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Arbor Realty Trust's CEO Discusses Q1 2012 Results - Earnings Call Transcript

We continue to diversify our revenue sources by growing our residential investment platform, which we believe will generate outsized returns on our capital. As of March 31, 2012, we had $65 million of residential securities outstanding with corresponding leverage of $55 million. These securities generally have an average expected life of 18 to 24 months and are expected to generate levered returns in excess of 20%.

In addition, in April, we originated three loans totaling $30 million with a weighted average yield of approximately 6% and expected levered returns in excess of 15%, and purchased three residential securities totaling $4 million with a weighted average yield of 6% and expected levered returns in excess of 20%.

Our pipeline remains strong and our goal is to continue to deploy our capital into new investment opportunities with a targeted return of 50% on an unlevered or levered basis. Clearly, this growth and diversification in our production has increased our core earnings run rate and we’re pleased with the opportunities we are seeing in this market to continue to increase and diversify our core earnings in the future.

We’ve also continued our success in recycling our capital through runoff and monetization of our nonperforming and unencumbered assets, which has increased our available liquidity to deploy into new investment opportunities.

In the first quarter, we generated cash runoff of $38 million and $18 million already in the second quarter. Our cash position as of today is approximately $35 million, not including approximately $21 million of cash collateral posted against our swaps.

We also have around $90 million of net unencumbered assets, as well as $145 million of our CDO bonds that we purchased for $64 million, which could produce additional liquidity. These assets, combined with cash on hand and cash posted against our swaps, gives us approximately $220 million of value. This, in addition to approximately $290 million of value between the equity in our CDO vehicles and our real estate-owned assets, for a total value of approximately $500 million.

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