure 2003-65, the Internal Revenue Service established a
safe harbor under which interest from loans secured by a first priority security
interest in ownership interests in a partnership or limited liability company
owning real property will be treated as qualifying income for both the 75% and
95% gross income tests, and the loans will be treated as qualifying assets for
purposes of the 75% asset test, provided several requirements are satisfied.
Revenue Procedure 2003-65 was effective August 4, 2003. While many of the loans
we made after the effective date of this Revenue Procedure that are not secured
by a direct interest in real property qualify for the safe harbor in Revenue
Procedure 2003-65, some loans do not qualify, and some loans made in the future
may not qualify, for the safe harbor. In addition, since the specific
requirements of Revenue Procedure 2003-65 were not known at the time we entered
into some of our existing loans, not all of these loans meet each of the safe
harbor tests. In those cases, the interest income from the loan will be
qualifying income for purposes of the 95% gross income test, but potentially
will not be qualifying income for purposes of the 75% gross income test and the
loans may not be qualifying assets for the 75% asset test discussed below.

   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

                                       19
-  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 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.

                                       20
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 (including all interests in subsidiary partnerships) 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.

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

   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 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.

                                       21
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. Moreover, as a result
of recently enacted legislation, our failure to meet the 5% or either of the 10%
tests described above will not necessarily result in our disqualification as a
REIT. So long as the overage is the result of reasonable cause, disqualification
is replaced by a two part process. First, we have the opportunity to dispose
without penalty (within six months of identifying the failure to meet the
requirements) interests comprising up to the lesser of $10,000,000 or 1% of our
total assets to meet the 5% and 10% tests. Second, assets in excess of the 1%
amount would be subject to a tax of the greater of $50,000 or the highest
corporate tax rate multiplied by the net income from those assets.

   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. As of the date of this prospectus,
we have one TRS, the value of which is less than 1% of our assets.

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,

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:

                                       22
-  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.

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. On May 28, 2003, President Bush signed into law
the Jobs and Growth Tax Relief Reconciliation Act of 2003, which we refer to as
the 2003 tax act. Under the 2003 tax act, the highest federal income tax rate on
capital gains and dividends was lowered to 15% for 2003-08, with taxpayers in
lower income brackets paying 5% on capital gains and dividends in 2003-07 and no
taxes on such income in 2008. However, dividends received from a REIT generally
do not qualify as dividends for this purpose. Instead, they are taxable as
ordinary income subject to a maximum rate of 35% (reduced pursuant to the 2003
tax act from the previous maximum rate of 38.6%). REIT dividends would qualify
for the reduced rate only to the extent the REIT makes a capital gains
distribution, distributes dividends received from a taxable REIT subsidiary or
other corporation or, to the extent permitted, a REIT pays corporate income
taxes and retains earnings. None of the dividends we have paid in the past would
have qualified for the reduced rate. In addition, a U.S.

                                       23
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.

   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%

                                       24
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 2003 tax
act, the maximum marginal individual income tax rate is 35% for 2003 and all
subsequent years. The maximum tax rate on long-term capital gain applicable to
non-corporate taxpayers was reduced by the 2003 tax act from 20% to 15%, with
taxpayers in lower income brackets paying 5%, 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 15% 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.

   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

                                       25
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.

      The Internal Revenue Service has issued a revenue ruling in which it held
that amounts distributed by a REIT to a tax-exempt employees' pension trust do
not constitute unrelated business taxable income, or UBTI. In general, subject
to the discussion below regarding a "pension-held REIT" and subject to the
following sentence, based upon such ruling and the statutory framework of the
Internal Revenue Code, distributions to a stockholder of a real estate
investment trust that is a tax-exempt entity should not constitute UBTI,
provided that:

         -  The tax-exempt entity has not financed the acquisition of its shares
            of common stock with "acquisition indebtedness" within the meaning
            of the Internal Revenue Code.

         -  The shares of common stock are not otherwise used in an unrelated
            trade or business of the tax-exempt entity.

         -  The real estate investment trust does not hold a residual interest
            in a real estate mortgage investment conduit ("REMIC") within the
            meaning of Section 860D of the Internal Revenue Code.

         -  All or a portion of our Company is not considered a taxable mortgage
            pool.

      Although we do not intend to invest a material amount of assets in REMICS,
certain taxable income produced by REMIC residual interests may cause our
stockholders to suffer certain adverse tax consequences. In addition, we have
entered into certain financing transactions which are treated as taxable
mortgage pools, and with respect to which we are treated as owning residual
interests. See "Certain Federal Income Tax Consequences."

      If any pension or other retirement trust that qualifies under Section
401(a) of the Internal Revenue Code holds more than 10% by value of the
interests in a pension-held REIT at any time during a taxable year, a portion of
the dividends paid to the qualified pension trust by such REIT may constitute
UBTI. For these purposes, a "pension-held REIT" is defined as a REIT: (1) that
would not have qualified as a REIT but for the provisions of the Internal
Revenue Code which look through such a qualified pension trust in determining
ownership of securities of the REIT; and (2) as to which at least one qualified
pension trust holds more than 25% by value of the interests of such REIT or one
or more qualified pension trusts (each owning more than a 10% interest by value
in the REIT) hold in the aggregate more than 50% by value of the interests in
such REIT.

      We do not expect that we will be a pension-held REIT. However,
notwithstanding our current belief that we will not be a "pension-held REIT," no
assurance can be given that we will not become a pension-held REIT in the
future.

      If we were to become a pension-held REIT in the future and were to
originate investments using debt, or otherwise were to engage in a transaction
resulting in UBTI, determined as though we were a qualified pension plan, any
qualified pension plan owning

                                       26
10% or more of our shares, by value, would have a portion of its dividend income
from us taxed as UBTI. Even if we were not a pension-held REIT, certain amounts
received by a stockholder that is a tax-exempt entity may be treated as UBTI.

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 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. Under recently enacted legislation, for our taxable
years beginning January 1, 2005 and thereafter, as long as our shares are traded
on an established U.S. securities market and the non-U.S. shareholder does not
own more than 5% of the class of shares with respect to which the distribution
is made, the distribution will not be treated as gain recognized from the sale
or exchange of a United States real property interest, and it will not be taxed
as a capital gain and no branch profits tax will be applicable. Instead, such
distributions will be taxed as ordinary dividends.

   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

                                       27
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.

STATE AND LOCAL TAXES

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

                                       28
SELLING SHAREHOLDERS

      The selling shareholders listed below acquired or may acquire the shares
listed in the column "Common Shares Registered Under This Prospectus" pursuant
to equity compensation granted under the 2005 equity compensation plan. The
table shows, as of May 31, 2005, certain information regarding the selling
shareholders' ownership of our common shares. We encourage our employees and
trustees to acquire common shares pursuant to this equity compensation. We
believe that this prospectus and the registration statement of which it is a
part, which permits resales of shares so acquired by our employees and trustees,
encourages acquisition of common shares by our employees and trustees 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 pursuant to
this equity compensation will be offered or sold, the selling shareholders are
not required to sell any shares. Employees and trustees, their family members,
trusts in which these persons have more than a 50% of the beneficial interest, a
foundation in which these persons (or the employee or trustee) control the
management of assets or any other entity in which these persons (or the employee
or trustee) own more than 50% of the voting interests, that acquire common
shares under the equity 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. Edward S. Brown has served as
one of our trustees since June 1999. Jonathan Z. Cohen has served as our Vice
Chairman of the Board of Trustees since October 2003, as our Secretary since
February 1998 and as one of our trustees since September 1997. S. Kristin Kim
has served as one of our trustees since October 2003. 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               520,391 (4)              366,526               153,865                      *
Edward S. Brown               13,448 (5)               13,448                     0                      *
Jonathan Z. Cohen             33,716 (6)               14,500                19,216                      *
S. Kristin Kim                11,396 (7)               11,396                     0                      *
Arthur Makadon                12,396 (8)               12,396                     0                      *
Joel R. Mesznik               17,948 (9)               14,948                 3,000                      *
Daniel Promislo               15,948 (10)              14,948                 1,000                      *
Scott F. Schaeffer           133,594 (11)             117,500                16,094                      *
Jay R. Cohen                 110,822 (12)              89,117                21,705                      *
Ellen J. DiStefano            79,362 (13)              70,182                 9,180                      *
Kenneth R. Frappier           30,815 (14)              29,500                 1,315                      *
----------

* Less than 1%.

(1)   Includes all common shares acquired and not previously sold by the
      relevant selling shareholder pursuant to the equity compensation granted
      under the 2005 equity compensation plan and all common shares which the
      relevant selling shareholder has the right to acquire through equity
      compensation granted under the equity plan, whether or not such right has
      yet vested or will become vested within 60 days after the date hereof.
      Includes common shares which may become issuable under phantom shares
      issued under the RAIT Investment Trust Phantom Share Plan, or the phantom
      share plan. The phantom share plan provides that phantom shares issued
      under the phantom share plan will be redeemed in cash, unless our
      shareholders authorize the issuance of common shares under the phantom
      share plan, and, if such shareholder approval is received, the
      compensation committee of our board of trustees may determine, in its sole
      discretion, that the redemption paid to the grantees for their phantom
      shares will be paid in common shares rather than cash. Our shareholders
      did authorize such issuance at our annual meeting of shareholders on May
      18, 2005. In the event the compensation committee made such a
      determination, any common

                                       29
shares so paid will be issued under the equity plan as an "other
      share-based award." As of the date of this prospectus, the compensation
      committee has not made any such determination. See "Proposal 2. Amendment
      and Restatement of the RAIT Investment Trust 1997 Stock Option Plan --
      Phantom Share Plan" in our definitive proxy statement filed with the U.S.
      Securities and Exchange Commission on April 11, 2005 for a discussion of
      the phantom share plan.

(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 25,592,077 common shares outstanding as of May 6, 2005. Common
      shares issuable pursuant to equity compensation granted to 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 5,100 common shares directly held by Mrs. Cohen; 9,228 common
      shares held in the Company's Cash and Deferred Savings Plan, or 401(k)
      plan, for the benefit of Mrs. Cohen; 30,446 common shares held by an
      individual retirement account, or IRA, for the benefit of Mrs. Cohen;
      126,801 common shares held by a charitable foundation of which Mrs. Cohen
      serves as trustee; 37,290 common shares held in an IRA account for the
      benefit of Mrs. Cohen's spouse, Edward E. Cohen; 68,190 common shares held
      by Solomon Investment Partnership, L.P., a limited partnership of which
      Mrs. Cohen and her spouse are the sole shareholders, officers and
      directors of the corporate general partner and are the sole limited
      partners; and 243,336 common shares issuable upon exercise of options
      granted under the equity plan. Of these options, 209,586 are fully vested
      and 33,750 will not vest within sixty days. Excludes 58,912 common shares
      deposited in a "rabbi" trust established in connection with the SERP
      established pursuant to Mrs. Cohen's employment agreement with the
      Company. Excludes common shares held by Resource America, Inc. Mrs. Cohen
      is (i) the spouse of Edward E. Cohen, the Chairman of the Board of
      Resource America, and (ii) the parent of Jonathan Z. Cohen, the Chief
      Executive Officer, President and a director of Resource America.

(5)   Includes 448 common shares that may become issuable upon the redemption of
      phantom shares granted pursuant to the phantom share plan. See footnote 1
      above.

(6)   Includes 32,420 common shares held directly by Mr. Jonathan Z. Cohen, 776
      common shares held in a 401(k) plan account for his benefit and 500 common
      shares issuable upon exercise of options granted under the equity plan.
      All of these options are fully vested Excludes common shares held by
      Resource America. See footnote 4 above.

(7)   Includes 10,000 common shares issuable upon exercise of options granted
      under the equity plan. Of these options, 2,500 are fully vested, 750 are
      subject to early exercise rights, but will not vest within sixty days and
      6,750 will not vest within sixty days. Includes 1,396 common shares that
      may become issuable upon the redemption of phantom shares granted pursuant
      to the phantom share plan. See footnote 1 above.

(8)   Includes 11,000 common shares issuable upon exercise of options granted
      under the equity plan. Of these options, 5,500 are fully vested, 2,750
      will vest within sixty days, 250 are subject to early exercise rights but
      will not vest within sixty days and 2,500 will not vest within sixty days.
      Includes 1,396 common shares that may become issuable upon the redemption
      of phantom shares granted pursuant to the phantom share plan. See footnote
      1 above.

(9)   Includes 448 common shares that may become issuable upon the redemption of
      phantom shares granted pursuant to the phantom share plan. See footnote 1
      above.

(10)  Includes 448 common shares that may become issuable upon the redemption of
      phantom shares granted pursuant to the phantom share plan. See footnote 1
      above.

(11)  Includes 87,500 common shares directly held by Mr. Schaeffer, 5,594 common
      shares held in a 401(k) plan account for the benefit of Mr. Schaeffer,
      3,000 common shares held in an IRA account for the benefit of Mr.
      Schaeffer and 37,500 common shares issuable upon exercise of options
      granted under the equity plan. Of these options, 9,375 are fully vested
      and 28,125 will not vest within sixty days.

                                       30
(12)  Includes 4,500 common shares held directly by Mr. Jay R. Cohen; 4,208
      common shares held in an IRA account for the benefit of Mr. Cohen; 27,771
      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;
      11,002 common shares held in Mr. Cohen's 401(k) plan account; and 55,000
      common shares issuable upon exercise of options granted under the equity
      plan. Of these options, 51,250 are fully vested and 3,750 will not vest
      within sixty days.

(13)  Includes 3,000 common shares directly held by Mrs. DiStefano, 2,502 common
      shares held by Mrs. DiStefano jointly with her spouse; 1,295 common shares
      held in an IRA account for the benefit of Mrs. DiStefano, 1,190 common
      shares held in an IRA account for the benefit of Mrs. DiStefano's spouse,
      64 common shares held in education IRA's for the benefit of Mrs.
      DiStefano's children, 5,629 common shares held in a 401(k) plan account
      for the benefit of Mrs. DiStefano, and 65,682 common shares issuable upon
      exercise of options granted under the equity plan. Of these options,
      61,932 are fully vested and 3,750 will not vest within sixty days.

(14)  Includes 9,000 common shares directly held by Mr. Frappier, 3,000 shares
      held by Mr. Frappier's spouse, 1,315 common shares held in a 401(k) plan
      account for the benefit of Mr. Frappier, and 17,500 common shares issuable
      upon exercise of options granted under the equity plan. Of these options,
      13,750 are fully vested, 625 are subject to early exercise rights but will
      not vest within sixty days and 3,125 will not vest within sixty days.

                                       31
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 or pursuant to any payment that may be required pursuant to equity
compensation granted to selling shareholders pursuant to the 2005 equity
compensation 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 or other such payment.

                                     EXPERTS

      Our consolidated financial statements as of December 31, 2004 and 2003 and
for each of the three years ended December 31, 2004 appearing in our Annual
Report on Form 10-K for the year ended December 31, 2004, which are incorporated
by reference in this prospectus, have been audited by Grant Thornton LLP,
independent registered public accountants, whose report is incorporated by such
reference in this prospectus and given upon their authority as experts in
accounting and auditing.

      With respect to the unaudited interim financial information for the
periods ended March 31, 2005 and 2004 incorporated by reference in this
prospectus, Grant Thornton LLP has reported that they have applied limited
procedures in accordance with professional standards for a review of such
information. However, the report of Grant Thornton LLP included in our quarterly
report on Form 10-Q for the quarter ended March 31, 2005 and incorporated by
reference herein, states that Grant Thornton LLP did not audit and does not
express any opinion on that interim financial information. Accordingly, the
degree of your reliance on this report on such information should be restricted
in light of the limited nature of the review procedures applied. Grant Thornton
LLP is not subject to the liability provisions of Section 11 of the Securities
Act for their report on the unaudited interim financial information because that
report is not a "report" or a "part" of the registration statement prepared or
certified by the accountants within the meaning of Sections 7 and 11 of the
Securities Act.

                                 LEGAL OPINIONS

      The legality of the securities will be passed upon for us by DLA Piper
Rudnick Gray Cary US LLP. 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, a professional corporation.

                                       32
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, but which we do not
include 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
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:

-  Annual Report on Form 10-K for the year ended December 31, 2004.

-  Quarterly Report on Form 10-Q for the quarter ended March 31, 2005.

-  Current Reports on Form 8-K filed January 31, 2005 and May 24, 2005.

-  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
                           c/o RAIT Partnership, L.P.
                         1818 Market 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.

                                       33
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
                                                              ----
Forward Looking Statements.............................         2
Our Company............................................         3
Risk Factors...........................................         4
Certain Provisions of Maryland
   Law and of our Declaration of
   Trust and Bylaws....................................        11
Federal Income Tax Consequences
   of our Status as a REIT.............................        15
Selling Shareholders...................................        29
Plan of Distribution...................................        32
Use of Proceeds........................................        32
Experts................................................        32
Legal Opinions.........................................        32
Where You Can Find More
   Information.........................................        33
2,500,000 Shares

                                  COMMON SHARES

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

                                RESALE PROSPECTUS

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

                                  June 3, 2005
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 900,000 of the registrant's common
shares of beneficial interest, par value $0.01 per share, issuable pursuant to
equity compensation granted pursuant to the registrant's RAIT Investment Trust
2005 Equity Compensation Plan. In accordance with General Instruction E to Form
S-8, the registrant incorporates by reference the contents of the registrant's
Registration Statements on Form S-8, Registration No. 333-67452, filed on August
14, 2001, and Registration No. 333-100766, filed on October 25, 2002, 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 for the year ended December 31, 2004.

   -  Quarterly Report on Form 10-Q for the quarter ended March 31, 2005.

   -  Current Reports on Form 8-K filed January 31, 2005 and May 24, 2005.

   -  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, or an act or omission committed in bad
faith 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 former
trustee or officer of RAIT.

      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

                                     II-1
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 undertaking
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. See "Certain Provisions of Maryland Law and of Our Declaration of
Trust and By laws -- Indemnification; Limitation of Trustees' and Officers'
Liability" and "--Indemnification Agreements" in the Resale Prospectus included
in this registration statement on Form S-8.

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 the 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;

(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

                                     II-2
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 to trustees, officers and controlling persons of
the registrant pursuant to the foregoing provisions, or otherwise, 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 any 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.

                                     II-3
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
June 3, 2005.

                                      RAIT INVESTMENT TRUST

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

                                     II-4
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.

                                   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                               Chairman, Chief Executive                  June 3, 2005
---------------------------------
          Betsy Z. Cohen                              Officer and Trustee
                                                 (Principal Executive Officer)

/s/   SCOTT F. SCHAEFFER                     President and Chief Operating Officer            June 3, 2005
---------------------------------
        Scott F. Schaeffer

/s/   ELLEN J. DISTEFANO                          Executive Vice President and                June 3, 2005
---------------------------------
        Ellen J. DiStefano                          Chief Financial Officer
                                                (Principal Financial Officer and
                                                 Principal Accounting Officer)

/s/   JONATHAN Z. COHEN                       Secretary, Vice-Chairman and Trustee            June 3, 2005
---------------------------------
         Jonathan Z. Cohen

/s/   EDWARD S. BROWN                                       Trustee                           June 3, 2005
---------------------------------
          Edward S. Brown

/s/   S. KRISTIN KIM                                        Trustee                           June 3, 2005
---------------------------------
          S. Kristin Kim

/s/   ARTHUR MAKADON                                        Trustee                           June 3, 2005
---------------------------------
          Arthur Makadon

/s/   JOEL R. MESZNIK                                       Trustee                           June 3, 2005
---------------------------------
          Joel R. Mesznik

/s/   DANIEL PROMISLO                                       Trustee                           June 3, 2005
---------------------------------
          Daniel Promislo
II-5
EXHIBIT INDEX

The following exhibits are filed herewith:
EXHIBIT       DOCUMENT
-------       --------
4.1           Amended and Restated Declaration of Trust of RAIT Investment
              Trust(1).

4.2           Articles of Amendment to Amended and Restated Declaration of Trust
              of RAIT Investment Trust(2).

4.3           Articles of Amendment to Amended and Restated Declaration of Trust
              of RAIT Investment Trust(3).

4.4           Certificate of Correction to the Amended and Restated Declaration
              of Trust of RAIT Investment Trust(4).

4.5           Articles Supplementary relating to the 7.75% Series A Cumulative
              Redeemable Preferred Shares of Beneficial Interest (the "Series A
              Articles Supplementary") (5).

4.6           Certificate of Correction to the Series A Articles
              Supplementary(5).

4.7           Articles Supplementary relating to the 8.375% Series B Cumulative
              Redeemable Preferred Shares of Beneficial Interest(6).

4.8           By-laws of RAIT Investment Trust, as amended(1).

4.9           Articles of Incorporation of RAIT General, Inc.(1).

4.10          By-laws of RAIT General, Inc.(1).

4.11          Articles of Incorporation of RAIT Limited, Inc.(1).

4.12          By-laws of RAIT Limited, Inc.(1).

4.13          Certificate of Limited Partnership of RAIT Partnership, L.P.(1).

4.14          Limited Partnership Agreement of RAIT Partnership, L.P.(1).

4.15          Form of Certificate for Common Shares of Beneficial Interest(3).

4.16          Form of Certificate for 7.75% Series A Cumulative Redeemable
              Preferred Shares of Beneficial Interest (7).

4.17          Form of Certificate for 8.375% Series B Cumulative Redeemable
              Preferred Shares of Beneficial Interest (6).

4.18          RAIT Investment Trust 2005 Equity Compensation Plan (8).

5             Opinion of DLA Piper Rudnick Gray Cary US LLP as to the legality
              of securities being registered (including consent).

8             Opinion of Ledgewood, a professional corporation, regarding tax
              matters (including consent).

15.1          Awareness Letter from Independent Accountants.

23.1          Consent of Grant Thornton LLP.

23.2          Consent of DLA Piper Rudnick Gray Cary US LLP (included in Exhibit
              5).

23.3          Consent of Ledgewood, a professional corporation (included in
              Exhibit 8).

24            Power of Attorney (included as part of signature pages to this
              registration statement).
(1)   Incorporated by reference to RAIT Investment Trust's Registration
      Statement on Form S-11 (Registration No. 333-35077).

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

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

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

(5)   Incorporated herein by reference to RAIT Investment Trust's Form 8-K as
      filed with the Securities and Exchange Commission on March 18, 2004 (File
      No. 1-14760).

(6)   Incorporated herein by reference to RAIT Investment Trust's Form 8-K as
      filed with the Securities and Exchange Commission on October 1, 2004 (File
      No. 1-14760).

                                     II-6
(7)   Incorporated herein by reference to RAIT Investment Trust's Form 8-K as
      filed with the Securities and Exchange Commission on March 22, 2004 (File
      No. 1-14760).

(8)   Incorporated by reference to RAIT Investment Trust's Form 8-K as filed
      with the Securities and Exchange Commission on May 24, 2005.

                                     II-7