What: Shares of RAIT Financial Trust Real Estate Trust (NYSE: RAS) are on the move, dropping more than 25% at 12 p.m. ET.
So what: RAIT announced a surprise cut in its quarterly dividend to $0.09 per share, from $0.18 per share previously. Along with the dividend announcement, the company puzzled investors by reaffirming its guidance for $0.22 to $0.23 per share in cash available for distribution in the fourth quarter.
It's rare to see a real estate investment trust reaffirm guidance and simultaneously slash its dividend 50% given the requirement that REITs pay out 90% of their income to shareholders as a dividend.
In the 8-K, RAIT separately announced it should be able to reach a settlement for a shareholder's derivative action (lawsuit) against the company and some of its executives.
Now what: The board of directors believes the $0.09 dividend will enable RAIT to support its lending platform. Executives highlighted the company's capital recycling plan on the third-quarter conference call, suggesting it would seek to monetize some property investments to rotate into its real estate lending business.