Propmodo Daily

By Franco Faraudo · Feb. 20, 2024

Greetings!

Numbers don’t lie, right? Well, they might not lie, but it turns out they can be made up. On a recent earnings call, the CEO of a large real estate company wanted to set the record straight on false data about their delinquency rates. We break it all down in today’s email.

Also, today we’re taking a closer look at Cushman & Wakefield’s AI strategy. C&W may not have spent as much on the technology as its larger rivals, but will a new partnership with Microsoft help them close the gap?

Now, let's dig in!

Disinformation About Real Estate Companies Is on the Rise

Arbor Realty Trust released its earnings report last week, and in it, Arbor's President and CEO, Ivan Kaufman, said something unusual, "I would like to spend some time talking about the short reports that have been written on our company."

The report he is referring to is data used for an article that was published in Bloomberg at the beginning of the month. The article cites preliminary data compiled by Banco Santander, which reported that "about 16.5% of Arbor's unpaid loans by value were past due in December, according to the data, about 2.5 times the level for the wider CRE CLO market."

Kaufman wanted to set the record straight, "While we will not get into a back and forth on the information in these reports or have detailed discussions on any specific loans, what we will point out is that the reports state that our CLO delinquencies were 16.5% in December and 26.6% in January when in reality, the rate of 1.3% for December and 5.6% for this January and as of today."

The reason for these false numbers, according to Kaufman, was to "drive down the company's stock price to achieve the desired goal of profit from a short position."

There has been a recent uptick in negative sentiment around the health of the commercial real estate industry and the banks that lend to it. There certainly are signs that delinquencies are on the rise. Even Kaufman admitted so, explaining, "One of the many reasons this is occurring is certain borrowers are taking the position that they will default first and negotiate second, which is not a strategy that works well with us."

But some of the bearish analysis (along with the numbers that it uses apparently) are fabricated. The people who hype the demise of a company or an industry to profit from their short positions even have a nickname now: crash bros.

The next few quarters are going to be difficult for the real estate industry; no one is denying that. But when it comes to predictions about fiery crashes, it is important to consider the source and be skeptical of the assumptions.

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