Arbor Realty Trust

Good morning, ladies and gentlemen, and welcome to the third quarter 2025 Arbor Realty Trust earnings conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during this period, you will need to press star and one on your telephone. If you would like to remove yourself from the question queue, please press star and two. Please be advised that today's conference is being recorded. If you should need any operator assistance, please press star zero. I would now like to turn the call over to your speaker for today, Paul Elenio, Chief Financial Officer. Please go ahead, sir.

Okay, thank you, David. And good morning, everyone, and welcome to the quarterly earnings call for Arbor Realty Trust. This morning, we'll discuss the results for the quarter ended September 30th, 2025. 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 after today or the occurrences of unanticipated events. I'll now turn the call over to Arbor's President and CEO, Ivan Kaufman.

Thank you, Paul, and thanks to everyone for joining us on today's call. As you can see from this morning's press release, we had another active and productive quarter with some very significant accomplishments that are worth noting. First, we continued our strong progress of creating substantial efficiencies on the right side of our balance sheet with a new $1 billion CLO that we issued in the third quarter with tremendously accretive terms. This deal was priced at 182 over, contained 89% leverage, and a 30-month replenishment feature, and generated an additional $75 million of liquidity. The CLO securitization market is incredibly constructive, and we're very pleased to be such a prolific multifamily originator and have a season-well-recognized securitization platform, which allows us to consistently access the market and grow our platform. And with the pricing levels we are seeing in the market, which has only gotten tighter since our last deal, we're able to compete very effectively in today's extremely competitive market and generate strong lending returns on our capital. We also successfully called one of our legacy CLOs in October, refinancing these assets within our current banking facilities, the bulk of which have replenishment features that allow us to substitute collateral as these loans run off. This was a great trade for us as the CLO was past its replenishment period and was delevering and becoming less efficient. After the un-mine, we are now financing these loans at similar prices to the CLO we redeemed and very significantly were able to pick up another $90 million of liquidity through enhanced leverage. One of the more significant accomplishments we had this quarter was the realization of a $48 million gain from the sale of a portion of the assets in the Lexford portfolio. If you recall, our equity investment in this portfolio was the focus of the first short seller report, which claimed that this was a fraudulent transaction and that we were misleading our shareholders as to the value of these assets. In fact, the reality was exactly the opposite. This was by far one of the best restructurings we have ever accomplished. Including the large gain we recorded this quarter, this investment has generated over $100 million of income over its lifespan, the return of $67 million of preferred equity, on top of us receiving all of our invested capital back. And there is still a portfolio of assets that we expect to be able to liquidate in the near future. We're also very successful in selling our interest in the legacy asset that we expect to close at the end of business today. This transaction will generate approximately $7 million of additional income in the fourth quarter, which combined with the gain from the Lexford transaction totals $55 million of income that was generated from two of our legacy investments. This gives us a tremendous amount of flexibility to be very aggressive in addressing our legacy issues. Our goal is to resolve these non-interest earning assets, which are creating a tremendous drag on earnings as quickly as possible. We believe it will take until the second quarter of next year to accomplish our goals. When completed, we will have effectively resolved a significant amount of our troubled assets and set up with a much better improved run rate of income, which will go a long way towards increasing our earnings and being able to draw a dividend again sometime in 2026. And very importantly, we will accomplish all of this with a very minimal impact on our book value, which is something no one else can say in our space. As I mentioned on the last call, the prolonged elevated rate environment has put certain borrowers in a position where they are running out of steam and are having difficulty raising additional equity to continue to manage their assets. As we stated before, we believe that the third and fourth quarter of this year will be the bottom of the cycle. And again, we are working very hard to quickly work through our loan book and re-deploy our capital into performing assets and improve our run rate of income for the future. Certainly, with the two recent interest rate cuts and the likelihood that we could potentially see one more cut this year, we're starting to feel more optimistic about the rate environment moving forward, which we believe will provide some much-needed relief for our borrowers. This positive trend gives us some wind at our backs for the first time in a while, and as this trend continues, we believe we will be able to meaningfully grow our origination volumes and start to move more assets off our balance sheet, which will increase our earnings run rate and position us well for the future. As I mentioned earlier, we've taken an aggressive approach resolving our legacy assets through a myriad of different strategies, including modifying loans, taking back assets as REOs to own and operate, and bringing in new sponsors to take over assets and assume our debt and create a more current income stream. We continue to examine all loans that are showing signs of distress and are accelerating the process of taking control of the real estate and working quickly towards a new creative resolution. This has resulted in a temporary spike in our delinquencies, and again, We look to expedite the resolution process of these loans, a number of which we have targeted to take back as REO and flip to new sponsors. This will take a few quarters to complete, and an interim will temporarily reduce our net interest rates until we complete the resolution process. However, when the smoke clears, we will have cleaned up the vast majority of our legacy book and create a more stable and growing run rate of income in the future. Turning now to our third quarter performance, as Paul will discuss in more detail, our quarterly results included a large gain from the likes of investment, as I mentioned earlier. This provides us with a unique ability to be very aggressive in accelerating the resolution of our problem loans without materially impacting our book value. The timing of these resolutions will take place over the next few quarters, which creates some lumpiness in our quarterly earnings going forward. to pay our currently quartered dividend for the balance of the year. And if we accomplish our goals effectively, we'll be able to improve our earnings run rate and put us in a good position to consider an increase in our dividend again sometime in 2026. And I can't stress this enough. We are accomplishing all of these goals without a material change in our book value, unlike the rest of our peers who have experienced significant book value deterioration. As I mentioned in our last call, the balance sheet lending business is incredibly competitive right now. There is a tremendous appetite for deals and a significant amount of capital out there chasing each transaction. As a result, we are being highly selective and have closed about $400 million in the third quarter, putting us at around $850 million of volume for the first nine months of the year. The guidance we gave at the beginning of the year of $1.5 to $2 billion of bridge production for 2025 was reflective of our views that the market would become overheated, and as a result, we dialed back our production numbers for 2025 to a more conservative level. We do have some large, high-quality yields on our pipeline, and we think we are likely to close by year-end, which gives us confidence that we may be able to come in with our original guidance despite the extremely competitive landscape. The bridge lending business is an important part of our overall strategy as it generates strong leverage returns on our capital in the short term while continuing to build up the pipeline of future agency deals. And with the significant efficiencies we're seeing in the securitization market, we're able to continue to produce strong leverage returns on our capital despite this extremely competitive landscape. In the agency business, we had a tremendous third quarter, originating $2 billion of loans, which is the second highest production quarter in our history. We had a very strong October, originating $750 million, which puts our 10-month volume numbers at $4.2 billion, making us very comfortable that we'll easily surpass our origination guidance of $3.5 to $4 billion, and the best year's production number, $4.5 billion as well. This is a tremendous accomplishment, especially given the rate environment which we were in for the better part of the year. This is a tremendous testament to the value of our franchise and the resiliency of our originations network with a loyal borrow base that we have cultivated over the many years. We continue to do an excellent job in growing our single-family rental business. We originated approximately $150 million of new business in the third quarter, and another $200 million in October, bringing our 10-month numbers to $1.2 billion. We also have a strong pipeline, giving us a comfort that we're able to meet our internal guidance of between $1.5 to $2 billion of production for 2025. This is a great business that offers three turns on our capital through construction, bridge, and permanent lending opportunities and generates strong leverage returns in the short term while providing us significant long-term benefits by further diversifying our income streams. And again, with the enhanced efficiencies that we're seeing in the securitization market and in our bank lines, we are generating mid- to high-teens returns on our capital, which will contribute to increased future earnings, especially as we continue to scale up this business. In our construction lending business, we are having a great success in growing out this platform with a real influx of new opportunities. We're seeing to do larger loans on high-quality assets with very experienced developers. In the third quarter, we closed 145 million in deals and another 65 million in October, bringing our 10-month numbers to around 500 million. We also have a very large pipeline with roughly 185 million on the application and another 675 million of additional applications outstanding and 900 million of deals we are currently screening, giving us confidence that we can up our guidance to the year from an initial 250 to 500 million to 750 to a billion for 2025. Additionally, and very significantly, the size of our current pipeline gives us real visibility into how we will be starting our 2026, which by all indications, we expect will produce meaningful growth over 2025 numbers. And so, between our agency business, bridge lending program, SFR and construction platform, plus our MES and PE business, we expect to originate between $8.5 and $9 billion in volume this year, and which was a very difficult environment for the vast majority of the year. And again, we have started to feel which we believe will lead to more robust origination volumes in the future. In summary, we had a very active and productive quarter with many notable accomplishments. Clearly, the outlook for interest rate environment has significantly improved from where it was in the beginning of the year, and we are feeling more optimistic as a result. We feel we now have some wind at our backs and will allow us to continue to grow our origination volumes and generate strong returns on our capital from the significant improvements and efficiencies we've created on the right side of our balance sheet. We also feel that the gains we have generated from our legacy investments puts us in a great position to accelerate the resolution of our legacy book and create a much improved run rate of income going forward without materially affecting our book value. And these improvements, coupled with the growth we are expecting in our Regenations platform, will go a long way in allowing us to achieve our goals by being able to grow our earnings and dividends in the near future. I will now turn over the call to Paul to take you through our financial results.