What changed in this filing

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Item 1. Business

2025-02-21 compared with 2024-02-20 · 51 added, 49 removed, 280 unchanged (26% of the section changed)

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Arbor is a Maryland corporation formed in 2003.

We are a nationwide real estate investment trust (“REIT”) and direct lender, providing loan origination and servicing for commercial real estate assets.

We operate through two business segments:

our Structured Loan Origination and Investment Business, or “Structured Business,” and our Agency Loan Origination and Servicing Business, or “Agency Business.”

Through our Structured Business, we invest in a diversified portfolio of structured finance assets in the multifamily, single-family rental (“SFR”) and commercial real estate markets, primarily consisting of bridge loans, in addition to mezzanine loans, junior participating interests in first mortgages and preferred and direct equity.

We also invest in real estate-related joint ventures and may directly acquire real property and invest in real estate-related notes and certain mortgage-related securities.

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We retain the servicing rights and asset management responsibilities on substantially all loans we originate and sell under the GSE and HUD programs.

We are an approved Fannie Mae Delegated Underwriting and Servicing (“DUS”) lender nationally, a Freddie Mac Multifamily Conventional Loan lender, seller/servicer, in New York, New Jersey and Connecticut, a Freddie Mac affordable, manufactured housing, senior housing and small balance loan (“SBL”) lender, seller/servicer, nationally and a HUD MAP and LEAN senior housing/healthcare lender nationally.

We are an approved Fannie Mae Delegated Underwriting and Servicing (“DUS”) lender nationally, a Freddie Mac Optigo® Conventional Loan and Small Balance Loan ("SBL") lender, seller/servicer, nationally and a HUD MAP and LEAN senior housing/healthcare lender nationally.

We also originate and retain the servicing rights on permanent financing loans that are generally underwritten using the guidelines of our existing agency loans sold to the GSEs, which we refer to as “Private Label” loans, and originate and sell finance products through conduit/commercial mortgage-backed securities (“CMBS”) programs.

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Substantially all of our operations are conducted through our operating partnership, Arbor Realty Limited Partnership (“ARLP”), for which we serve as the indirect general partner, and ARLP’s subsidiaries.

We are organized to qualify as a real estate investment trust (“REIT”) for U.S.

We are organized to qualify as a REIT for U.S.

federal income tax purposes.

A REIT is generally not subject to federal income tax on its REIT-taxable income that is distributed to its stockholders, provided that at least 90% of its REIT-taxable income is distributed and provided that certain other requirements are met.

A REIT is generally not subject to federal income tax on its taxable income that is distributed to its stockholders;

provided that at least 90% of its taxable income is distributed and provided that certain other requirements are met.

Certain of our assets that produce non-qualifying REIT income, primarily within the Agency Business, are operated through taxable REIT subsidiaries (“TRS”), which are part of our TRS consolidated group (the “TRS Consolidated Group”) and are subject to U.S.

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Business Objectives and Strategy

We have an annuity-based business model that drives our diversified income streams to produce consistent earnings growth and to maximize the total return to our stockholders.

In our Structured Business, our primary focus is on maximizing the interest margin on our loans (yield on investments less cost to finance investments) and growing our loan portfolio which also provides a pipeline to growth in our Agency/GSE servicing portfolio.

In our Agency Business, our primary focus is growing the fees generated from our origination platform and the stable earnings associated with our servicing portfolio.

We have an annuity-based business model that generates diversified income streams, which allows us to maximize the total return to our stockholders.

In our Structured Business, our primary objective is maximizing the interest margin on our loans (yield on investments less cost to finance investments) and growing our loan portfolio, which also provides a pipeline to growth in our GSE/Agency servicing portfolio.

In our Agency Business, our primary objective is growing the fees generated from our origination platform and the stable earnings associated with our servicing portfolio.

One of our core business strategies is to generate additional agency lending opportunities by refinancing our multifamily balance sheet bridge loan portfolio when it is practical and appropriate to do so.

We execute this strategy by underwriting the multifamily bridge loans we originate to a potential future agency financing.

We then continue to work with our borrowers on this execution through the life cycle of the multifamily bridge loan.

When effective, this strategy allows us to recapture refinancing opportunities, deleverage our balance sheet, and generate additional income streams through our capital-light Agency Business.

Our primary objectives are to generate cash available for distribution and facilitate capital appreciation, which we believe can be achieved through the following investment strategies:

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Our Agency Business benefits from our long-established relationships with Fannie Mae, Freddie Mac and HUD enabling us to offer a broad range of loan products and services which maximizes our ability to meet borrowers’ needs.

Leverage the Experience of Executive Officers and Our Employees.

Leverage the Experience of Executive Officers and Employees.

Our executive officers and employees have extensive experience originating and managing structured commercial real estate investments.

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We pursue short-term and long-term lending and investment opportunities and primarily target transactions where we believe we have competitive advantages, particularly our lower cost structure and in-house underwriting capabilities.

Our primary focus has been, and continues to be, first mortgage lending in the highly attractive and stable multifamily real estate sector.

Through our Structured Business, we offer the following investment types:

Our primary focus is first mortgage lending in the highly attractive and stable multifamily real estate sector.

Through our Structured Business, we focus primarily on the following investment types:

Bridge Financing.

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Mezzanine Financing.

We offer mezzanine financing in the form of loans that are subordinate to a conventional first mortgage loan and senior to the borrower’s equity in a transaction.

We offer mezzanine financing in the form of loans that are subordinate to a conventional first mortgage loan (including certain GSE/Agency loans) and senior to the borrower’s equity in a transaction.

Mezzanine financing may take the form of loans secured by pledges of ownership interests in entities that directly or indirectly control the real property or subordinated loans secured by second mortgage liens on the property.

We may also require additional security such as personal guarantees, letters of credit and/or additional collateral unrelated to the property.

We may also require additional security such as personal guarantees, letters of credit

and/or additional collateral unrelated to the property.

Similar to our bridge loans, the yield on these investments may be enhanced by prepaid and deferred interest payments, yield look-backs and participating interests.

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Preferred Equity Investments.

We provide financing by making preferred equity investments in entities that directly or indirectly own real property.

We provide financing by making preferred equity investments in entities that directly or indirectly own real property that are subordinate to a first mortgage loan (including certain GSE/Agency loans).

In cases where the terms of a first mortgage prohibit additional liens on the ownership entity, such as in mezzanine financing, investments structured as preferred equity in the entity owning the property serve as viable financing substitutes.

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Similar to our bridge loans, the yield on these investments may be enhanced by prepaid and deferred interest payments, yield look-backs and participating interests.

Junior Participation Financing.

We offer junior participation financing in the form of a junior participating interest in the senior debt.

Junior participation financings have the same obligations, collateral and borrower as the senior debt.

The junior participation interest

is subordinated to the senior debt by virtue of a contractual agreement between the senior debt lender and the junior participating interest lender.

Similar to our bridge loans, the yield on these investments may be enhanced by prepaid and deferred interest payments, yield look-backs and participating interests.

Structured Transactions.

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GSE and HUD Agency Lending.

We are one of 25 approved lenders that participate in Fannie Mae’s DUS program and one of 22 lenders approved as a Freddie Mac Multifamily Conventional Loan lender for multifamily, manufactured, student, affordable and certain seniors housing properties, one of 12 participants in the Freddie Mac SBL program and an approved HUD MAP and LEAN lender providing construction permanent loans to developers and owners of multifamily housing, affordable housing, seniors housing and healthcare facilities.

We are one of 25 approved lenders that participate in Fannie Mae’s DUS program and one of 22 lenders approved as a Freddie Mac Optigo ® Conventional Loan lender for multifamily, manufactured, and student housing properties, one of 12 participants in the Freddie Mac Optigo ® SBL program and an approved HUD MAP and LEAN lender providing construction permanent loans to developers and owners of multifamily housing, affordable housing, seniors housing and healthcare facilities.

We underwrite, originate, sell and service multifamily mortgage loans across the U.S.

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27 148,845 6.42 % 53.9

Construction Multifamily 2 4,367 9.97 % 20.8

Other Single‑Family Rental 1 3,082 9.36 % 10.3

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(1) “Weighted Average Pay Rate” is a weighted average, based on each loan’s unpaid principal balance (“UPB”), of our interest rate required to be paid monthly as stated in the individual loan agreements.

(1) “Weighted Average Pay Rate” is a weighted average, based on the unpaid principal balance (“UPB”) of each loan in our portfolio, of the interest rate required to be paid as stated in the individual loan agreements.

Certain loans and investments that require an additional rate of interest “accrual rate” to be paid at maturity are not included in the weighted average pay rate as shown in the table.

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One of the Agency Business’s primary sources of revenue are the gains and fees recognized from the origination and sale of mortgage loans.

Loans originated under GSE and HUD programs, as well as our SFR fixed rate product, are generally sold within 60 days from the

loan origination date.

Loans originated under GSE and HUD programs, as well as our SFR fixed rate product, are generally sold within 60 days from the loan origination date.

Our Private Label loans are either sold instantaneously or pooled and securitized, or sold, generally within 180 days of loan origination.

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Product Concentrations Geographic Concentrations

Count UPB (1) Percent

Count UPB (1) %

Servicing Fee Rate

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(1) Excludes loans in which we are not collecting a servicing fee.

(2) Represents four bridge loans sold by our Structured Business that we are servicing.

See Note 3 for details.

(2) Represents bridge loans sold by our Structured Business that we are servicing.

(3) No other individual state represented 4% or more of the total.

The following describes our lending and investment process for both our Structured and Agency Businesses.

We have a network of sales and support offices in California, Florida, Indiana, Maryland, Massachusetts, Michigan, New Jersey, New York and Pennsylvania that staff 26 loan originators who solicit property owners, developers, and mortgage loan brokers.

We have a network of sales and support offices in California, Florida, Indiana, Maryland, Massachusetts, Michigan, New Jersey, New York, and Texas that staff 26 loan originators who solicit property owners, developers, and mortgage loan brokers.

In some instances, the originators accept loan applications which meet our underwriting criteria from a select group of mortgage loan brokers.

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We continuously refine our underwriting criteria based upon actual loan portfolio experience and as market conditions and investor requirements evolve.

Investment Approval Process.

We apply an established investment approval process to all loans and other investments proposed for our Structured Business before submitting each proposal for final approval.

A written report is generated for every loan or other investment that is submitted to our credit committee for approval, which consists of our chief executive officer, chief credit officer and executive vice president of structured finance.

The report includes a description of the prospective borrower and any guarantors, the collateral, and the proposed use of investment proceeds, as well as borrower and property financial statements and analysis.

The report also includes an analysis of borrower liquidity, net worth, cash investment, income, credit history and operating experience.

All transactions require the approval of the majority of the members of our credit committee.

Following the approval of a transaction, our underwriting and servicing departments, together with our asset management group, assure that all loan approval terms have been satisfied and conform to lending requirements established for that particular transaction.

Our loan approval process for the Agency Business requires the submission of a detailed loan package in accordance with our underwriting checklist to our agency loan committee for approval.

Credit & Investment Committee Approval Process.

We apply an established credit and investment approval process to all proposed loans and other investments for our Structured Business.

All proposed loans and investments are submitted to and presented to our credit & investment committee ("C&IC”) overseen by our chief credit officer and comprised of participants from originations, screening, underwriting, treasury, securitization, servicing, asset management and legal.

The C&IC convenes weekly, or as needed, to review and approve transactions.

Prior to presentation to the C&IC, the underwriter on each proposed loan or investment submits a written credit memo for distribution to all C&IC participants.

The credit memo includes all material information concerning the prospective sponsor, the property, the proposed business plan, and all loan or investment related risks and mitigants.

At the C&IC meeting, the underwriter presents the transaction and answers any questions posed by C&IC members.

All transactions require the unanimous approval of the respective approvers, including the chief credit officer.

Minutes of each loan or other investment presented at C&IC are recorded by the committee secretary and subsequently ratified by the chief credit officer.

Following the approval of a transaction at C&IC, the deal team is responsible for ensuring that all conditioned approval terms have been satisfied and conform to programmatic lending requirements, as well as to those established for the transaction at C&IC.

Our loan approval process for the Agency Business requires the submission of a detailed loan package in accordance with the applicable agency program requirements and guidelines.

Our agency loan committee consists of multiple members of our senior and executive management teams, including our chief underwriter for the Agency Business and its chief operating officer.

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This group monitors each investment’s operating history, local economic trends and rental and occupancy rates and evaluates the underlying property’s competitiveness within its market.

This group assesses ongoing and potential operational and financial performance of each investment in order to evaluate and ultimately improve its operations and financial viability.

This group assesses ongoing and potential operational and

financial performance of each investment in order to evaluate and ultimately improve its operations and financial viability.

The asset management group performs frequent onsite inspections, conducts meetings with borrowers and evaluates and participates in the budgeting process, financial and operational review and renovation plans of each underlying property.

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Financing Policies.

We finance our structured finance investments primarily by borrowing against, or “leveraging,” our existing portfolio and using the proceeds to acquire additional mortgage assets.

We finance our Structured Business investments primarily by borrowing against, or “leveraging,” our existing portfolio and using the proceeds to acquire additional mortgage assets.

We expect to incur debt such that we will maintain an equity-to-assets ratio no less than 20% (including junior subordinated notes as equity), although the actual ratio may be lower from time to time depending on market conditions and other factors deemed relevant.

Our charter and bylaws do not limit the amount of indebtedness we can incur, and the Board of Directors has discretion to deviate from or change our indebtedness policy at any time, provided that we are in compliance with our bank covenants.

Our charter and bylaws do not limit the amount of indebtedness we can incur, and the Board of Directors has discretion to deviate from or change our indebtedness policy at any time;

provided that we are in compliance with our bank covenants.

However, we intend to maintain an adequate capital base to protect against various business environments in which our financing and hedging costs might exceed the interest income from our investments.

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Equity Capital Policies.

Subject to applicable law, our Board of Directors have the authority, without further stockholder approval, to issue additional previously authorized common stock and preferred stock or otherwise raise capital, including through the issuance of debt instruments, in any manner and on the terms and for the consideration it deems appropriate, including in exchange for property.

instruments, in any manner and on the terms and for the consideration it deems appropriate, including in exchange for property.

We may in the future issue common stock or units of partnership interest in our operating partnership in connection with acquisitions.

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We, our executive officers, and Arbor Commercial Mortgage, LLC (“ACM”), our former manager, face conflicts of interests because of our relationships with each other and the way in which our business is structured.

approximately 6% of the voting interest in our stock at December 31, 2023.

ACM has approximately 6% of the voting interest in our stock at December 31, 2024.

Our chairman and chief executive officer also serves as the chief executive officer of ACM, beneficially owns approximately 35% of the outstanding membership interests of ACM and controls all voting interests in ACM.

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Compliance with Federal, State and Local Environmental Laws

Properties that we may acquire directly or indirectly through partnerships, and the properties underlying our structured finance investments and mortgage-related securities, are subject to various federal, state and local environmental laws, ordinances and regulations.

Properties that we may acquire directly or indirectly through partnerships, and the properties underlying our Structured Business investments and mortgage-related securities, are subject to various federal, state and local environmental laws, ordinances and regulations.

Under these laws, ordinances and regulations, a current or previous owner of real estate (including, in certain circumstances, a secured lender that acquires ownership or control of a property) may become liable for the costs of removal or remediation of certain hazardous or toxic substances or petroleum product releases at, on, under or in its property.

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Certain environmental laws also impose liability in connection with the handling of or exposure to materials containing asbestos.

These laws allow third parties to seek recovery from owners of real properties for personal injuries associated with materials containing asbestos.

These laws allow third parties to seek recovery from owners of real

properties for personal injuries associated with materials containing asbestos.

Our operating costs and the values of these assets may be adversely affected by the obligation to pay for the cost of complying with existing environmental laws, ordinances, and regulations, as well as the cost of complying with future legislation, and our income and ability to make distributions to our stockholders could be affected adversely by the existence of an environmental liability with respect to properties we may acquire.

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Annual increases and incentive compensation are based on merit, which is communicated to employees at the time of hiring and documented through our talent management process as part of our annual review procedures and upon promotion and/or internal transfer.

All employees are eligible for health insurance, including mental health coverage, prescription drug benefits, dental and vision insurance, flexible spending accounts, paid and unpaid leaves, disability/accident coverage and participation in a 401K plan.

We also have a flexible telecommuting policy, which allows eligible employees to work remotely one day per week.

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Corporate Governance and Internet Address

Effective February 15, 2023, our Board of Directors approved and adopted the amended and restated bylaws.

The bylaws include revisions to Article II, Section 1 to clarify that all meetings of stockholders may be held partially or solely by means of remote communication.

The prior bylaws mandated that all meetings of stockholders be held at a physical location.

There were also a number of other changes made that were deemed necessary to conform to the Securities and Exchange Commission’s (“SEC”) universal proxy rules.

The foregoing description of the bylaws does not purport to be complete and is qualified in its entirety by reference to the full text of the bylaws, a copy of which is attached hereto as Exhibit 3.9.

Our internet address is www.arbor.com.

All our filings with the SEC are made available free of charge through our website, including this report, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to such reports, if any, as filed with the SEC as soon as reasonably practicable after such filing.

All our filings with the Securities and Exchange Commission (“SEC”) are made available free of charge through our website, including this report, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to such reports, if any, as filed with the SEC as soon as reasonably practicable after such filing.

Our website also contains our code of business conduct and ethics, code of ethics for chief executive and senior financial officers, corporate governance guidelines, stockholder communications with the Board of Directors, and the charters of the key committees of our Board of Directors.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1. Business