Arbor – April CLO Update

Author: Viceroy Research Published on: April 17, 2024 Published in: Arbor Realty Trust (NYSE:ABR)

April 17, 2024 – Arbor’s underlying CLO performance data for April is now live. 37 of Arbor’s CLO loans are nlow delinquent, representing 11% of its CLO book.To superficially achieve this remarkable “rehabilitation” feat: Arbor has modified 56 loans in the past month.

These modifications substantially comprise of capitalization of interest, “temporary” rate reductions, forbearance agreements, maturity extensions and/or a combination of the same. In total: Arbor have modified loans of 81 properties in 2024 alone.

The weighted DSCR of modified loans is ~55%, about 500bps lower than the average CLO weighted DSCR.
The nature of many extended loans are various, high leverage loans secured against the same assets.
Adjusting for this: the LTV of loans modified in 2024 ranges between ~60% to 121%, with the average at about 85%.
We reiterate that the LTV denominator, being the values of the properties, is ludicrous. The LTV is vastly understated.
We note that the cap rate of underlying assets whose loans were modified in 2024 is ~3.9% against a 10 year T-bill rate of 4.62%.

There is no rate cut large enough, no rate caps cheap enough, and no investors dumb enough to save Arbor.

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