ABR has announced that they will be selling 3.1 million new shares of the 6.25% fixed to floating rate preferred (ABR-F) which had been originally issued on 10/4/2021. There will be an additional 465,000 shares available for over allotment.
The shares were priced at $24.20.
The pricing term sheet can be found here.
20 thoughts on “Arbor Realty Prices Reopened Preferred Share Issue”
Fantastic buy in my opinion… (disclosure — I bought some)
Why do you think a 6.45% yield from mortgage REIT preferred is a fantastic buy? Once the Fed embarks on its series of rate increases, this security could easily trade down to a 7% yield (or higher).
Any REIT that issues preferred 3.2% below $25 reeks of desperation.
The floating feature doesn’t even happen for nearly 5 years? The days of mortgage REIT preferreds trading well above $25 are likely over for a long time.
Rob in Vegas,
The discount does appear to show a need for quick cash, but at 24.20 is already yielding 7.1%, no?
$25*.0625 = $1.5625
$1.5625/$24.20 = 6.45%.
ABR+F would have to fall to $22.32 to yield 7%.
Thanks Rob, so that leaves me confused why the master list shows current yield at 24.25 = 7.08% Is the math off on the calculation for the cell?
ABR-F 6.250% $24.25 -$0.03 6.45% 7.08%
I think that the math might be off. It looks like the 7.08% assumes a call at $25. So it would not really be YTW. More like yield to best (if there were such a thing). That’s just based on a quick look.
The official term is yield to call (YTC).
Yes. On the Master List, the column heading is “Yield to Worst” (YTW). All I was trying to convey is that the YTC of 7.08% in this case is not actually the YTW.
Few things, first don’t confuse ABR with agency mortgage REITs like AGNC & NLY, this is mainly structured finance assets in various real estate markets. They are more credit oriented rather than spreads on agency securities & repo rates. But as a preferred shareholder I am more interested in default & ability to pay dividend long term, less on how the stock price moves. ABR presents a good credit risk having managed fine in 2020 and stock near all time highs. I have very little concern on bankruptcy. So now looking at preferred I see issue way down in price due to issuance of new shares — not due to some negative company news. Current yield is now about 6.5%, fixed for 4.75 years, then kicks in floating at SOFR+5.44% — this gives great protection if we see a spike in rates down the road. So high credit quality (not to be mistaken for investment grade though) with interest rate protection, and I believe once the overhang from the share sale passes it could easily go back to par.
Considering this is not your ordinary mortgage REIT, I totally agree with you and have bought some also, as I can live with this return for as long as I have to. No guarantee the fed will be able to raise that much.
can’t place a buy order on Fidelity. I’ve tried 2 different accounts.
I see this error message:
(DB0002) This security is restricted from online opening trades or restricted to closing trades only. Please contact a Fidelity representative at 800-544-6666 for more information. For more information regarding variable rate preferred stocks or bonds, please contact a Fidelity Fixed Income Specialist at 800-544-5372.
Fidelity does that with anything F/F eventually – sometimes they’re slow to catch on…. It’s because they believe you’re too stupid to know what you’re buying if you want to buy F/F.
This is a great time to swap you D or E shares for the F shares.
IF you want to switch to a fixed-to-float.
The F shares have a 6.125% floor so it is the best of both worlds.
I am holding the D (6.375%) and E (6.25%). My reasoning for not swapping is that F has an equivalent (or lesser) coupon than either D or E, and it’s call risk is equivalent or perhaps greater than D or E:
– E and F are equivalent until F starts floating, while D pays 12.5 bps more than either of them, so there’s no advantage in holding F before it starts floating.
– D, E, and F are all callable within a 4-month period (Jun, Aug, and Oct ’26), and of course F starts floating when it’s first callable. So call risk for F is equivalent (if it starts floating at 6.125-6.375%) or higher (if it floats higher than 6.375%) than D and E.
What am I missing (and believe me, I fully expect I’m missing something)?
It is true that F has a slightly better YTC than D or E as of today’s closing prices, so maybe F is more attractive for new money, but it that enough to warrant a swap?
I’m swapping my ABR-F shares back to the E shares.
I did the same yesterday and posted in “Flipping/Div”:
“Just sold ABR-F @ $24.17 and
bot ABR-E @ $22.49.”
I felt good when I did it, later comments made me hesitate if inflation persists but feel better now seeing you r doing the same .
I just saw your post dd. I think the spread has gotten too wide as well. Lets hope we’re both right!