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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported)
August 5, 2005 (August 3, 2005)
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Arbor Realty Trust, Inc.
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(Exact name of registrant as specified in its charter)
Maryland 001-32136 20-0057959
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(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
333 Earle Ovington Boulevard, Suite 900 Uniondale, New York 11553
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(Address of principal executive offices) (Zip Code)
(516) 832-8002
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(Registrant's telephone number, including area code)
Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of the
following provisions:
[ ] Written communications pursuant to Rule 425 under the Securities
Act (17 CFR 230.425)
[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange
Act (17 CFR 240.14a-12)
[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the
Exchange Act (17 CFR 240.14d-2(b))
[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the
Exchange Act (17 CFR 240.13e-4(c))
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Arbor Realty Trust, Inc.
Current Report on Form 8-K
ITEM 2.02 RESULTS OF OPERATIONS AND FINANCIAL CONDITION.
On August 5, 2005, Arbor Realty Trust, Inc. (the "Company") issued a
press release announcing its earnings for quarter ended June 30, 2005, a copy of
which is attached hereto as Exhibit 99.1.
ITEM 5.02(d) ELECTION OF DIRECTORS.
On August 3, 2005, the board of directors (the "Board") of the Company
approved an increase in the number of its members from seven directors to nine
directors and elected Ms. Karen Edwards and Mr. Kyle Permut as directors to fill
the two resulting vacancies. Ms. Edwards was elected to serve in the class of
directors whose term expires at the 2006 annual meeting of stockholders. Mr.
Permut was elected to serve in the class of directors whose term expires at the
2007 annual meeting of stockholders. The Board has determined that each of Ms.
Edwards and Mr. Permut are "independent" directors for purposes of rules of the
New York Stock Exchange.
ITEM 8.01 OTHER EVENTS.
On August 3, 2005, the Board declared a quarterly cash dividend of
$0.57 per share of the Company's common stock for the quarter ended June 30,
2005 which is payable on August 31, 2005 to common shareholders of record on
August 15, 2005.
ITEM 9.01 FINANCIAL STATEMENTS AND EXHIBITS.
(c) Exhibits
Exhibit Number
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99.1 Press Release, dated August 5, 2005.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Dated: August 5, 2005 ARBOR REALTY TRUST, INC.
By: /s/ Frederick C. Herbst
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Name: Frederick C. Herbst
Title: Chief Financial Officer
EXHIBIT INDEX
Exhibit Number
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99.1 Press Release, dated August 5, 2005.
Exhibit 99.1
ARBOR REALTY TRUST REPORTS SECOND QUARTER 2005 RESULTS
Second Quarter Highlights:
- Net income increased 296% to $22.9 million from 2Q04
- Diluted earnings per share of $1.36
- New loans and investments of $171 million
- Declared quarterly dividend of $0.57 per share, an increase of 4%
from last quarter
- Two new independent directors appointed
UNIONDALE, N.Y., Aug. 5 /PRNewswire-FirstCall/ -- Arbor Realty Trust, Inc.
(NYSE: ABR), a real estate investment trust focused on the business of investing
in real estate related bridge and mezzanine loans, preferred and direct equity
investments, mortgage-related securities and other real estate related assets,
today announced financial results for the quarter ended June 30, 2005. Arbor
reported net income for the quarter of $22.9 million, or $1.36 per diluted
common share, compared to net income for the quarter ended June 30, 2004 of $5.8
million, or $0.38 per diluted common share. Net income for the six months ended
June 30, 2005 was $32.6 million, or $1.94 per diluted common share, compared to
net income for the six months ended June 30, 2004 of $8.9 million, or $0.76 per
diluted share.
"Our record quarterly results reflect solid execution of our business plan
to enhance Arbor's long-term franchise value," said Ivan Kaufman, Chairman and
Chief Executive Officer of Arbor. "The financial results for the quarter
validate our business model and our previous investor communications. In those
communications, we frequently refer to our equity participation interests and
the potential value they could have. This quarter we received a distribution in
excess of $36 million from one of these investments, which significantly
enhanced our earnings, book value and available capital."
The results for the second quarter include a $36.5 million distribution from
Prime Outlets Acquisition Company LLC ("Prime"), an entity in which Arbor owns
an equity and profits interest. Prime refinanced the debt on a portion of the
assets in its portfolio, receiving proceeds in excess of the amount of the
previously existing debt. The excess proceeds were distributed to each of the
partners in accordance with Prime's operating agreement. Of the distribution
received by Arbor, $17.2 million was recorded as interest income, representing
the portion of the distribution received from the profits interest pertaining to
the Company's mezzanine loan to the borrower. $8.0 million of the distribution
was recorded as income from equity affiliates. An additional $9.2 million was
recorded as deferred revenue because Arbor has guaranteed a portion of the new
debt. Finally, $2.1 million was recorded as a return of Arbor's equity
investment.
During the quarter, Arbor originated 12 loans and investments totaling $152
million. "The quarterly loan volume is in line with our expectations and
reflects the strength of our origination platform in an increasingly competitive
market," said Mr. Kaufman. "As we have said all along, we will not chase
transactions that do not satisfy our portfolio objectives merely for the sake of
growth. Our preference is to close solid transactions, even if they have a
slightly lower yield, rather than try to win business based on overly aggressive
pricing or proceeds. In addition to our closed loan volume in the second
quarter, there was one $77 million loan, which was previously anticipated to be
closed in May, but did not close until July. Assuming that this loan closed on
the anticipated schedule, our origination volume and net interest income would
have been even higher."
During the quarter 10 loans with an outstanding balance of $86 million were
repaid.
Total revenues for the quarter ended June 30, 2005 were $39.3 million, an
increase of 229% from the second quarter of 2004.
At June 30, 2005, the net balance in the loan and investment portfolio was
$947 million, an increase of 9% from March 31, 2005. The average balance of the
loan and investment portfolio during the second quarter was $870 million and the
average yield on these assets for the quarter was 9.85%, excluding the impact
from the Prime distribution. Despite an increase in LIBOR interest rates during
the quarter, this yield is lower than the previous quarter because the spreads
earned on new loan originations were lower than the spreads on loans that were
repaid.
Arbor's investments in mortgage-related securities had a weighted average
balance in the second quarter of $41.5 million and an average yield of 2.08%.
These assets were financed by borrowings with a weighted average balance in the
quarter of $39.2 million and an average cost of 3.28%.
Interest expense for the quarter was $9.7 million, an increase of 193% from
the second quarter of 2004. This increase reflects increased average borrowings
during the quarter as well as increased interest rates. The average balance of
debt financing on the loan and investment portfolio during the quarter was $646
million and the average cost of these borrowings was 5.80%.
For the quarter, Arbor's manager, Arbor Commercial Mortgage, LLC, earned
$6.7 million of incentive compensation, representing 25% of the amount by which
earnings for the four most recent quarters exceeded a 9.5% return on equity, as
described in the management agreement with Arbor's manager. Arbor Commercial
Mortgage intends to exercise its option to receive $2.3 million of its incentive
compensation in shares of Arbor's common stock.
Financing Activity
Mr. Kaufman commented, "We are taking several steps to enhance the long-
term value of our franchise. Since March, we have issued approximately $100
million of long-term junior subordinated notes. As we've stated in the past, we
view the issuance of these notes as a preferable alternative to raising capital.
Over the long term, these will be accretive to earnings and maximize the value
of our equity participation interests to existing shareholders. Due to timing of
originations and payoffs in the quarter, the proceeds from these issuances were
not fully deployed, which had a dilutive impact on net interest margin for the
second quarter. We believe they will be accretive in the third quarter and we
are well positioned to finance future growth of the portfolio."
As of June 30, 2005, Arbor's financing facilities for the loan and
investment portfolio totaled approximately $1 billion and borrowings outstanding
under such facilities were $793 million.
Portfolio Activity
During the second quarter of 2005, we originated 12 new loans and
investments totaling $152 million. Of the new loans and investments, eight were
mezzanine loans totaling $98 million, three were bridge loans totaling $52
million and there was one preferred equity investment of $2 million.
During the quarter, approximately $86 million of loans paid off. Of this
amount, $22 million were scheduled maturities and $64 million were loans on
properties that were either sold or refinanced outside of Arbor.
At June 30, 2005, the loan and investment portfolio unpaid principal balance
was $950.4 million with a weighted average current interest pay rate of 8.77%.
At the same date, advances on financing facilities pertaining to the loan and
investment portfolio totaled $793 million, with a weighted average interest rate
of 5.55%.
The loan and investment portfolio continues to perform according to terms
and there have been no defaults. Arbor continues to seek loans and investments
that will generate superior risk-adjusted returns with a long-term objective of
capital preservation and earnings stability in varying interest rate and credit
cycles.
Dividend
At its meeting on August 3, 2005, the Board of Directors declared a dividend
of $0.57 per share for the quarter ended June 30, 2005, to be paid on August 31,
2005 to shareholders of record on August 15, 2005. This dividend represents a 4%
increase over the previous quarter and reflects management's understanding of
the importance to investors of a stable and growing dividend.
Equity Participation Interests
"The value of our equity participation interests has always been a topic of
interest," commented Mr. Kaufman. "The receipt of the Prime distribution clearly
demonstrates the value these investments could have. Due to the uncertainty of
the timing and ultimate value of these investments, our disclosures regarding
these investments has been limited. Given the potential values, we are adopting
a policy of offering additional data as definitive information is available.
There are no assurances that these equity participation interests will
ultimately realize any significant value. Attached as an exhibit to this press
release is a schedule of certain data pertaining to these investments. We hope
this will give potential and existing investors additional information to assist
them in making an informed investment decision."
New Independent Directors
At its meeting on August 3, 2005, the Board of Directors appointed two new
independent directors, Ms. Karen Edwards and Mr. Kyle Permut.
Ms. Edwards currently serves as Senior Vice President at Asset Management
Advisors, an integrated wealth management firm. Prior to her current position,
she was the Chief Operating Officer at New Vantage Group. Prior to that, she was
a Managing Director of Friedman, Billings, Ramsey.
Mr. Permut is currently retired. He formerly served as Managing Director and
head of CIBC World Market's Debt Capital Markets Group in the United States,
where he served as a member of the firm's USA Management Committee, its
Executive Board and on the Debt Capital Markets Management Committee.
Earnings Conference Call
Management will host a conference call today at 10:00 a.m. EDT. A live
webcast of the conference call will be available online at
http://www.arborrealtytrust.com. Web participants are encouraged to go to
Arbor's Web site at least 15 minutes prior to the start of the call to register,
download and install any necessary audio software. Listening to the webcast
requires speakers and RealPlayer(TM) software, downloadable without charge at
http://www.real.com. Those without Web access should access the call
telephonically at least ten minutes prior to the conference call. The dial-in
numbers are (866) 825-3308 for domestic callers and (617) 213-8062 for
international callers. The participant passcode for both is 65179976.
After the live webcast, the call will remain available on Arbor's Web site,
http://www.arborrealtytrust.com through August 26, 2005. In addition, a
telephonic replay of the call will be available until August 26, 2005. The
replay dial-in number is (888) 286-8010 for domestic callers and (617) 801-6888.
Please use passcode: 49540451.
About Arbor Realty Trust, Inc.
Arbor Realty Trust, Inc. is a real estate investment trust which invests in
a diversified portfolio of multi-family and commercial real estate related
bridge and mezzanine loans, preferred equity investments, mortgage related
securities and other real estate related assets. Arbor commenced operations in
July 2003 and conducts substantially all of its operations through its operating
partnership, Arbor Realty Limited Partnership and its subsidiaries. Arbor is
externally managed and advised by Arbor Commercial Mortgage, LLC, a national
commercial real estate finance company operating through 15 offices in the US
that specializes in debt and equity financing for multi-family and commercial
real estate.
Safe Harbor Statement
Certain items in this press release may constitute forward-looking
statements within the meaning of the "safe harbor" provisions of the Private
Securities Litigation Reform Act of 1995. These statements are based on
management's current expectations and beliefs and are subject to a number of
trends and uncertainties that could cause actual results to differ materially
from those described in the forward-looking statements. Arbor can give no
assurance that its expectations will be attained. Factors that could cause
actual results to differ materially from Arbor's expectations include, but are
not limited to, continued ability to source new investments, changes in interest
rates and/or credit spreads, changes in the real estate markets, and other risks
detailed in the Arbor's Annual Report on Form 10-K for the year ended December
31, 2004 and its other reports filed with the SEC. Such forward-looking
statements speak only as of the date of this press release. Arbor expressly
disclaims any obligation or undertaking to release publicly any updates or
revisions to any forward-looking statements contained herein to reflect any
change in Arbor's expectations with regard thereto or change in events,
conditions, or circumstances on which any such statement is based.
ARBOR REALTY TRUST, INC. AND SUBSIDIARIES
CONSOLIDATED INCOME STATEMENTS
Unaudited
Three Months Ended June 30, Six Months Ended June 30,
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2005 2004 2005 2004
------------ ------------ ------------ ------------
Revenue:
Interest income $ 39,295,309 $ 11,939,350 $ 62,416,467 $ 20,102,741
Other income 46 5,427 387,844 26,531
Total revenue 39,295,355 11,944,777 62,804,311 20,129,272
Expenses:
Interest expense 9,690,559 3,310,544 18,016,712 5,934,437
Employee compensation
and benefits 956,687 617,137 2,110,896 1,230,443
Stock based
compensation 372,828 92,806 464,855 207,007
Selling and
administrative 927,895 366,843 1,773,774 611,154
Management fee -
related party 7,360,947 540,939 8,991,265 834,057
Total expenses 19,308,916 4,928,269 31,357,502 8,817,098
Income before
minority interest
and income from
equity affiliates 19,986,439 7,016,508 31,446,809 11,312,174
Income from equity
affiliates 8,006,443 - 8,453,440 -
Income before
minority interest 27,992,882 7,016,508 39,900,249 11,312,174
Income allocated
to minority
interest 5,126,510 1,236,560 7,328,236 2,427,899
Net income $ 22,866,372 $ 5,779,948 $ 32,572,013 $ 8,884,275
Basic earnings
per common share $ 1.36 $ 0.39 $ 1.95 $ 0.77
Diluted earnings
per common share $ 1.36 $ 0.38 $ 1.94 $ 0.76
Dividends declared
per common share $ 0.55 $ 0.35 $ 1.02 $ 0.73
Weighted average number of
shares of common
stock outstanding:
Basic 16,794,922 14,764,377 16,715,639 11,497,612
Diluted 20,587,501 18,432,278 20,528,073 14,904,925
ARBOR REALTY TRUST, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
June 30, December 31,
2005 2004
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(Unaudited)
Assets:
Cash $ 103,107,951 $ 6,401,701
Restricted cash 73,836,140 -
Loans and investments, net 939,126,806 831,783,364
Related party loans, net 7,749,538 7,749,538
Available-for-sale securities, at
fair value 37,983,075 46,582,592
Investment in equity affiliates 17,908,670 5,254,733
Other assets 26,160,427 14,523,249
Total assets $ 1,205,872,607 $ 912,295,177
Liabilities and Stockholders' Equity:
Repurchase agreements $ 300,770,741 $ 409,109,372
Collateralized debt obligations 303,319,000 -
Notes payable 194,911,045 165,771,447
Notes payable - related party 30,000,000 -
Due to related party - 158,503
Due to borrowers 2,578,819 8,587,070
Other liabilities 27,116,478 5,665,881
Total liabilities 858,696,083 589,292,273
Minority interest 63,467,340 60,249,731
Stockholders' equity:
Preferred stock, $0.01 par value:
100,000,000 shares authorized;
3,776,069 shares issued and
outstanding 37,761 37,761
Common stock, $0.01 par value:
500,000,000 shares authorized; 16,879,241
and 16,467,218 shares issued and
outstanding at June 30, 2005
and December 31, 2004,
respectively 168,792 164,672
Additional paid-in capital 262,272,544 254,427,982
Retained earnings 24,418,388 8,813,138
Deferred compensation (883,265) (160,780)
Accumulated other comprehensive loss (2,305,036) (529,600)
Total stockholders' equity 283,709,184 262,753,173
Total liabilities and stockholders'
equity $ 1,205,872,607 $ 912,295,177
Arbor Realty Trust, Inc.
Summary of Equity Participation Interests
(all dollar amounts in thousands)
unaudited
Initial ART Current Approximate
Investment Investment Investment Square
Name Amount Date Amount Profit % Footage
- ------------------------ ------------ ------------ ------------ ------------ ------------
80 Evergreen $ 384 3Q03 $ 384 12.50% 77,680
930 Flushing 1,126 3Q03 - 12.50% 304,080
Prime Portfolio 2,100 4Q03 - 7.50% 6,700,000
Prime Portfolio - 16.67% 6,700,000
450 W. 33rd Street 1,500 4Q03 2,711 28.00% 1,746,734
823 Park Avenue - 3Q04 - 20.00% 50,000
York Avenue 540 3Q04 540 8.70% n/a
Toy Building 10,000 2Q05 10,000 20.00% 958,000
On The Ave 2,000 2Q05 2,000 33.33% 170,000
Arbor Realty Trust, Inc.
Summary of Equity Participation Interests
(all dollar amounts in thousands)
unaudited
(Continued)
Current
Property Debt Balance
Name Type Location On Property Comments
- ------------------ -------------- ------------- ------------ -------------------------
80 Evergreen Warehouse Brooklyn, NY $ 4,664
930 Flushing Warehouse Brooklyn, NY 25,000 Property refinanced
July 2005
Prime Portfolio Retail Outlets Multi-state 827,000 Property refinanced
June 2005
Prime Portfolio Retail Outlets Multi-state All equity returned
to investors
450 W. 33rd Street Office New York City 350,000 Preferred return of 12.5%
823 Park Avenue Conversion New York City 95,000 *Condo conversion -
investment held in
Taxable REIT
Subsidiary ("TRS")
York Avenue Conversion New York City 22,000
Toy Building Conversion New York City 625,000 *Condo conversion -
TRS asset
On The Ave Hotel New York City 67,000 *Condo/hotel
conversion - TRS
asset
* - debt balance represents anticipated debt financing required to complete
condominium conversion project
Arbor Realty Trust, Inc.
Internal Rate of Return ("IRR") Lookbacks
(all dollar amounts in thousands)
Unaudited
Loan
Origination Commitment Pay Rate@ IRR
Loan Name Date Amount Index 30-Jun-05 Rate
- --------------------- ----------- ---------- ---------- --------- ------
James Hotel 2Q05 $ 14,500 LIBOR+5.00% 8.14% 16.25%
135 Greenwich St. 1Q05 11,815 LIBOR+5.00% 8.14% 12.00% Year 1
LIBOR+5.00% 13.00% Year 2
LIBOR+5.00% 15.00% Year 3
The Pointe Lakeview 1Q05 5,750 LIBOR+5.00% 8.14% 16.00%
Waipouli Beach Resort 1Q05 14,300 LIBOR+5.00% 8.14% 12.50%
Total $ 46,365 8.14% 13.98%
These loans contain a provision whereby upon repayment of the loan, the
borrower must make an additional payment in an amount sufficient to give
Arbor Realty Trust, Inc. the yield noted in the "IRR Rate" column.
Management has not yet determined that these amounts are collectable and,
therefore, has not accrued the difference between the current pay rate and
the IRR rate.
Contacts: Investors:
Arbor Realty Trust, Inc. Stephanie Carrington/ Denise Roche
Rick Herbst, Chief Financial Officer The Ruth Group
516-832-7408 646-536-7017 / 7008
rick.herbst@thearbornet.com scarrington@theruthgroup.com
droche@theruthgroup.com
Media:
Bonnie Habyan, SVP of Marketing
516-229-6615
bonnie.habyan@thearbornet.com
SOURCE Arbor Realty Trust, Inc.
-0- 08/05/2005
/CONTACT: Rick Herbst, Chief Financial Officer, Arbor Realty Trust,
+1-516-832-7408, rick.herbst@thearbornet.com; Investors - Stephanie Carrington,
+1-646-536-7017, scarrington@theruthgroup.com, or Denise Roche, +1-646-536-7008,
droche@theruthgroup.com, both of The Ruth Group for Arbor Realty Trust; Media -
Bonnie Habyan, SVP of Marketing, Arbor Realty Trust, +1-516-229-6615,
bonnie.habyan@thearbornet.com/
/Web site: http://www.arborrealtytrust.com /