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Risks
1. Interest Rate Risk: Arbor Realty Trust’s business model depends heavily on debt financing, making them particularly susceptible to fluctuations in interest rates.
2. Default Risk: As a lender, Arbor Realty Trust has a wide range of borrowers who have varying credit quality, so the company faces the risk that one or more of these borrowers will default on their loan.
3. Regulatory Risk: Real estate investments are subject to government regulations, which can change at any time, creating uncertainty for the company.
4. Liquidity Risk: Due to the highly illiquid nature of real estate investments, Arbor Realty Trust can experience difficulty in converting its assets to cash when it needs it.
5. Competition Risk: Arbor Realty Trust’s success relies on its ability to consistently attract and retain customers. As the real estate lending market is highly competitive in nature, the company faces a risk of losing competition to other lenders.
6. Credit Risk: As a lender, Arbor Realty Trust is exposed to credit risk arising from its exposure to various loan portfolios. If a borrower fails to up keep loan commitments, Arbor Realty Trust could experience losses.