Item 1.01 Entry into a Material Definitive Agreement.
On December 13, 2021, Arbor Realty Trust, Inc. ("Arbor") announced that two of
its consolidated subsidiaries, Arbor Realty Commercial Real Estate Notes
2021-FL4, Ltd. (the "Issuer") and Arbor Realty Commercial Real Estate Notes
2021-FL4, LLC (the "Co-Issuer" and, together with the Issuer, the "Co-Issuers")
issued $1,714,125,000 principal amount of investment grade-rated notes (the
"Offered Notes") and $194,250,000 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. Simultaneously with the issuance of
the Notes: (1) the Issuer issued and sold preferred shares (the "Preferred
Shares") with a notional amount of $191,625,000 to a consolidated subsidiary of
Arbor, and (2) the $194,250,000 of below investment grade-rated notes were
purchased by a consolidated subsidiary of Arbor.
The Notes were issued pursuant to an indenture, dated as of December 13, 2021
(the "Indenture"), by and among the Co-Issuers, Arbor Realty SR, Inc., as
advancing agent, U.S. Bank, National Association, as trustee, paying agent,
calculation agent, transfer agent, custodial securities intermediary, backup
advancing agent, notes registrar and 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 net 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 eight classes of Notes (each, a
"Class") were issued pursuant to the terms of the Indenture: (1) $1,170,750,000
aggregate principal amount of Class A Senior Secured Floating Rate Notes ("Class
A Notes"); (2) $139,125,000 aggregate principal amount of Class A-S Senior
Secured Floating Rate Notes ("Class A-S Notes"); (3) $89,250,000 aggregate
principal amount of Class B Secured Floating Rate Notes ("Class B Notes"); (4)
$102,375,000 aggregate principal amount of Class C Secured Floating Rate Notes
("Class C Notes"); (5) $139,125,000 aggregate principal amount of Class D
Secured Floating Rate Notes ("Class D Notes"); (6) $73,500,000 aggregate
principal amount of Class E Secured Floating Rate Notes ("Class E Notes"); (7)
$128,625,000 aggregate principal amount of Class F Floating Rate Notes ("Class F
Notes"); and (8) $65,625,000 aggregate principal amount of Class G Floating Rate
Notes ("Class G Notes"). Simultaneously with the issuance of the Notes, the
Issuer also issued and sold Preferred Shares with a notional amount of
$191,625,000 to a consolidated subsidiary of Arbor and the Class F Notes and
Class G Notes were purchased by a consolidated subsidiary of Arbor.
As of December 13, 2021 (the "Closing Date"), the Notes are secured by a
portfolio of real estate related assets and cash with a face value of
approximately $2,100,000,000, with real estate related assets consisting
primarily of first-lien mortgage bridge loans. 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-and-a-half-year replacement period that allows the principal proceeds and
sale proceeds (if any) of the collateral interests 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 $314,975,222 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), at which point it is expected that the Issuer will own collateral
interests with a face value of approximately $2,100,000,000. If the Issuer is
unable to invest any financing capacity in suitable collateral interests within
such time period, remaining cash and cash equivalents will be used to redeem the
Notes in order of seniority pursuant to the Indenture.
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") 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 Notes represent non-recourse obligations of the Issuer 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, neither of the Co-Issuers will have
any obligation to pay any further amounts in respect of the Notes.
The Offered Notes have an initial weighted average interest rate of
approximately 1.68% plus one-month LIBOR. When LIBOR becomes unavailable, U.S.
Bank National Association, in its capacity as the benchmark agent, will
determine and implement an alternative benchmark to replace LIBOR for all
purposes under the Indenture and the Notes. Interest payments on the Notes are
payable monthly, beginning on January 17, 2022, to and including November 15,
2036, 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 November 15, 2036, 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 2.83 years and 5.17 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 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 and Class G 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 and Class G 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 and Class G 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 and Class G 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 and Class G 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 and Class G Notes; and 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. Payments on the Notes will be
senior to dividends and all other distributions in respect of the Preferred
Shares.
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 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 June 15, 2024, and
on any interest payment date thereafter, the Co-Issuers may redeem the Notes and
the Preferred Shares at the direction of the holders of a majority of the
Preferred Shareholders.
. . .
Item 7.01 Regulation FD Disclosure.
On December 13, 2021, Arbor issued a press release announcing the closing of the
commercial real estate mortgage 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
Exhibit Number Exhibit
99.1 Press release, dated December 13, 2021.
104 Cover Page Interactive Data File - the cover page XBRL tags are
embedded within the Inline XBRL document.
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