Arbor Realty Trust (NYSE:ABR) reported second-quarter distributable earnings of $31 million, or $0.15 per share, as the mortgage real estate investment trust continued to work through non-performing loans and restructure its funding profile.
Chief Executive Officer Ivan Kaufman said the company completed several capital-markets transactions during the quarter and early in the third quarter that increased liquidity and reduced financing costs. Arbor unwound another legacy collateralized loan obligation, refinancing the loans through bank lines at pricing nearly 40 basis points lower and with leverage improved by nearly 10 percentage points. Kaufman said the transaction generated about $135 million of additional liquidity.
Convertible Offering and Cost Reduction Efforts
In early July, Arbor completed a $375 million convertible debt offering and used most of the proceeds to repay its September bonds. The company also used $114 million of the proceeds to repurchase 21 million shares at $5.42 per share, which Kaufman said was below 50% of book value.
Chief Financial Officer Paul LeMieux said the share repurchase raised pro forma book value per share to $11.59 from $10.95 at June 30, representing a 6% increase. Kaufman said the buyback was expected to be accretive to both book value per share and future earnings per share.
Arbor also announced a workforce reduction in certain areas of its business. The company expects recurring annual savings of approximately $10 million, or $0.05 per share, after a one-time severance payment. Kaufman said the company is also pursuing further expense reductions, including wider use of artificial intelligence to improve operational and process efficiency.
Originations Rise, Though Rates Affect Closing Timing
Arbor originated $1.05 billion through its agency platform during the second quarter, along with $50 million of CMBS brokerage transactions, for total agency-related volume of $1.1 billion. Year-to-date agency volume totaled about $1.9 billion, up 30% from the prior year, management said.
Higher and volatile interest rates have slowed transaction closings, Kaufman said, though the company has a growing pipeline of larger loans and expects a stronger second half. Management said it hopes to generate agency volume similar to 2025, although closing timing remains uncertain.
In balance-sheet lending, Arbor originated $160 million during the quarter and more than $550 million in the first half. Kaufman said the bridge-lending market remains highly competitive, leading the company to focus on larger transactions with higher-quality sponsors. Arbor maintained its 2026 balance-sheet lending guidance of $1 billion to $1.5 billion.
The company’s single-family rental platform originated $315 million during the second quarter and another $215 million in July, bringing year-to-date volume to $700 million. Kaufman attributed a stronger forward pipeline in part to the passage of the One Big Beautiful Bill Act and its carve-outs for build-to-rent businesses. Arbor also expects to originate between $500 million and $750 million in construction lending.
Arbor’s fee-based servicing portfolio grew to $36.7 billion at June 30. LeMieux said the portfolio carried a weighted average servicing fee of 35 basis points and an estimated remaining life of six years, producing about $128 million of gross annual income.
Legacy Loan Resolutions Remain Central Focus
Management said elevated interest rates have extended the timeline for resolving delinquent loans and real estate owned, or REO, assets. Kaufman said Arbor expects it could take another four to six quarters to resolve the majority of these assets.
At June 30, Arbor had approximately $525 million of delinquencies and $545 million of REO assets, for total non-performing assets of roughly $1.07 billion. The company resolved $90 million of those assets in July and had executed agreements to resolve another $105 million in August. Kaufman said those transactions would reduce the non-performing loan book to approximately $875 million, a 13% decline from the first quarter.
Management also said it has visibility into resolving another $200 million to $300 million of delinquencies during the third and fourth quarters and aims to reduce REO assets to about $300 million by year-end. Arbor generally seeks to market potential REO assets to existing borrowers and, in many cases, provides seller financing to support execution, executives said during the question-and-answer session.
Arbor’s legacy portfolio declined to $4.7 billion at June 30 after the company resolved $800 million of loans during the quarter. Kaufman said the company is targeting restructurings and resolutions of roughly $500 million per quarter, which could reduce the legacy portfolio to about $2.4 billion by year-end and below $1 billion by the end of 2027.
Reserves and Near-Term Earnings Pressure
LeMieux said second-quarter distributable earnings excluded $10 million of realized losses tied to resolutions of delinquent and REO assets that had previously been reserved for. The company recorded an additional $14 million of REO impairments, $22 million of specific reserves on balance-sheet loans, and $16 million of additional general CECL reserves during the quarter.
Management expects realized losses of $20 million to $30 million per quarter for the next few quarters as it accelerates asset resolutions, though the precise timing may vary. LeMieux said distributable earnings could remain in the $0.15 to $0.17 per-share range over the next two or three quarters, with potential improvement in 2027 as non-performing assets are converted into income-producing loans.
During the call, Kaufman said maximizing shareholder value remains Arbor’s objective and that strategic alternatives are among the options the company considers. He closed by saying Arbor is “extraordinarily well positioned” to continue navigating the prolonged downturn.
About Arbor Realty Trust (NYSE:ABR)
Arbor Realty Trust, Inc (NYSE: ABR) is a real estate investment trust specializing in the origination, acquisition, financing, structuring and management of commercial real estate loans and securities. The company focuses primarily on multifamily and commercial mortgage lending, targeting properties such as apartment communities, senior housing and healthcare facilities. Through both agency and non-agency channels, Arbor Realty Trust seeks to deliver liquidity solutions to borrowers while generating stable, risk-adjusted returns for its shareholders.
Core business activities include originating first-mortgage loans secured by multifamily and mixed-use properties, as well as providing mezzanine financing and preferred equity investments.
