<PAGE>
    As filed with the Securities and Exchange Commission on August 13, 2001.
                                                           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)

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

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

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

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

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

                                    Copy to:
                           J. Baur Whittlesey, Esquire
                            Ledgewood Law Firm, P.C.
                        1521 Locust Street - Eighth Floor
                             Philadelphia, PA 19102
                                 (215) 735-0663
<TABLE>
<CAPTION>
                                             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                unit(1)                price(1)             fee
---------------------------------------------------------------------------------------------------------------
<S>                       <C>                       <C>                    <C>                  <C>
Common shares,
par value
$.01 per
share                       800,000 shares           $16.20                 $12,960,000          $3,240(2)
</TABLE>

                                                                 Page 1 of _____
<PAGE>


(1) 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 American Stock Exchange on August 7, 2001.

(2) Pursuant to Rule 457(p) under the Securities Act, the full amount of such
    registration fee is offset by $3,240 of the filing fee previously paid in
    connection with the filing of a registration statement on Form S-11,
    registration statement no. 333-35077, initially filed September 8, 1997.




                                     PART I

                INFORMATION REQUIRED IN SECTION 10(a) PROSPECTUS

Item 1. Plan Information.

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

Item 2. Registrant Information and Employee Plan Annual Information.

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



                                                                 Page 2 of _____
<PAGE>

RESALE PROSPECTUS

                              RAIT INVESTMENT TRUST

               UP TO 800,000 COMMON SHARES OF BENEFICIAL INTEREST
         (including 566,798 common shares to be sold for the account of
                             selling shareholders)

         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 options, and the common
shares of beneficial interest issuable upon exercise of those options, granted
to our employees and trustees under our 1997 Stock Option Plan.

         Our officers and trustees, who are listed on page 43 below as "selling
shareholders," acquired or will acquire the shares to be offered by exercising
stock options granted to them under the 1997 Stock Option Plan. We encourage our
officers and trustees to invest in our company through the exercise of their
options. We believe that this prospectus and the registration statement of
which it is a part, which permits resales of shares acquired by our officers and
trustees through option exercises, encourage these exercises by providing
liquidity for their investment. Accordingly, while the selling shareholders may
sell up to the number of common shares listed in the "Shares to be Sold" column
opposite their names at any time or from time to time until the termination of
this offering, they are not required to sell any shares.

         Our common shares are listed for trading on the American 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 1818 Market Street, Philadelphia, Pennsylvania 19103.
Our telephone number is (215) 861-7900.

         You should read the section entitled "Risk Factors" beginning on page 2
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 August 13, 2001



                                                                 Page 3 of _____


<PAGE>


                                   OUR COMPANY

General

         We are 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 have three principal business activities:

              o   we make mortgage loans directly to borrowers,

              o   we acquire mortgage loans from others, and

              o   we acquire real properties or interests in real properties.

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

Direct Lending

         We make real estate loans directly to borrowers whose financing needs
do not conform to the criteria of institutional lenders and lenders that
securitize loans. We attempt to adapt the terms of our direct loans to meet the
particular needs of a borrower. We emphasize junior lien or other forms of
subordinated, or "mezzanine," financing, including wraparound financing, with
principal amounts generally between $2.0 million and $30.0 million. We also
provide short-term bridge financing. This financing may be in excess of our
targeted size range where the borrower has a committed source of take-out
financing, or we believe that it can arrange take-out financing, to reduce our
investment to an amount within our targeted size range.

         We seek to include "appreciation interest" provisions in our loans.
These provisions require a borrower to pay us a percentage of any increase in
the value of a property underlying one of our loans over the value of the
property at the time the loan is made or over a value agreed upon by us and the
borrower. Alternatively, these provisions may require payment of a percentage of
the increase in a property's revenues over a stated revenue level, usually the
level at the time the loan is made. The measurement period for an appreciation
interest typically ends at loan repayment. We generally seek an appreciation
interest of at least 25%, and may seek to obtain both types of appreciation
interest in appropriate circumstances.

Loan Acquisition

         We also acquire existing real property loans held by banks, other
institutional lenders or third-party investors. We focus on loans that, because
of one or more past defaults under the original loan terms due to lack of a
strong operating history for the underlying properties, the borrowers'
historical credit problems, cash flow problems at the underlying properties or


                                                                 Page 4 of _____
<PAGE>

other factors, we can acquire at a discount to their outstanding balances and
the appraised value of their underlying properties. We will not acquire any
loan, however, unless the prior loan holder, property owner or some other person
has taken material steps to resolve the problems relating to the loan and its
underlying property, and where completion of the resolution process will not
involve our active intervention. We seek to acquire loans for which completion
of the resolution process will enhance our total return through increased yields
or realization of some portion or all of the discount at which they were
acquired.

Loan Portfolio

            The following table sets forth information regarding our loans as of
March 31, 2001:
<TABLE>
<CAPTION>
                                                      Investments in                    Average      Range of
                                                       real estate         Number       loan-to-       loan           Range of
      Type of loan                                        loans           of loans      value(1)     yields(2)        maturities
      ------------                                    -------------       --------     ---------     ---------        ----------
<S>                                                   <C>                 <C>          <C>           <C>           <C>
Long-term first mortgages and
  senior loan participations(3)(4)................     $10,677,888            6            43%         11-16%       3/28/01-7/14/09

Mezzanine (including wraparound) loans (5)........      85,937,949           15            81%         10-30%(7)    2/01/02-1/31/09

Short-term bridge loans (6).......................      40,468,449            7            76%         14-35%(7)    5/16/01-1/23/02
</TABLE>
-----------------
(1) Calculated as outstanding loan balance divided by the appraised value of the
    underlying collateral based on appraisals we obtained when the loan was
    originated or purchased.

(2) All of our loans are at fixed rates.

(3) Five of these loans, in the aggregate amount of $8.7 million at March 31,
    2001, are cash flow loans or participations in cash flow loans. A cash flow
    loan, although at a stated rate of interest, must pay interest to the extent
    of all cash flow from the property underlying the loan after property
    operating expenses. Our cash flow loans are loans in default under the
    original loan terms that we acquired at a discount and are subject to
    forbearance agreements.

(4) Five of these loans, in the aggregate amount of $5.4 million at March 31,
    2001, including four cash flow loans, in the aggregate amount of $3.4
    million at March 31, 2001, have appreciation interests.

(5) Includes $44.6 million of senior financing. Eleven of these loans, in the
    aggregate amount of $31.8 million at March 31, 2001, are with recourse only
    to the properties securing the loans. Three loans, in the aggregate amount
    of $8.7 million at March 31, 2001, are cash flow loans and are subject to
    forbearance agreements. Nine loans, in the aggregate amount of $69.3 million
    at March 31, 2001, including three cash flow loans, in the aggregate amount
    of $8.7 million at March 31, 2001, have appreciation interests.



                                                                 Page 5 of _____
<PAGE>

(6) Includes $13.0 million of senior financing. Two of these loans, in the
    aggregate amount of $17.5 million at March 31, 2001, have appreciation
    interests. Two of these loans, in the aggregate amount of $15.7 million at
    March 31, 2001, are secured by guarantees from the principals of the
    borrower.

(7) Includes loan fees charged.

Acquisition of Property Interests

         We also acquire real property either directly, or indirectly through
ownership of an interest in an entity that itself owns a real property. We
believe that acquiring property interests is advantageous for three reasons.
First, it gives us flexibility in addressing the financial needs and tax
situations of borrowers in situations where debt financing may not be
appropriate. Second, it provides us with the opportunity to participate in
capital appreciation in addition to current income. Third, it assists us in our
tax planning, as we discuss in the prospectus section "Federal Income Tax
Consequences of Our Status as a REIT."

         We currently own the following property interests:

              o   500-unit apartment building in Philadelphia, Pennsylvania with
                  an acquisition cost of $19.5 million. After acquisition, we
                  obtained non-recourse financing of $15.0 million ($14.89
                  million at March 31, 2001), which bears interest at 7.73% and
                  is due on December 1, 2009, and of $2.3 million ($2.3 million
                  at March 31, 2001), which bears interest at 7.17% and is due
                  March 2, 2012.

              o   25% preferred interest in a limited liability company that
                  owns a 168-unit apartment complex in Baltimore, Maryland. We
                  originally acquired 100% of the limited liability company for
                  $4.4 million. We subsequently sold a 75% interest in the
                  limited liability company to a third party. The property is
                  subject to $3.9 million of non-recourse financing ($3.8
                  million at March 31, 2001), which bears interest at 7.88% and
                  is due on November 1, 2001.

              o   89% partnership interest in a partnership that owns a building
                  in Philadelphia, Pennsylvania with 456,000 square feet of
                  retail/office space. We acquired our interest for $750,000.
                  The property is subject to non-recourse financing of $42.9
                  million at March 31, 2001 that bears interest at 6.85% and is
                  due on August 1, 2008.

              o   Building in Rohrerstown, Pennsylvania with 12,630 square feet
                  on 2.93 acres used as a diagnostic imaging center. We acquired
                  the property for $1.7 million. After acquisition, we obtained
                  non-recourse financing of $1.1 million ($1.1 million at March
                  31, 2001), which bears interest at 7.33% and is due on August
                  1, 2008.

              o   51% preferred interest in a limited liability company that
                  owns a building in Philadelphia, Pennsylvania with 88
                  apartment units and 56,000 square feet of commercial space. We
                  acquired our interest for $5.6 million. The property is
                  subject to financing of $11.6 million ($11.7 million at March
                  31, 2001), which bears interest at 8.367&% and is due on March
                  11, 2028.

                                                                 Page 6 of _____

<PAGE>
                                  RISK FACTORS

                                     General

         Transactions with our affiliates may result in conflicts of interest.
We have relationships with Resource America, Inc., Brandywine Construction &
Management, Inc. and The Bancorp.com, Inc., which may give rise to conflicts of
interest. Resource America sponsored our formation and currently owns 10.85% of
our outstanding common shares. We have in the past purchased investments from
and sold investments to Resource America and we anticipate that we will do so in
the future, subject to a limitation contained in our declaration of trust. Our
company and Resource America also own various interests in the same assets.

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

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

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

                            Investment Activity Risks

Financing Considerations

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

         Our loans typically provide payment structures other than equal
periodic payments that retire a loan over its specified term, including
structures that defer payment of some portion of accruing interest, or defer
repayment of principal, until loan maturity. Where a borrower must pay a loan
balance in a large lump sum payment, its ability to satisfy this obligation may
depend upon its ability to obtain suitable refinancing or otherwise to raise a
substantial cash amount, which we do not control and which may be subject to the
same considerations we describe elsewhere in this "Risk Factors - Investment
Activity Risks" section. In addition, mortgage lenders can lose their lien


                                                                 Page 7 of _____
<PAGE>

priority in many jurisdictions, including those in which our existing loans are
located, to persons who supply labor and materials to a property. For these and
other reasons, the total amount that we may recover from one of our loans may be
less than the total amount of a loan or our cost of acquisition.

         Longer term, subordinate and non-conforming loans are illiquid and
their value may decrease. Our loans generally have maturities between four and
ten years and typically do not conform to standard loan underwriting criteria.
Many of our loans are subordinate loans. As a result, our loans are relatively
illiquid investments. We may be unable to vary our portfolio promptly in
response to changing economic, financial and investment conditions. As a result,
the fair market value of our portfolio may decrease in the future.

         Investment in subordinate loans may involve increased risk of loss. We
emphasize junior lien loans and other forms of subordinated financing, including
wraparound loans. As of March 31, 2001, 18 of our loans, constituting 74.8% of
our loans by book value, were junior lien loans. Because of their subordinate
position, junior lien loans carry a greater credit risk than senior lien
financing, including a substantially greater risk of non-payment of interest or
principal. Where, as part of a financing structure, we take an equity or other
unsecured position, our risk of loss may be materially increased. A decline in
the real estate market could adversely affect the value of the property so that
the aggregate outstanding balances of senior liens may exceed the value of the
underlying property. In the event of a default on a senior loan, we may elect to
make payments, if we have the right to do so, in order to prevent foreclosure on
the senior loans. In the event of foreclosure, we will be entitled to share in
the proceeds only after satisfaction of the amounts due to senior lienors, which
may result in our being unable to recover the full amount, or, indeed, any of
our investment. It is also possible that in some cases, a "due on sale" clause
included in a senior mortgage, which accelerates the amount due under the senior
mortgage in case of the sale of the property, may apply to the sale of the
property if we foreclose, increasing our risk of loss.

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

         As of March 31, 2001, 13 of our loans, constituting 26.4% of our loans
by book value, were not collateralized by recorded or perfected liens, although
five of those loans, constituting 8.4% of our loans by book value, are secured
by deeds-in-lieu of foreclosure, also known as "pocket deeds." A deed-in-lieu of
foreclosure is a deed executed in blank that the holder is entitled to record
immediately upon a default in the loan. Seven of these loans, constituting 18.0%
of our loans by book value are secured by pledges of equity interests in the
borrowers. These 13 loans are subordinate not only to existing liens encumbering
the underlying property, but also to future judgment or other liens that may
arise. Furthermore, in a bankruptcy, we will have materially fewer rights than
secured creditors and our rights 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 and more complex legal process than
enforcement of a mortgage loan.

         Investment in non-conforming loans may involve increased risk of loss.
Loans we acquire generally do not conform to conventional loan criteria due to


                                                                 Page 8 of _____
<PAGE>

past defaults by borrowers. These defaults typically result from lack of a
strong operating history for the properties underlying the loans, the borrower's
historical credit problems, the properties' underlying cash flow problems or
other factors. As a result, our loans may have a higher risk of default and loss
than conventional loans. Any loss we incur may reduce distributions to
shareholders or adversely affect the value of our shares.

         Discounted loans may have high rates of default. We acquire loans at a
discount from both the outstanding balances of the loans and the appraised value
of the properties underlying the loans. Typically, discounted loans are in
default under the original loan terms or other requirements and subject to
forbearance agreements. A forbearance agreement typically requires a borrower to
pay to the lender all revenue from a property after payment of the property's
operating expenses in return for the lender's agreement to withhold exercising
its rights under the loan documents. As of March 31, 2001, eight of our loans,
constituting 12.7% of our loans by book value, had been acquired at a discount
to both their outstanding balances and the appraised values of the underlying
properties. Each of these loans is in default under its original loan terms but
is current under the related forbearance agreement. Acquiring loans at a
discount involves a substantially higher degree of risk of non-collection than
loans that conform to institutional underwriting criteria. We do not acquire a
loan unless material steps have been taken toward resolving problems with the
loan, or its underlying property. However, previously existing problems may
recur or other problems may arise.

         Financing with high loan-to-value ratios may involve increased risk of
loss. We anticipate that many of our loans will have loan-to-value ratios in
excess of 80%. 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. As of March 31, 2001, 19 of our loans,
constituting 62.6% of our loans by book value, had loan-to-value ratios in
excess of 80%. By reducing the margin available to cover fluctuations in
property value, a high loan-to-value ratio increases the risk that, upon
default, the amount obtainable from sale of the underlying property may be
insufficient to repay the financing.

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

         Lack of geographic diversification exposes our investments to a higher
risk of loss from regional economic factors. We emphasize financing properties
located in the Philadelphia, Pennsylvania metropolitan area and the
Baltimore/Washington corridor. While we have no specific geographic limitations
on where we may invest, we anticipate that our loans will continue to be


                                                                 Page 9 of _____
<PAGE>

concentrated in the Philadelphia region and the Baltimore/Washington corridor
for the foreseeable future. This lack of geographic diversification may make our
loan portfolio more sensitive to economic developments of a primarily regional
nature, which may result in reduced rates of return or higher rates of default
than might be incurred with a more geographically diverse investment portfolio.

         We may not obtain appreciation interests at the rate we seek, or at
all; we may not benefit from appreciation interests we do obtain. In addition to
an agreed upon interest rate, we seek to obtain appreciation interests from our
borrowers. Appreciation interests require a borrower to pay us additional
amounts based upon a property's increase in value, revenues or both. While we
seek appreciation interests at rates of at least 25%, we may not be able to
obtain these rates. Moreover, we may not be able to negotiate appreciation
interest provisions in any of our loans. In addition, while we 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. Of the 28 loans in our portfolio as of March 31, 2001, 16
have appreciation interests, constituting 67.2% of our loans by book value.
Three of these appreciation interests, with respect to loans constituting 7.3%
of our loans by book value, are less than the 25% target rate. The value of any
appreciation interest depends on the performance and value of the property
underlying the loan and, thus, is subject to real estate investment risks.
Accordingly, we may not realize any benefits from our appreciation interests. We
do not anticipate receiving significant amounts from our appreciation interests
in the early years of our loans.

         Appreciation interests may cause loss of the priority of our lien.
Because appreciation interests allow us to participate in the increase in a
property's value or revenue, courts, including a court in a bankruptcy,
arrangement or similar proceeding, may determine that we should be treated as a
partner of, or joint venturer with, the borrower. If a court makes that
determination, we could lose our lien priority in the property or lose any
benefit of our lien.

         Loans secured by interests in entities owning real property may involve
increased risk of loss. We may originate or acquire loans secured by interests
in entities that own real properties rather than by a direct security interest
in the underlying properties. These loans may be illiquid or otherwise have
features that may make it difficult for us to obtain a return of our investment
in the event of a default.

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

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


                                                                Page 10 of _____
<PAGE>


         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.

Real Property Considerations

         The value of our property interests depends on conditions beyond our
control. Although we emphasize originating or acquiring loans, we have acquired
five property interests as of March 31, 2001 and anticipate that we will acquire
more in the future. Real property investments are subject to varying degrees of
risk. Yields from our real properties depend on their net income and capital
appreciation. Income from, and appreciation of, our properties may be adversely
affected by general and local economic conditions, neighborhood values,
competitive overbuilding, weather, casualty losses and other factors beyond our
control. The value of real properties may also be affected by factors such as
the cost of compliance with regulations and liability under applicable
environmental laws, changes in interest rates and the availability of financing.
Income from a property will be adversely affected if a significant number of
tenants are unable to pay rent or if available space cannot be rented on
favorable terms. Operating and other expenses of our properties, particularly
significant expenses such as mortgage payments, real estate taxes and
maintenance costs, generally do not decrease when income decreases and, even if
revenues increase, operating and other expenses may increase faster than
revenues.

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

         Uninsured and underinsured losses may affect the value of, or return
from, our property interests. Our properties, and the properties underlying our
loans, have comprehensive insurance in amounts we believe sufficient to permit
the replacement of the properties in the event of a total loss, subject to
applicable deductibles. There are, however, certain types of losses, such as
earthquakes, floods and hurricanes that may be uninsurable or not economically
insurable. Also, inflation, changes in building codes and ordinances,
environmental considerations, and other factors might make it impractical to use
insurance proceeds to replace a damaged or destroyed property. If any of


                                                                Page 11 of _____
<PAGE>

these or similar events occurs, it may reduce our return from an affected
property and the value of our investment.

         We may have less control of our investment when we invest in joint
ventures, partnerships or similar real property interests. Our acquisition of
equity interests in entities which own real property provides risks not present
in real property loans or direct property ownership. For example, the other
equity owners in the entity holding the property might have economic or business
interests or goals which are inconsistent with our business interests or goals
and may be in a position to take action contrary to our instructions or to our
policies and objectives. Moreover, if we are a limited partner in a limited
partnership and have rights allowing us control over the partnership or its
property, we may be deemed to be a general partner and liable for the debts of
the partnership beyond the amount of our investment.

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

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

Other Investment Activity Considerations

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


                                                                Page 12 of _____
<PAGE>

         Lack of diversification in investments increases our dependence on
individual investments. Although we generally invest between $2.0 million and
$30.0 million in a loan or property interest, our declaration of trust does not
limit the size of our investments. If we acquire larger loans or property
interests, our portfolio will be concentrated in a smaller number of assets,
increasing the risk of loss to shareholders if a default or other problem
arises.

                               Legal and Tax Risks

         We will be taxed as a regular corporation if we fail to maintain our
REIT status. We have operated and intend to continue to operate in a manner that
permits us to qualify as a real estate investment trust, or REIT, for federal
income tax purposes. However, the federal income tax laws governing REITs are
complex, and we have not obtained a ruling from the Internal Revenue Service
about our status as a REIT. We have received an opinion of counsel that we
qualify as a REIT based on our current operations and on certain assumptions and
representations concerning future operations. Opinions of counsel are not
binding on the Internal Revenue Service or any court. The opinion only
represents the view of counsel based on counsel's review and analysis of
existing law. Furthermore, our continued qualification as a REIT will depend on
our satisfaction of the asset, income, organizational, distribution and
shareholder ownership requirements of the Internal Revenue Code on a continuing
basis.

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

         "Phantom Income" may require us to borrow or sell assets to meet REIT
distribution requirements. We must distribute at least 90% of our annual net
taxable income, excluding any net capital gain or retained capital gain, in
order to maintain our REIT status. For years before 2001, we were required to
distribute 95% of this income. In addition, we will be subject to a 4%
nondeductible excise tax on the amount, if any, by which our distributions in
any calendar year are less than the sum of:

              o   85% of our ordinary income for that year,

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

              o   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


                                                                Page 13 of _____
<PAGE>

expenditures of cash, such as depreciation on owned real estate. The three
principal ways in which this "phantom income" may arise for us are:

              o   Origination or acquisition of loans, including loans with
                  appreciation interests, that may be deemed to have original
                  issue discount for federal income tax purposes. Original issue
                  discount is generally equal to the difference between an
                  obligation's issue price and its stated redemption price at
                  maturity. We must recognize as income in each year the portion
                  of the original issue discount that accrues during that year,
                  even though we do not receive cash in that year in the amount
                  of the original issue discount. As of March 31, 2001, two of
                  our loans, constituting 23.6% of our loans by book value, were
                  originated or acquired with original issue discount.

              o   Accruing interest with respect to a loan at a rate greater
                  than the rate at which we receive interest. In particular,
                  this may happen where the rate at which interest is paid on a
                  loan is less than the stated rate. As of March 31, 2001, seven
                  of our loans, constituting 26.0% of our loans by book value,
                  generate this type of "phantom income."

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

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

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

         Origination fees we receive will not be REIT qualifying income. Any
origination fees we receive will not be qualifying income for purposes of the
75% or 95% gross income tests applicable to REITs, under the Internal Revenue
Code. For a description of these tests, you should read the prospectus section
"Federal Income Tax Consequences of Our Status as a REIT - Income Tests." We
typically receive initial payments, or "points," from borrowers as commitment
fees or additional interest. So long as the payment is for the use of money,
rather than for services provided by us, we believe that this income should not
be classified as non-qualifying origination fees. However, the Internal Revenue


                                                                Page 14 of _____
<PAGE>

Service may seek to reclassify this income as origination fees instead of
commitment fees or interest. If we cannot satisfy 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. Thirteen
of our loans as of March 31, 2001, constituting 13.2% of our assets by book
value, are only indirectly secured by real property. We may acquire or originate
similar loans in the future. We may also originate junior loans where a senior
loan does not permit us to record a mortgage against the underlying property or
substantially restricts our rights as a junior secured lender. In these
situations, the Internal Revenue Service may conclude that interest on our loans
does not constitute interest from obligations "secured by mortgages on real
property or on interests in real property." As a result, interest from these
sources would not qualify for purposes of the 75% gross income test. For a
description of this test, you should read the prospectus section "Federal Income
Tax Consequences of our Status as a REIT - Income Tests." With respect to the 11
loans that are subject to these restrictions, because we have directly
exercisable foreclosure rights upon any default, our counsel is of the opinion
that interest income from these loans will constitute qualifying income.

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

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

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

         Our board of trustees may change our policies without shareholder
consent. Our board of trustees determines our policies and, in particular, our
investment policies. Our board of trustees may amend or revise our policies or


                                                                Page 15 of _____
<PAGE>

approve transactions that deviate from these policies without a vote of or
notice to the shareholders. Policy changes could adversely affect the market
price of our shares and our ability to make distributions. We cannot change our
policy of seeking to maintain REIT qualification without the approval of the
holders of two-thirds of the outstanding common 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 8.3% or, with respect to Resource
America, 15%, of our outstanding common shares and provides that:

              o   A transfer that violates the limitation is void.

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

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

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

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

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 real estate investment trust, we are subject to
various provisions of Maryland law which impose restrictions and require that
specified procedures be followed with respect to 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 these provisions, our board of trustees has the right to rescind
the election at any time without notice to the shareholders.





                                                                Page 16 of _____
<PAGE>

                  DESCRIPTION OF SHARES OF BENEFICIAL INTEREST

General

         Under our declaration of trust we may issue up to 200,000,000 common
shares and 25,000,000 preferred shares. At August 2, 2001, we had outstanding
12,419,684 common shares and no preferred shares. In addition, we have reserved
800,000 common shares for issuance under our employee stock option plan and
141,667 common shares for issuance on the exercise of warrants.

Common Shares

         Subject to the preferential rights of any preferred shares outstanding,
the ownership limitations described in "Restrictions on Ownership and Transfer,"
below, and the right of our board of trustees to establish separate classes of
common shares and determine their rights and preferences, our common shares have
the following characteristics:

          o  each common share entitles the holder to one vote on matters voted
             on by common shareholders,

          o  the common shares do not have cumulative voting rights,

          o  distributions are payable as and when authorized by the board of
             trustees,

          o  holders of common shares generally are not liable for our debts,

          o  if we are liquidated, each common share participates pro
             rata in our assets that remain after payment, or provision
             for payment, of our debts and payment of the liquidation
             preferences of any preferred shares, and

          o  the common shares do not have conversion, exchange, sinking fund,
             redemption, appraisal or preemptive rights, and

          o  each common shares has a par value of $.01 per share.

         Our board of trustees may establish separate classes of common shares
and determine their rights and preferences; however, the board of trustees has
no present plans to do so. The common shares are listed on the American Stock
Exchange under the symbol "RAS." The transfer agent for the common shares is the
American Stock Transfer & Trust Company.




                                                                Page 17 of _____


<PAGE>

Preferred Shares

         The following description of the terms of our preferred shares sets
forth certain general terms and provisions of our authorized preferred shares.
If we offer preferred shares, the specific designation and rights will be
described in a supplement to the prospectus relating to the offering of such
preferred shares.

         Our board of trustees can, without approval of shareholders, issue one
or more series of preferred shares. The board can also determine the number of
shares of each series and the rights, preferences, conversion or other rights,
voting powers, restrictions, limitation as to distribution, redemption
provisions and other terms or conditions as the board to trustees may approve.
As a result, without shareholder approval, the board of trustees may issue
preferred shares with rights senior to those of the common shares.

Restrictions on Ownership and Transfer

         To qualify as a REIT under the Internal Revenue Code, we must meet
several requirements regarding the number of our shareholders and concentration
of ownership of our shares. These requirements are described at "Federal Income
Tax Consequences of Our Status as a REIT - Requirements for Qualification." Our
declaration of trust contains provisions that restrict the ownership and
transfer of our shares to assist us in complying with these Internal Revenue
Code requirements. We refer to these restrictions as the "ownership limitation."

         The ownership limitation provides that, in general:

               o  no person may own more than 8.3% of our outstanding common
                  shares, and

               o  no person may own more than 9.8% of our outstanding preferred
                  shares.

However, Resource America, which was our sponsor at the time of our formation,
may own up to 15% of our common shares. It owned 10.55% of August 2, 2001.

         Ownership of our shares is subject to attribution rules under the
Internal Revenue Code, which may result in a person being deemed to own shares
held by other persons. The board of trustees may waive the ownership limitation
if it determines that the waiver will not jeopardize our status as a REIT. As a
condition of such a waiver, the board of trustees may require an opinion of
counsel satisfactory to it or undertakings or representations from the applicant
with respect to preserving our REIT status. We required no such waiver with
respect to Resource America's ownership rights, which are established as part of
our declaration of trust.

         Any person, including Resource America, who acquires shares in
violation of the ownership limitation must notify us immediately and provide us
with any information we may request in order to determine the effect of the




                                                                Page 18 of _____
<PAGE>

acquisition on our status as a REIT. The ownership limitation will not apply if
the board of trustees determines that it is no longer in our best interest to
qualify as a REIT. Otherwise, the ownership limitation may be changed only by an
amendment to our declaration of trust by a vote of two-thirds of our outstanding
voting shares.

         Our declaration of trust provides that if any purported transfer of
shares results in

                o   any person violating the ownership limitation,

                o   our being "closely held,"

                o   our shares being owned by fewer than 100 persons, or

                o   our owning 10% or more of a tenant of our real property

the transfer will be of no force or effect as to the excess number of shares and
the purported transferee or owner will cease to own any right or interest in the
excess shares.

         Shares exceeding the ownership limitation will transfer automatically,
by operation of law, to a trust, the beneficiary of which will be a qualified
charitable organization selected by us. The trustee of the trust will be
designated by us and must be unaffiliated with us and the prohibited transferee.
The trustee must sell the excess shares to a qualified person and distribute the
sales proceeds to the prohibited transferee. Where excess shares result from an
event other than a transfer, or from a transfer for no consideration, such as a
gift, the trustee will sell the excess shares to a qualified person and
distribute to the prohibited owner an amount equal to the lesser of the market
price of the excess shares on the date they become excess shares or the sales
proceeds received by the trust for the excess shares, and can exercise all
voting rights with respect to the excess shares.

         In addition, we may purchase any common shares held in the trust for
the lesser of:

                o   the price per share in the transaction that resulted in the
                    transfer to the trust or, in the case of a gift, the market
                    price at the time of the gift, or

                o   the market price on the date we agree to purchase the
                    shares.

We may purchase the shares at any time before the trustee has sold the shares.
The net sale proceeds will be paid to the prohibited transferee.

         All share certificates bear a legend referring to the restrictions
described above.

         Every owner of more than 5%, (or any lower percentage set by federal
income tax laws) of outstanding common shares must file a completed
questionnaire with us containing information regarding his or her ownership. In
addition, each shareholder must, upon demand, disclose in writing any
information we may request in order to determine the effect, if any, of such
shareholder's actual and constructive ownership of common shares on our status
as a REIT and to ensure compliance with the ownership limitation.




                                                                Page 19 of _____

<PAGE>


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

Board of Trustees

         The declaration of trust requires that we have no fewer than three or
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

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

              o   been one of our officers, or

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

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

         Our declaration of trust provides that a trustee may be removed by a
two-thirds vote of our outstanding voting shares. This provision, when coupled
with the provision authorizing the board of trustees to fill vacant
trusteeships, precludes shareholders, as a practical matter, from removing
incumbent trustees and filling the vacancies created by such removal with their
own nominees.

                                                                Page 20 of _____
<PAGE>

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

              o   80% of our outstanding voting shares, and

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

unless, among other conditions, the shareholders receive a minimum price, as
defined by Maryland law, for their shares and the consideration is received in
cash or in the same form as previously paid by the interested shareholder for
its shares.

         These provisions do not apply, however, to business combinations that
are approved or exempted by the board of trustees prior to the time that the
interested shareholder becomes an interested shareholder.

Control Share Acquisitions

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

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

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

              o   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.

                                                                Page 21 of _____
<PAGE>

         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 status.

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

Amendment of Our Declaration of Trust and Bylaws

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

Meetings of Shareholders

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

Advance Notice of Nominations of Trustees and New Business

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

                                                                Page 22 of _____
<PAGE>

Dissolution

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

Indemnification; Limitation of Trustees' and Officers' Liability

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

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

              o   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. Our bylaws
require us to indemnify each trustee or officer who has been successful, on the
merits or otherwise, in the defense of any proceeding to which he is made a
party by reason of his service in the foregoing capacities.

         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

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

                  o   was committed in bad faith or

                  o   was the result of active and deliberate dishonesty; or

              o   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

              o   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

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

                                                                Page 23 of _____
<PAGE>

Indemnification Agreements

         We have indemnification agreements with each of our officers and
trustees. The indemnification agreements require us to indemnify our 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 officers and trustees seeking to enforce
their rights under the indemnification agreements and may cover 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 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.

                       FEDERAL INCOME TAX CONSEQUENCES OF
                              OUR STATUS AS A REIT

         This section summarizes the federal income tax issues that you, as a
shareholder, 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 the
tax issues that may be important to certain types of shareholders that are
subject to special treatment under the federal income tax laws, such as
insurance companies, tax-exempt organizations, financial institutions or
broker-dealers, and non-U.S. individuals and foreign corporations.

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

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

                                                                Page 24 of _____
<PAGE>
Taxation

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

         Our qualifications 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:

              o   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.

              o   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.

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

                  o   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

                  o   other non-qualifying income from foreclosure property.

              o   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.

              o   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:

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


                                                                Page 25 of _____
<PAGE>

                  o   a fraction intended to reflect our profitability.

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

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

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

                  o   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.

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

              o   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:

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

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

         The rules described in this paragraph will apply assuming that we make
an election under the Treasury regulations.

Requirements for Qualification

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

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

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

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

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

                                                                Page 26 of _____
<PAGE>

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

              o   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.

              o   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.

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

              o   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 requirement 5 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
requirement 6, we will be deemed to have satisfied requirement 6 for that
taxable year. For purposes of determining share ownership under requirement 6,
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 requirement 6.

         We have issued sufficient common shares with sufficient diversity of
ownership to satisfy requirements 5 and 6. In addition, our declaration of trust
restricts the ownership and transfer of our common shares so that we should
continue to satisfy requirements 5 and 6. The provisions of our declaration of
trust restricting the ownership and transfer of common shares are described in
"Description of Shares of Beneficial Interest --Restrictions on Ownership and
Transfer."

         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 subsidiaries, RAIT General and RAIT Limited
and we own all of their capital stock. RAIT General, RAIT Limited and RAIT
Partnership also own all of the capital stock in [eight] other corporations
involved in the ownership of certain of our portfolio assets. Thus, RAIT
General, RAIT Limited and the other [eight] subsidiaries will be ignored as
separate entities, and all of their assets, liabilities, and items of income,


                                                                Page 27 of _____
<PAGE>

deduction, and credit will be treated as our assets, liabilities and items of
income, deduction and credit.

         An unincorporated entity, such as a partnership that has a single
owner, is not treated as an entity separate from its parent. We own all of RAIT
General and RAIT Limited, which, in turn, own all of RAIT Partnership, the
entity that holds all of our investment assets. Thus, RAIT Partnership will not
be treated as an entity separate from us for so long as its only partners are
RAIT General and RAIT Limited, and we own all of their capital stock.

         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 of us for purposes of applying the various REIT qualification
requirements.

         Tax legislation enacted in 1999 allows a REIT to own up to 100% of the
stock of a "taxable REIT subsidiary," or TRS, beginning on January 1, 2001. A
TRS may earn income that would not be qualifying income if earned directly by
the parent REIT. Both the subsidiary and the REIT must jointly elect to treat
the subsidiary as a TRS. A TRS will pay income tax at regular corporate rates on
any income that it earns. In addition, the new rules limit the deductibility of
interest paid or accrued by a TRS to its parent REIT to assure that the TRS is
subject to an appropriate level of corporate taxation. Further, the rules impose
a 100% excise tax on transactions between a TRS and its parent REIT or the
REIT's tenants that are not conducted on an arm's-length basis. We do not
currently have any TRSs, but may form one or more TRSs in the future.

Income Tests

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

              o   rents from real property,

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

              o   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


                                                                Page 28 of _____
<PAGE>

disposition of stock or securities, income from certain interest rate hedging
contracts, or any combination of the foregoing. Gross income from any
origination fees we obtain or from our sale of property that we hold primarily
for sale to customers in the ordinary course of business is excluded from both
income tests. The following paragraphs discuss the specific application of the
gross income tests to us.

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

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

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

         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. As of March 31, 2001 five loans are collateralized with
deeds-in-lieu of foreclosure and seven are secured by pledges of equity
interests. 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. Since the amount of income from these
loans is relatively small, less than 16.0% of gross income, we believe that
compliance with the 75% test will be unaffected.

                                                                Page 29 of _____
<PAGE>

         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. As of March 31, 2001, 16 of our loans had such features. 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:

              o   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;

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

              o   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.

                                                                Page 30 of _____
<PAGE>

         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:

              o   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;

              o   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

              o   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:

              o   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.

              o   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.

              o   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. Pursuant to legislation effective January 1,
                  2001, the allocation of rent between real and personal
                  property is based on the relative fair market values of the
                  real and personal property.

                                                                Page 31 of _____
<PAGE>

              o   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, as
                  of January 1, 2001, we may own up to 100% of the stock of a
                  TRS. 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:

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

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

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

         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:

              o   cash or cash items, including certain receivables;

              o   government securities;

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

              o   interests in mortgages on real property;

                                                                Page 32 of _____
<PAGE>

              o   stock in other REITs; and

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

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

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

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

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

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

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

         If the fair market value of the real property securing a mortgage loan
equals or exceeds the outstanding principal balance of the loan, the loan will
be a qualifying asset. However, if the outstanding principal balance of a
mortgage loan exceeds the fair market value of the real property securing the
loan, the excess amount may not be a qualifying asset, although the matter is
not free from doubt. An "interest" in real property also generally includes an
interest in mortgage loans secured by controlling equity interests in
partnerships 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. In addition, we have purchased and originated
loans that are only indirectly secured by real estate, and we may continue to do
so in the future. With respect to 13 of our loans as of March 31, 2001 that are
only indirectly secured by real estate, five are collateralized with
deeds-in-lieu of foreclosure. Counsel is of the opinion that these loans qualify
as real estate assets for the purposes of the 75% asset test. We cannot assure
you that the Internal Revenue Service will not challenge that position.

         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


                                                                Page 33 of _____
<PAGE>

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:

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

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

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

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

Distribution Requirements

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

              o   the sum of

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

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

              o   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.

                                                                Page 34 of _____
<PAGE>

         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:

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

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

              o   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:

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

              o   the inclusion of that income and deduction of such 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.

                                                                Page 35 of _____
<PAGE>

         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. A U.S. shareholder will not
qualify for the dividends received deduction generally available to
corporations. The term "U.S. shareholder" means a holder of preferred or common
shares that for United States federal income tax purposes is:

              o   a citizen or resident of the United States;

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

              o   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

              o   any trust with respect to which

                                                                Page 36 of _____
<PAGE>

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

                  o   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 preferred or common shares.
Instead, such distribution will reduce the adjusted basis of such preferred or
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 preferred or common shares as long-term capital
gain, or short-term capital gain if the preferred or common shares have been
held for one year or less, assuming the preferred or 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 preferred or
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 preferred or 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 its 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


                                                                Page 37 of _____
<PAGE>

distributions that economically represent a return of capital, rather than a
dividend. These distributions would be offset in later years by distributions
representing economic income that would be treated as returns of capital for
federal income tax purposes. Taking into account the time value of money, this
acceleration of federal income tax liabilities may reduce a shareholder's
after-tax return on his or her investment in us to an amount less than the
after-tax return on an investment with an identical before-tax rate of return
that did not generate phantom income. For example, if an investor with a 30% tax
rate purchases a taxable bond with an annual interest rate of 10% on its face
value, the investor's before-tax return on the investment would be 10% and the
investor's after-tax return would be 7%. However, if the same investor purchased
our shares at a time when the before-tax rate of return was 10%, the investor's
after-tax rate of return on the shares might be somewhat less than 7% as a
result of our phantom income. In general, as the ratio of our phantom income to
its 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 Common 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
preferred or common shares as long-term capital gain or loss if the U.S.
shareholder has held the preferred or common shares for more than one year.
However, a U.S. shareholder must treat any loss upon a sale or exchange of
preferred or 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 preferred or common shares may be disallowed if the
U.S. shareholder purchases other preferred or common shares within 30 days
before or after the disposition.

Capital Gains and Losses

         The tax rate differential between capital gain and ordinary income for
non-corporate taxpayers may be significant. A taxpayer generally must hold a
capital asset for more than one year for gain or loss derived from its sale or
exchange to be treated as long-term capital gain or loss. Under the Economic
Growth and Tax Relief Reconciliation Act of 2001, the maximum marginal
individual income tax rate of 39.6% for ordinary income reduces to 38.6% for the
period from July 1, 2001 to the end of 2001, resulting in an effective maximum
rate of 39.1% for all of 2001. The 2001 Act reduces the maximum rate for
ordinary income to 38.6% for all of 2002 and 2003, to 37.6% for 2004 and 2005,
and to 35% for 2006 to 2011. The maximum tax rate on long-term capital gain
applicable to non-corporate taxpayers, which was not affected by the 2001 Act,
is 20% for sales and exchanges of assets held for more than one year. The
maximum tax rate on long-term capital gain from the sale or exchange of "section
1250 property," or depreciable real property, is 25% to the extent that such
gain would have been treated as ordinary income if the property were "section
1245 property." With respect to distributions that we designate as capital gain
dividends and any retained capital gain that we are deemed to distribute, we
generally may designate whether such a distribution is taxable to our
non-corporate shareholders at a 20% or 25% rate. In addition, the
characterization of income as capital gain or ordinary income may affect the
deductibility of capital losses. A non-corporate taxpayer may deduct capital
losses not offset by capital gains against its ordinary income only up to a
maximum annual amount of $3,000. A non-corporate taxpayer may carry forward
unused capital losses indefinitely. A corporate taxpayer must pay tax on its net
capital gain at ordinary corporate rates. A corporate taxpayer can deduct


                                                                Page 38 of _____
<PAGE>

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 31% with respect to
distributions unless the holder:

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

              o   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 common or preferred shares with
debt, a portion of the income that it receives from us would constitute
unrelated business taxable income pursuant to the "debt-financed property"
rules. Furthermore, social clubs, voluntary employee benefit associations,
supplemental unemployment benefit trusts, and qualified group legal services
plans that are exempt from taxation under special provisions of the federal
income tax laws are subject to different unrelated business taxable income
rules, which generally will require them to characterize distributions that they
receive from us as unrelated business taxable income. Finally, in certain
circumstances, a qualified employee pension or profit sharing trust that owns
more than 10% of our shares must treat a percentage of the dividends that it
receives from us as unrelated business taxable income. Such percentage is equal
to the gross income we derive from an unrelated trade or business, determined as
if we were a pension trust, divided by our total gross income for the year in
which we pay the dividends. That rule applies to a pension trust holding more
than 10% of our shares only if:

                                                                Page 39 of _____
<PAGE>

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

              o   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

              o   either

                  o   one pension trust owns more than 25% of the value of our
                      shares or
                  o   a group of pension trusts individually holding more than
                      10% of the value of our shares collectively owns more than
                      50% of the value of our shares.

Taxation of Non-U.S. Shareholders

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

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

              o   the non-U.S. shareholder files an IRS Form 4224 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 preferred or common shares. Instead, such a
distribution will reduce the adjusted basis of those preferred or 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 preferred or common shares, if the non-U.S. shareholder otherwise would be
subject to tax on gain from the sale or disposition of our preferred or 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


                                                                Page 40 of _____
<PAGE>

accumulated earnings and profits, we normally will withhold tax on the entire
amount of any distribution at the same rate as we would withhold on a dividend.
However, a non-U.S. shareholder may obtain a refund of amounts that we withhold
if we later determine that a distribution in fact exceeded our current and
accumulated earnings and profits.

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

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

         A non-U.S. shareholder generally will not incur tax under FIRPTA as
long as at all times non-U.S. persons hold, directly or indirectly, less than
50% in value of our shares. We cannot assure you that this test will be met.
However, a non-U.S. shareholder that owned, actually or constructively, 5% or
less of the preferred and common shares at all times during a specified testing
period will not incur tax under FIRPTA if the preferred and 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:

              o   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

              o   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.

                                                                Page 41 of _____
<PAGE>

State and Local Taxes

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



                                                                Page 42 of _____
<PAGE>

                              SELLING SHAREHOLDERS

         The selling shareholders listed below acquired or will acquire the
shares listed in the column "Common Shares Registered under this Prospectus"
upon the exercise of options granted under the 1997 Stock Option Plan. The table
shows, as of July 18, 2001, certain information regarding the selling
shareholders' beneficial ownership of our common shares. We encourage our
officers and trustees to invest in our company through the exercise of their
options. We believe that this prospectus and the registration statement of which
it is a part, which permits resales of shares acquired by our officers and
trustees through option exercises, encourage these exercises by providing
liquidity for their investment. Accordingly, while the number of shares set
forth in the column "Common Shares Owned after the Offering" assumes that all
common shares acquired by a shareholder through exercise of his or her options
will be offered or sold, the selling shareholders are not required to sell any
shares.
<TABLE>
<CAPTION>
                                                     Common Shares        Common Shares
                              Amount and Nature     Registered under      Owned after                   Percentage of Class
   Selling Shareholder         of Shares Owned     this Prospectus(1)     the Offering        Before Offering       After Offering
   -------------------         ---------------     ------------------     ------------        ---------------       --------------
<S>                          <C>                  <C>                   <C>                   <C>                  <C>
Betsy Z. Cohen                    429,327(2)            311,526             117,801               3.2%                    *
  Chairman and Chief
  Executive Officer

Jonathan Z. Cohen                  23,063(3)             10,500              12,563                 *                     *
  Secretary and Trustee

Joel R. Mesznik                    13,500(4)             10,500               3,000                 *                     *
 Trustee

Daniel Promislo                    11,500(5)             10,500               1,000                 *                     *
  Trustee

Edward S. Brown                    10,000(6)             10,000                   0                 *                     *
  Trustee

S. Peter Albert                    17,500(7)             10,000               7,500                 *                     *
  Trustee

Scott F. Schaeffer                 83,751(8)             75,000               8,751                 *                     *
  President and Chief
  Operating Officer

Jay R. Cohen                       99,846(9)             68,117              31,729                 *                     *
  Executive Vice
  President

Ellen J. DiStefano                 63,748(10)            60,682               3,066                 *                     *
  Vice President and
   Chief Financial
   Officer
</TABLE>
-------------
* Less than 1%.






                                                                Page 43 of _____
<PAGE>

 (1) Includes both vested options and unvested options that will vest during the
     two years following the date of this prospectus held by the selling
     shareholders.

 (2) Includes 100 shares held directly by Mrs. Cohen, 2,848 shares held in our
     Cash and Deferred Savings Plan (the "401(k) Plan") for the benefit of Mrs.
     Cohen, 26,852 shares held in an individual retirement account ("IRA") for
     the benefit of Mrs. Cohen; 66,801 shares held as trustee of a charitable
     foundation, 32,659 shares held in an IRA for the benefit of Mrs. Cohen's
     spouse, Edward E. Cohen, and 311,526 shares issuable upon exercise of
     options granted under the 1997 Stock Option Plan, (of the 311,526 options,
     212,013 are vested, 9,131 will vest within 60 days and 90,382 will vest
     within two years). Excludes shares held by Resource America, Inc., of which
     Edward E. Cohen is Chairman and Chief Executive Officer.

 (3) Includes 10,500 shares issuable upon exercise of options granted under the
     1997 Stock Option Plan, (all 10,500 options are vested), 12,000 shares
     held directly by Mr. Cohen and 563 shares held in a 401(k) account for his
     benefit.

 (4) Includes 10,500 shares issuable upon exercise of options granted under the
     1997 Stock Option Plan, (all 10,500 options are vested) and 3,000 shares
     held directly by Mr. Mesznik.

 (5) Includes 10,500 shares issuable upon exercise of options granted under the
     1997 Stock Option Plan, (all 10,500 options are vested) and 1,000 shares
     held directly by Mr. Promislo.

 (6) Includes 10,000 shares issuable upon exercise of options granted under the
     1997 Stock Option Plan, (10,000 are vested).

 (7) Includes 10,000 shares issuable upon exercise of options granted under the
     1997 Stock Option Plan, (10,000 are vested) and 7,500 shares held directly
     by Mr. Albert.

 (8) Includes 75,000 shares issuable upon exercise of options granted under the
     1997 Stock Option Plan, (of the 75,000 options, 25,000 are vested, 0 will
     vest within 60 days and 50,000 will vest within two years) 7,500 shares
     held directly by Mr. Schaeffer; and 1,251 shares held in a 401(k) account
     for the benefit of Mr. Schaeffer.

 (9) Includes 68,117 shares issuable upon exercise of options granted under the
     1997 Stock Option Plan, (of the 68,117 options, 46,558 are vested, 2,029
     will vest within 60 days and 19,530 will vest within two years) 3,208
     shares held in an IRA account for the benefit of Mr. Cohen, 17,000 shares
     held jointly by Mr. Cohen and his spouse, 7,341 shares held in an IRA for
     the benefit of Mr. Cohen's spouse, and 4,180 shares held in Mr. Cohen's
     401(k) account.

(10) Includes 60,682 shares issuable upon exercise of options granted under the
     1997 Stock Option Plan, (of the 60,682 options, 39,091 are vested, 1,420
     will vest within 60 days and 20,171 will vest within two years) 2,002 held
     jointly by Mrs. DiStefano and her spouse; 1,000 shares held in an IRA for
     the benefit of Mrs. DiStefano; 1,000 shares held in an IRA for the benefit
     of Mrs. DiStefano's spouse; 2,633 shares held in a 401(k) account for the
     benefit of Mrs. DiStefano; and 64 shares held for the benefit of Mrs.
     DiStefano's minor children.

                                                                Page 44 of _____
<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 American Stock
Exchange or otherwise, in special offerings, secondary distributions pursuant to
and in accordance with applicable rules and regulations of the SEC and the
American 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 receive any of the proceeds from the sale of the common
shares offered by the selling shareholders.

                                     EXPERTS

         Grant Thornton LLP, independent certified public accountants, audited
our consolidated financial statements and related financial statement schedules
incorporated by reference in this prospectus. These documents are incorporated
by reference in this prospectus in reliance upon the report of Grant Thornton
LLP, given upon their authority as experts in accounting and auditing.

                                 LEGAL OPINIONS

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

                       WHERE YOU CAN FIND MORE INFORMATION

         We file annual, quarterly and current reports, proxy statements and
other information with the SEC. You may read and copy any reports, statements or
other information that we filed with the SEC at the SEC's Public Reference Room
at 450 Fifth Street, N.W., Washington, D.C. 20549. You may request copies of
these documents, upon payment of a copying fee, by writing to the SEC. Please
call the SEC at 1-800-SEC-0330 for information on the operation of the Public
Reference Room. Our SEC filings are also available to the public on the SEC
internet site at http://www.sec.gov.
                 -------------------
                                                                Page 45 of _____
<PAGE>

         You may also read and copy this information at the National Association
of Securities Dealers, Inc., 1735 K Street, N.W., Washington, D.C. 20006.

         The SEC allows us to "incorporate by reference" the information we file
with it, which means that we can disclose important information to you by
referring you to documents we have filed with the SEC which are not included in
this prospectus. The information incorporated by reference is considered part of
this prospectus, and later information that we file with the SEC will
automatically update and replace this information. We incorporate by reference
the documents listed below and any future filings made with the SEC under
Sections 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934:

              o   Annual Report on Form 10-K for the year ended December 31,
                  2000.

              o   Quarterly Report on Form 10-Q for the quarter ended March 31,
                  2001.

              o   Current Report on Form 8-K filed July 6, 2001.

              o   Current Report on Form 8-K filed July 19, 2001.

              o   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
                     Vice President and Chief Financial Officer
                     1818 Market Street, 28th Floor
                     Philadelphia, Pennsylvania  19103
                     (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.





                                                                Page 46 of _____
<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>
<CAPTION>

TABLE OF CONTENTS                                                                                800,000 Shares

Prospectus                                                        Page
----------                                                        ----
<S>                                                               <C>                            <C>
Our Company................................                         4
                                                                                                  COMMON SHARES
Risk Factors...............................                         7

Description of Shares of                                                                       -------------------
   Beneficial Interest.....................                        17                           RESALE PROSPECTUS
                                                                                               -------------------
Certain Provisions of  Maryland
   Law and of our Declaration of
   Trust and Bylaws........................                        20

Federal Income Tax Consequences
   of our Status as a REIT.................                        24

Selling Shareholders.......................                        43

Plan of Distribution.......................                        45                              August 13, 2001

Use of Proceeds............................                        45

Experts....................................                        45

Legal Opinions.............................                        45

Where You Can Find More
   Information.............................                        45
</TABLE>



                                                                Page 47 of _____


<PAGE>
                                     PART II

               INFORMATION REQUIRED IN THE REGISTRATION STATEMENT

Item 3. Incorporation of Documents by Reference.

         The following documents of RAIT Investment Trust (the "Registrant")
filed with the Securities and Exchange Commission (the "SEC"), are incorporated
by reference in this Registration Statement as of their respective dates:


              o   Annual Report on Form 10-K for the year ended December 31,
                  2000.

              o   Quarterly Report on Form 10-Q for the quarter ended March 31,
                  2001.

              o   Current Report on Form 8-K filed July 6, 2001.

              o   Current Report on Form 8-K filed July 19, 2001.

              o   Description of common shares contained in Form 8-A/A dated
                  January 2, 1998.

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



Item 4. Description of Securities.

         Not applicable.


Item 5. Interests of Named Experts and Counsel.

         Not applicable.

Item 6. Indemnification of Trustees and Officers.

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

                                                                Page 48 of _____
<PAGE>

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

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

Item 7. Exemption from Registration Claimed.

         Not applicable.

Item 8. Exhibits.

         The following exhibits are filed herewith:

Exhibit
  No.                                Document
-------                              --------

4        (i)*     Amended and Restated Declaration of Trust.
         (ii)**   Articles of Amendment of Amended and Restated Declaration of
                  Trust.
         (iii)*** Articles of Amendment of Amended and Restated Declaration of
                  Trust.


                                                                Page 49 of _____
<PAGE>

         (iv)*    Bylaws, as amended.
         (v)***   Form of specimen certificate representing common shares.
         (vi)     RAIT Investment Trust 1997 Stock Option Plan.

5        Opinion of Ballard Spahr Andrews & Ingersoll, LLP as to the legality
         of securities being registered (including consent).

8        Opinion of Ledgewood Law Firm, P.C., regarding tax matters (including
         consent).

23(a)    Consent of Grant Thornton LLP.

23(b)    Consent of Ballard Spahr Andrews & Ingersoll, LLP (included in Exhibit
         5).

23(c)    Consent of Ledgewood Law Firm, P.C. (included in Exhibit 8).

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

  *Incorporated herein by reference to RAIT Investment Trust's Registration
   Statement on Form S-11 (File No. 333-35077), as amended.
 **Incorporated herein by reference to RAIT Investment Trust's Registration
   Statement on Form S-11 (File No. 333-53067), as amended.
***Incorporated herein by reference to RAIT Investment Trust's Registration
   Statement on Form S-2 (File No. 333-55518), as amended.

Item 9. Undertakings.

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

         The undersigned Registrant hereby undertakes:

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

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

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

              (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


                                                                Page 50 of _____
<PAGE>

a new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.

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

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

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

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

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




                                                                Page 51 of _____
<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
August 13, 2001.

                                  RAIT INVESTMENT TRUST


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


                                POWER OF ATTORNEY

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



                                                                Page 52 of _____
<PAGE>


                                   SIGNATURES

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


/s/ Betsy Z. Cohen                                 Date: August 13, 2001
--------------------------------------
BETSY Z., COHEN, Chairman, Chief
Executive Officer and Trustee


/s/ Scott F. Schaeffer                             Date: August 13, 2001
--------------------------------------
SCOTT F. SCHAEFFER, President and
Chief Operating Officer


/s/ Ellen J. DiStefano                             Date: August 13, 2001
--------------------------------------
ELLEN J. DISTEFANO, Vice President,
Chief Financial Officer and Assistant
Secretary


/s/ Jonathan Z. Cohen                              Date: August 13, 2001
--------------------------------------
JONATHAN Z. COHEN, Secretary and
Trustee


/s/ Joel R. Mesznik                                Date: August 13, 2001
--------------------------------------
JOEL R. MESZNIK, Trustee


/s/ Daniel Promislo                                Date: August 13, 2001
--------------------------------------
DANIEL PROMISLO, Trustee


/s/  S. Peter Albert                               Date: August 13, 2001
--------------------------------------
S. PETER ALBERT, Trustee


/s/  Edward Brown                                  Date: August 13, 2001
-------------------------------------
EDWARD BROWN, Trustee


                                                                Page 53 of _____
[{"type": "S-8", "sequence": "1", "filename": "s-8.txt", "secsgml_size_bytes": 168298}]
{"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": "333-67452", "film-number": "1708750"}, "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 August 13, 2001.
                                                           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)

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

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

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

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

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

                                    Copy to:
                           J. Baur Whittlesey, Esquire
                            Ledgewood Law Firm, P.C.
                        1521 Locust Street - Eighth Floor
                             Philadelphia, PA 19102
                                 (215) 735-0663
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                unit(1)                price(1)             fee
---------------------------------------------------------------------------------------------------------------
Common shares,
par value
$.01 per
share                       800,000 shares           $16.20                 $12,960,000          $3,240(2)
Page 1 of _____
(1) 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 American Stock Exchange on August 7, 2001.

(2) Pursuant to Rule 457(p) under the Securities Act, the full amount of such
    registration fee is offset by $3,240 of the filing fee previously paid in
    connection with the filing of a registration statement on Form S-11,
    registration statement no. 333-35077, initially filed September 8, 1997.

                                     PART I

                INFORMATION REQUIRED IN SECTION 10(a) PROSPECTUS

Item 1. Plan Information.

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

Item 2. Registrant Information and Employee Plan Annual Information.

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

                                                                 Page 2 of _____
RESALE PROSPECTUS

                              RAIT INVESTMENT TRUST

               UP TO 800,000 COMMON SHARES OF BENEFICIAL INTEREST
         (including 566,798 common shares to be sold for the account of
                             selling shareholders)

         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 options, and the common
shares of beneficial interest issuable upon exercise of those options, granted
to our employees and trustees under our 1997 Stock Option Plan.

         Our officers and trustees, who are listed on page 43 below as "selling
shareholders," acquired or will acquire the shares to be offered by exercising
stock options granted to them under the 1997 Stock Option Plan. We encourage our
officers and trustees to invest in our company through the exercise of their
options. We believe that this prospectus and the registration statement of
which it is a part, which permits resales of shares acquired by our officers and
trustees through option exercises, encourage these exercises by providing
liquidity for their investment. Accordingly, while the selling shareholders may
sell up to the number of common shares listed in the "Shares to be Sold" column
opposite their names at any time or from time to time until the termination of
this offering, they are not required to sell any shares.

         Our common shares are listed for trading on the American 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 1818 Market Street, Philadelphia, Pennsylvania 19103.
Our telephone number is (215) 861-7900.

         You should read the section entitled "Risk Factors" beginning on page 2
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 August 13, 2001

                                                                 Page 3 of _____
OUR COMPANY

General

         We are 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 have three principal business activities:

              o   we make mortgage loans directly to borrowers,

              o   we acquire mortgage loans from others, and

              o   we acquire real properties or interests in real properties.

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

Direct Lending

         We make real estate loans directly to borrowers whose financing needs
do not conform to the criteria of institutional lenders and lenders that
securitize loans. We attempt to adapt the terms of our direct loans to meet the
particular needs of a borrower. We emphasize junior lien or other forms of
subordinated, or "mezzanine," financing, including wraparound financing, with
principal amounts generally between $2.0 million and $30.0 million. We also
provide short-term bridge financing. This financing may be in excess of our
targeted size range where the borrower has a committed source of take-out
financing, or we believe that it can arrange take-out financing, to reduce our
investment to an amount within our targeted size range.

         We seek to include "appreciation interest" provisions in our loans.
These provisions require a borrower to pay us a percentage of any increase in
the value of a property underlying one of our loans over the value of the
property at the time the loan is made or over a value agreed upon by us and the
borrower. Alternatively, these provisions may require payment of a percentage of
the increase in a property's revenues over a stated revenue level, usually the
level at the time the loan is made. The measurement period for an appreciation
interest typically ends at loan repayment. We generally seek an appreciation
interest of at least 25%, and may seek to obtain both types of appreciation
interest in appropriate circumstances.

Loan Acquisition

         We also acquire existing real property loans held by banks, other
institutional lenders or third-party investors. We focus on loans that, because
of one or more past defaults under the original loan terms due to lack of a
strong operating history for the underlying properties, the borrowers'
historical credit problems, cash flow problems at the underlying properties or

                                                                 Page 4 of _____
other factors, we can acquire at a discount to their outstanding balances and
the appraised value of their underlying properties. We will not acquire any
loan, however, unless the prior loan holder, property owner or some other person
has taken material steps to resolve the problems relating to the loan and its
underlying property, and where completion of the resolution process will not
involve our active intervention. We seek to acquire loans for which completion
of the resolution process will enhance our total return through increased yields
or realization of some portion or all of the discount at which they were
acquired.

Loan Portfolio

            The following table sets forth information regarding our loans as of
March 31, 2001:
Investments in                    Average      Range of
                                                       real estate         Number       loan-to-       loan           Range of
      Type of loan                                        loans           of loans      value(1)     yields(2)        maturities
      ------------                                    -------------       --------     ---------     ---------        ----------
Long-term first mortgages and
  senior loan participations(3)(4)................     $10,677,888            6            43%         11-16%       3/28/01-7/14/09

Mezzanine (including wraparound) loans (5)........      85,937,949           15            81%         10-30%(7)    2/01/02-1/31/09

Short-term bridge loans (6).......................      40,468,449            7            76%         14-35%(7)    5/16/01-1/23/02
-----------------
(1) Calculated as outstanding loan balance divided by the appraised value of the
    underlying collateral based on appraisals we obtained when the loan was
    originated or purchased.

(2) All of our loans are at fixed rates.

(3) Five of these loans, in the aggregate amount of $8.7 million at March 31,
    2001, are cash flow loans or participations in cash flow loans. A cash flow
    loan, although at a stated rate of interest, must pay interest to the extent
    of all cash flow from the property underlying the loan after property
    operating expenses. Our cash flow loans are loans in default under the
    original loan terms that we acquired at a discount and are subject to
    forbearance agreements.

(4) Five of these loans, in the aggregate amount of $5.4 million at March 31,
    2001, including four cash flow loans, in the aggregate amount of $3.4
    million at March 31, 2001, have appreciation interests.

(5) Includes $44.6 million of senior financing. Eleven of these loans, in the
    aggregate amount of $31.8 million at March 31, 2001, are with recourse only
    to the properties securing the loans. Three loans, in the aggregate amount
    of $8.7 million at March 31, 2001, are cash flow loans and are subject to
    forbearance agreements. Nine loans, in the aggregate amount of $69.3 million
    at March 31, 2001, including three cash flow loans, in the aggregate amount
    of $8.7 million at March 31, 2001, have appreciation interests.

                                                                 Page 5 of _____
(6) Includes $13.0 million of senior financing. Two of these loans, in the
    aggregate amount of $17.5 million at March 31, 2001, have appreciation
    interests. Two of these loans, in the aggregate amount of $15.7 million at
    March 31, 2001, are secured by guarantees from the principals of the
    borrower.

(7) Includes loan fees charged.

Acquisition of Property Interests

         We also acquire real property either directly, or indirectly through
ownership of an interest in an entity that itself owns a real property. We
believe that acquiring property interests is advantageous for three reasons.
First, it gives us flexibility in addressing the financial needs and tax
situations of borrowers in situations where debt financing may not be
appropriate. Second, it provides us with the opportunity to participate in
capital appreciation in addition to current income. Third, it assists us in our
tax planning, as we discuss in the prospectus section "Federal Income Tax
Consequences of Our Status as a REIT."

         We currently own the following property interests:

              o   500-unit apartment building in Philadelphia, Pennsylvania with
                  an acquisition cost of $19.5 million. After acquisition, we
                  obtained non-recourse financing of $15.0 million ($14.89
                  million at March 31, 2001), which bears interest at 7.73% and
                  is due on December 1, 2009, and of $2.3 million ($2.3 million
                  at March 31, 2001), which bears interest at 7.17% and is due
                  March 2, 2012.

              o   25% preferred interest in a limited liability company that
                  owns a 168-unit apartment complex in Baltimore, Maryland. We
                  originally acquired 100% of the limited liability company for
                  $4.4 million. We subsequently sold a 75% interest in the
                  limited liability company to a third party. The property is
                  subject to $3.9 million of non-recourse financing ($3.8
                  million at March 31, 2001), which bears interest at 7.88% and
                  is due on November 1, 2001.

              o   89% partnership interest in a partnership that owns a building
                  in Philadelphia, Pennsylvania with 456,000 square feet of
                  retail/office space. We acquired our interest for $750,000.
                  The property is subject to non-recourse financing of $42.9
                  million at March 31, 2001 that bears interest at 6.85% and is
                  due on August 1, 2008.

              o   Building in Rohrerstown, Pennsylvania with 12,630 square feet
                  on 2.93 acres used as a diagnostic imaging center. We acquired
                  the property for $1.7 million. After acquisition, we obtained
                  non-recourse financing of $1.1 million ($1.1 million at March
                  31, 2001), which bears interest at 7.33% and is due on August
                  1, 2008.

              o   51% preferred interest in a limited liability company that
                  owns a building in Philadelphia, Pennsylvania with 88
                  apartment units and 56,000 square feet of commercial space. We
                  acquired our interest for $5.6 million. The property is
                  subject to financing of $11.6 million ($11.7 million at March
                  31, 2001), which bears interest at 8.367&% and is due on March
                  11, 2028.

                                                                 Page 6 of _____
RISK FACTORS

                                     General

         Transactions with our affiliates may result in conflicts of interest.
We have relationships with Resource America, Inc., Brandywine Construction &
Management, Inc. and The Bancorp.com, Inc., which may give rise to conflicts of
interest. Resource America sponsored our formation and currently owns 10.85% of
our outstanding common shares. We have in the past purchased investments from
and sold investments to Resource America and we anticipate that we will do so in
the future, subject to a limitation contained in our declaration of trust. Our
company and Resource America also own various interests in the same assets.

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

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

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

                            Investment Activity Risks

Financing Considerations

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

         Our loans typically provide payment structures other than equal
periodic payments that retire a loan over its specified term, including
structures that defer payment of some portion of accruing interest, or defer
repayment of principal, until loan maturity. Where a borrower must pay a loan
balance in a large lump sum payment, its ability to satisfy this obligation may
depend upon its ability to obtain suitable refinancing or otherwise to raise a
substantial cash amount, which we do not control and which may be subject to the
same considerations we describe elsewhere in this "Risk Factors - Investment
Activity Risks" section. In addition, mortgage lenders can lose their lien

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priority in many jurisdictions, including those in which our existing loans are
located, to persons who supply labor and materials to a property. For these and
other reasons, the total amount that we may recover from one of our loans may be
less than the total amount of a loan or our cost of acquisition.

         Longer term, subordinate and non-conforming loans are illiquid and
their value may decrease. Our loans generally have maturities between four and
ten years and typically do not conform to standard loan underwriting criteria.
Many of our loans are subordinate loans. As a result, our loans are relatively
illiquid investments. We may be unable to vary our portfolio promptly in
response to changing economic, financial and investment conditions. As a result,
the fair market value of our portfolio may decrease in the future.

         Investment in subordinate loans may involve increased risk of loss. We
emphasize junior lien loans and other forms of subordinated financing, including
wraparound loans. As of March 31, 2001, 18 of our loans, constituting 74.8% of
our loans by book value, were junior lien loans. Because of their subordinate
position, junior lien loans carry a greater credit risk than senior lien
financing, including a substantially greater risk of non-payment of interest or
principal. Where, as part of a financing structure, we take an equity or other
unsecured position, our risk of loss may be materially increased. A decline in
the real estate market could adversely affect the value of the property so that
the aggregate outstanding balances of senior liens may exceed the value of the
underlying property. In the event of a default on a senior loan, we may elect to
make payments, if we have the right to do so, in order to prevent foreclosure on
the senior loans. In the event of foreclosure, we will be entitled to share in
the proceeds only after satisfaction of the amounts due to senior lienors, which
may result in our being unable to recover the full amount, or, indeed, any of
our investment. It is also possible that in some cases, a "due on sale" clause
included in a senior mortgage, which accelerates the amount due under the senior
mortgage in case of the sale of the property, may apply to the sale of the
property if we foreclose, increasing our risk of loss.

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

         As of March 31, 2001, 13 of our loans, constituting 26.4% of our loans
by book value, were not collateralized by recorded or perfected liens, although
five of those loans, constituting 8.4% of our loans by book value, are secured
by deeds-in-lieu of foreclosure, also known as "pocket deeds." A deed-in-lieu of
foreclosure is a deed executed in blank that the holder is entitled to record
immediately upon a default in the loan. Seven of these loans, constituting 18.0%
of our loans by book value are secured by pledges of equity interests in the
borrowers. These 13 loans are subordinate not only to existing liens encumbering
the underlying property, but also to future judgment or other liens that may
arise. Furthermore, in a bankruptcy, we will have materially fewer rights than
secured creditors and our rights 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 and more complex legal process than
enforcement of a mortgage loan.

         Investment in non-conforming loans may involve increased risk of loss.
Loans we acquire generally do not conform to conventional loan criteria due to

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past defaults by borrowers. These defaults typically result from lack of a
strong operating history for the properties underlying the loans, the borrower's
historical credit problems, the properties' underlying cash flow problems or
other factors. As a result, our loans may have a higher risk of default and loss
than conventional loans. Any loss we incur may reduce distributions to
shareholders or adversely affect the value of our shares.

         Discounted loans may have high rates of default. We acquire loans at a
discount from both the outstanding balances of the loans and the appraised value
of the properties underlying the loans. Typically, discounted loans are in
default under the original loan terms or other requirements and subject to
forbearance agreements. A forbearance agreement typically requires a borrower to
pay to the lender all revenue from a property after payment of the property's
operating expenses in return for the lender's agreement to withhold exercising
its rights under the loan documents. As of March 31, 2001, eight of our loans,
constituting 12.7% of our loans by book value, had been acquired at a discount
to both their outstanding balances and the appraised values of the underlying
properties. Each of these loans is in default under its original loan terms but
is current under the related forbearance agreement. Acquiring loans at a
discount involves a substantially higher degree of risk of non-collection than
loans that conform to institutional underwriting criteria. We do not acquire a
loan unless material steps have been taken toward resolving problems with the
loan, or its underlying property. However, previously existing problems may
recur or other problems may arise.

         Financing with high loan-to-value ratios may involve increased risk of
loss. We anticipate that many of our loans will have loan-to-value ratios in
excess of 80%. 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. As of March 31, 2001, 19 of our loans,
constituting 62.6% of our loans by book value, had loan-to-value ratios in
excess of 80%. By reducing the margin available to cover fluctuations in
property value, a high loan-to-value ratio increases the risk that, upon
default, the amount obtainable from sale of the underlying property may be
insufficient to repay the financing.

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

         Lack of geographic diversification exposes our investments to a higher
risk of loss from regional economic factors. We emphasize financing properties
located in the Philadelphia, Pennsylvania metropolitan area and the
Baltimore/Washington corridor. While we have no specific geographic limitations
on where we may invest, we anticipate that our loans will continue to be

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concentrated in the Philadelphia region and the Baltimore/Washington corridor
for the foreseeable future. This lack of geographic diversification may make our
loan portfolio more sensitive to economic developments of a primarily regional
nature, which may result in reduced rates of return or higher rates of default
than might be incurred with a more geographically diverse investment portfolio.

         We may not obtain appreciation interests at the rate we seek, or at
all; we may not benefit from appreciation interests we do obtain. In addition to
an agreed upon interest rate, we seek to obtain appreciation interests from our
borrowers. Appreciation interests require a borrower to pay us additional
amounts based upon a property's increase in value, revenues or both. While we
seek appreciation interests at rates of at least 25%, we may not be able to
obtain these rates. Moreover, we may not be able to negotiate appreciation
interest provisions in any of our loans. In addition, while we 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. Of the 28 loans in our portfolio as of March 31, 2001, 16
have appreciation interests, constituting 67.2% of our loans by book value.
Three of these appreciation interests, with respect to loans constituting 7.3%
of our loans by book value, are less than the 25% target rate. The value of any
appreciation interest depends on the performance and value of the property
underlying the loan and, thus, is subject to real estate investment risks.
Accordingly, we may not realize any benefits from our appreciation interests. We
do not anticipate receiving significant amounts from our appreciation interests
in the early years of our loans.

         Appreciation interests may cause loss of the priority of our lien.
Because appreciation interests allow us to participate in the increase in a
property's value or revenue, courts, including a court in a bankruptcy,
arrangement or similar proceeding, may determine that we should be treated as a
partner of, or joint venturer with, the borrower. If a court makes that
determination, we could lose our lien priority in the property or lose any
benefit of our lien.

         Loans secured by interests in entities owning real property may involve
increased risk of loss. We may originate or acquire loans secured by interests
in entities that own real properties rather than by a direct security interest
in the underlying properties. These loans may be illiquid or otherwise have
features that may make it difficult for us to obtain a return of our investment
in the event of a default.

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

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

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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.

Real Property Considerations

         The value of our property interests depends on conditions beyond our
control. Although we emphasize originating or acquiring loans, we have acquired
five property interests as of March 31, 2001 and anticipate that we will acquire
more in the future. Real property investments are subject to varying degrees of
risk. Yields from our real properties depend on their net income and capital
appreciation. Income from, and appreciation of, our properties may be adversely
affected by general and local economic conditions, neighborhood values,
competitive overbuilding, weather, casualty losses and other factors beyond our
control. The value of real properties may also be affected by factors such as
the cost of compliance with regulations and liability under applicable
environmental laws, changes in interest rates and the availability of financing.
Income from a property will be adversely affected if a significant number of
tenants are unable to pay rent or if available space cannot be rented on
favorable terms. Operating and other expenses of our properties, particularly
significant expenses such as mortgage payments, real estate taxes and
maintenance costs, generally do not decrease when income decreases and, even if
revenues increase, operating and other expenses may increase faster than
revenues.

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

         Uninsured and underinsured losses may affect the value of, or return
from, our property interests. Our properties, and the properties underlying our
loans, have comprehensive insurance in amounts we believe sufficient to permit
the replacement of the properties in the event of a total loss, subject to
applicable deductibles. There are, however, certain types of losses, such as
earthquakes, floods and hurricanes that may be uninsurable or not economically
insurable. Also, inflation, changes in building codes and ordinances,
environmental considerations, and other factors might make it impractical to use
insurance proceeds to replace a damaged or destroyed property. If any of

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these or similar events occurs, it may reduce our return from an affected
property and the value of our investment.

         We may have less control of our investment when we invest in joint
ventures, partnerships or similar real property interests. Our acquisition of
equity interests in entities which own real property provides risks not present
in real property loans or direct property ownership. For example, the other
equity owners in the entity holding the property might have economic or business
interests or goals which are inconsistent with our business interests or goals
and may be in a position to take action contrary to our instructions or to our
policies and objectives. Moreover, if we are a limited partner in a limited
partnership and have rights allowing us control over the partnership or its
property, we may be deemed to be a general partner and liable for the debts of
the partnership beyond the amount of our investment.

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

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

Other Investment Activity Considerations

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

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Lack of diversification in investments increases our dependence on
individual investments. Although we generally invest between $2.0 million and
$30.0 million in a loan or property interest, our declaration of trust does not
limit the size of our investments. If we acquire larger loans or property
interests, our portfolio will be concentrated in a smaller number of assets,
increasing the risk of loss to shareholders if a default or other problem
arises.

                               Legal and Tax Risks

         We will be taxed as a regular corporation if we fail to maintain our
REIT status. We have operated and intend to continue to operate in a manner that
permits us to qualify as a real estate investment trust, or REIT, for federal
income tax purposes. However, the federal income tax laws governing REITs are
complex, and we have not obtained a ruling from the Internal Revenue Service
about our status as a REIT. We have received an opinion of counsel that we
qualify as a REIT based on our current operations and on certain assumptions and
representations concerning future operations. Opinions of counsel are not
binding on the Internal Revenue Service or any court. The opinion only
represents the view of counsel based on counsel's review and analysis of
existing law. Furthermore, our continued qualification as a REIT will depend on
our satisfaction of the asset, income, organizational, distribution and
shareholder ownership requirements of the Internal Revenue Code on a continuing
basis.

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

         "Phantom Income" may require us to borrow or sell assets to meet REIT
distribution requirements. We must distribute at least 90% of our annual net
taxable income, excluding any net capital gain or retained capital gain, in
order to maintain our REIT status. For years before 2001, we were required to
distribute 95% of this income. In addition, we will be subject to a 4%
nondeductible excise tax on the amount, if any, by which our distributions in
any calendar year are less than the sum of:

              o   85% of our ordinary income for that year,

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

              o   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

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expenditures of cash, such as depreciation on owned real estate. The three
principal ways in which this "phantom income" may arise for us are:

              o   Origination or acquisition of loans, including loans with
                  appreciation interests, that may be deemed to have original
                  issue discount for federal income tax purposes. Original issue
                  discount is generally equal to the difference between an
                  obligation's issue price and its stated redemption price at
                  maturity. We must recognize as income in each year the portion
                  of the original issue discount that accrues during that year,
                  even though we do not receive cash in that year in the amount
                  of the original issue discount. As of March 31, 2001, two of
                  our loans, constituting 23.6% of our loans by book value, were
                  originated or acquired with original issue discount.

              o   Accruing interest with respect to a loan at a rate greater
                  than the rate at which we receive interest. In particular,
                  this may happen where the rate at which interest is paid on a
                  loan is less than the stated rate. As of March 31, 2001, seven
                  of our loans, constituting 26.0% of our loans by book value,
                  generate this type of "phantom income."

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

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

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

         Origination fees we receive will not be REIT qualifying income. Any
origination fees we receive will not be qualifying income for purposes of the
75% or 95% gross income tests applicable to REITs, under the Internal Revenue
Code. For a description of these tests, you should read the prospectus section
"Federal Income Tax Consequences of Our Status as a REIT - Income Tests." We
typically receive initial payments, or "points," from borrowers as commitment
fees or additional interest. So long as the payment is for the use of money,
rather than for services provided by us, we believe that this income should not
be classified as non-qualifying origination fees. However, the Internal Revenue

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Service may seek to reclassify this income as origination fees instead of
commitment fees or interest. If we cannot satisfy 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. Thirteen
of our loans as of March 31, 2001, constituting 13.2% of our assets by book
value, are only indirectly secured by real property. We may acquire or originate
similar loans in the future. We may also originate junior loans where a senior
loan does not permit us to record a mortgage against the underlying property or
substantially restricts our rights as a junior secured lender. In these
situations, the Internal Revenue Service may conclude that interest on our loans
does not constitute interest from obligations "secured by mortgages on real
property or on interests in real property." As a result, interest from these
sources would not qualify for purposes of the 75% gross income test. For a
description of this test, you should read the prospectus section "Federal Income
Tax Consequences of our Status as a REIT - Income Tests." With respect to the 11
loans that are subject to these restrictions, because we have directly
exercisable foreclosure rights upon any default, our counsel is of the opinion
that interest income from these loans will constitute qualifying income.

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

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

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

         Our board of trustees may change our policies without shareholder
consent. Our board of trustees determines our policies and, in particular, our
investment policies. Our board of trustees may amend or revise our policies or

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approve transactions that deviate from these policies without a vote of or
notice to the shareholders. Policy changes could adversely affect the market
price of our shares and our ability to make distributions. We cannot change our
policy of seeking to maintain REIT qualification without the approval of the
holders of two-thirds of the outstanding common 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 8.3% or, with respect to Resource
America, 15%, of our outstanding common shares and provides that:

              o   A transfer that violates the limitation is void.

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

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

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

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

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 real estate investment trust, we are subject to
various provisions of Maryland law which impose restrictions and require that
specified procedures be followed with respect to 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 these provisions, our board of trustees has the right to rescind
the election at any time without notice to the shareholders.

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DESCRIPTION OF SHARES OF BENEFICIAL INTEREST

General

         Under our declaration of trust we may issue up to 200,000,000 common
shares and 25,000,000 preferred shares. At August 2, 2001, we had outstanding
12,419,684 common shares and no preferred shares. In addition, we have reserved
800,000 common shares for issuance under our employee stock option plan and
141,667 common shares for issuance on the exercise of warrants.

Common Shares

         Subject to the preferential rights of any preferred shares outstanding,
the ownership limitations described in "Restrictions on Ownership and Transfer,"
below, and the right of our board of trustees to establish separate classes of
common shares and determine their rights and preferences, our common shares have
the following characteristics:

          o  each common share entitles the holder to one vote on matters voted
             on by common shareholders,

          o  the common shares do not have cumulative voting rights,

          o  distributions are payable as and when authorized by the board of
             trustees,

          o  holders of common shares generally are not liable for our debts,

          o  if we are liquidated, each common share participates pro
             rata in our assets that remain after payment, or provision
             for payment, of our debts and payment of the liquidation
             preferences of any preferred shares, and

          o  the common shares do not have conversion, exchange, sinking fund,
             redemption, appraisal or preemptive rights, and

          o  each common shares has a par value of $.01 per share.

         Our board of trustees may establish separate classes of common shares
and determine their rights and preferences; however, the board of trustees has
no present plans to do so. The common shares are listed on the American Stock
Exchange under the symbol "RAS." The transfer agent for the common shares is the
American Stock Transfer & Trust Company.

                                                                Page 17 of _____
Preferred Shares

         The following description of the terms of our preferred shares sets
forth certain general terms and provisions of our authorized preferred shares.
If we offer preferred shares, the specific designation and rights will be
described in a supplement to the prospectus relating to the offering of such
preferred shares.

         Our board of trustees can, without approval of shareholders, issue one
or more series of preferred shares. The board can also determine the number of
shares of each series and the rights, preferences, conversion or other rights,
voting powers, restrictions, limitation as to distribution, redemption
provisions and other terms or conditions as the board to trustees may approve.
As a result, without shareholder approval, the board of trustees may issue
preferred shares with rights senior to those of the common shares.

Restrictions on Ownership and Transfer

         To qualify as a REIT under the Internal Revenue Code, we must meet
several requirements regarding the number of our shareholders and concentration
of ownership of our shares. These requirements are described at "Federal Income
Tax Consequences of Our Status as a REIT - Requirements for Qualification." Our
declaration of trust contains provisions that restrict the ownership and
transfer of our shares to assist us in complying with these Internal Revenue
Code requirements. We refer to these restrictions as the "ownership limitation."

         The ownership limitation provides that, in general:

               o  no person may own more than 8.3% of our outstanding common
                  shares, and

               o  no person may own more than 9.8% of our outstanding preferred
                  shares.

However, Resource America, which was our sponsor at the time of our formation,
may own up to 15% of our common shares. It owned 10.55% of August 2, 2001.

         Ownership of our shares is subject to attribution rules under the
Internal Revenue Code, which may result in a person being deemed to own shares
held by other persons. The board of trustees may waive the ownership limitation
if it determines that the waiver will not jeopardize our status as a REIT. As a
condition of such a waiver, the board of trustees may require an opinion of
counsel satisfactory to it or undertakings or representations from the applicant
with respect to preserving our REIT status. We required no such waiver with
respect to Resource America's ownership rights, which are established as part of
our declaration of trust.

         Any person, including Resource America, who acquires shares in
violation of the ownership limitation must notify us immediately and provide us
with any information we may request in order to determine the effect of the

                                                                Page 18 of _____
acquisition on our status as a REIT. The ownership limitation will not apply if
the board of trustees determines that it is no longer in our best interest to
qualify as a REIT. Otherwise, the ownership limitation may be changed only by an
amendment to our declaration of trust by a vote of two-thirds of our outstanding
voting shares.

         Our declaration of trust provides that if any purported transfer of
shares results in

                o   any person violating the ownership limitation,

                o   our being "closely held,"

                o   our shares being owned by fewer than 100 persons, or

                o   our owning 10% or more of a tenant of our real property

the transfer will be of no force or effect as to the excess number of shares and
the purported transferee or owner will cease to own any right or interest in the
excess shares.

         Shares exceeding the ownership limitation will transfer automatically,
by operation of law, to a trust, the beneficiary of which will be a qualified
charitable organization selected by us. The trustee of the trust will be
designated by us and must be unaffiliated with us and the prohibited transferee.
The trustee must sell the excess shares to a qualified person and distribute the
sales proceeds to the prohibited transferee. Where excess shares result from an
event other than a transfer, or from a transfer for no consideration, such as a
gift, the trustee will sell the excess shares to a qualified person and
distribute to the prohibited owner an amount equal to the lesser of the market
price of the excess shares on the date they become excess shares or the sales
proceeds received by the trust for the excess shares, and can exercise all
voting rights with respect to the excess shares.

         In addition, we may purchase any common shares held in the trust for
the lesser of:

                o   the price per share in the transaction that resulted in the
                    transfer to the trust or, in the case of a gift, the market
                    price at the time of the gift, or

                o   the market price on the date we agree to purchase the
                    shares.

We may purchase the shares at any time before the trustee has sold the shares.
The net sale proceeds will be paid to the prohibited transferee.

         All share certificates bear a legend referring to the restrictions
described above.

         Every owner of more than 5%, (or any lower percentage set by federal
income tax laws) of outstanding common shares must file a completed
questionnaire with us containing information regarding his or her ownership. In
addition, each shareholder must, upon demand, disclose in writing any
information we may request in order to determine the effect, if any, of such
shareholder's actual and constructive ownership of common shares on our status
as a REIT and to ensure compliance with the ownership limitation.

                                                                Page 19 of _____
CERTAIN PROVISIONS OF MARYLAND LAW AND OF
                       THE DECLARATION OF TRUST AND BYLAWS

Board of Trustees

         The declaration of trust requires that we have no fewer than three or
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

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

              o   been one of our officers, or

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

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

         Our declaration of trust provides that a trustee may be removed by a
two-thirds vote of our outstanding voting shares. This provision, when coupled
with the provision authorizing the board of trustees to fill vacant
trusteeships, precludes shareholders, as a practical matter, from removing
incumbent trustees and filling the vacancies created by such removal with their
own nominees.

                                                                Page 20 of _____
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

              o   80% of our outstanding voting shares, and

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

unless, among other conditions, the shareholders receive a minimum price, as
defined by Maryland law, for their shares and the consideration is received in
cash or in the same form as previously paid by the interested shareholder for
its shares.

         These provisions do not apply, however, to business combinations that
are approved or exempted by the board of trustees prior to the time that the
interested shareholder becomes an interested shareholder.

Control Share Acquisitions

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

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

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

              o   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.

                                                                Page 21 of _____
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 status.

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

Amendment of Our Declaration of Trust and Bylaws

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

Meetings of Shareholders

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

Advance Notice of Nominations of Trustees and New Business

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

                                                                Page 22 of _____
Dissolution

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

Indemnification; Limitation of Trustees' and Officers' Liability

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

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

              o   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. Our bylaws
require us to indemnify each trustee or officer who has been successful, on the
merits or otherwise, in the defense of any proceeding to which he is made a
party by reason of his service in the foregoing capacities.

         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

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

                  o   was committed in bad faith or

                  o   was the result of active and deliberate dishonesty; or

              o   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

              o   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

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

                                                                Page 23 of _____
Indemnification Agreements

         We have indemnification agreements with each of our officers and
trustees. The indemnification agreements require us to indemnify our 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 officers and trustees seeking to enforce
their rights under the indemnification agreements and may cover 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 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.

                       FEDERAL INCOME TAX CONSEQUENCES OF
                              OUR STATUS AS A REIT

         This section summarizes the federal income tax issues that you, as a
shareholder, 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 the
tax issues that may be important to certain types of shareholders that are
subject to special treatment under the federal income tax laws, such as
insurance companies, tax-exempt organizations, financial institutions or
broker-dealers, and non-U.S. individuals and foreign corporations.

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

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

                                                                Page 24 of _____
Taxation

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

         Our qualifications 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:

              o   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.

              o   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.

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

                  o   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

                  o   other non-qualifying income from foreclosure property.

              o   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.

              o   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:

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

                                                                Page 25 of _____
o   a fraction intended to reflect our profitability.

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

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

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

                  o   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.

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

              o   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:

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

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

         The rules described in this paragraph will apply assuming that we make
an election under the Treasury regulations.

Requirements for Qualification

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

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

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

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

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

                                                                Page 26 of _____
o   At least 100 persons are beneficial owners of its shares or
                  ownership certificates.

              o   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.

              o   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.

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

              o   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 requirement 5 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
requirement 6, we will be deemed to have satisfied requirement 6 for that
taxable year. For purposes of determining share ownership under requirement 6,
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 requirement 6.

         We have issued sufficient common shares with sufficient diversity of
ownership to satisfy requirements 5 and 6. In addition, our declaration of trust
restricts the ownership and transfer of our common shares so that we should
continue to satisfy requirements 5 and 6. The provisions of our declaration of
trust restricting the ownership and transfer of common shares are described in
"Description of Shares of Beneficial Interest --Restrictions on Ownership and
Transfer."

         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 subsidiaries, RAIT General and RAIT Limited
and we own all of their capital stock. RAIT General, RAIT Limited and RAIT
Partnership also own all of the capital stock in [eight] other corporations
involved in the ownership of certain of our portfolio assets. Thus, RAIT
General, RAIT Limited and the other [eight] subsidiaries will be ignored as
separate entities, and all of their assets, liabilities, and items of income,

                                                                Page 27 of _____
deduction, and credit will be treated as our assets, liabilities and items of
income, deduction and credit.

         An unincorporated entity, such as a partnership that has a single
owner, is not treated as an entity separate from its parent. We own all of RAIT
General and RAIT Limited, which, in turn, own all of RAIT Partnership, the
entity that holds all of our investment assets. Thus, RAIT Partnership will not
be treated as an entity separate from us for so long as its only partners are
RAIT General and RAIT Limited, and we own all of their capital stock.

         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 of us for purposes of applying the various REIT qualification
requirements.

         Tax legislation enacted in 1999 allows a REIT to own up to 100% of the
stock of a "taxable REIT subsidiary," or TRS, beginning on January 1, 2001. A
TRS may earn income that would not be qualifying income if earned directly by
the parent REIT. Both the subsidiary and the REIT must jointly elect to treat
the subsidiary as a TRS. A TRS will pay income tax at regular corporate rates on
any income that it earns. In addition, the new rules limit the deductibility of
interest paid or accrued by a TRS to its parent REIT to assure that the TRS is
subject to an appropriate level of corporate taxation. Further, the rules impose
a 100% excise tax on transactions between a TRS and its parent REIT or the
REIT's tenants that are not conducted on an arm's-length basis. We do not
currently have any TRSs, but may form one or more TRSs in the future.

Income Tests

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

              o   rents from real property,

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

              o   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

                                                                Page 28 of _____
disposition of stock or securities, income from certain interest rate hedging
contracts, or any combination of the foregoing. Gross income from any
origination fees we obtain or from our sale of property that we hold primarily
for sale to customers in the ordinary course of business is excluded from both
income tests. The following paragraphs discuss the specific application of the
gross income tests to us.

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

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

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

         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. As of March 31, 2001 five loans are collateralized with
deeds-in-lieu of foreclosure and seven are secured by pledges of equity
interests. 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. Since the amount of income from these
loans is relatively small, less than 16.0% of gross income, we believe that
compliance with the 75% test will be unaffected.

                                                                Page 29 of _____
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. As of March 31, 2001, 16 of our loans had such features. 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:

              o   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;

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

              o   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.

                                                                Page 30 of _____
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:

              o   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;

              o   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

              o   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:

              o   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.

              o   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.

              o   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. Pursuant to legislation effective January 1,
                  2001, the allocation of rent between real and personal
                  property is based on the relative fair market values of the
                  real and personal property.

                                                                Page 31 of _____
o   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, as
                  of January 1, 2001, we may own up to 100% of the stock of a
                  TRS. 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:

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

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

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

         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:

              o   cash or cash items, including certain receivables;

              o   government securities;

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

              o   interests in mortgages on real property;

                                                                Page 32 of _____
o   stock in other REITs; and

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

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

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

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

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

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

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

         If the fair market value of the real property securing a mortgage loan
equals or exceeds the outstanding principal balance of the loan, the loan will
be a qualifying asset. However, if the outstanding principal balance of a
mortgage loan exceeds the fair market value of the real property securing the
loan, the excess amount may not be a qualifying asset, although the matter is
not free from doubt. An "interest" in real property also generally includes an
interest in mortgage loans secured by controlling equity interests in
partnerships 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. In addition, we have purchased and originated
loans that are only indirectly secured by real estate, and we may continue to do
so in the future. With respect to 13 of our loans as of March 31, 2001 that are
only indirectly secured by real estate, five are collateralized with
deeds-in-lieu of foreclosure. Counsel is of the opinion that these loans qualify
as real estate assets for the purposes of the 75% asset test. We cannot assure
you that the Internal Revenue Service will not challenge that position.

         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

                                                                Page 33 of _____
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:

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

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

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

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

Distribution Requirements

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

              o   the sum of

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

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

              o   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.

                                                                Page 34 of _____
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:

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

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

              o   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:

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

              o   the inclusion of that income and deduction of such 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.

                                                                Page 35 of _____
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. A U.S. shareholder will not
qualify for the dividends received deduction generally available to
corporations. The term "U.S. shareholder" means a holder of preferred or common
shares that for United States federal income tax purposes is:

              o   a citizen or resident of the United States;

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

              o   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

              o   any trust with respect to which

                                                                Page 36 of _____
o   a United States court is able to exercise primary
                      supervision over its administration, and

                  o   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 preferred or common shares.
Instead, such distribution will reduce the adjusted basis of such preferred or
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 preferred or common shares as long-term capital
gain, or short-term capital gain if the preferred or common shares have been
held for one year or less, assuming the preferred or 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 preferred or
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 preferred or 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 its 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

                                                                Page 37 of _____
distributions that economically represent a return of capital, rather than a
dividend. These distributions would be offset in later years by distributions
representing economic income that would be treated as returns of capital for
federal income tax purposes. Taking into account the time value of money, this
acceleration of federal income tax liabilities may reduce a shareholder's
after-tax return on his or her investment in us to an amount less than the
after-tax return on an investment with an identical before-tax rate of return
that did not generate phantom income. For example, if an investor with a 30% tax
rate purchases a taxable bond with an annual interest rate of 10% on its face
value, the investor's before-tax return on the investment would be 10% and the
investor's after-tax return would be 7%. However, if the same investor purchased
our shares at a time when the before-tax rate of return was 10%, the investor's
after-tax rate of return on the shares might be somewhat less than 7% as a
result of our phantom income. In general, as the ratio of our phantom income to
its 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 Common 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
preferred or common shares as long-term capital gain or loss if the U.S.
shareholder has held the preferred or common shares for more than one year.
However, a U.S. shareholder must treat any loss upon a sale or exchange of
preferred or 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 preferred or common shares may be disallowed if the
U.S. shareholder purchases other preferred or common shares within 30 days
before or after the disposition.

Capital Gains and Losses

         The tax rate differential between capital gain and ordinary income for
non-corporate taxpayers may be significant. A taxpayer generally must hold a
capital asset for more than one year for gain or loss derived from its sale or
exchange to be treated as long-term capital gain or loss. Under the Economic
Growth and Tax Relief Reconciliation Act of 2001, the maximum marginal
individual income tax rate of 39.6% for ordinary income reduces to 38.6% for the
period from July 1, 2001 to the end of 2001, resulting in an effective maximum
rate of 39.1% for all of 2001. The 2001 Act reduces the maximum rate for
ordinary income to 38.6% for all of 2002 and 2003, to 37.6% for 2004 and 2005,
and to 35% for 2006 to 2011. The maximum tax rate on long-term capital gain
applicable to non-corporate taxpayers, which was not affected by the 2001 Act,
is 20% for sales and exchanges of assets held for more than one year. The
maximum tax rate on long-term capital gain from the sale or exchange of "section
1250 property," or depreciable real property, is 25% to the extent that such
gain would have been treated as ordinary income if the property were "section
1245 property." With respect to distributions that we designate as capital gain
dividends and any retained capital gain that we are deemed to distribute, we
generally may designate whether such a distribution is taxable to our
non-corporate shareholders at a 20% or 25% rate. In addition, the
characterization of income as capital gain or ordinary income may affect the
deductibility of capital losses. A non-corporate taxpayer may deduct capital
losses not offset by capital gains against its ordinary income only up to a
maximum annual amount of $3,000. A non-corporate taxpayer may carry forward
unused capital losses indefinitely. A corporate taxpayer must pay tax on its net
capital gain at ordinary corporate rates. A corporate taxpayer can deduct

                                                                Page 38 of _____
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 31% with respect to
distributions unless the holder:

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

              o   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 common or preferred shares with
debt, a portion of the income that it receives from us would constitute
unrelated business taxable income pursuant to the "debt-financed property"
rules. Furthermore, social clubs, voluntary employee benefit associations,
supplemental unemployment benefit trusts, and qualified group legal services
plans that are exempt from taxation under special provisions of the federal
income tax laws are subject to different unrelated business taxable income
rules, which generally will require them to characterize distributions that they
receive from us as unrelated business taxable income. Finally, in certain
circumstances, a qualified employee pension or profit sharing trust that owns
more than 10% of our shares must treat a percentage of the dividends that it
receives from us as unrelated business taxable income. Such percentage is equal
to the gross income we derive from an unrelated trade or business, determined as
if we were a pension trust, divided by our total gross income for the year in
which we pay the dividends. That rule applies to a pension trust holding more
than 10% of our shares only if:

                                                                Page 39 of _____
o   the percentage of our dividends that the tax-exempt trust must
                  treat as unrelated business taxable income is at least 5%;

              o   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

              o   either

                  o   one pension trust owns more than 25% of the value of our
                      shares or
                  o   a group of pension trusts individually holding more than
                      10% of the value of our shares collectively owns more than
                      50% of the value of our shares.

Taxation of Non-U.S. Shareholders

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

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

              o   the non-U.S. shareholder files an IRS Form 4224 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 preferred or common shares. Instead, such a
distribution will reduce the adjusted basis of those preferred or 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 preferred or common shares, if the non-U.S. shareholder otherwise would be
subject to tax on gain from the sale or disposition of our preferred or 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

                                                                Page 40 of _____
accumulated earnings and profits, we normally will withhold tax on the entire
amount of any distribution at the same rate as we would withhold on a dividend.
However, a non-U.S. shareholder may obtain a refund of amounts that we withhold
if we later determine that a distribution in fact exceeded our current and
accumulated earnings and profits.

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

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

         A non-U.S. shareholder generally will not incur tax under FIRPTA as
long as at all times non-U.S. persons hold, directly or indirectly, less than
50% in value of our shares. We cannot assure you that this test will be met.
However, a non-U.S. shareholder that owned, actually or constructively, 5% or
less of the preferred and common shares at all times during a specified testing
period will not incur tax under FIRPTA if the preferred and 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:

              o   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

              o   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.

                                                                Page 41 of _____
State and Local Taxes

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

                                                                Page 42 of _____
SELLING SHAREHOLDERS

         The selling shareholders listed below acquired or will acquire the
shares listed in the column "Common Shares Registered under this Prospectus"
upon the exercise of options granted under the 1997 Stock Option Plan. The table
shows, as of July 18, 2001, certain information regarding the selling
shareholders' beneficial ownership of our common shares. We encourage our
officers and trustees to invest in our company through the exercise of their
options. We believe that this prospectus and the registration statement of which
it is a part, which permits resales of shares acquired by our officers and
trustees through option exercises, encourage these exercises by providing
liquidity for their investment. Accordingly, while the number of shares set
forth in the column "Common Shares Owned after the Offering" assumes that all
common shares acquired by a shareholder through exercise of his or her options
will be offered or sold, the selling shareholders are not required to sell any
shares.
Common Shares        Common Shares
                              Amount and Nature     Registered under      Owned after                   Percentage of Class
   Selling Shareholder         of Shares Owned     this Prospectus(1)     the Offering        Before Offering       After Offering
   -------------------         ---------------     ------------------     ------------        ---------------       --------------
Betsy Z. Cohen                    429,327(2)            311,526             117,801               3.2%                    *
  Chairman and Chief
  Executive Officer

Jonathan Z. Cohen                  23,063(3)             10,500              12,563                 *                     *
  Secretary and Trustee

Joel R. Mesznik                    13,500(4)             10,500               3,000                 *                     *
 Trustee

Daniel Promislo                    11,500(5)             10,500               1,000                 *                     *
  Trustee

Edward S. Brown                    10,000(6)             10,000                   0                 *                     *
  Trustee

S. Peter Albert                    17,500(7)             10,000               7,500                 *                     *
  Trustee

Scott F. Schaeffer                 83,751(8)             75,000               8,751                 *                     *
  President and Chief
  Operating Officer

Jay R. Cohen                       99,846(9)             68,117              31,729                 *                     *
  Executive Vice
  President

Ellen J. DiStefano                 63,748(10)            60,682               3,066                 *                     *
  Vice President and
   Chief Financial
   Officer
-------------
* Less than 1%.

                                                                Page 43 of _____
(1) Includes both vested options and unvested options that will vest during the
     two years following the date of this prospectus held by the selling
     shareholders.

 (2) Includes 100 shares held directly by Mrs. Cohen, 2,848 shares held in our
     Cash and Deferred Savings Plan (the "401(k) Plan") for the benefit of Mrs.
     Cohen, 26,852 shares held in an individual retirement account ("IRA") for
     the benefit of Mrs. Cohen; 66,801 shares held as trustee of a charitable
     foundation, 32,659 shares held in an IRA for the benefit of Mrs. Cohen's
     spouse, Edward E. Cohen, and 311,526 shares issuable upon exercise of
     options granted under the 1997 Stock Option Plan, (of the 311,526 options,
     212,013 are vested, 9,131 will vest within 60 days and 90,382 will vest
     within two years). Excludes shares held by Resource America, Inc., of which
     Edward E. Cohen is Chairman and Chief Executive Officer.

 (3) Includes 10,500 shares issuable upon exercise of options granted under the
     1997 Stock Option Plan, (all 10,500 options are vested), 12,000 shares
     held directly by Mr. Cohen and 563 shares held in a 401(k) account for his
     benefit.

 (4) Includes 10,500 shares issuable upon exercise of options granted under the
     1997 Stock Option Plan, (all 10,500 options are vested) and 3,000 shares
     held directly by Mr. Mesznik.

 (5) Includes 10,500 shares issuable upon exercise of options granted under the
     1997 Stock Option Plan, (all 10,500 options are vested) and 1,000 shares
     held directly by Mr. Promislo.

 (6) Includes 10,000 shares issuable upon exercise of options granted under the
     1997 Stock Option Plan, (10,000 are vested).

 (7) Includes 10,000 shares issuable upon exercise of options granted under the
     1997 Stock Option Plan, (10,000 are vested) and 7,500 shares held directly
     by Mr. Albert.

 (8) Includes 75,000 shares issuable upon exercise of options granted under the
     1997 Stock Option Plan, (of the 75,000 options, 25,000 are vested, 0 will
     vest within 60 days and 50,000 will vest within two years) 7,500 shares
     held directly by Mr. Schaeffer; and 1,251 shares held in a 401(k) account
     for the benefit of Mr. Schaeffer.

 (9) Includes 68,117 shares issuable upon exercise of options granted under the
     1997 Stock Option Plan, (of the 68,117 options, 46,558 are vested, 2,029
     will vest within 60 days and 19,530 will vest within two years) 3,208
     shares held in an IRA account for the benefit of Mr. Cohen, 17,000 shares
     held jointly by Mr. Cohen and his spouse, 7,341 shares held in an IRA for
     the benefit of Mr. Cohen's spouse, and 4,180 shares held in Mr. Cohen's
     401(k) account.

(10) Includes 60,682 shares issuable upon exercise of options granted under the
     1997 Stock Option Plan, (of the 60,682 options, 39,091 are vested, 1,420
     will vest within 60 days and 20,171 will vest within two years) 2,002 held
     jointly by Mrs. DiStefano and her spouse; 1,000 shares held in an IRA for
     the benefit of Mrs. DiStefano; 1,000 shares held in an IRA for the benefit
     of Mrs. DiStefano's spouse; 2,633 shares held in a 401(k) account for the
     benefit of Mrs. DiStefano; and 64 shares held for the benefit of Mrs.
     DiStefano's minor children.

                                                                Page 44 of _____
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 American Stock
Exchange or otherwise, in special offerings, secondary distributions pursuant to
and in accordance with applicable rules and regulations of the SEC and the
American 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 receive any of the proceeds from the sale of the common
shares offered by the selling shareholders.

                                     EXPERTS

         Grant Thornton LLP, independent certified public accountants, audited
our consolidated financial statements and related financial statement schedules
incorporated by reference in this prospectus. These documents are incorporated
by reference in this prospectus in reliance upon the report of Grant Thornton
LLP, given upon their authority as experts in accounting and auditing.

                                 LEGAL OPINIONS

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

                       WHERE YOU CAN FIND MORE INFORMATION

         We file annual, quarterly and current reports, proxy statements and
other information with the SEC. You may read and copy any reports, statements or
other information that we filed with the SEC at the SEC's Public Reference Room
at 450 Fifth Street, N.W., Washington, D.C. 20549. You may request copies of
these documents, upon payment of a copying fee, by writing to the SEC. Please
call the SEC at 1-800-SEC-0330 for information on the operation of the Public
Reference Room. Our SEC filings are also available to the public on the SEC
internet site at http://www.sec.gov.
                 -------------------
                                                                Page 45 of _____
You may also read and copy this information at the National Association
of Securities Dealers, Inc., 1735 K Street, N.W., Washington, D.C. 20006.

         The SEC allows us to "incorporate by reference" the information we file
with it, which means that we can disclose important information to you by
referring you to documents we have filed with the SEC which are not included in
this prospectus. The information incorporated by reference is considered part of
this prospectus, and later information that we file with the SEC will
automatically update and replace this information. We incorporate by reference
the documents listed below and any future filings made with the SEC under
Sections 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934:

              o   Annual Report on Form 10-K for the year ended December 31,
                  2000.

              o   Quarterly Report on Form 10-Q for the quarter ended March 31,
                  2001.

              o   Current Report on Form 8-K filed July 6, 2001.

              o   Current Report on Form 8-K filed July 19, 2001.

              o   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
                     Vice President and Chief Financial Officer
                     1818 Market Street, 28th Floor
                     Philadelphia, Pennsylvania  19103
                     (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.

                                                                Page 46 of _____
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                                                                                800,000 Shares

Prospectus                                                        Page
----------                                                        ----
Our Company................................                         4
                                                                                                  COMMON SHARES
Risk Factors...............................                         7

Description of Shares of                                                                       -------------------
   Beneficial Interest.....................                        17                           RESALE PROSPECTUS
                                                                                               -------------------
Certain Provisions of  Maryland
   Law and of our Declaration of
   Trust and Bylaws........................                        20

Federal Income Tax Consequences
   of our Status as a REIT.................                        24

Selling Shareholders.......................                        43

Plan of Distribution.......................                        45                              August 13, 2001

Use of Proceeds............................                        45

Experts....................................                        45

Legal Opinions.............................                        45

Where You Can Find More
   Information.............................                        45
Page 47 of _____
PART II

               INFORMATION REQUIRED IN THE REGISTRATION STATEMENT

Item 3. Incorporation of Documents by Reference.

         The following documents of RAIT Investment Trust (the "Registrant")
filed with the Securities and Exchange Commission (the "SEC"), are incorporated
by reference in this Registration Statement as of their respective dates:

              o   Annual Report on Form 10-K for the year ended December 31,
                  2000.

              o   Quarterly Report on Form 10-Q for the quarter ended March 31,
                  2001.

              o   Current Report on Form 8-K filed July 6, 2001.

              o   Current Report on Form 8-K filed July 19, 2001.

              o   Description of common shares contained in Form 8-A/A dated
                  January 2, 1998.

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

Item 4. Description of Securities.

         Not applicable.

Item 5. Interests of Named Experts and Counsel.

         Not applicable.

Item 6. Indemnification of Trustees and Officers.

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

                                                                Page 48 of _____
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. RAIT's Declaration of Trust permits RAIT, to the
maximum extent permitted by Maryland law, to indemnify and to pay or reimburse
reasonable expenses in advance of final disposition of a proceeding to (1) any
present or former trustee or officer who is made a party to the proceeding by
reason of his service in that capacity or (2) any individual who, while a
trustee of RAIT, and at the request of RAIT, serves or has served as a director,
officer, partner, trustee, employee or agent of another corporation,
partnership, joint venture, trust, employee benefit plan or other enterprise and
who is made a party to the proceeding by reason of his service in that capacity.

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

Item 7. Exemption from Registration Claimed.

         Not applicable.

Item 8. Exhibits.

         The following exhibits are filed herewith:

Exhibit
  No.                                Document
-------                              --------

4        (i)*     Amended and Restated Declaration of Trust.
         (ii)**   Articles of Amendment of Amended and Restated Declaration of
                  Trust.
         (iii)*** Articles of Amendment of Amended and Restated Declaration of
                  Trust.

                                                                Page 49 of _____
(iv)*    Bylaws, as amended.
         (v)***   Form of specimen certificate representing common shares.
         (vi)     RAIT Investment Trust 1997 Stock Option Plan.

5        Opinion of Ballard Spahr Andrews & Ingersoll, LLP as to the legality
         of securities being registered (including consent).

8        Opinion of Ledgewood Law Firm, P.C., regarding tax matters (including
         consent).

23(a)    Consent of Grant Thornton LLP.

23(b)    Consent of Ballard Spahr Andrews & Ingersoll, LLP (included in Exhibit
         5).

23(c)    Consent of Ledgewood Law Firm, P.C. (included in Exhibit 8).

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

  *Incorporated herein by reference to RAIT Investment Trust's Registration
   Statement on Form S-11 (File No. 333-35077), as amended.
 **Incorporated herein by reference to RAIT Investment Trust's Registration
   Statement on Form S-11 (File No. 333-53067), as amended.
***Incorporated herein by reference to RAIT Investment Trust's Registration
   Statement on Form S-2 (File No. 333-55518), as amended.

Item 9. Undertakings.

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

         The undersigned Registrant hereby undertakes:

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

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

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

              (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

                                                                Page 50 of _____
a new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.

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

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

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

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

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

                                                                Page 51 of _____
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
August 13, 2001.

                                  RAIT INVESTMENT TRUST

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

                                POWER OF ATTORNEY

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

                                                                Page 52 of _____
SIGNATURES

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

/s/ Betsy Z. Cohen                                 Date: August 13, 2001
--------------------------------------
BETSY Z., COHEN, Chairman, Chief
Executive Officer and Trustee

/s/ Scott F. Schaeffer                             Date: August 13, 2001
--------------------------------------
SCOTT F. SCHAEFFER, President and
Chief Operating Officer

/s/ Ellen J. DiStefano                             Date: August 13, 2001
--------------------------------------
ELLEN J. DISTEFANO, Vice President,
Chief Financial Officer and Assistant
Secretary

/s/ Jonathan Z. Cohen                              Date: August 13, 2001
--------------------------------------
JONATHAN Z. COHEN, Secretary and
Trustee

/s/ Joel R. Mesznik                                Date: August 13, 2001
--------------------------------------
JOEL R. MESZNIK, Trustee

/s/ Daniel Promislo                                Date: August 13, 2001
--------------------------------------
DANIEL PROMISLO, Trustee

/s/  S. Peter Albert                               Date: August 13, 2001
--------------------------------------
S. PETER ALBERT, Trustee

/s/  Edward Brown                                  Date: August 13, 2001
-------------------------------------
EDWARD BROWN, Trustee

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