Arbor Realty Trust (ABR) to Acquire Arbor Commercial's Agency Platform in $250M Deal
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Arbor Realty Trust, Inc. (NYSE: ABR) announced today that it has entered into a definitive agreement to acquire the agency platform (the “Acquired Businesses”) of Arbor Commercial Mortgage LLC (“Arbor Commercial Mortgage” or “ACM”) for $250 million. The purchase price is to be paid 50% in stock and 50% in cash with the stock component to be paid with 19.23 million Operating Partnership Units, which was based on a stock price of $6.50 per share. The purchase price is subject to potential adjustment based on changes in the value of the acquired servicing portfolio on the closing date. The Company has the option, at the discretion of the Special Committee of the Board of Directors of Arbor Realty Trust, to utilize up to $50 million of seller financing to satisfy a portion of the cash consideration. All of the employees directly related to the Acquired Businesses will become a part of the Company following the consummation of the transaction.
The Acquired Businesses represent a leading national multifamily agency loan origination and servicing platform with over 200 direct employees, including 20 originators in eight states and have over 20 years of experience. The Acquired Businesses originated over $3 billion in loans in 2015, the vast majority of which were government sponsored loans through Fannie Mae Delegated Underwriting and Servicing (DUS ®) program, Federal Home Loan Mortgage Corporation (Freddie Mac) and Government National Mortgage Association (Ginnie Mae). The Acquired Businesses have a servicing portfolio of approximately $11 billion of unpaid principal balance as of January 31, 2016 and has the distinction of being one of the 25 Fannie Mae DUS® licensed lenders as well as a top 10 multifamily DUS® lender for nine consecutive years. The Acquired Businesses were the top small loan lender for Fannie Mae in 2014 and the top small balance lender for Freddie Mac in 2015 by origination volume.
“We are extremely excited to have reached an agreement to purchase ACM’s significant agency platform,” said Ivan Kaufman, Chief Executive Officer. “We believe this will be a transformational transaction that will benefit our shareholders greatly, and we expect the transaction to be immediately accretive to our earnings and dividends.”
“This transaction represents a significant milestone for the Company. The acquisition provides the Company with new origination verticals and provides a stable and predictable servicing fee revenue stream. This transaction will also broaden our product offerings and increase our size and scale creating a fully integrated franchise,” said Bill Green, Lead Independent Director.
Arbor Realty Trust expects the transaction to be accretive to its earnings and provide several strategic benefits for shareholders:
- Diversification and predictability of earnings streams: The acquisition of a long dated prepayment protected servicing portfolio will result in a consistent and recurring cash flow stream in a diversified stable annuity of servicing income.
- Creates fully integrated franchise: The Acquired Businesses add significant new origination and servicing verticals to Arbor Realty Trust that complement existing commercial real estate lending products. These new business lines also provide a strong foothold in the GSE multifamily sector with high barriers to entry providing natural limitations on competition and will meaningfully increase the size and scale of the Company.
- Comprehensive product offering: Following consummation of the transaction, the Company will be able to meet the multiple needs of its clients with products for short-term and long-term commercial real estate financing needs.
- Larger more efficient Company: The acquisition will result in a significant increased equity base and market cap, creating a larger, more efficient vehicle to access capital.
- Full alignment with shareholders: Experienced management team that is fully aligned with shareholders through significant stock ownership.
In addition, the Company has obtained a two year option to purchase for $25 million the existing management contract and fully internalize the management structure. The exercise of this option is at the discretion of the Special Committee of the Board of Directors of Arbor Realty Trust, which has no obligation to exercise its option.
The transaction will require certain government and GSE approvals as well as a shareholder vote and other third party approvals. The transaction is expected to close during the third quarter of 2016, however, there can be no assurances that the transaction will be completed during this period or at all.
The independent members of the Board of Directors of Arbor Realty Trust acting on the recommendation of a Special Committee of independent directors unanimously approved the asset purchase agreement relating to this acquisition. The Special Committee of the Board of Directors retained J.P. Morgan Securities, LLC as financial advisor and Willkie Farr & Gallagher LLP as legal advisor with respect to the acquisition. Skadden, Arps, Slate, Meagher & Flom LLP acted as legal advisor to Arbor Realty Trust, Inc. Wells Fargo Securities, LLC and Dechert LLP acted as ACM’s financial and legal advisors.
Conference Call and Webcast Information
The Company will host a conference call on February 26, 2016 at 10:00 AM Eastern Time to discuss the transaction during its scheduled fourth quarter 2015 earnings call. A live webcast of the conference call will be available at www.arborrealtytrust.com in the investor relations area of the website. Those without web access should access the call telephonically at least ten minutes prior to the conference call. The dial-in numbers are (866) 516-5034 for domestic callers and (678) 509-7613 for international callers. Please use participant passcode 51725743.
After the live webcast, the call will remain available on the Company's website, www.arborrealtytrust.com, through March 31, 2016. In addition, a telephonic replay of the call will be available until March 4, 2016. The replay dial-in numbers are (855) 859-2056 for domestic callers and (404) 537-3406 for international callers. Please use passcode 51725743.
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Create E-mail Alert Related CategoriesCorporate News, Guidance, Hot Corp. News, Management Comments, Mergers and Acquisitions
Related EntitiesJPMorgan, Dividend, Earnings, Wells Fargo, Definitive Agreement
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