Arbor – February 2025 CLO Update

Author: Viceroy Research Published on: February 21, 2025 Published in: Arbor Realty Trust (NYSE:ABR)

February 21, 2025 – Arbor’s CLO delinquencies are up 33% month-on-month in January 2025 to $1.1b. Substantially all delinquencies have already been modified, many as recently as Q4 2024.

Arbor has modified $4.7b of loans and holds $1.0b of delinquent loans.
- Modified loans represent ~82% of Arbor’s ~$6b CLO portfolio, and delinquent loans ~17%.
- Substantially all delinquent loans have already been modified, many as recently as Q4 2024.
- Delinquent loans are not being cured and are falling further into delinquency.
- $414m of loans are delinquent over 90 days.

Arbor tries to cure the true value of its delinquencies by modifying loans month-on-month.
- Arbor has modified >$1b of loans in the last 2 months.
- Substantially all these loans had already been modified, many in Q4 2024.
“Debt Service Amounts” due by borrowers have fallen (annualized) $15m over this month on a comparable book size. This is in line with concessions Arbor is making to borrowers through rate-cut modifications.
The DSCR of modified loans now fully captures 75bps of rate cuts and still only sits slightly above ~0.6x and down month-on-month.
Implied underlying cap rates sit at 4.2%. Any realistic revaluation of underlying collateral values will completely wipe out Arbor’s equity stake of its CLO.

There is no growth opportunity to fund multifamily real estate because the entire industry is underwater. This is reflected in Arbor’s shrinking book, the inability of its short-term borrowers to move on to agency loans or refinance their investments, and the stagnant multifamily property market.

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