Arbor Realty Trust filed SEC Form 8-K: Entry into a Material Definitive Agreement, Creation of a Direct Financial Obligation, Regulation FD Disclosure, Financial Statements and Exhibits
$ABR
Real Estate Investment Trusts
Real Estate
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): May 30, 2025
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Item 1.01 Entry into a Material Definitive Agreement.
On May 30, 2025, a consolidated subsidiary of Arbor Realty Trust, Inc. (“Arbor”), Arbor Realty Commercial Real Estate Notes 2025-BTR1, LLC (the “Issuer”), issued $682,581,000 principal amount of investment grade-rated notes (the “Offered Notes”) and $119,277,115 principal amount of below investment grade-rated notes (collectively with the Offered Notes, the “Notes”), evidencing a commercial real estate mortgage loan securitization (the “Securitization”), and sold such Notes in a private placement. The $119,277,115 of below investment grade-rated notes were purchased by a wholly owned subsidiary of Arbor.
The Notes were issued pursuant to an indenture, dated as of May 30, 2025 (the “Indenture”), by and among the Issuer, Arbor Realty SR, Inc., as advancing agent, Wilmington Trust, National Association, as trustee, Computershare Trust Company, National Association, as note administrator, paying agent, calculation agent, transfer agent, securities intermediary, backup advancing agent and notes registrar and Computershare Trust Company, National Association, as custodian. The information contained in Item 2.03 of this Form 8-K regarding the terms of the Indenture and the Notes is incorporated by reference into this Item 1.01.
The Notes have not been registered under the Securities Act of 1933, as amended (the “Securities Act”), or any state securities laws, and unless so registered, may not be offered or sold in the United States except pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act and applicable state securities laws.
The proceeds of the sale of the Notes will be used to repay borrowings under Arbor’s current credit facilities, pay transaction expenses and fund future loans and investments.
Item 2.03 Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant.
The aggregate principal amounts of the following eleven classes of Notes (each, a “Class”) were issued pursuant to the terms of the Indenture: (1) $200,929,000 aggregate principal amount of Class A Senior Secured Floating Rate Notes (“Class A Notes”); (2) $200,000,000 aggregate principal amount of Class A-1R Senior Secured Revolving Floating Rate Notes (“Class A-1R Notes”); (3) Class A-1T Senior Secured Floating Rate Notes (“Class A-1T Notes) with an aggregate principal amount of $0 as of the Closing Date (as defined below); (4) $100,232,000 aggregate principal amount of Class A-S Secured Floating Rate Notes (“Class A-S Notes”); (5) $60,139,000 aggregate principal amount of Class B Secured Floating Rate Notes (“Class B Notes”); (6) $50,116,000 aggregate principal amount of Class C Secured Floating Rate Notes (“Class C Notes”); (7) $55,128,000 aggregate principal amount of Class D Secured Floating Rate Notes (“Class D Notes”); (8) $16,037,000 aggregate principal amount of Class E Secured Floating Rate Notes (“Class E Notes”); (9) $40,093,000 aggregate principal amount of Class F Secured Floating Rate Notes (“Class F Notes”); (10) $25,058,000 aggregate principal amount of Class G Secured Floating Rate Notes (“Class G Notes” and, together with the Class F Notes and the Offered Notes, the “Secured Notes”); and (11) $54,126,115 aggregate principal amount of Income Notes (“Income Notes”). A portion of the Class D Notes and all of the Class E Notes were purchased by Arbor and the Class F Notes, Class G Notes and Income Notes were purchased by a consolidated subsidiary of Arbor.
As of May 30, 2025 (the “Closing Date”), the Secured Notes are secured by a portfolio of real estate related assets and cash with a face value of approximately $583,571,984, with real estate related assets consisting primarily of first-lien mortgage construction and bridge loans secured by build-to-rent properties. Through its ownership of the equity of the Issuer, Arbor intends to own the portfolio of collateral interests until its maturity and will account for the issuance of the Offered Notes on its balance sheet as a financing. The financing has an approximate two year replacement period that allows the principal proceeds and sale proceeds (if any) of the collateral interests and advances on the Class A-1R Notes to be reinvested in qualifying replacement collateral interests, subject to the satisfaction of certain conditions set forth in the Indenture. The proceeds of the issuance of the securities also includes $50,000,000 for the purpose of acquiring additional collateral interests for a period of up to 180 days from the Closing Date (or an additional 30 days in the case of collateral interests for which binding commitments to purchase have been entered into during the 180-day period). If the Issuer is unable to invest any financing capacity in suitable collateral interests within such time period, remaining cash and cash equivalents (excluding, at the election of the Collateral Manager (as defined below), an amount up to $10,000,000 to be held for the purchase of replacement collateral interests) will be used to redeem the Notes in order of seniority pursuant to the Indenture. The Class A-1R Notes represent a revolving commitment to advance up to $200,000,000, which can be used to fund future advances required pursuant to the collateral interests and acquire qualifying replacement collateral Interests. Following the 180-day ramp-up period and assuming that the entire commitment under the Class A-1R Notes is utilized to fund future advances or acquire qualifying replacement collateral interests, it is expected that the Issuer will own collateral interests with a face value of approximately $801,858,115.
The collateral interests acquired on the Closing Date were purchased by the Issuer from a consolidated subsidiary of Arbor, and the seller made certain representations and warranties to the Issuer with respect to the collateral interests it sold. If any such representations or warranties are materially inaccurate, the Issuer may compel the seller to repurchase the affected collateral interests from it for an amount not exceeding par plus accrued interest and certain additional charges, if then applicable. Additional collateral interests and replacement collateral interests are expected to be purchased on similar terms, pursuant to criteria and conditions set forth in the Indenture.
The Issuer entered into a Collateral Management Agreement with Arbor Realty Collateral Management, LLC, a consolidated subsidiary of Arbor (the “Collateral Manager”) pursuant to which the Collateral Manager has agreed to advise the Issuer on certain matters regarding the collateral interests and other eligible investments securing the Notes. The Collateral Manager has waived its right to receive a management fee for the services rendered under the Collateral Management Agreement.
The Issuer, the Collateral Manager and the trustee entered into a Servicing Agreement with Arbor Multifamily Lending, LLC, a majority-owned subsidiary of Arbor (the “Servicer”) and Trimont LLC, as master servicer, backup servicer and backup special servicer, pursuant to which the Servicer has agreed to act as the servicer and special servicer for the collateral interests. In connection with its duties under the Servicing Agreement, the Servicer has waived its right to servicing and special servicing fees but will be entitled to reimbursement of certain costs and expenses.
The Secured Notes were issued by the Issuer and are payable solely from the collateral interests and certain other assets pledged under the Indenture. To the extent the collateral interests and other pledged assets are insufficient to make payments in respect of the Notes, the Issuer will have no obligation to pay any further amounts in respect of the Notes and the Notes will be non-recourse to the Issuer with respect thereto.
The Offered Notes have an initial weighted average interest rate of approximately 2.48% plus Term SOFR. Interest payments on the Notes are payable monthly, beginning on June 23, 2025, to and including January 23, 2041, the stated maturity date of the Notes. As advancing agent under the Indenture, Arbor Realty SR, Inc., a consolidated subsidiary of Arbor, may be required to advance interest payments due on the Notes on the terms and subject to the conditions set forth in the Indenture. Arbor Realty SR, Inc. is entitled to receive a fee, payable on a monthly basis in accordance with the priority of payments set forth in the Indenture, equal to 0.07% per annum on the aggregate outstanding principal amount of the Notes.
Each Class of Notes will mature at par on January 23, 2041, unless redeemed or repaid prior thereto. Principal payments on each Class of Notes will be paid at the stated maturity in accordance with the priority of payments set forth in the Indenture. However, it is anticipated that the Notes will be paid in advance of the stated maturity date in accordance with the priority of payments set forth in the Indenture. The weighted average life of the Notes is currently expected to be between 3.69 years and 4.81 years. The calculation of the weighted average lives of the Notes assumes certain collateral characteristics including that there are no prepayments, defaults, extensions or delinquencies. There is no assurance that such assumptions will be met.
In general, payments of principal and interest (including any defaulted interest amount) on the Class A Notes, Class A-1R Notes and Class A-1T Notes will be pari passu and will be senior to all payments of principal and interest on the Class A-S Notes, Class B Notes, Class C Notes, Class D Notes, Class E Notes, Class F Notes, Class G Notes and Income Notes; payments of principal and interest (including any defaulted interest amount) on the Class A-S Notes will be senior to all payments of principal and interest on the Class B Notes, Class C Notes, Class D Notes, Class E Notes, Class F Notes, Class G Notes and Income Notes; payments of principal and interest (including any defaulted interest amount) on the Class B Notes will be senior to all payments of principal and interest on the Class C Notes, Class D Notes, Class E Notes, Class F Notes, Class G Notes and Income Notes; payments of principal and interest (including any defaulted interest amount) on the Class C Notes will be senior to all payments of principal and interest on the Class D Notes, Class E Notes, Class F Notes, Class G Notes and Income Notes; payments of principal and interest (including any defaulted interest amount) on the Class D Notes will be senior to all payments of principal and interest on the Class E Notes, Class F Notes, Class G Notes and Income Notes; payments of principal and interest (including any defaulted interest amount) on the Class E Notes will be senior to all payments of principal and interest on the Class F Notes, Class G Notes and Income Notes; payments of principal and interest (including any defaulted interest amount or deferred interest amount) on the Class F Notes will be senior to all payments of principal and interest on the Class G Notes and Income Notes; and payments of principal and interest (including any defaulted interest amount or deferred interest amount) on the Class G Notes will be senior to all payments of principal and interest on the Income Notes.
The Notes are subject to a clean-up call redemption (at the option of and at the direction of the Collateral Manager), in whole but not in part, on any interest payment date on which the aggregate outstanding principal amount of the Offered Notes has been reduced to 10% or less of the aggregate outstanding principal amount of the Offered Notes outstanding on the issuance date.
Subject to certain conditions described in the Indenture, on May 20, 2027, and on any interest payment date thereafter, the Issuer may redeem the Notes at the direction of the holders of a majority of the Income Notes.
The Notes are also subject to a mandatory redemption on any interest payment date on which certain note protection tests set forth in the Indenture are not satisfied or if ratings assigned to the Notes as of the Closing Date are not confirmed after a 180-day period for the purchase of additional assets. Any mandatory redemption of the Notes is to be paid from interest and principal proceeds of the collateral interests in accordance with the priority of payments set forth in the Indenture, until the applicable note protection tests are satisfied or the applicable ratings are reinstated.
If certain events occur that would make the Issuer subject to paying U.S. federal income taxes or would make certain payments to or from the Issuer subject to withholding tax, then the holders of a majority of the Income Notes may require that the Issuer prepay all of the Notes.
Arbor Realty SR, Inc. has agreed to comply with the retention requirements of Regulation RR under the Securities Exchange Act of 1934, as amended, by causing a “majority-owned affiliate” (as defined in Regulation RR) to retain the Income Notes in an amount equal to not less than 5% of the aggregate fair value of the Notes as of the Closing Date. However, if Regulation RR is modified or repealed, Arbor Realty SR, Inc. may choose to comply with Regulation RR as is then in effect.
The redemption price for each Class of Secured Notes is generally the aggregate outstanding principal amount of such Class, plus accrued and unpaid interest (including any defaulted interest amounts and deferred interest amounts, as applicable).
In addition to standard events of default, the Indenture also contains the following events of default: (1) a requirement of the Issuer or pool of assets securing the Secured Notes to register as an investment company under the Investment Company Act of 1940, as amended, and (2) the loss of the Issuer’s status as a qualified REIT subsidiary or other disregarded entity of Arbor Realty SR, Inc. for U.S. federal income tax purposes.
Item 7.01 Regulation FD Disclosure.
On June 2, 2025, Arbor issued a press release announcing the closing of a unique build-to-rent loan securitization disclosed in Items 1.01 and 2.03 of this Form 8-K, a copy of which is furnished as Exhibit 99.1 hereto.
Item 9.01 Financial Statements and Exhibits.
(d) Exhibits
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| 104 | Cover Page Interactive Data File - the cover page XBRL tags are embedded within the Inline XBRL document. | |||||||
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.
| ARBOR REALTY TRUST, INC. | ||||||||
| Date: June 2, 2025 | By: | /s/ Paul Elenio | ||||||
| Name: | Paul Elenio | |||||||
| Title: | Chief Financial Officer | |||||||