Arbor Realty REIT: Standing Tall Amidst Headwinds (NYSE:ABR)


When it comes to the US Housing Market, there are a number of economic headwinds that are impacting recent economic activity and because of those headwinds, the demand for home ownership has declined, while the demand for rental housing has increased.

With that said and as an income-driven investor, I wanted to take a closer look at a REIT that’s not only been a bright spot for investors since the Great Financial Crisis of 2008-09, but one that has also positioned itself quite nicely to benefit from these headwinds and that REIT is Arbor Realty Trust (NYSE:ABR).

Arbor Realty Trust is a Real Estate Investment Trust (REIT) that operates in two segments, a Structured business as well as an Agency business. The first of these segments invests in a diversified portfolio of structured finance assets in the multifamily, single-family rental or SFR and commercial real estate markets, primarily consisting of bridge and mezzanine loans. The second of these segments originates, sells and services a range of multifamily finance products through Fannie Mae and Freddie Mac and together with Fannie Mae, GSEs, Ginnie Mae, FHA and the U.S. Department of Housing and Urban Development (together with Ginnie Mae and FHA, HUD).

According to ABR’s second-quarter earnings there were several positive takeaways from both its Structured and Agency businesses. For starters its Structured business saw its loan portfolio surpass the $15 billion dollar mark which represented 6% growth and included $2.05 billion in new loan originations while also closing on a $1.05 billion collateralized structured vehicle. On the other hand, its Agency business executed $1.27 billion in loan originations while maintaining a servicing portfolio of $26.77 billion.

Why do those numbers matter? In short, they matter because there are a number of significant quarter-over-quarter increases across key data sets. When we take a closer look at ABR’s Structured Business, we can see, as noted above, a 6% increase in its total loan portfolio which includes a 7.4% increase in multifamily bridge loans and a 25.42% increase in single-family rental or SFR bridge loans. When we take a closer look at ABR’s Agency Business we can see a 4.4% increase in revenues on a quarter-over-quarter basis ($68.8 million vs. $65.9 million), as well as an 14.4% increase in its quarter-over-quarter margins (1.59% vs. 1.39%).

When it comes to ABR’s recent dividend performance there are certainly a few positives to note for current shareholders and potential investors alike. For starters this is the 9th consecutive increase in its quarterly dividend ($0.38 vs. $0.34) and over the course of those nine quarters, shareholders have seen a 30% increase in dividends, which is significant since REITs such as LXP Industrial Trust (LXP) has only seen a 12.5% increase in its quarterly dividend over the last two years and Corporate Office Properties Trust (OFC) hasn’t seen a single increase in its quarterly dividend in nearly two years.

Now that we’ve taken a deeper dive into the financials, I want to take a quick look at some of the recent insider activity by the executives at ABR. On September 12, 2022 William Green, a Director at ABR acquired 9,255 shares of the company which subsequently increased his holdings to 134,705 shares. Additionally, On August 31, 2022, Melvin Lazar, also a Director with ABR, acquired 167 shares of the company which subsequently increased his holdings to 6,564 shares. These insider transactions demonstrated increases of 7.4% and 2.6%, respectively.

The great thing about insiders increasing their respective holdings and a company that regularly increases and consistently distributes its dividends to shareholders is that it signals long-term confidence for the income-driven investor and in today’s highly volatile and uncertain markets, these are exactly what we need to battle economic headwinds.