Real Estate

Multifamily Loan Originator Arbor Realty Trust Seeing Strongest Earnings Ever

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Arbor Realty Trust, Inc. (NYSE: ABR), a multifamily loan originator, is seeing its strongest earnings ever, even as rents and occupancy levels in the multifamily sector look set to decline in the next 12-18 months.

“It’s going to get a little bit soft, but our baseline is phenomenal. We can handle that softness…all in all we’re in an extraordinarily great place,” Arbor President and CEO Ivan Kaufman said Oct. 1 during an NYU Schack Capital Markets Leadership Series webinar.

Kaufman said the dramatic decline in interest rates can more than offset the decline in rents and occupancy that borrowers are facing.

At the same time, Kaufman noted that Arbor’s strong lending platform in conjunction with Fannie Mae and Freddie Mac, a balance sheet exceeding $5 billion, and other diversified business activities put the company in a solid position.

Furthermore, after a 10-year bull run, Arbor was already preparing for a recession ahead of the pandemic, Kaufman explained. That prior planning enabled Arbor to increase its dividend during the crisis. “Our earnings have never been better,” he said.

Because of a shortage of investable asset classes today, according to Kaufman, “multifamily has become the darling in the industry…that market is on fire again.” All core-plus assets, especially in suburban areas, are in huge demand, he said. Urban areas, however, face a different outlook. “I think people are concerned about what’s going to happen in the urban areas, specifically in class-A (housing),” he added.

Turning to CMBS issuance, Kaufman said that after being “decimated” at the start of the pandemic, the market is returning slowly. “There’s a lot of private capital that wants to make a lot of yield. Once some of these assets reach their bottom, you’ll see that market return,” he noted.

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