Arbor Realty stock: 33% short interest, 11.4% dividend yield

on Jan 3, 2024
  • Arbor Realty Trust is the most shorted REIT stock in the US.
  • It has a short interest of 33% even though it yields over 11.4%.
  • The company has come under scrutiny from short-sellers.

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Arbor Realty Trust (NYSE: ABR) stock price has had mixed fortunes since I published my last report in August. It initially crashed to $11.76 as I predicted and then bounced back to a peak of $16.36 in December. This year, the shares have pulled back to $15, giving it a market cap of over $3 billion.

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High short interest

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Arbor Realty Trust is not a beloved Real Estate Trust (REIT), as evidenced by its high short interest. It has a short interest of about 33%, making it the most shorted REITs in the United States.

Its short interest jumped after the company received a short attack by Viceroy Research, who believe that the company is uninvestable. The analysts highlighted several headwinds the company is facing, including high-interest rates and the challenges in the multifamily home industry.

For starters, Arbor Realty is a REIT that operates two businesses: Structured Business and Agency Business. Its structured business segment is made up of its structured loan origination and investment while the latter is made up of agency loan origination and servicing.

In simple terms, the company invests in a diversified portfolio of structured finance in areas like multi and single-family rental and commercial real estate. In this area, it offers bridge, mezzanine, and junior loans. It also originates, sells, and services through Freddie Mac and Fannie Mae.

As part of this business, Arbor provides bridge loans, mostly during the renovation period and then refinances them into bridge loans. This model worked well when interest rates were near zero. 

Recently, however, the Fed has hiked rates to a two-decade high of between 5.25% and 5.50%. While the Fed has hinted that it will cut rates this year, I don’t see it lowering them to where they were before the pandemic.

The implication of this is that Arbor Realty is seeing thinner margins in this high-interest rate environment. There are also delinquency risks as evidenced in the last quarter when the company saw $28 million in delinquencies. 

Still, there are some positives about Arbor Realty. For one, in its most recent quarter, the company outperformed its internal and Wall Street expectations. Its agency business generated $1.1 billion in originations and $1.2 billion in loan sales. It also generated distributable earnings of $112 million.

The other positive is that its insiders are still buying the stock. Elenio Paul and Ivan Kaufman have bought shares worth over $1 million in the past two months. The company also increased its share repurchase program to $150 million.

Arbor Realty stock price forecast

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Arbor Realty stock

ABR chart by TradingView

ABR share price has been in a strong uptrend in the past few months. This trend started after the company published relatively strong financial results. As a result, the 50-day and 100-day moving averages have made a bullish crossover. 

However, the stock has also formed what looks like a double-top pattern whose neckline is at $11.7. In technical analysis, this is one of the most bearish signs in the market. Therefore, at this stage, I urge caution since the shares could continue its downtrend.

More upside will be confirmed if the stock moves above the resistance points at $16.35 and $16.75. If this happens, it will open the possibility of the shares jumping to $20.


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