Chairman and CEO at Arbor Realty Trust
Last year's rank: 46
Ivan Kaufman has spent the past 18 months preparing for a recession — one he believes we’re already well into — and this allowed Arbor Realty Trust to accumulate over $800 million of cash and liquidity on hand as of February.
“This has provided us with the unique ability to remain offensive, and take advantage of the many opportunities that will exist in this recession to go on a premium yield on our capital,” Kaufman said in an email.
Kaufman believes the U.S. has already been in a recession for around six to nine months, and that the present quarter is the bottom. “When we look back, we’ll see it,” said Kaufman. “We are a leader in the build-to-rent space, a most active lender there, and what we saw firsthand nine to 12 months ago was that construction costs were so high that developers couldn’t build. That’s over now. Costs have come down, lumber in particular.”
Arbor generated $10.9 billion in originations in 2022, and its $28 billion fee-based servicing portfolio generates around $115 million per year in recurring cash flow. With this, in addition to an increase in earnings on its $2.3 billion escrow balance, the company is generating $195 million in cash earnings annually “before we turn on the lights each day,” said Kaufman.
Major deals for Arbor in 2022 included co-funding one of the largest Fannie Mae structured adjustable-rate mortgage (SARM) loans of 2022, in support of New York-based Emerald Empire’s acquisition of Pangea Real Estate’s Chicago portfolio.
“This deal supported and sustained thousands of units of affordable housing in Chicago — we have a strong social commitment to that — and it also opened up renters to more equitable opportunity by sharing their on-time rent payments with the three major credit bureaus to help build their credit scores,” said Kaufman. “That was set up as part of Fannie Mae’s innovative Multifamily Positive Rent Payment Reporting pilot program, and it’s the latest in a long line of pilot partnerships we’ve done with the agencies.”
Considering Arbor’s current position, Kaufman is optimistic about the remainder of 2023. “Given the benefit of our low-liability structures, they put us in a position to continue to have outstanding earnings,” said Kaufman. “If we leverage our existing liability structures, with assets, we have a real cushion and a real benefit. We are sitting in a pretty good position.” —L.G.