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Arbor Realty Trust (NYSE:ABR)
Q3 2021 Earnings Call
Oct 29, 2021, 10:00 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:


Operator

Good morning, ladies and gentlemen, and welcome to the third quarter 2021 Arbor Realty Trust earnings conference call. [Operator instructions] Please be advised that today's conference is being recorded. [Operator instructions] I would now like to turn the call over to your speaker today, Paul Elenio, chief financial officer. Please go ahead.

Paul Elenio -- Chief Financial Officer

OK. Thank you, Leo, and good morning, everyone, and welcome to the quarterly earnings call for Arbor Realty Trust. This morning, we'll discuss the results for the quarter ended September 30, 2021. With me on the call today is Ivan Kaufman, our president and chief executive officer.

Before we begin, I need to inform you that statements made in this earnings call may be deemed forward-looking statements that are subject to risks and uncertainties, including information about possible or assumed future results of our business, financial condition, liquidity, results of operations, plans, and objectives. These statements are based on our beliefs, assumptions, and expectations of our future performance, taking into account the information currently available to us. Factors that cause actual results to differ materially from Arbor's expectations in these forward-looking statements are detailed in our SEC reports. Listeners are cautioned not to place undue reliance on these forward-looking statements which speak only as of today.

Arbor undertakes no obligation to publicly update or revise these forward-looking statements to reflect events or circumstances after today or the occurrences of unanticipated events. I'll now turn the call over to Arbor's president and CEO, Ivan Kaufman.

Ivan Kaufman -- President and Chief Executive Officer

Thank you, Paul, and thanks to everyone for joining us on today's call. As you can see from this morning's press release, we had another outstanding quarter with many significant accomplishments, including exceptional operating results. It is very important for us to continue to emphasize the value of having multiple products with diverse income streams which has allowed us to consistently grow our earnings and dividends while maintaining a very low dividend payout ratio. We've strategically built an annuity-based business model of creating multiple income streams from a single investment.

As a result, not only did we generate strong risk-adjusted returns on our capital, which positively affect our current earnings, more importantly, we are also building a much higher-quality future earnings and dividend growth story by ensuring that our assets will provide us with multiple other products in the future. And this is one of the major differentiators of our business platform, which is why we strongly believe we should consistently trade at a substantial premium and much lower dividend yield than anyone else in our peer group. Our record results, combined with our very positive outlook on the long-term growth of our platform, has allowed us to once again increase our dividend to $0.36 a share. This is our sixth consecutive quarterly dividend increase and our tenth increase in the last 13 quarters, all while maintaining the lowest dividend payout ratio in the industry.

We've built a premium operating platform, which, as I mentioned in the past, is focused on the right asset classes with very stable liability structures. We have a thriving balance sheet, GSE agency, private label, and single-family rental, as well as an industry-leading securitization platform, that has allowed us to produce a long track record of exceptional performance with consistent earnings and dividend growth. And as a result, we've been the top-performing REIT in our space for five consecutive years now in all the major performance metrics, including earnings and dividend growth, ROE, and total shareholder return. And again, we are very confident in our ability to continue to produce outstanding results in the future.

Before we discuss the details of our quarterly results, I want to highlight some of our more notable recent accomplishments. We had a very active and successful quarter in many areas of our business. We produced tremendous transaction volumes, originating in excess of $4 billion in new loans and investments this quarter, including $2.5 billion in balance sheet loan originations, which is another new record. We have now closed $10 billion in loans through the first nine months of the year.

And just as importantly, our pipeline is currently at an all-time high. We are once again in the capital markets, successfully raising approximately $615 million of accretive capital to fund this growth. We issued $270 million of five-year 4.5% unsecured debt and $345 million of new 6.25% perpetual preferred equity, which will be extremely accretive to our future earnings and dividends. Every time we raise capital to fund our growing balance sheet loan business, which is not only accretive to our current earnings and dividends but also allows us to build a pipeline for two to three years of new GSE agency and private-label loans that produce additional long-term-dated income streams, ensuring the growth of our platform and creating high-quality earnings and dividends for the future.

We are also very successful in continuing to access the CLO securitization market in the third quarter, closing our 16th and largest CLO to date totaling $1.5 billion with very favorable terms and pricing. We have consistently been a leader in the CLO securitization market. It's financing our high-quality balance sheet portfolio with the appropriate liability structures continuing to be one of the key business strategies. The utilization of these vehicles has contributed greatly to our success by allowing us to appropriately match-fund our assets with nonrecourse, non-mark-to-market, long-term debt and generate attractive level returns on our capital and provide us with a rock-solid balance sheet.

And in October, we were very pleased to have closed our third private-label securitization totaling $535 million with a very effective execution which will contribute greatly to our fourth quarter earnings and continues to demonstrate the strength and diversity of our versatile lending platform and tremendous securitization expertise. Turning now to our third quarter performance, as Paul will discuss in more detail, our quarterly financial results were once again remarkable. We produced distributable earnings of $0.49 per share, which is well in excess of our current dividend, representing a payout ratio of around 75%. In our balance sheet business, we are seeing tremendous growth in efficiencies as we continue to scale our platform at a very rapid pace.

We are a top balance sheet lender in the industry which has allowed us to grow our loan book another 24% in the third quarter on record quarterly volume of $2.5 billion. We have already grown our balance sheet 67% this year to $9.2 billion at September 30. And our pipeline is also at an all-time high, which will allow us to continue to meaningfully grow our loan book going forward. And again, I want to emphasize the significant value of our balance sheet business, which not only generates strong levered returns on our capital, but very importantly, these investments also provide us the future agency and private-label transactions with long-dated income streams.

We continue to experience strong growth in our GSE agency platform, and we are seeing significant increased momentum in our private-label program as well. We originated approximately $1.1 billion in agency loans in the third quarter and $1.7 billion, including our private-label business. We also have a robust pipeline, giving us confidence in our ability to produce significant agency and private-label volumes for the balance of our year. Our GSE and agency platform continues to offer premium value as it requires limited capital and generates significant returns, long-dated, predictable income stream that produces significant annual cash flow.

Additionally, our $26 billion GSE agency servicing portfolio, which has grown 16% in the last year, is mostly prepayment-protected and generates approximately $120 million a year and growing reoccurring cash flow, which is up 19% from $101 million annually last year. This is in addition to the strong gain-on-sale margins we continue to generate from our origination platform, which, combined with new and increasing servicing revenues, will contribute -- will continue to contribute greatly to our earnings and dividends. We're also pleased with the continued growth we experienced in our single-family rental platform. In the third quarter, we committed to another $150 million of product, and it produced $500 million of volume for the first nine months of the year.

We also have well over $1 billion of additional deals in our pipeline, making us optimistic about the growth opportunities in this segment of our business. We are a leader in the build-to-rent space which provides us with the opportunity to originate construction bridge and permanent loans in the same transaction. And again, similar to our balance sheet business, the platform provides us yet another path to future transactions that will produce additional long-dated income streams. In summary, we had another exceptional quarter and are well-positioned to close out 2021 as another record year.

We have developed a unique, multi-tiered, annuity-based operating platform that provides us with future annuity of high-quality, long-dated income streams, making us confident in our ability to continue to grow our earnings and dividends and significantly outperform our peers. I will now turn the call over to Paul to take you through the financial results. 

Paul Elenio -- Chief Financial Officer

 OK. Thank you, Ivan. As Ivan mentioned, we had another exceptional quarter, producing distributable earnings of $76 million or $0.47 per share and $0.49 per share, excluding a one-time realized loss of $2.8 million on a non-multifamily asset that we had taken a reserve on early last year as a result of the pandemic. These quarterly results once again translated into industry high ROEs of approximately 17% and have allowed us to increase our dividend to an annual run rate of $1.44 a share, and this dividend increase reflects our sixth consecutive quarterly increase and our 22nd increase in the last 10 years.

Our financial results continue to benefit greatly from many aspects of our diverse annuity-based business model, including significant growth in our agency, private label, and balance sheet business platforms that produce substantial gain-on-sale margins, long-dated servicing income, and strong levered returns on our capital. Additionally, as we mentioned in the past, the credit quality of our portfolio has been outstanding as we have very little exposure to the asset classes that have been affected the most by the recession, and we also believe we have adequately reserved against those positions. During the height of the pandemic, we recorded approximately $35 million in reserves related to these assets. As we mentioned on our last call, we successfully sold one of our positions in the second quarter, completely recovering a $7.5 million reserve we had against this asset and collecting $3.5 million in back interest.

And in the third quarter, we resolved another one of these loans, receiving a payoff of $2 million on a $4.7 million asset that we had a $3.8 million reserve on, resulting in a charge-off of approximately $2.8 million and a reserve recovery of $1 million. We have also seen positive developments with our nonperforming loans as trends continue to improve. We received a full payoff of $24 million loan, including recovering approximately $3 million of unpaid interest during the quarter, and we continue to make progress on our remaining NPLs as well. We have always prided ourselves on investing heavily in our asset management function, and the success we're having in working out these assets further demonstrates the value of our unique platform.

Looking at the results from our GSE agency business, we originated $1.1 billion of loans and recorded $1 billion in loan sales in the third quarter. The margin on our GSE agency loan sales was 1.60% in the third quarter, compared to 1.83% in the second quarter, mainly due to higher percentage of FHA loan sales in the second quarter which carry a much higher profit margin. Additionally, as Ivan mentioned, we were very active in our private-label program, originating $625 million of new loans in the third quarter, as well as completing our third private-label securitization, totaling $535 million in October. And in the third quarter, we also recorded $33 million of mortgage servicing rights income related to $1.9 billion of committed loans, representing an average MSR rate of around 1.75%, compared to 2.20% last quarter, mainly due to a higher mix of FHA and private-label loans in the third quarter that contain lower servicing fees.

Our servicing portfolio of $26 billion has a weighted average servicing fee of 46 basis points and an estimated remaining life of nine years. This portfolio will continue to generate a predictable annuity of income going forward of around $120 million gross annually, which is up approximately $19 million or 19% on an annualized basis from the same time last year. Additionally, prepayment fees related to certain loans that have yield maintenance provisions increased substantially to $11 million for the third quarter, compared to $4 million for the second quarter, mainly due to significantly more runoff this quarter. And the current tax provision related to our TRS operations was down to approximately $4 million this quarter from approximately $11 million last quarter.

This decrease was largely related to less gain-on-sale income on our agency business this quarter due to our second private-label securitization closing last quarter and from a change in the mix of our taxable agency business income as a result of the significant growth we continue to experience in our balance sheet business. This change in mix effectively lowered our overall estimated effective tax rate for the year, resulting in a catch-up reduction to our third quarter current tax provision of around $3 million. In our balance sheet lending operation, we grew our portfolio another 24% to $9.2 billion in the third quarter on record quarterly volume of $2.5 billion. Our $9.2 billion investment portfolio had an all-in yield of 4.97% at September 30, compared to 5.33% at June 30, mainly due to higher rates on runoff as compared to new originations during the quarter.

The average balance in our core investments increased substantially to $8.2 billion this quarter from $6.6 billion last quarter, mainly due to significant growth we experienced in both the second and third quarters. The average yield on these investments was 5.55% for the third quarter, compared to 5.85% for the second quarter, again mainly due to higher interest rates on runoff as compared to originations in the second and third quarters. Total debt on our core assets was approximately $8.6 billion at September 30 with an all-in debt cost of approximately 2.64%, which was down from a debt cost of around 2.79% at June 30, mainly due to a reduction in the cost of funds from our new CLO vehicle and reduced rates in our warehouse and repurchase agreements during the third quarter. The average balance in our debt facilities was up to approximately $7.3 billion for the third quarter from $5.9 billion for the second quarter, mostly due to financing the growth in our portfolio and issuing $270 million of senior unsecured notes during the third quarter.

On the average, cost of funds in our debt facilities increased to -- decreased to 2.76% for the third quarter from 2.89% for the second quarter, again mainly due to the full impact of reduced pricing in our CLO vehicles and warehouse facilities. Our overall net interest spreads on our core assets decreased to 2.79% this quarter, compared to 2.96% last quarter, and our overall spot net interest spreads were also down to 2.33% at September 30 from 2.54% at June 30 from yield compression on new originations as compared to runoff. That completes our prepared remarks for this morning. I'll now turn it back to the operator to take any questions you may have at this time.

Leo? 

Questions & Answers:


Operator

Thank you. [Operator instructions] We'll take our first question from Steve Delaney of JMP Securities. 

Steve Delaney -- JMP Securities -- Analyst

Thanks. Good morning, Ivan and Paul. Look, congrats, not just on these results, which you keep putting up every quarter, but finally, for the performance of ABR stock this year with a 41% gain. That has really benefited our clients.

We appreciate that. Not -- and I did hear your comments, Ivan, that you certainly didn't need to go on that, but it is a nice accomplishment this year. Want to recognize that. 

Ivan Kaufman -- President and Chief Executive Officer

Thank you, Steve. 

Steve Delaney -- JMP Securities -- Analyst

Sure. When you started the private-label business, we saw it as kind of a more defensive thing post-COVID which -- where Freddie and Fannie going to be, and it obviously has become more than that. And I'm curious, just from the borrower's perspective, what the benefits are. You're obviously able to fund new loans from borrowers who would like a private execution rather than Freddie and Fannie.

So just sort of help us understand the dynamics there and why they select your -- take your private execution versus agency. Thanks. 

Ivan Kaufman -- President and Chief Executive Officer

That's a great question, and let me give you a little perspective. It's all about the math, right? So right now, you have the two agencies that are going to do about $160 billion between the two with their caps. It's what they did last year. 50% of that is going to be for mission-driven business.

So that's -- only $80 billion that's now available for non-mission business. Keep in mind, multifamily values are up around 30% over the last 15 to 18 months, so that $30 billion is only like $50 billion, right, of agency product available. The market is about a $400 billion market. So the private label, while it was a necessary product because the footprint of the agencies might have gotten cut back on the Calabria, the math I just laid out to you shows you that they are cut back relative to the size and growth of the market.

So that void has to be filled. And when the agencies get filled, the pricing backs up. And then the private label actually becomes a better execution on a pricing basis for non-mission business. So for me, it's just math.

So it's not as though the agencies are unlimited. They are limited and very limited in context to the size of the market and the growth of the market. So we believe that that will continue to be an outstanding product. We're very unique in the sense that we are one of the few who have the capital base to hold the product.

While it's in form for securitization, securitize it, retain the B-pieces as attractive yields and really manage that part of the market. We are a lender. When it comes to products, we're not a broker. And I think clients will really respect the fact that we are the lender.

We close our own product, and we buy our own pieces, and we service that product. So I believe this is going to be an extremely competitive aspect in the market for us as we go forward. 

Steve Delaney -- JMP Securities -- Analyst

That's really helpful. I have to tell you, I've been watching the monthly volumes for Freddie and Fannie this year, and they're kind of puny. And you see $4 billion -- $3 billion, $4 billion, and you're thinking, "Why -- you've got room. Why aren't you lending more?" But you just told me something I hadn't focused on, and that is they don't have an unlimited amount of normal higher-income-type property they can do because they have to first hit their 50% mission-driven mandate.

And that really does help put it in context going forward. So that's very helpful. So it sounds like it's a business opportunity that should have legs going forward, certainly as long as these caps have that component. And I can't imagine the affordable being reduced anytime soon.

So thank you.

Ivan Kaufman -- President and Chief Executive Officer

And it will become more dominant. And I think because of the way we're structured, the way we do our business, it gives us a unique competitive advantage, and we're going to really work on that as well. 

Steve Delaney -- JMP Securities -- Analyst

And you mentioned you're not a broker, but you're a lender. I think -- I mean I've kind of lost having a handle on how large your production platform has become. Just curious if you can share with us how many producers -- as a percentage of your overall headcount, how many producers do you have? And have you found the opportunity or the need to open any regional offices around the country beyond your New York headquarters? 

Ivan Kaufman -- President and Chief Executive Officer

So we have, I believe, approximately 25 originators. All the staff primarily have been homegrown. We really don't hire outside. And we really can't add anybody right now.

We're at full capacity in terms of production and capability. Our biggest restraint right now is people. We have turned away business in our fourth quarter, significant. We're at our peak. We can't produce anymore, and it's just the way it is in the market.

Everybody is extraordinarily busy. We're probably busy than most. Our balance sheet has been outperforming even our own expectations. But underwriters, analysts, they're in short form.

We've been able to retain a majority of our people, add in a little bit, use some third parties out there, but we're full. So right now, we just want to handle what our originators are bringing in. And I think, hopefully, in the first quarter, we can add to the staff a little bit and manage the demand we have. 

Steve Delaney -- JMP Securities -- Analyst

Thanks for the comments.

Operator

We'll take our next question from Rick Shane of J.P. Morgan. 

Rick Shane -- J.P. Morgan -- Analyst

Thanks, guys, for taking my questions this morning. look, I'd like to talk a little bit about the agency business and how we should think about the difference between the pipeline on the Fannie, Freddie paper and the private label. I'm curious if there are differences in terms of accumulation periods for each, what the hold times look like, and more importantly, how we should think about hedging and revenue recognition. Is there anything in terms of pipeline hedging with rates moving around we should be aware of? 

Ivan Kaufman -- President and Chief Executive Officer

So in terms of our pipeline, Paul can get more granular than I can. He has all the numbers. But our pipeline is at, I think, all-time highs on all product types. Clearly, the FHA pipeline, a period of time to close those loans, probably is averaging nine months right now, six to nine months.

They're extremely backed up. The gestation period to go through the system is long. Typically, Fannie and Freddie loans are anywhere between 45 to 90 days from time of application to time of close. Things are a little backed up right now with third parties and turnaround times, both at the agencies and here, so those are taking a little bit longer.

Our bridge pipeline is as strong as ever, and we're actually quoting right now to close bridge loans, which used to be done within 45 days, we'll call it, in 75 to 90, just the backup in the industry on third parties and our own processing systems. The demand for bridge product is extremely strong. I think what we're seeing in the market are people are buying a lot of product today, and they're seeing that new rents are 5% to 10% above old rents, so they want to bridge the product for 12 months, get full unit terms and then do a permanent takeout. So that philosophy fits in very well with our business model.

This will do the bridge loan, get great risk adjustment returns and then turn it into an agency loan and then once again get additional gain on sale and get long-term bridge loans and have proprietary deal flow. So that has worked extremely well for our business model, and we see that to be very, very strong all the way through the end of the year. And we've already booked -- booking most of our closings for January and February, believe it or not. So that's our overall outlook.

In terms of our floating rate book, we, in the past six to nine months, have been very liberal in terms of people buying caps. As of last week, we've made it mandatory for people to buy caps. I have a little concern that rates may rise. And in fact, we have the rights under our documents to require people to buy caps.

For loans in our portfolio, where I'll go through our portfolio now and having people buy rate caps, I have a little bit of concern that there'll be a little bit of a rise in rates, and we want to protect ourselves against that. So that's our overall philosophy. Paul, do you want to add anything to that? 

Paul Elenio -- Chief Financial Officer

Sure. So Rick, to some of your other questions, the way we look at the agency business or the GSE agency business, and the APL business from an execution perspective is, as you know, the GSE agency business, when we rate lock a loan, we're immediately selling it forward in a forward commitment. So that's how we hedge our interest rate risk. We really have no interest rate risk because at the time we rate lock the loan, we're immediately selling it forward with a commitment.

So that's our hedge. And that usually gets taken out within 30 to 60 days, on average 45 days, from the day of closing to the day of sale to the agency. So that's how we handle that execution. As far as the pipeline, we did about $1 billion, $1.1 billion of straight GSE agency business in the third quarter.

We've already done in October $450 million, so we're off to a good start. I would say the fourth quarter is probably going to be a little -- hopefully a little elevated from the third, but that's what we're expecting. On the APL business, as you may have seen in the balance sheet, we had about $780 million of APL on our balance sheet at the end of September. We accumulate that product.

It's a little bit of a longer run anywhere from, let's say, three to six months, more closer to three months, probably somewhere 90 to 180 days as we accumulate it. And that $780 million that we had on our balance sheet, we did execute, as we mentioned in our prepared remarks, a $535 million third securitization in October. So we're left with $225 million of that product on our balance sheet after that trade. And as we originate in the fourth quarter, we'll hopefully get enough product and demand to pull for another execution at some point.

As far as the hedging goes and the revenue recognition, it's really quite simple. So on the agency side, we don't have a hedge because, as I mentioned, we have a forward commitment. And on the APL side, because those are fixed-rate loans without a forward commitment as we accumulate them on our balance sheet, we do enter into interest rate swaps. And we enter in those to protect ourselves from the movements, up or down, in interest rates.

What we do for accounting is because they're not effective swaps for accounting, they have to be brought through the P&L as a hit or income, depending if those swaps are in the money or out of the money for accounting for GAAP. But we defer those gains or losses for our distributable earnings, and we bring them in when the securitization is complete, really to match it up with the revenue we've created from the securitization. Hopefully, that answered your question. I think that's where you were going. 

Rick Shane -- J.P. Morgan -- Analyst

Both parts -- both responses were incredibly helpful. Thank you, guys.

Paul Elenio -- Chief Financial Officer

You're welcome.

Operator

We'll take our next question from Stephen Laws of Raymond James. 

Stephen Laws -- Raymond James -- Analyst

Hi. Good morning. Ivan and Paul, congratulations, continued fantastic execution on the business. You covered a couple of the segments already.

Maybe wanted to touch on the prepayment fees you mentioned were up sequentially. I know your investments are prepayment-protected. Paul, can you maybe talk a little bit about how you expect those fees to trend? What -- are you continuing to see elevated prepayments through October? How should we think about that as far as our models here in the coming quarters?

Paul Elenio -- Chief Financial Officer

Sure. Steve, it's a great question, and you and I had this conversation, I think, last quarter as well. A little surprising this quarter that I continue to see elevated runoffs and elevated yield maintenance provisions being paid. Just to put it in some context, back in the first quarter, we had roughly $400 million of runoff with, I think, $2.5 million of prepayment penalties.

In the second quarter, it jumped to $800 million of runoff with $4.2 million of prepayment protections. And then this quarter, we saw $1 billion of runoff with $11.2 million of prepayment penalties. So what we're seeing -- and it's an interesting trend, and I don't know if it continues, I think it does, but it's hard to tell. I haven't seen the October numbers yet.

We'll get them in the next couple of days. So as Ivan mentioned, with the values of real estate climbing pretty much 30% over the last 15 to 18 months, what we're seeing is people writing those yield maintenance checks and paying off loans very early in their life because they're either selling them in the market or refinancing them in the market. Obviously, we are laser-focused on making sure we're getting any refinance opportunities. And they're writing those checks because they're getting appreciated value.

So does that trend continue? Ivan can probably give you a view. It probably does for a little bit, it's just hard to quantify where this is going to go over the next couple of quarters.

Ivan Kaufman -- President and Chief Executive Officer

I think that values are up considerably. You have a combination of cap rate compression and growth in rents a little more than people expected. And there are a lot of people taking gains on their assets, so they're selling them, paying yield maintenance, which we get the benefit of. But sales activity is up.

But that also spills into another area. It also spills into an area of higher credit quality, right? So if our values are up and rents are up, that means our existing portfolios are going to do better. And that's one of the reasons why our bridge product is so important, because on the bridge side we have a huge portfolio. And with values up and income streams up, as these rents turn and the values come in, we're going to have a huge stream of bridge loans turning into agency and private-label loans.

And that's our business platform. But I do expect the fourth quarter -- and Paul and I have a difference of opinion. Paul is more conservative, I'm seeing a lot of sales activity. So I think the prepayment should be pretty -- prepayment fee should be pretty strong for the fourth quarter. 

Stephen Laws -- Raymond James -- Analyst

Appreciate the color. It's nice having the wind at your back there on the fees. I know Steve touched on the private-label and Rick at the agency. Can you talk maybe about the opportunity in SFR? I know it's a little smaller but continue to drive some increases there.

Can you talk about the opportunity at SFR, as well as kind of the competitive landscape there? 

Ivan Kaufman -- President and Chief Executive Officer

Sure. The SFR business and a single-family, build-to-rent business, is a business we like the most. So we're pretty dominant in that space. We do a construction loan, which turns into a bridge loan, which eventually turns into a takeout loan if they don't sell a property.

When you do a construction loan, which we have a significant number of commitments, the funding occurs over a period of 24 months. So the initial commitment is very small, but it builds up over time. That's a big pipeline. We love the business.

We like the risk profile. We got into it early. Cap rates have compressed. Values are up huge, and we've really made our mark very well.

In terms of providing financing for scattered sites, we're doing a significant amount of that. That business is growing. We like that as well. Once again, there's a lot of liquidity.

There's a lot of competition in that market, but we're growing it slowly. Paul, do you have some numbers that you can lay out? 

Paul Elenio -- Chief Financial Officer

Yes. Do you want -- on the build-to-rent side? 

Ivan Kaufman -- President and Chief Executive Officer

Yes, both. 

Paul Elenio -- Chief Financial Officer

So yes, so the numbers we laid out is on the build-to-rent side, we've committed to fund on build-to-rent deals, life to date, about $500 million. We have a significant amount more in our pipeline. And during the quarter, we did another -- I think it was another -- between what we funded and what we committed to, another $100 million. So that's a product that's really starting to build momentum.

And as we talked about in our commentary, it also feeds down the road our Agency and APL business, which is all part of our annuity-based model. But yes, we've laid out the numbers. We've done about $150 million of total product in the third quarter. Through the year to date, we've done about $500 million.

Life to date, since the business has begun, we've done about $1 billion with about $500 million of that being build-to-rent. So -- and we've got a pretty big pipeline. 

Stephen Laws -- Raymond James -- Analyst

Great. Appreciate the details there, and thanks for your time this morning. 

Paul Elenio -- Chief Financial Officer

Thanks, Steve.

Operator

We'll take our next question from Jade Rahmani of KBW. 

Jade Rahmani -- KBW -- Analyst

Thank you very much. I was wondering, Ivan, if you could share your view on the competitive spending markets right now. Debt funds and mortgage REITs clearly have seen a surge in their originations. Do you have any concerns about underwriting standards and competitive pressures in the market? 

Ivan Kaufman -- President and Chief Executive Officer

We've definitely a lot of competitors, and there's a lot of business out there. I do always have concerns when there's a lot of competition. We have a great reputation in the market. We pick our spots.

We know where to put our dollars. We believe that in all competitive markets, there are a lot of mistakes that are always going to be made. And we just have to proceed very prudently. We've put a huge focus on lending on cash flow deals, deals that have positive coverage that need very little heavy lift.

That's very different than what happened four or five years ago when there were a lot of B and C assets being bought with tremendous amount of lift. The lift is very small. It's basically unit terms. Our biggest concern right now is the market turned into a syndicator market, where you have a lot of syndicators coming in with very little net worth and liquidity raising money and don't have the liquidity to withstand a -- withstand any bumps in the road.

So we're very careful of who we're dealing with. Usually where speed bumps is with multiple assets. And we want to make sure the structure between the GP and the LPs are good. I think that's where a lot of mistakes are being made right now.

They're working with thinly capitalized sponsors. They're working with people who they're trying to win a deal for 5 basis points with no structure. We're maintaining our structure on our deals. Other people are not.

So I think we have a lot of experience in the way we run our business, and we're able to be a little more selective than most. 

Jade Rahmani -- KBW -- Analyst

Thanks. And historically, what percentage of the business is in the affordable housing space? 

Ivan Kaufman -- President and Chief Executive Officer

I think we're one of the higher mission-driven business people, and a lot of it had to do with our small balance lending in our workforce housing. I think we're one of the top five Fannie Mae mission-driven business lenders. That's pretty consistent with what we've done. I'd have to check the numbers to see if it's migrated at all, but we've usually been a top deliverer to Fannie and Freddie on the mission-driven business. 

Paul Elenio -- Chief Financial Officer

Yes. That's right, Ivan. I don't have the numbers here either. We'll get them to you, guys, but that's -- I don't think it's changed dramatically. 

Jade Rahmani -- KBW -- Analyst

OK. And do you also know the conversion rate historically of the multifamily bridge loans into the agency product? 

Ivan Kaufman -- President and Chief Executive Officer

Yeah, Paul has that.

Paul Elenio -- Chief Financial Officer

Sure. So I think you got to look at it a couple of ways, right? So we've historically targeted anywhere to 40% to 60%, sometimes higher, of recapture rate on our bridge loans. Certainly, when there's sales involved, which there have been some lately, you don't always recapture that business because you don't always have that ability. But anything that's not sold that comes up for refinance or takeout, our recapture rate is very, very high, probably in the 70% to 80% range on anything that's not sold.

With stuff being sold, it's probably in the 40% to 50% range overall. But that's our target. And as Ivan mentioned, we're putting a lot of bridge loans right now. And with the increase in values and when rents roll, we're really sizing up a lot of these deals to come to agency.

That's our model. So we think that recapture rate will be very high on the business we've been putting on. Ivan, would you agree with that? 

Ivan Kaufman -- President and Chief Executive Officer

Yeah. I think you have to look at the product we're putting on. Most of the products we're putting on is requiring a turn of rents, very little capex. And the business model for the person buying it is to put on a bridge loan, make those terms and then turn it to an agency.

Historically, most of the loans were heavy-lift loans, 20%, 30%, 40% capex, huge repositioning, and usually a two-, three-year gestation period. And what happened with a lot of those loans, the gains were so huge with the market changes that a lot of people chose to sell those assets. So we think the recapture rate is going to be higher because the intended business purpose was specifically for a shorter-term bridge loan with a quick turn into agency or FHA. And we do think our FHA platform is going to be a huge beneficiary of our bridge loans.

Because as they're doing it, they'll file with the FHA, which takes nine months to a year, and they'll run that process simultaneously. So we're pretty optimistic and hopeful that that will really feed into our platform. 

Jade Rahmani -- KBW -- Analyst

And lastly, in terms of Fannie and Freddie and how they're doing right now, it seems like their most recent monthly numbers showed a pretty decent sequential uptick. Are you seeing them become a lot more active? Or would you say it's kind of a steady-state positioning? 

Ivan Kaufman -- President and Chief Executive Officer

Well, they come and go. I think when they didn't know what their allocation is, they backed off. They were pretty full for the year. I think they'll be pretty active in the first quarter.

They've lowered their pricing, and we think we'll have a good fourth quarter. And then they'll want to gear up in the first quarter, and we'll see what the flow is for them. But we think the numbers are going to be pretty good for the next two quarters. 

Jade Rahmani -- KBW -- Analyst

Thanks for taking the questions.

Operator

We'll take our next question from Lee Cooperman of Omega Family Office. 

Lee Cooperman -- Omega Advisors -- Private Investor

Thank you. Let me first echo Steve Delaney's comments. You guys have done an outstanding job. You deserve a kudos.

And thanks because I have been here almost the entire run and still there. So one of my questions. I noticed you raised some fixed-rate money at 4.5% to 6.25%. The stock yield, 7.1%.

We're selling it at a significant justified premium to book value. So what are you putting money out at? I can figure out your cost of capital. What are you putting money out at these days? And you said that there's tremendous opportunities. I assume with the tremendous opportunities, your spreads should get wider, right? 

Ivan Kaufman -- President and Chief Executive Officer

So we're generally putting -- it's still a competitive market. So I think the range, when we put out money on multifamily bridge loans, we're generally getting a 10% to 12% yield, somewhere in that range. And that doesn't take into consideration the significant economics we derive when that converts into an agency loan to gain on sale on the servicing fee. And then the returns become infinite in the sense, because the gain on sales and those long-term servicing fees are really what we're striving for.

So it's a matter of balance of how we raise the different elements of capital to fund for that business, and we're very careful on how we do that. 

Lee Cooperman -- Omega Advisors -- Private Investor

It was like a potential machine you've created here. I guess the logical question is what could derail this? Is it the rising rates? I mean we're a beneficiary of these low rates which have exposure to rising rates. 

Ivan Kaufman -- President and Chief Executive Officer

Listen, we -- I believe a little differently than most. I believe that rates are going to rise different than most people. I think that we are underwriting and positioning our business to rise in the 10-year to about 2.50%. That's what I'm thinking in the way I'm running our business.

So we'll make sure that we have appropriate asset management skills, underwrite our loans accordingly and know how they exit, and know how to manage that business. We're also underwriting LIBOR to probably rise to 50 to 75. That's just our outlook. So we can handle that rise in interest rates and manage our business accordingly and make sure we have ample liquidity to manage the growth in our business. 

Lee Cooperman -- Omega Advisors -- Private Investor

Well, congratulations-en on a terrific job for all the shareholders, including yourself, which is the world of that capitalism. 

Ivan Kaufman -- President and Chief Executive Officer

Thank you. 

Paul Elenio -- Chief Financial Officer

Thanks, Lee. 

Operator

And it appears that we have no further questions at this time. I'd be happy to return the call over to our presenters for any concluding remarks. 

Ivan Kaufman -- President and Chief Executive Officer

OK. Well, thank you, everybody, for participating. Once again, it's been an amazing quarter. We are looking forward to finishing the year very, very strong and positioning ourselves for a great 2022.

Have a great weekend, everybody. Take care. 

Paul Elenio -- Chief Financial Officer

Thanks, everyone. 

Operator

[Operator signoff]

Duration: 26 minutes

Call participants:

Paul Elenio -- Chief Financial Officer

Ivan Kaufman -- President and Chief Executive Officer

Steve Delaney -- JMP Securities -- Analyst

Rick Shane -- J.P. Morgan -- Analyst

Stephen Laws -- Raymond James -- Analyst

Jade Rahmani -- KBW -- Analyst

Lee Cooperman -- Omega Advisors -- Private Investor

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