Arbor Realty Trust

Good morning, ladies and gentlemen, and welcome to the third quarter ARPA Realty Trust earnings conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be question and answer session. To ask a question during this period, you will need to press star 1 on your telephone. If you want to remove yourself from the queue, please press the pound key. Please be advised that today's conference is being recorded. If you need operator assistance, please press star zero. I would now like to turn the call over to your speaker today, Paul Elenio, Chief Financial Officer. Please begin, sir.

Okay, thank you, and good morning, everyone, and welcome to the quarterly earnings call for Argo Realty Trust. This morning, we'll discuss the results for the quarter ended September 30th, 2020. With me on the call today is Ivan Kaufman, our President and Chief Executive Officer. Before we begin, I need to inform you that statements made in this earnings call may be deemed forward-looking statements that are subject to risk and uncertainties, including information about possible or assumed future results of our business, financial condition, liquidity, results of operations, plans, and objectives. These statements are based on our beliefs, assumptions, and expectations of our future performance, taking into account the information currently available to us. Factors that could cause actual results to differ materially from Arbor's expectations in these forward-looking statements are detailed in our SEC reports. Listeners are cautioned not to place undue reliance on these forward-looking statements, which speak only as of today. Arbor undertakes no obligation to publicly update or revise these forward-looking statements to reflect events or circumstances as of today or the occurrences of unanticipated events. I'm now turning the call over to Arbor's President and CEO, Ivan Kaplan.

Thank you, Paul, and thanks to everyone for joining us on today's call. We hope that you and your families are safe and healthy. We all realize the difficulties and complexities that our country and the entire world continue to deal with from the effects of COVID, and so we appreciate your participation during these challenging times. As we've discussed on our last few calls, we are very well positioned to succeed in the current economic climate. We've built a viable operating platform, focusing on a right asset class with very stable liability structures strong liquidity liquidity an active balance sheet and a gfc agency business and many diversified income streams that generate strong strong core earnings and dividends in every market cycle we have also developed a business model that provides many diversified opportunities for growth which clearly clearly puts us in a class by ourselves and has allowed us to be a top performer commercial mortgage rate in the space. We had another record quarter with our third quarter results reflecting the continued commitment and successful execution of our business strategy and the diverse platform we have developed. Our continued momentum and truly remarkable third quarter results have once again allowed us to increase our dividend to 32 cents a share. This is our second consecutive quarterly dividend increase reflecting a 7% increase so far this year and represents a payout ratio of around 70% compared to an industry average of 90% to 95%. As Paul will discuss in more detail, our core earnings for the third quarter were $0.50 per share, which is an incredible accomplishment and a true testament to the value of our franchise and the many diverse income streams we have created. We continue to realize significant benefits from many areas of our diverse platform, including substantial growth in our GSC agency platform that continues to produce strong margins and increase servicing fees, continued growth and significant benefits from the size and scale of our balance sheet business, substantial income from our residential business, strong performance of our multifamily-focused portfolios with very few delinquencies and extremely low forbearances, and reductions in our overhead and general and administrative expenses. And these recurring benefits combined with our projected origination, strong pipeline, and credit quality of our portfolio puts us in a unique position to be able to continue to produce significant core earnings going forward, and we are appropriately positioned to excel in this environment. The strong core earnings outlook has allowed us to once again increase our dividends. which now reflects an 11% yield based on yesterday's closing stock price. Prior to the pandemic, we were trading at a much lower dividend yield of around 8%, which if applied to our current dividend would result in a stock price of $16 a share. And again, we believe based on our resiliency and strong performance, that we should be trading above those levels, and we feel this is a great opportunity for shareholders to realize substantial value appreciation. We continue to experience significant growth in our GFC agency platform. We originated 1.5 billion GFC agency loans in the third quarter and 3.6 billion for the first nine months of this year, which is up approximately 11% from last year's comparable period. Our pipeline is also at an all-time high, and as a result, we expect to produce a very strong origination volume in the fourth quarter and likely grow our agency production by as much as 20% to 30% over last year's numbers while maintaining very strong gain on sale margins. In this unprecedented environment, our GFC agency platform continues to offer a premium value as it requires limited capital and and generate significant, long-dated, predictable income streams and produces significant annual cash flow. Additionally, our $22.6 billion GFC agency's servicing portfolio, which we have grown 12.5% already this year, is mostly prepayment protected and generates over $100 million a year and growing in reoccurring cash flow. This is in addition to the strong gain on sale margins we continue to generate, origination platform, which combined with new and increased servicing revenues, will continue to contribute greatly to our car earnings and dividends. From a liquidity perspective, we are very pleased to report that we have current cash and liquidity position of approximately $500 million, which not only provides us with adequate liquidity to navigate the current market conditions, but also gives us offensive capital to take advantage of accretive lending opportunities. This has allowed us to replace our runoff and continue to grow our balance sheet loan book with high-quality multifamily bridge loans that generate attractive levered returns and create a substantial pipeline of future GSE agency originations volume and long-dated servicing revenues. We are very pleased with the high-quality balance sheet we have created that is also financed with the appropriate liability structures. A balance sheet loan book has grown to $5.1 billion and is financed with $3.4 billion of debt. Approximately $2.5 billion, or 75% of that debt, is non-recourse, non-mark-to-market CLOs, and approximately $900 million is financed through warehouse and repurchase facilities that are secured by $1.2 billion in assets with eight different banks that we have longstanding relationships with. Additionally, the majority of the loans being financed in these bank lines are also rated and CLO eligible, greatly mitigating the risk of financing these loans through short-term facilities. It is also very important to highlight that over 90% of our book are senior bridge loans, and more importantly, 80% of our portfolio is in multifamily assets. which has been the most resilient asset class in all cycles and continues to significantly outperform all other asset classes in this recession as well. Additionally, we've had tremendous performance in our multifamily portfolio with well over 99% collections and no loan modifications with great concessions to date. And most of the loans in our portfolio contain interest reserves and or replenishment obligations by our borrowers giving us the ability to effectively manage our portfolio through this dislocation. As a reminder, we have very little exposure to the asset classes that have been affected the most by this recession, such as retail and hospitality. Our total exposure to these asset classes is approximately $175 million, or approximately 3% of our portfolio. We also believe we have adequately reserved for these assets and do not feel at this point that any material further impairment will be necessary, which gives us confidence that our adjusted book value of $9.74 actually reflects the current impact of the recession. We also continue to see very positive trends related to our GSE agency business collections, which we believe reflects the strength of our borrowers and the quality of our GSE agency portfolio. We only have a handful of delinquent loans outstanding and extremely low forbearance numbers in our portfolio through October. Loans in forbearance represent less than 0.4% of our $16.5 billion Fannie Mae book and around 6% of our $5 billion Freddie Mac loan book, which is unchanged since July, and we've had very few requests for forbearance in the last several months. And as a result of these extremely low forbearance numbers, we have recovered almost all of the $700,000 of servicing advances that we had outstanding last quarter, and currently we have less than $20,000 of unrecovered servicing advances. In summary, we are extremely pleased to have built such a versatile operating platform that is multifamily-centric with many significant diversified income streams that continue to produce strong car earnings and dividends in all cycles. We are also well-positioned to succeed in the current economic climate and are excited about the many opportunities we see to continue to grow our franchise, core earnings, and dividends going forward. We believe this puts us in a class by ourselves, and our performance and track record speaks for themselves. And we believe that an investment in our company today at these levels would provide a tremendous long-term return, and our primary focus remains on continuing to maximize shareholder value. I will now turn the call over to Paul to take you through the financial results.