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Arbor Realty: High Yield in Mortgage Servicing
11/26/2020 5:00 am EST
Arbor Realty is a nationwide real estate investment trust and direct lender, providing loan origination and servicing for multifamily homes, senior housing, health care and other diverse commercial real estate assets.
Arbor manages a multibillion-dollar servicing portfolio, specializing in government-sponsored enterprise products. It product platform also includes commercial mortgage-backed security (CMBS), bridge, mezzanine and preferred equity lending.
For Q3 2020, Arbor posted earnings per share of 50 cents, beating the average analyst estimate of 32 cents. This was an increase from the 37 cents in the same quarter a year ago. Q3 net interest income of $43.8 million increased from $32.4 million a year ago.
Agency business generated revenue was $81.8 million vs. $81.1 million in Q2 2020, and income from mortgage servicing rights was $42.4 million, or 2.77% of loan commitments, vs. $32.4 million, or 2.69% of loan commitments in Q2 2020.
Fee-based servicing of portfolios totaled $22.56 billion on Sept. 30, up 4.5% from June 30, and is primarily the result of $1.48 billion of new agency loan originations.
Structured Business generated 13 loans totaling $291.8 million, consisting primarily of multifamily bridge loans totaling $235.1 million in Q3. The loan portfolio has passed the $5 billion mark.
Additionally, Arbor recently conducted a seven million share secondary stock offering on Nov. 10, raising $94.5 million for business-related investments.
Shares of ABR have pulled back from $14.40 just prior to the stock offering. Earnings are forecast to come in at $1.01 for 2020 and increase sharply in 2021 to $1.52 per share.
Arbor pays an annual dividend of $1.28 per share, translating to a 9.84% current yield. I believe that the stock has a very good chance of delivering a 20% total return to us in the next 12 months. Let’s put this well-positioned financial company to work.
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