JPMorgan analyst Richard Shane downgraded Arbor Realty to Underweight from Neutral with a price target of $13.50, up from $11.50. Rising interest rates have been a headwind for both residential mortgage real estate investment trusts and commercial mortgage REITs for almost two years, the analyst tells investors in a research note. However, for the first time since this rate cycle began, JPMorgan sees “risk skewed towards lower rather than higher.” While commercial mortgage REITs will continue to face deteriorating credit, lower rates could bring incremental relief for projects at the edge of default. says JPMorgan. Nonetheless, the firm downgrades Arbor Realty to Underweight, saying the stock’s higher multiple represents a premium to book value despite a deteriorating credit environment..
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