(Bloomberg) -- Arbor Realty Trust Inc. is returning to securitization markets for the first time in three years as it looks to package up loans secured by apartment rental properties.
The commercial real estate lender is close to finalizing a bond deal that would raise over $800 million in a process being led by JPMorgan Chase & Co., said people familiar with the matter, who asked for anonymity to discuss sensitive information.
JPMorgan and Arbor didn't respond to requests for comment.
The deal bundles together some of Arbor's floating interest rate loans secured by mortgages on "build-to-rent" apartment communities in various stages of completion, according to a bond rating report Tuesday from Morningstar DBRS. Real estate developers use build-to-rent loans when constructing properties that are mainly for the purpose of renting them out.
The market for estate loans packaged into debt slowed dramatically after the Federal Reserve sharply raised interest rates in 2022. Shares of the publicly-traded real estate investment trust have lost more than a third of their value since the beginning of that cycle.
Over $11.5 billion of CRE CLOs have been sold so far this year, compared with just $2.2 billion at the same point last year, according to data compiled by Bloomberg News. But starting this year, a number of firms have sold new deals as investors grew more optimistic about commercial real estate.
Arbor's securitization is being issued in at least eight portions, or tranches, with ratings from AAA down to B-, said the people, adding that Arbor isn't selling the lowest rated portions. Investors are expected to lock in prices by the end of this week, they said.
Arbor Realty is one of the largest firms known to use the deals, called real estate collateralized loan obligations, having issued over $10 billion dollars' worth of the debt. But it hasn't sold any of the debt since 2022, when rising rates depressed the value of many of its securitized loans.
Since then the firm has worked to trim its securitized loans, including by repurchasing some of them from the CLOs. Arbor used a $1.1 billion loan from JPMorgan in March to redeem two of its CLOs, a transaction it said created around $80 million of extra liquidity.
The firm's cash on hand fell to $309 million as of the end of March, compared with about $929 million at the end of 2023.
The build-to-rent loans in Arbor's latest deal are slightly different than the loans Arbor has usually securitized, bridge loans sometimes known as "fix and flip."
(Updates with CRE CLO year-to-date issuance comparison in sixth paragraph.)
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