Moody's Ratings has reaffirmed the Ba2 corporate family rating for Arbor Realty Trust, Inc. (NYSE:ABR) and maintained the Ba3 rating on the backed senior unsecured debt of Arbor Realty Sr, Inc., but the agency shifted Arbor's outlook to negative from stable.
According to Moody's, the outlook change is driven by weaker trends within Arbor's multifamily loan portfolio and a longer-than-expected timetable to resolve non-performing assets. The rating agency said it expects the company to face challenges related to asset quality and earnings over the next 12-18 months.
Moody's highlighted that Arbor's non-performing assets reached a peak unpaid principal balance of $1.2 billion, representing 10.0% of total loans as of September 30, 2025. By March 31, 2026, the unpaid principal balance had declined to $1.0 billion, equivalent to 8.0% of total loans. Still, the remaining level of non-performing loans continues to weigh on results.
Distributable earnings fell sharply, with the company reporting $14.5 million in distributable earnings in the first quarter of 2026, down from $57.3 million in the same period a year earlier. Moody's attributed the deterioration in earnings to the ongoing drag from non-performing assets.
On the funding side, Arbor has several upcoming maturities: $270 million of senior unsecured notes maturing in September 2026, $275 million maturing in March 2027, and $250 million maturing in October 2027. Moody's described Arbor's liquidity position as adequate, citing an unencumbered assets-to-unsecured debt ratio of 1.6x as of March 31, 2026.
Capitalization metrics remain a relative strength. Moody's noted a tangible common equity to tangible managed assets ratio of 19.1% as of March 31, 2026. In response to the weaker outlook for distributable earnings, Arbor reduced its quarterly dividend from $0.30 per share to $0.17 per share.
Moody's affirmation of the ratings combined with a negative outlook underscores the agency's view that, despite supportive capital and liquidity metrics, the pace of recovering non-performing assets and the associated pressure on earnings will be key factors to monitor in the coming 12-18 months.