Arbor Realty Trust Q1 Earnings Call Highlights

Key Points

• Arbor Realty Trust said it is making progress on reducing troubled assets, but higher long-term rates are slowing resolutions and continuing to pressure earnings. Management called the legacy loan book a major drag and said it remains the company’s top priority.
• The board cut the quarterly dividend to $0.17 per share, and executives said second- and third-quarter earnings may mark a low point before improving later in 2026. CFO Paul Elenio said Q2 earnings could dip to about $0.15 per share due to temporary financing inefficiencies.
• Non-performing assets fell to about $1 billion at quarter-end, but Arbor expects more losses as it works through delinquencies and REO assets. Management still sees a path to meaningful improvement, with earnings potentially rebounding in Q4 and continuing into 2027.

Arbor Realty Trust NYSE: ABR executives said the company is making progress reducing troubled assets but warned that higher long-term rates are extending the timeline for resolutions and weighing on earnings.

On the company’s first-quarter 2026 earnings call, President and Chief Executive Officer Ivan Kaufman said Arbor remains focused on working through a legacy loan portfolio that continues to create “a tremendous drag” on results. The company reported distributable earnings of $0.18 per share for the quarter, while Chief Financial Officer Paul Elenio said shareholder earnings were $37.4 million, or $0.18 per share, excluding $23 million of one-time realized losses tied to the resolution of delinquent and real estate owned assets.

Kaufman also addressed past short-seller reports and related legal and regulatory matters, saying Arbor believes any pending investigations initiated after those reports have been closed without action against the company. He added that a class action lawsuit was recently dismissed without prejudice after the company’s motion to dismiss was granted.

Dividend Reset as Rates Pressure Resolution Timeline

Arbor’s board reset the quarterly dividend to $0.17 per share. Kaufman said the decision reflected a more volatile rate environment and a slightly longer timeline for resolving delinquent and sub-performing loans.

“We believe this is a dividend we will be able to cover from earnings for the rest of the year,” Kaufman said, adding that the company sees potential for growth later in 2026 and into 2027 as it reduces the earnings drag from legacy assets.

Elenio said the second and third quarters are likely to represent a “low water mark” for earnings, hovering around $0.17 per share, though he estimated second-quarter earnings at about $0.15 per share because of roughly $0.02 per share of temporary financing-cost inefficiencies. He said Arbor expects earnings to begin growing in the fourth quarter if it executes on its plan to turn non-performing assets into performing loans.

Non-Performing Assets Decline, But Losses Expected to Continue

Kaufman said Arbor ended the quarter with about $500 million in delinquencies and about $500 million of REO assets, for total non-performing assets of roughly $1 billion. That was down approximately $100 million, or 9%, from the prior quarter. The company recorded $200 million of new delinquencies in the first quarter and $300 million of resolutions.

Management said Arbor has line of sight on another $200 million to $300 million of delinquency resolutions expected in the second and third quarters, plus another $100 million that could potentially be resolved by year-end. Kaufman said the company remains optimistic it can reduce REO assets to about $250 million to $300 million by the end of 2026, even after taking back an additional $100 million of assets over the next few quarters.

Elenio said the company recorded $12.5 million of impairment on its REO book and another $9 million of specific reserves on its balance sheet loan book in the first quarter, for total REO impairments and specific reserves of $21.5 million. He guided to approximately $15 million to $25 million of realized losses per quarter for the balance of the year, while noting the company expects to continue reserving as it receives more price discovery on assets.

Agency, Bridge and Construction Lending Updates

Arbor originated $708 million of agency volume in the first quarter and completed its first CMBS brokerage transaction of $88 million, bringing total first-quarter volume in that area to $795 million. Kaufman said the results were in line with guidance, given the seasonal nature of the agency business and the impact of higher rates. He said Arbor had closed $350 million of volume through the first week of May and still expects to produce similar volumes to last year, with a stronger second half dependent on rates.

In the balance sheet lending business, Arbor originated $400 million in the quarter. Kaufman said the bridge lending market remains “incredibly competitive,” leading the company to be highly selective and focus on larger deals with high-quality sponsors. In response to an analyst question, he said Arbor is intentionally moving toward larger loans because that allows management to focus more attention on each deal.

The company also issued another collateralized loan obligation during the quarter, priced at 1.73 percentage points over the benchmark with 88% leverage and a 2.5-year replenishment feature. Kaufman called the execution an “incredible accomplishment,” noting it was priced during the height of the Iranian conflict.

In construction lending, Arbor closed one $113 million deal in the first quarter and expects to close another $250 million in the second quarter. Kaufman said the pipeline supports the company’s target of $750 million to $1 billion of construction lending production in 2026.

Single-Family Rental Business Begins to Recover

Kaufman said Arbor’s single-family rental business had an unusually slow start to the year, driven primarily by uncertainty surrounding proposed housing legislation. He said the bill, in its current form, did not include the full carve-out for build-to-rent businesses that had been expected, causing some market participants to pause activity.

However, in response to a question from KBW analyst Jade Rahmani, Kaufman said momentum has returned as market participants increasingly believe the bill will not pass in its current form and that appropriate carve-outs will be considered. Arbor originated about $125 million in single-family rental volume in the first quarter. Kaufman said the company already had about $200 million in the second quarter and expects to exceed $300 million for the period.

He described the borrower base as often institutionally backed, with many borrowers holding between five and 30 assets. Kaufman also said credit markets are aggressive and that agencies, including Fannie Mae and Freddie Mac, as well as the CMBS market, view the product favorably.

Regional Credit Trends and Portfolio Commentary

Asked by Raymond James analyst David Farnum about exposure to Texas and Florida, Kaufman said the company is seeing signs of stabilization after softness over the past 24 months. He cited Florida and Atlanta as markets that faced particular challenges, including effects from immigration enforcement activity that he said sharply affected occupancy at some assets.

Kaufman said Arbor is seeing resets in rental rates, improving occupancy and better tenant screening. He also said the company has been more aggressive in requiring management changes or taking control of assets that are not performing properly.

“We’re seeing the benefit of our effort by seeing a real stabilization in these assets and now a growth back in occupancy and operating income,” Kaufman said.

Arbor’s investment portfolio stood at $12 billion at March 31, with an all-in yield of 7.03%, compared with 7.08% at Dec. 31. Elenio said the decline was mainly due to resetting rates on certain legacy loans and a slight decline in SOFR. Total debt on core assets was about $10.7 billion at quarter-end, with an all-in cost of debt of approximately 6.4%.

Management repeatedly emphasized that resolving the legacy loan book remains Arbor’s top priority. Kaufman said the company believes it has a clear path to resolving the majority of these assets over the next several quarters, which he said should help rebuild the earnings base heading into 2027.

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.

This instant news alert was generated by narrative science technology and financial data from MarketBeat in order to provide readers with the fastest reporting and unbiased coverage. Please send any questions or comments about this story to contact@marketbeat.com.