Arbor Realty Trust (NYSE:) is a real estate investment trust that operates a bit differently than other REITs. Most REITs own properties and then manage those properties for their clients. For example, some firms own shopping malls and collect rent from the stores that operate in the malls. Some specialize in specific sectors like healthcare facilities or computer server farms.
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But there are a handful that don’t own any properties at all yet structure themselves as REITs. These firms are more like traditional banks. They solely offer direct financing for properties. This is what ABR does.
It provides lending solutions to clients looking to finance multi-family properties, commercial buildings, healthcare facilities, elder care facilities and even single family rental properties.
One of the advantages to doing business this way is that there’s no property to manage. That means there’s no overhead on maintenance, either in personnel or materials costs.
Also, it allows ABR to be more flexible when it comes to its customer base. If one sector of the market is doing well, it can concentrate its efforts there, rather than being stuck in another sector’s misfortunes. And in the current economic cycle, REITs of all stripes are doing well because interest rates are low and likely heading lower before they head higher. That means REITs can borrow and refinance at great rates, which keeps their costs down.
Plus, the United States economy is doing well, especially compared to other countries. Job growth is plodding along and hourly income also marches upwards. In an economy where 70% of the engine is consumer spending, these are positives.
Arbor Realty Trust and an Aging Population
ABR stock also has something else in its arsenal. It works in two of the biggest long-term growth sectors out there — healthcare and elder care.
While they’re both closely linked, they are also not conjoined twins.
As the U.S. population gets older — millions of baby boomers will be hitting the 65-year-old benchmark every year for the next decade or more — elder care becomes an increasingly important issue, especially as the cost to maintain a home or rent an apartment continues to rise.
Along with that, in frequency and that means more visits to doctors, hospitals and outpatient clinics.
On the other end of the spectrum, as apartment rents continue to rise, renting single-family homes is actually becoming a viable option for younger couples or people looking for an alternative to multi-family housing.
The Bottom Line on ABR Stock
The point is, Arbor Realty Trust has some pretty solid long-term growth demographics covered. And that’s reflected in ABR stock. Year-to-date ABR stock is up nearly 25%. But the cherry on top — and it’s a pretty sizable cherry — is it delivers a 9.4% dividend on top of that kind of growth.
My Portfolio Grader gives ABR stock a “B” rating due to the lack of conviction in its economic numbers. But that still makes it a good buy for long-term growth.
is a renowned growth investor. He is the editor of four investing newsletters: Growth Investor, , Accelerated Profits and . His most popular service, Growth Investor, has a track record of beating the market 3:1 over the last 14 years. He uses a combination of quantitative and fundamental analysis to identify market-beating stocks. Mr. Navellier has made his proven formula accessible to investors via his free, online stock rating tool, PortfolioGrader.com. Louis Navellier may hold some of the aforementioned securities in one or more of his newsletters.
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