Item 1.01 Entry into a Material Definitive Agreement.
On May 25, 2022, Arbor Realty Trust, Inc. ("Arbor") announced that its
consolidated subsidiary, Arbor Realty Commercial Real Estate Notes 2022-FL2, LLC
(the "Issuer"), issued $872,812,000 principal amount of investment grade-rated
notes (the "Offered Notes") and $177,188,000 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. The $177,188,000
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 May 25, 2022 (the
"Indenture"), by and among the Issuer, Arbor Realty SR, Inc., as advancing
agent, U.S. Bank Trust Company, National Association, as trustee, paying agent,
calculation agent, transfer agent, backup advancing agent and notes registrar
and U.S. Bank National Association, as custodian and custodial securities
intermediary. 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 nine classes of Notes (each, a
"Class") were issued pursuant to the terms of the Indenture: (1) $567,000,000
aggregate principal amount of Class A Senior Secured Floating Rate Notes ("Class
A Notes"); (2) $116,812,000 aggregate principal amount of Class A-S Senior
Secured Floating Rate Notes ("Class A-S Notes"); (3) $44,625,000 aggregate
principal amount of Class B Secured Floating Rate Notes ("Class B Notes"); (4)
$52,500,000 aggregate principal amount of Class C Secured Floating Rate Notes
("Class C Notes"); (5) $66,938,000 aggregate principal amount of Class D Secured
Floating Rate Notes ("Class D Notes"); (6) $24,937,000 aggregate principal
amount of Class E Secured Floating Rate Notes ("Class E Notes"); (7) $56,438,000
aggregate principal amount of Class F Secured Floating Rate Notes ("Class F
Notes"); (8) $31,500,000 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 (9) $89,250,000 aggregate principal amount of
Income Notes ("Income Notes"). The Class F Notes, Class G Notes and Income Notes
were purchased by a consolidated subsidiary of Arbor.
As of May 25, 2022 (the "Closing Date"), the Secured Notes are secured by a
portfolio of real estate related assets and cash with a face value of
approximately $1,050,000,000, 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 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 $73,128,469 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 $1,050,000,000. If the Issuer is unable to invest any financing
capacity in suitable collateral interests within such time period, remaining
cash and cash equivalents (excluding, at the election of the Collateral Manager
(as defined below), an amount up to $15,000,000 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 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 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 2.36% plus Term SOFR. Interest payments on the Notes are payable
monthly, beginning on June 15, 2022, to and including May 15, 2037, 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 May 15, 2037, 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 2.60 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 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 15, 2024, 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.
. . .
Item 7.01 Regulation FD Disclosure.
On May 25, 2022, 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 May 25, 2022.
104 Cover Page Interactive Data File - the cover page XBRL tags are embedded
within the Inline XBRL document.
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