================================================================================
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) January 12, 2006
(January 11, 2006)
----------
Arbor Realty Trust, Inc.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Maryland 001-32136 20-0057959
------------------------------ ------------ -------------------
(State or other (Commission (IRS Employer
jurisdiction of incorporation) File Number) Identification No.)
333 Earle Ovington Boulevard, Suite 900 Uniondale, New York 11553
-----------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(516) 832-8002
----------------------------------------------------
(Registrant's telephone number, including area code)
Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of the
following provisions:
[ ] Written communications pursuant to Rule 425 under the Securities
Act (17 CFR 230.425)
[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange
Act (17 CFR 240.14a-12)
[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the
Exchange Act (17 CFR 240.14d-2(b))
[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the
Exchange Act (17 CFR 240.13e-4(c))
================================================================================
Arbor Realty Trust, Inc.
Current Report on Form 8-K
ITEM 1.01. ENTRY INTO A MATERIAL DEFINITIVE AGREEMENT.
On January 11, 2006, Arbor Realty Trust, Inc. ("Arbor") announced that
two of its consolidated subsidiaries, Arbor Realty Mortgage Securities Series
2005-1, Ltd. (the "Issuer") and Arbor Realty Mortgage Securities Series 2005-1
LLC (the "Co-Issuer" and together with the Issuer, the "Issuers") issued
approximately $356 million principal amount of investment grade-rated notes (the
"Notes") evidencing a collateralized debt obligation and sold such Notes in a
private placement. Simultaneously with the issuance of the Notes, the Issuer
issued and sold preferred shares with a notional amount of approximately $119
million to a consolidated subsidiary of Arbor.
The Notes were issued pursuant to an indenture, dated as of January 11,
2006. The information contained in Item 2.03 of this Form 8-K regarding the
terms of the indenture and the Notes is incorporated by reference into this Item
1.01.
The Issuer and Co-Issuer sold the Notes in a private placement pursuant
to a note purchase agreement, dated as of January 11, 2006, with Wachovia
Capital Markets, LLC, as initial purchaser. The Notes were resold to non-U.S.
persons in offshore transactions in reliance on Regulation S under the
Securities Act of 1933, as amended (the "Securities Act"), and in the United
States to U.S. persons who are qualified institutional buyers within the meaning
of Rule 144A under the Securities Act and qualified purchasers within the
meaning of the Investment Company Act of 1940, as amended. The Notes have not
been registered under the Securities Act, or any state securities laws, and
unless so registered, may not be offered or sold in the United States except
pursuant to an exemption from, or in a transaction not subject to, the
registration requirements of the Securities Act and applicable state securities
laws.
The net proceeds of the sale of the Notes were used to repay borrowings
under Arbor's current credit facilities and transaction expenses. Wachovia Bank,
National Association, an affiliate of Wachovia Capital Markets, LLC, is the
lender under a $350 million master repurchase agreement, dated as of December
23, 2003, with a consolidated subsidiary of Arbor. $269 million of the net
proceeds from the sale of the Notes was used to reduce the amount outstanding
under this agreement. Wachovia Bank, National Association is also the lender
under a $100 million repurchase agreement with a consolidated subsidiary of
Arbor. In connection with the issuance of the Notes, the Issuer entered into an
interest rate swap agreement and an interest basis swap agreement, each dated as
of January 11, 2005, with Wachovia Bank, National Association, as hedge
counterparty as described in Item 2.03 of this Form 8-K.
ITEM 2.03. CREATION OF A DIRECT FINANCIAL OBLIGATION OR AN OBLIGATION UNDER AN
OFF-BALANCE SHEET ARRANGEMENT OF A REGISTRANT.
The following aggregate principal amounts of the following nine classes
of Notes (each, a "Class") were issued pursuant to the terms of an indenture,
dated as of January 11, 2006 (the "Indenture") by and among Arbor Realty
Mortgage Securities Series 2005-1, Ltd. (the "Issuer"), Arbor Realty Mortgage
Securities Series 2005-1 LLC (the "Co-Issuer" and together with the Issuer, the
"Issuers") Arbor Realty SR, Inc., as advancing agent, and LaSalle Bank National
Association, as trustee, paying agent, calculation agent, transfer agent,
custodial securities intermediary, backup advancing agent and notes registrar:
(1) $161,500,000 aggregate principal amount of Class A-1 Senior Secured Floating
Rate Term Notes, (2) $40,375,000 aggregate principal amount of Class A-2 Second
Priority Senior Secured Floating Rate Term Notes, (3) $57,000,000 aggregate
principal amount of Class B Third Priority Floating Rate Term Notes, (4)
$29,687,500 aggregate principal amount of Class C Fourth Priority Floating Rate
Capitalized Interest Term Notes, (5) $10,212,500 aggregate principal amount of
Class D Fifth Priority Floating Rate Capitalized Interest Term Notes, (6)
$9,025,000 aggregate principal amount of Class E Sixth Priority Floating Rate
Capitalized Interest Term Notes, (7) $17,575,000 aggregate principal amount of
Class F Seventh Priority Floating Rate Capitalized Interest Term Notes, (8)
$13,062,500 aggregate principal amount of Class G Eighth Priority Floating Rate
Capitalized Interest Term Notes, and (9) $17,812,500 aggregate principal amount
of Class H Ninth Priority Floating Rate Capitalized Interest Term Notes.
Simultaneously with the issuance of the Notes, the Issuer also issued and sold
preferred shares (the "Preferred Shares") with a notional amount of
approximately $119 million to a consolidated subsidiary of Arbor.
The Notes are secured by a portfolio of collateral debt securities with
a face value of approximately $412 million, consisting primarily of real
estate-related bridge loans, mezzanine loans and junior participating interests
in first mortgage loans, and approximately $63 million of cash available for
investment in similar real estate-related collateral debt securities in the
future. Arbor intends to own the portfolio of collateral debt securities until
its maturity and will account for the issuance of the Notes on its balance sheet
as a financing. The financing has a five-year reinvestment period that allows
the principal proceeds and sale proceeds (if any) of the collateral debt
securities to be reinvested in qualifying replacement collateral debt
securities, subject to the satisfaction of certain conditions set forth in the
Indenture.
The collateral debt securities were purchased by the Issuer from other
consolidated subsidiaries of Arbor, and each seller made certain representations
and warranties to the Issuer with respect to the collateral debt securities it
sold. If any such representations or warranties are inaccurate, the Issuer may
compel the seller to repurchase the affected collateral debt security from it
for an amount not exceeding par plus accrued interest and certain additional
charges, if then applicable.
The Issuer entered into a Collateral Management Agreement with Arbor
Realty Collateral Management, LLC, a consolidated subsidiary of Arbor (the
"Collateral Manager") pursuant to which the Collateral Manager has agreed to
advise the Issuer on certain matters regarding the collateral debt securities
and other eligible investments securing the Notes in exchange for a fee which is
payable on a quarterly basis in accordance with the priority of payments set
forth in the Indenture. The Collateral Manager's fee is equal to 0.25% per annum
of the net outstanding portfolio balance (the sum of (i) the aggregate principal
balance of the collateral debt securities (excluding "defaulted securities") and
the principal proceeds thereof, (ii) cash and eligible investments held in
certain accounts pledged as security for payment the Notes and (iii) with
respect to any collateral debt securities that are "defaulted securities," the
anticipated recovery as determined and calculated under the Indenture). The
payment of 40% of the Collateral Manager's fee is senior to payments on the
Notes and the payment of 60% is junior to payments on the Notes.
The Issuer, the Collateral Manager and the trustee entered into a
Servicing Agreement with Arbor Commercial Mortgage, LLC, the external manager of
Arbor (the "Servicer"), pursuant to which the Servicer has agreed to service all
the collateral debt securities (and, in the case of collateral debt securities
that are whole loans or mezzanine loans, the underlying assets backing such
collateral debt securities as well). In connection with its duties under the
Servicing Agreement, the Servicer is not entitled to a base servicing fee, but
will receive certain fees with respect to defaulted securities and the
liquidation or workout of collateral debt securities, and will be entitled to
retain, as additional servicing compensation, late fees, defaulted interest,
extension fees, prepayment fees, partial release fees and similar servicing fees
typically retained by servicers in servicing commercial mortgage loans. The
payment or reimbursement of the Servicer's compensation will be senior to
payments of interest on the Notes.
The Notes represent non-recourse obligations of the Issuers payable
solely from the collateral debt securities and other assets pledged under the
Indenture. To the extent the collateral debt securities and other pledged assets
are insufficient to makes payments in respect of the Notes, neither of the
Issuers will have any obligation to pay any further amounts in respect of the
Notes.
The Notes have an initial weighted average interest rate of
approximately 0.73% plus three-month LIBOR. Interest payments on the Notes are
payable quarterly, beginning on April 21, 2006, to and including April 21, 2038,
the stated maturity date of the Notes. In order to manage the Issuer's exposure
to interest rate mismatches between the Notes and the collateral debt securities
that bear interest at a fixed rate or at a floating rate not based on
three-month LIBOR, the Issuer entered into an interest rate swap agreement and
an interest basis swap agreement, each dated as of January 11, 2005, with
Wachovia Bank, National Association, as hedge counterparty. As advancing agent
under the Indenture, Arbor Realty SR, Inc., a consolidated subsidiary of Arbor,
may be required to advance interest payments due on the Notes on the terms and
subject to the conditions set forth in the Indenture. Arbor Realty SR, Inc. is
entitled to receive a fee, payable on a quarterly basis in accordance with the
priority of payments set forth in the Indenture, equal to 0.07% per annum on the
aggregate outstanding principal amount of the Class A Notes and the Class B
Notes.
Each Class of Notes will mature at par on April 21, 2038, unless
redeemed or repaid prior thereto. Principal payments on each Class of Notes will
be paid at the stated maturity in accordance with the priority of payments set
forth in the Indenture. However, it is anticipated that the Notes will be paid
well in advance of the stated maturity date in accordance with the priority of
payments in the Indenture. The weighted average lives of the nine classes of the
Notes is currently expected to be between six years and seven and one-half
years. The calculation of the weighted average lives of the Notes assumes
certain collateral characteristics and that there are no prepayments, defaults
or delinquencies. There is no assurance that such assumptions will be met.
The Class C, Class D, Class E, Class F, Class G and Class H Notes will
be entitled to receive quarterly scheduled amortization amounts (on a pari passu
basis within each such Class), if and to the extent that funds are available for
such purpose in accordance with the priority of payments set forth in the
Indenture. The scheduled amortization amount for the Class C, Class D, Class E,
Class F, Class G and Class H Notes is up to $359,756, $123,756, $109,366,
$212,976, $158,293 and $215,854, respectively, in each case on each interest
payment date occurring during the period from April 21, 2006 to, but excluding,
April 21 2011, determined on a non-cumulative basis and only to the extent that
amounts are available to pay such scheduled amortization amounts in accordance
with the priorities of payments set forth in the Indenture.
In general, payments of interest on any Class of Notes (including any
defaulted interest amount related to such Class of Notes) will be senior to all
payments of interest on any Class of Notes with a lower alphabetical designation
(including any defaulted interest amount related to such Class of Notes). In
general, payments of principal of any Class of Notes (including, in the case of
the Class C, Class D, Class E, Class F, Class G and Class H Notes, any
capitalized interest related to such Class of Notes) will be senior to all
payments of principal of any Class of Notes with a lower alphabetical
designation (including, in the case of the Class C, Class D, Class E, Class F,
Class G and Class H Notes, any capitalized interest related to such Class of
Notes).
From April 21, 2016 until (but not including) the date on which a
clean-up call redemption may be exercised (as described below), the Notes and
the Preferred Shares may be redeemed (in whole but not in part) if a successful
auction of the collateral debt securities is completed in accordance with the
terms of the Indenture (which requires, among other things, that the cash
purchase price for such collateral debt securities, together with the balance of
eligible investments and cash in certain accounts pledged to secure payment of
the Notes, is at least equal to the amount necessary to redeem the Notes and pay
certain other required amounts under the priority of payments set forth in the
Indenture).
The Notes are subject to a clean-up call redemption (at the direction
of the Collateral Manager), in whole but not in part, on any interest payment
date on which the aggregate outstanding principal amount of the Notes (excluding
certain capitalized interest) has been reduced to 10% of the aggregate principal
amount of the Notes outstanding on the issuance date.
Subject to certain conditions described in the Indenture, on April 21,
2009 and on any interest payment date thereafter, the Issuer may redeem the
Notes and the Preferred Shares at the direction of (i) holders of at least a
majority of the aggregate outstanding notional amount of the Preferred Shares or
(ii) the Collateral Manager unless holders of a majority of the aggregate
outstanding notional amount of the of the Preferred Shares object.
The Notes are also subject to a mandatory redemption on any interest
payment date on which certain coverage tests set forth in the Indenture are not
satisfied. Any mandatory redemption of the Notes is to be paid from interest and
principal proceeds of the collateral debt securities in accordance with the
priority of payments set forth in the Indenture, until the applicable coverage
tests are satisfied.
Within 10 business days after the date (the "Effective Date") which is
the earlier of 270 days after the issuance of the Notes or the date on which the
aggregate principal balance of the collateral debt securities is at least equal
to $475 million, the Issuer will request that each rating agency that rated a
Class of Notes confirm the rating it initially assigned to such Class of Notes
at the time of issuance. If any such initial rating of any Class of Notes has
not been confirmed, or is reduced or withdrawn, within 20 business days after
the Effective Date by any such rating agency, then any uninvested portion of the
approximately $63 million plus certain interest proceeds remaining after payment
of various fees and expenses and interest then payable on the Notes (and, under
certain circumstances, certain required payments of principal on the Notes),
will be used to pay principal of the Notes, in accordance with the priority of
payments, until each such rating is confirmed or reinstated or such Class has
been paid in full.
If certain events occur which would make the Issuer subject to paying
U.S. income taxes or would make certain payments to or from the Issuer subject
to withholding tax, then the holders of a majority of the aggregate outstanding
notional amount of the Preferred Shares may require that the Issuer prepay all
of the Notes.
The redemption price for each Class of Notes is generally the aggregate
outstanding principal amount of such Class, plus accrued and unpaid interest
(including any defaulted interest amounts and any capitalized interest amounts).
The Notes may be amortized in part by the Issuer (at the election and
direction of the Collateral Manager) if, during the reinvestment period, the
Collateral Manager (for at least 30 consecutive days) is unable to identify
appropriate collateral debt securities that satisfy the eligibility criteria
required under the Indenture in sufficient amounts to permit reinvestment and
the Collateral Manager notifies the trustee and the Issuer of such election and
the amount to be amortized.
In addition to standard events of default, the Indenture also contains
the following events of default: (1) the requirement of the Issuer, Co-Issuer or
pool of assets securing the Notes to register as an investment company, and (2)
the loss of the Issuer's status as a qualified REIT subsidiary of Arbor Realty
SR, Inc.
ITEM 8.01. OTHER EVENTS.
On January 12, 2006, Arbor issued a press release announcing the
closing of the collateralized debt obligation disclosed in Items 1.01 and 2.03
of this Form 8-K, a copy of which is filed as Exhibit 99.1 hereto.
ITEM 9.01. FINANCIAL STATEMENTS AND EXHIBITS.
(d) Exhibits
Exhibit Number
--------------
99.1 Press Release, dated January 12, 2006.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Dated: January 12, 2006 ARBOR REALTY TRUST, INC.
By: /s/ Walter K. Horn
------------------------------
Name: Walter K. Horn
Title: General Counsel, Secretary and
Director of Compliance
EXHIBIT INDEX
Exhibit Number
--------------
99.1 Press Release, dated January 12, 2006.