Ladder Capital Corp Q3 FY2024 earnings call

• Ladder generated distributable earnings of $37.7 million, or $0.30 per share, with a return on equity of 9.8% and a balance sheet with $1.9 billion in liquidity, including $1.6 billion in cash and cash equivalents. - Closed a $500 million seven-year unsecured corporate bond offering, with 57% of total debt as unsecured corporate bonds, and S&P upgraded the corporate credit rating, while Moody's and Fitch revised the outlook to positive. - Loan portfolio totaled $2 billion, began transitioning from CUSIPs to loans, with bridge lending focused on new acquisitions with basis resets and refinances/recapitalizations. - Purchased $422 million of AAA securities in the third quarter, and the real estate portfolio generated stable net operating income.

Loan Portfolio: Totaled $2 billion or 38% of total assets, with a weighted average yield of 9.33% and limited future funding commitments of $58 million. Received $492 million in paydowns in the third quarter. Securities: Purchased approximately $431 million of AAA securities in the third quarter, ended the quarter with an $853 million portfolio, where 98% was investment-grade rated and 91% was AAA rated, entirely unencumbered. Real Estate: $946 million portfolio generated $14.1 million in net rental income during the third quarter, consisting of 155 net lease properties, over 70% of which had investment-grade rated tenants with long-term leases.

• Optimistic about achieving investment grade status to enhance market position. - Beginning to deploy liquidity by investing in securities and shifting focus to loan origination as securities spreads tighten. - Expect the pace of new loan originations to increase in the coming quarters, with reallocation of cash from T-bills to securities and loans to add to distributable earnings in 2025.

• Potential for real estate values to destabilize despite established reserves. - Competition from regional banks and highly leveraged non-bank competitors with ongoing credit issues. - Need for careful due diligence in loan originations, as some refinances may involve overly large loan requests and proper valuation assessment.

Q: Can you talk about where Ladder is seeing the best opportunities in the market?

A: Pamela McCormack mentioned focusing on core products like middle market lending, new acquisitions with basis resets, attractive dollars per foot, and recapitalizations/refinances of newer vintage properties in lease-up.

Q: What's driving the high number of repayments?

A: Brian Harris noted smaller loans, especially apartment related, are getting refinanced, with a lot of due diligence involved, and some loans being paid off due to land value purchases or asset sales.

Q: How does the origination pipeline compare to typical quarterly levels?

A: Adam Siper stated the volume of new acquisitions and term sheets has picked up materially, ramping up and expected to continue building comfortably, with origination volume expected to move towards an average run rate of $250 million to $400 million per quarter.

Q: Could Ladder continue with the buyback in the fourth quarter?

A: Brian Harris said yes, with remaining authorization over $40 million, and they would continue to be active with buybacks as they have significant liquidity and cash on hand.

Q: What factors weighed on Ladder's origination volumes?

A: Brian Harris and Pamela McCormack mentioned it's a lagging business with loans closing 60-90 days after application, and factors include appropriate valuation assessment, sobriety in ownership, and foreclosures at low prices affecting urgency of loan portfolio sales from banks.