1294017--12/20/2010--JER_Investors_Trust

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Risks Relating to Our Ability to Continue as a Going Concern Our current financial condition raises substantial doubt regarding our ability to continue as a going concern. However, our consolidated financial statements are presented on a going concern basis. Risks Relating to Our Business We may not be able to access financing on favorable terms, or at all, which could adversely affect our ability to execute our business plan. Deterioration of market conditions has recently and may continue to negatively impact our business, results of operations and financial condition, including liquidity. A prolonged economic slowdown, a lengthy or severe recession, or declining real estate values could harm our operations. We do not know what impact the Dodd-Frank Act will have on our business. Under our repurchase agreements, we may be required to post significant amounts of cash collateral to satisfy our margin requirements and scheduled amortization due to lower collateral values or declines in advances rates from lenders or to repurchase securities upon the occurrence of certain events. If the counterparty to our repurchase agreement becomes insolvent or otherwise defaults on its obligation to resell the underlying securities back to us at the end of the transaction term, we may lose money on such repurchase transaction. Lenders may require us to enter into restrictive covenants relating to our operations. Investor demand for commercial real estate CDOs has been substantially curtailed. We have incurred significant debt to finance our investments, which has and may continue to subject us to increased risk of loss and reduce cash available for distributions to our stockholders. Interest rate fluctuations could reduce our ability to generate income on our investments and may cause losses. If credit spreads widen before we obtain long-term match funded financing for our assets, the value of our assets may suffer and we may earn lower returns on our equity invested. We may not be able to acquire eligible securities and/or loans for future CDO issuances, or may not be able to issue CDO securities on attractive terms that closely match fund the duration of our assets and liabilities, which may require us to seek more costly financing for our investments or to liquidate assets. The use of CDO financings with over-collateralization requirements has had a negative impact on our cash flow. The failure to comply with CDO coverage tests has had a negative impact on our cash flow. We may be required to repurchase loans that we have sold to indemnify holders of our CDOs. An increase in prepayment rates could adversely affect yields on our investments. Our hedging transactions may limit our gains, result in losses or limit our free cash flow. Hedging instruments often are not traded on regulated exchanges, guaranteed by an exchange or its clearing house, or regulated by any U.S. or foreign governmental authorities and involve risks and costs. We are subject to significant competition and we may not compete successfully. Maintenance of our Investment Company Act exemption imposes limits on our operations. Risks Related to Our Investments Our real estate investments are subject to risks particular to real property. The mortgage loans in which we invest and the mortgage loans underlying the mortgage backed securities in which we invest are subject to risks of delinquency, foreclosure and loss, which could result in losses to us. Credit Statistics on Collateral Pool for First-Loss CMBS Investments Our investments in subordinated commercial mortgage backed securities could subject us to increased risk of losses. Investment in non-investment grade CMBS may be illiquid, may have a higher risk of default, and may not produce current returns. Investments in mezzanine loans involve greater risks of loss than senior loans secured by income producing properties. We may not have control over certain of our loans and investments. Investment in non-conforming and non-investment grade loans may involve increased risk of loss. Credit ratings assigned to our investments are subject to ongoing evaluation and we cannot assure you that the ratings currently assigned to our investments will not be downgraded or that they accurately reflect the risks associated with those investments. Rating agency downgrades have and may continue to adversely affect our cash flows. Insurance on mortgage loans and real estate securities collateral may not cover all losses. Many of our investments are illiquid and we may not be able to vary our portfolio in response to changes in economic and other conditions. Lack of diversification in number of investments increases our dependence on individual investments. Liability relating to environmental matters may impact the value of our properties or the properties underlying our investments. Investment properties we have acquired and the properties underlying our investments are required to comply with the Americans with Disabilities Act and fire, safety and other regulations, which may require us or them to make unintended expenditures that adversely impact their ability to make interest payments to us and our ability to pay dividends to stockholders. We may be adversely affected by unfavorable economic changes in geographic areas where the properties underlying our investments may be concentrated. Risks Relating to Our Management and our Relationship with Our Manager and J.E. Robert Company and its Affiliates We are dependent upon our manager and certain key personnel of J.E. Robert Company provided to us through our manager and may not find a suitable replacement if our manager terminates the management agreement or such key personnel are no longer available to us. There are conflicts of interest in our relationship with J.E. Robert Company and its affiliates, including with our manager, which could result in decisions that are not in the best interests of our stockholders. Termination of our management agreement would be costly. Our investment opportunities may be limited by the conflicts of interest policy of J.E. Robert Company, which manages or co-manages private equity funds with investment objectives that overlap with ours, and by the terms of the US Debt Fund. We may invest in mortgage loans, mezzanine loans or B-Notes where a JER Fund owns all or a portion of the equity in the underlying borrower, and as a result, we will not have the typical control, approval, consent or other rights we generally obtain in such investments. Mr. Joseph E. Robert, Jr. has significant control over our company and will influence decisions regarding our operations and our business. Our board of directors has approved very broad investment guidelines for our manager and does not approve each investment decision made by our manager. We may change our investment strategy without stockholder consent, which may result in riskier investments. We may change our operational policies without stockholder consent, which may adversely affect the market price of our common stock and our ability to make distributions to our stockholders. Risks Related to Our Organization and Structure Maryland takeover statutes may prevent or make difficult a change of control of our company that could be in the interests of our stockholders. Our authorized but unissued common and preferred stock may prevent a change in our control. The requirements of the Investment Company Act impose limits on our operations. Our rights and the rights of our stockholders to take action against our directors and officers are limited, which could limit your recourse in the event of actions not in your best interests. Our charter contains provisions that make removal of our directors difficult, which could make it difficult for our stockholders to effect changes to our management. Risks Related to Our Taxation as a REIT Our failure to qualify as a REIT would result in higher taxes and reduced cash available for distribution to our stockholders. Dividends payable by REITs do not qualify for the reduced tax rates. REIT distribution requirements could adversely affect our liquidity position and ability to execute our business plan. We have in the past chosen, and may in the future choose, to pay dividends in our own stock, in which case you may be required to pay income taxes in excess of the cash dividends you receive. The stock ownership limit imposed by the Internal Revenue Code for REITs and our charter may restrict our business combination opportunities. Even if we remain qualified as a REIT, we may face other tax liabilities that reduce our cash flow. Complying with REIT requirements may cause us to forego otherwise attractive opportunities. Complying with REIT requirements may force us to liquidate otherwise attractive investments. Liquidation of assets may jeopardize our REIT status. Complying with REIT requirements may limit our ability to hedge effectively. The taxable mortgage pool rules may increase the taxes that we or our stockholders may incur, and may limit the manner in which we effect future securitizations. The tax on prohibited transactions will limit our ability to engage in transactions, including certain methods of securitizing mortgage loans, which would be treated as sales for federal income tax purposes. Risks Related to Trading of our Common Stock Our Common Stock is no longer traded on the NYSE. We no longer file reports with the SEC. The market price and trading volume of our common stock may be volatile. We have not established a minimum distribution payment level and we cannot assure you of our ability to make distributions in the future. An increase in market interest rates may have an adverse effect on the market price of our common stock.

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1294017--12/20/2010--JER_Investors_Trust_Inc