IRT

Business Context and Reporting Period

Company: Empire American Realty Trust, Inc. (Note: Request metadata listed "Independence Realty Trust," but the filing text identifies the registrant as Empire American Realty Trust, Inc.)
Reporting Period: Quarterly period ended June 30, 2010.
Status: Development Stage Company. The Company was incorporated on March 26, 2009, and has not yet commenced operations or acquired any real estate assets. It intends to qualify as a Real Estate Investment Trust (REIT) beginning with the taxable year ending December 31, 2010.
Capitalization: 20,000 shares of common stock outstanding as of June 30, 2010.

Key Financial Metrics

Note: Revenue consists entirely of interest income from short-term loans made to the Company's sponsor. No operating revenue from real estate exists.

Material Changes vs. Prior Period

• Profitability: The Company reported a net income of $5,120 for the six months ended June 30, 2010, compared to a net loss of $173 for the period from inception (March 26, 2009) to June 30, 2009. This improvement is driven by interest income of $5,370 generated from a $200,000 short-term loan to the sponsor.
• Liquidity: Cash and cash equivalents increased from $205,667 at December 31, 2009, to $209,566 at June 30, 2010.
• Liabilities: Total liabilities increased from $3,031 to $28,250, primarily due to a $27,000 subscription payable related to funds held in escrow for stock subscriptions.
• Offering Status: The Company commenced its public offering on May 18, 2010. As of August 11, 2010, it had received subscriptions for 125,555 shares, pending satisfaction of conditions.

Outlook, Risks, and Management Commentary

• Business Plan: The Company intends to use proceeds from its offering to acquire a diversified portfolio of multifamily properties and real estate-related debt. It has not yet identified specific assets for investment.
• Related Party Transactions: The Company relies heavily on its Sponsor and Advisor (Empire American Advisors, LLC). Significant fees are anticipated upon the operational stage, including selling commissions (up to 7%), dealer manager fees (up to 3%), acquisition fees (2.5%), and asset management fees (0.75% of average invested assets).
• REIT Qualification: The Company plans to elect REIT status for the 2010 tax year. Failure to qualify would subject the Company to regular corporate income taxes, materially affecting net income.
• Risks: Key risks include the lack of operating history, the "best efforts" nature of the offering (no guarantee of raising minimum capital), reliance on the Advisor for investment selection, and potential conflicts of interest with affiliates. The Company currently has no off-balance sheet arrangements.
• Dividends: No dividends have been declared or paid as of June 30, 2010.

Investor Verification Checklist

• Offering Minimums: Verify if the Company has raised the minimum offering requirements to proceed with the business plan, as expenses are not reimbursed until this threshold is met.
• Asset Acquisition: Confirm if any specific real estate assets have been identified or contracted for purchase, as the Company currently holds no real estate investments.
• Related Party Loans: Review the terms and repayment status of loans made to the Sponsor, which currently constitute the Company's only revenue source.
• Subscription Escrow: Verify the status of the $27,000 in subscription escrow and the conditions required for the issuance of the subscribed shares.
• REIT Status: Monitor the filing of the 2010 tax return to confirm successful qualification as a REIT.