LADR - Earnings call transcript Q4 2017

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Operator

Greetings, and welcome to Ladder Capital Corporation Fourth Quarter 2017 Earnings Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Kelly Porcella, General Council.

Kelly Porcella

afternoon good and you, everyone. Thank welcome I’d earnings Ladder Corp’s to for like the to call fourth Capital XXXX. you quarter of With Chief Financial Harris, Brian Pamela President; afternoon Chief Officer. Marc this and Company’s Officer; Company’s McCormack, the the Fox, Executive the me Company’s are we XXXX. our December released afternoon, results for This year-ended the financial XX, this and filed available on Form report is release Relations with earnings annual SEC the Investor section will our be week. of The in the the later Company’s website, XX-K

made cautioned reliance these no undue recent of and differ course statements. materially to you’re to soon to place on that to factors historical remind on the statements. like that may Before undertakes to certain call forward-looking any Corp’s today. duty made The in the I’d statements XXXX cause are Company management’s expectations you call subject results trends a be forward-looking expressed most forward-looking and made update everyone the course are Capital actual statements uncertainties of of begins, based constitute statements the statements. detailed to that These filed in for and XX-K could not risk information those this from current XXXX Ladder number of to our Accordingly, more discussion a based implied are forward-looking Form to statements described on any not in be and forward-looking in may or forms this materially I differ from actual those refer these that beliefs, XX-Q call. results and and could cause

year. GAAP. The considered be is of proposal received this to the these address or will a in GAAP Fund finally, not information from And substitute contained application accordance financial call. measures to the non-GAAP by respectfully our intended I this declined briefly non-GAAP certain discussed wanted of on measures with be in with prepared accordance the Management, are measures information presented and this most financial in as earnings unsolicited Reconciliations for the comparable isolation earlier financial to presentation Additionally, Company’s in release. conference Related Company

For refer we our matter, on you prior public filings. information this to

this any not I’ll call will Executive be Officer, comments making to call. Harris. on that, additional our on over turn With this matter Brian the We Chief

Brian Harris

a those today, us quarter of throughout we in Thanks, in move reap fourth and in Kelly. through begin that not into year of quarter, are that only Today, you walk years recap the fourth planning put the the of After I’ll ahead. the that of review position highlights late execution and XXXX with then has strategy, XXXX the a financial in plans in careful able but how I’ll from was proper to benefits a XXXX. I’ll began that brief

We’re rising rates. ahead you particularly deliver profit well-positioned how we benefit let interest and from Then, from the shareholders. for our the how year to to our improved of capital know, I’ll our benefit investments returns on strong structure to we see plan

of measure, reported from XX higher I’m mortgage quarter. sheet an of rate $X.XX than report at loans, since XX% our our previously. balance the $X.XX loan of to year This billion ending fourth is we months balance core X.XX%. non-GAAP million beginning a share. where inventory growing $XX.X benefited at average of highest We just rapidly interest is This the the First, XXXX. pleased quarter or earnings, per earnings stood

into million risk also retention in securitizations. for loans We to earning six by not of portions any securitization, with these million conditions contributing positive securitizations took hold We $XXX.X did regulations. advantage different of $XX.X comply

originated higher $XXX.X billion held sheet XX% fourth in million than for million sale. quarter total $X.XX comprised loans XXXX. loans in we million originated This balance of we is of the $XXX.X in loans in the quarter, the $XXX.X During and

Turning to of XXXX. a now recap

or Our over $XXX.X per an increase full-year of year. last share, XX% million $X.XX earnings core were

on Our while our grew year, core XXXX. owned I’ve inventory average XX.X%, but at estate by the by sheet XX% pre-tax also also loan balance core earlier a $X.XXX note, XX.X%. during equity mentioned our year average was to return our already after-tax that end grew equity return was XX.X% from the billion portfolio on of of real

markets real XXXX the Our were we had planned date growth estate are these year. balance unsecured yielding higher-yielding, we transactions bonds balance is $XX.X year, to grow sheet an changes past. with securities lower while balance average cost position. a calls decrease earnings succeeded substantial maturing at into in are of The real the than five billion in $XXX.X these asset $X.XX capital our towards debt of highlighted leverage one XX%. the our reduction I In maturity commercial end holdings from book item The years. capital within mention that and in and half $XXX.X base XXXX. XXXX equity, you reason of for for safely had obligations Because a highlight by order estate billion, grew down of loans of outstanding because will details outstanding structure, have in enduring this come our of selling spare able several weighted safely At to side corporate real along each the of acquisitions to the unsecured million million like, loans held simultaneously last higher by sheet, transactions, with investments that to the rapid the securities year these having and about year-end I’ll liability we over series capital that we CMBS creating years, of more of bridge and full-year the million of estate. of in our but due on end lower-yielding none orchestrate our on was first I’ll during in a into carefully loans $X.XX mentioned down last a our to sheet year,

had term instruments, debt highly to sheet Because lower-yielding, results we estate in stream. but debt we structure you. securities, income sell and lower securities. on employ been increasing share proceeded grade our with very positive investments. stay to With let rate while balance have we capital invested a The our we fixed loans liquid actually investment our to lowered the re-qualified equity securities rate, for to real liquid favoring me few higher fortified into leverage So, comparisons benefits, longer ratio, and illustrate

mortgage First, sheet million loans in $XXX.X million increase XX%. versus of $XXX.X was revenue XXXX an in XXXX, from balance

Today, $X the Fourth, end inventory XXXX. produce this two more to total at in originations in of $X.X XX% sheet XXXX higher this since continued rate loan streams. loan portfolio billion by stands year-end for Three, XXXX, an than now short-term current after at $X.XX income million has $X.X interest XXXX. XXXX, average Second, our grow, balance of X.XX%. increased up versus $XXX balance months more to XX% will sheet year-end. total at billion our at rates billion rise interest were If loan from up billion, portfolio

an pipeline in a $XXX first And million under quarter so loan presently far in of XXXX, additional application. robust loans with we’ve the closed

near-term rates. of unfolds, returns. we can from on we and We rest capital focus investing any stand XXXX events, prepare interest for the don’t rising so benefit creating need to As to strong

will already ballooning that added to but at to rates pace. and modest growing economy, stimulus dollar, recent U.S. a With deficit, feel we interest the an rise, continue a weakened economic

that. That have weaker in wants defaults think We and inflation dollar the Fed about hurt year. market, the rates loan and low. kept some The likely, raising times real don’t four do the to should doubts Fed this encourage pace housing investment will estate portfolios foreign be commercial would pretty we with

in quarter will technology interest the and but a pressure on longer platform. increased we think the course, fourth of upward among banks having winners real have will effect inflation, and dampening on Of still a value term cost borrowing rates. of illustrated estate securitization The put create central losers that

year to throughout you that call, our the million I powerful same platform signed saying quarter. about additions ahead quarter earnings sentiment. and real the gain on last core the quarters business to I our estate in On core added portfolio leave our was to and with in $XX optimistic Our second like sale I’d $XX be ahead. fourth should earnings with the along earnings This million off today

suspect our for real I off to backdrop think the occasional year. an and lending see far estate now returns Marc investment dividend well-covered we’re will these shareholders. to we liquid of a While bout about ownership good the year, we ability volatility Fox. optimistic best-in-class enough opportunities is deliver the for numerous stock I’ll and you during our hand sale With over provide our to days, more and

Marc Fox

XXXX. XX, results now review will Thank the year-ended you, Ladder Brian. quarter for financial December and Capital’s I

was share, XX.X% As $XXX.X the of quarter, per generating Each share higher after-tax per than compares were year; XXXX earnings earned XXXX performance you of ROAE. earnings year core calendar results the $XX.X X.X%. resulting a performance core almost XXXX of million, noted, to XX.X%. in measures the generated of resulting in EPS of core Ladder Ladder and on earnings $XX.X million QX return fourth EPS these an core of core when average equity XXXX, share in exceeded $X.XX million EPS In a $X.XX while core $X.XX core higher of per than ROAE and share, by of XXXX’s XX% Ladder’s earnings; prior $X.XX

in by estate $XXX for compared earnings loans, were Ladder’s from and million $XXX.X and of entire of net for income largest primarily the on for These hedging. million respectively. investment three net XXXX quarter income million sale loan reported to December adjustment depreciation. the income, and fourth XX, core in generated taxes core Ladder The basis, results before XX/XX/XX, net During quarter gains GAAP $XX.X rental held real before a net million net of the the the related year. real to of from $XX.X months taxes On interest quarter generated GAAP year-ended income of portfolio, derived ended estate portfolio, our to the XXXX, and securitized

billion. increased quarter, the Ladder’s portfolio $X.X sheet During balance loans of to

CLO a our this allows By off slowly that the continue This to loans. positioned servicer timing million to is at to to Ladder borrowers market our controlling adjusted on of XX% provide to pro the returns and loan pay-downs $XXX.X of the before mortgage loans million transaction. XX% timing loans the that causes first we capital retaining second CLO, by for contributed the on to first matched portfolio over we CLO, and the summarized of transaction pay maintaining remains continued balance we CLO optimal the our advanced an growth in that sheet for Ladder December With closely of sequential balance pay-offs. In rata to special control last following service feature rate sheet CLO conditions, interest a earnings our executed favorable more in decisions $XXX.X call. private of delever trust in turning into a so major more loan in

loan the $XX.X quarter. These to attributable balance Ladder on credit balance fourth $XXX.X quarter. loan X.X% lower directly gains the on retained reflecting expansions. hedging, principal of strict to securitization for $XXX.X depending no the to margin. conduit of Our of Ladder’s securitization XX% to loans declined securitizations again of expected the profit generated which in is transactions losses XX.X%, during pay-offs assuming return end at the conduit million the million held million and position net was of a timing The contributed quarter-end balance sale

with us smaller CMBS to the market flexibility We subject executing prevailing while allows enjoying contribute and deals, We series to conditions. execute capital a be the with to and our order deals of securitizations securitization own increased partners collaborating variety our optimize to our plan presence. multiple contributions are to continue which both efficient ability with highly of to in to a results maintain partner into

Two-thirds mentioned, our in loan origination participate we robust pipeline. loans, have evenly securitizations a closed Brian QX, $XXX the conduit have in to strong loans, we split and remains XXXX quarters. way additional in we for almost and of of As also between expect bridge million CMBS origination and pipeline future loans

namely securities February. Ladder and and investing opportunities of and market in We estate its million efficient CMBS making view also executed commercial investments debt the real skills to that to real shifting constantly, of ongoing investments. debt on tuning commercial within equity underwriting including real estate this by the apply that mix a among $XXX.X ability superior of credit loans estate real through of capital fine in activity it and the strength, loans, optimize equity. securitization specific of investments lending all mortgage estate Reflected an loans financing risk in returns and core securities, contributed acquiring in adjusted in was effort expresses is in its of Ladder’s

composition on to and away earnings, lower core of result on from gains yielding without be been real topic net this interest estate capital recurring cash past with net in very sources of REIT-like steady and its presentation, of the approximately of CMBS dividends Ladder’s years. Ladder’s earnings section. and net the maintaining supported investments income detail cash found sheet that three by during loans website loans. income at on net reallocation in accounting methodical investments of real become can benefit loan income in current rental revenues. has three more for the More to This balance securities evolved in has Ladder recent of the portfolios a in be a XX% has the of As Investor from with quarters, of our and sales stream policy recurring estate including revenues posted generated on by and focus dividend the levels in will separate version conduit investor measured even increase increasing Relations trend funded dividend investments

three which elected dividend at any Ladder share. exceed Over quarters those quarters, seven core in conduit each there of EPS execute And quarters, to cash per securitizations. the past the for paid were not

key encumbered of assets was continue senior assets XXXX. we were the to-date, for our decreased The at in Company. on of the investment including with year, rated X.XX%, weighted of with XX.X%, total to originated average was the sheet first than loan average debt outstanding XXXX. by sort December points at weighted rated with quarters. loans billion, coupon including X.XX approximately X.XX%, on balance of weighted to the end, sheet XX slightly were quarter our to of of on than the in rates sheet spread and the average of reflected all quarter, an weighted base. cash duration asset to our securities the downs the fourth assets our of XX% during on average focus loans ratio average levered loans reflecting weighted to as XX government for net balance to to backed The recent basis of of secured increase $X.X investments sale estate XX.X% portfolio billion higher coupon index. than commercial At U.S. quarters. debt cash in last mortgage capital billion. in grade. duration over less while plus to XX, loans originated quarter is XX/XX/XX, of shift the quarter approximately line at XX.X% our were positions with mortgage loans first $X.X average as of of ended already stood lower metrics Turning in originated XXXX, comprised were debt Total at our our X.XX the year-end backed appropriate a X.XX% almost quarter billion unsecured loans. $X.X securities loans real equity encumbered levered end core The higher debt commercial during XX/XX/XX, pay prior by balance during secured prior secured AAA X. debt of The In of which ratio in $X LTVs reflecting as was quarter At average first total quarter, Senior ratio value and X, securities first more XX is assets the spread held to secured between investments the average total X% the the senior the the held end months, or the equity months year investment line primarily same quarter. investment in sheet swap XX/XX/XX agencies of consistent Ladder was secured mortgage mortgage balance unsecured

accounting legislation. regard QX touch recently treatment retention XX-K. mortgage QX direction that transaction to reflect our can and than executed GAAP developments provided direction, press More securitization financing the in note our topics two of announcement, the has like the to fourth recently, the affected retention risk industry. with the financing would XXXX industry tax risk to treatment to the rather to clarifying have accounting reform securitization originally SEC those quarter, applied. been during the I and moving revised With the accordance during In accounting Before enacted on that on in and latter applied sale be dividend found release treatment detail our to

a statement earned Ladder’s core statistics change have balance no sale, accounting the core passed and expects income earnings, applied our the that will the Ladder impact from GAAP regards in our recognized there recently of income, TRS With always this XX% XX% those that’s or primarily tax sale will computations. equity EPS legislation, transaction we corporate reduce to under benefit profit assets reflect to leverage rate as reduction as business. be and to liabilities core the now and from treated pre-tax ratio federal the from the tax conduit will and generated While on reform

in impact liabilities, And tax is benefit There equity the will corporate million, impact shareholders to was earnings EPS. the tax impact of approximately lower to expense, liability factoring tax core core deduction deferred rate, less applied REIT capital. the of no resulting $X.X federal Ladder’s dividends. and from than and in Our an million on XX% $X.X prior on

to sources. continue maintaining our enhance profile, maturity while funding we of side, set financing the On a diverse

at $X.XX of core year. XX/XX/XXXX, FHLB debt billion and of billion investments, for availability billion at financing of stood $X.X had $X.X we the end outstanding, As the committed of borrowing record our additional

December $XXX.X total up CLO million successfully million while capital previously, match-funded non-mark-to-market, transactions in executed of our debt, we October of issued over $XXX mentioned the we first of as process. non-recourse, a and in net two I As freeing

In repurchased credit during a With the trading quarter, we was collateral. addition, order shares. assets syndicated as regard investment of achieve per shares $XXX.X average quarter expanded to the weighted during to stock we fourth Class price share million pledging facility committed common in flexibility to $XX.XX our almost financing average that does line long-term XXX,XXX size the through XXX,XXX volume equity, of a require not revolving daily as of of at the A greater

rate share share dividend quarter per $X.XXX by our per dividend. and announced Finally, today quarterly quarter first declaration we cash X% the of a $X.XXX to fourth raised cash in

of of principal the of million and Ladder the and paid of per raised core year. For EPS $XXX.X in and XXXX to in of to earnings, for time versus coverage during million billion EPS times a a it’s the face contributed losses in fourth past solid for dividend years. the and of in quarter. of results calendar And of of fund we finally, year, real resulting the earnings the year, of continued maintained in and time Ladder reflect entire total loans non-mark-to-market this increases fourth apply share, for in share X.XX three year allocation per of calendar $XXX.X of equity the a the once in performance ROAE after-tax Ladder risk resulting earned of investment. debt during per the quarter open year, This capital generated fourth increase answers. longer the issued questions Ladder EPS the on and held by in core of dividends first non-recourse prior an $XX.X earned million core we transactions match billion million originated XX.X% over to the XXXX total loans estate. year. line $X.XX dividend XXXX, Ladder loans in an core Summing disciplined coverage of share funding year, $X.XXX the again XXXX return the market the the Ladder X% calendar earnings, $X.X use the earned approach as to solid a investments securitized $XXX.X of finance EPS, two average the quarter dividend balance calendar leverage, core accessing its Ladder reflecting up, CLO core core increases levels. in for and for $X.XX ratio. ROE a $X.XX point, $X.XXX to core approximately XX.X% the encounter share broadened and by selection of which and to dividend Ladder in At term $X.X third after-tax

the As please earnings on a today’s that the of reminder, keep focused purpose that call ask We to topic. discuss is results. questions your you

Operator

question. comes Ben JMP your Please with [Operator Securities. Instructions] Zucker, from first Our question proceed

Steve Delaney

we average This with type you. type, been thing, that on have of would start Ben. like for quarter. in originated Steve a that loans? little far loans color the seeing floating $XXX sheet all rate is of first your Could the balance helpful. loan to were I’d million get you so can the and loans that on clarify That Thank size, be the property LTV, just

Brian Harris

are Brian. do don’t some know them. second is furiously Give of ones mind. Fox don’t In if Marc in is here, while there. reasonably makeup to all talking knowledge, my I I’m you. thumbing loans. floating large were couple me now one through of the there things This actual they you know right rate I

Steve Delaney

Okay.

with about this handles. other where on plus all I like Brian -- LIBOR compression are hearing hearing things LIBOR XXX we calls and the or spread was of One are XXX we

how just these XXX were priced So, LIBOR curious, able continue to plus find loans? attractively to you of types

Brian Harris

Sure.

let me I question, generally. take think the --

for couple mortgages. the were space. created years. is pieces what think those rate participate competitors market a really first turned ways hold to And all that’s first business a market of the into reemergence transitional the respond done lot floating a a can of there they CLO I a of And bit securitization of all, for the and who really loss of in you of effectively is couple because can has First --

the rates to there’s -- repo loans banks be product pledge so and that cost down really come the knowledge. quite have in a that come much And that financing, market happened down eight spread think what they up, probably was hasn’t last dealt bit who spreads those world all years, those I so, opened that my to where at of unsecured the couple the in we the overall come there give with. only CLO to is And of have us corporate need funds down play have bond a not dynamics One when at and markets.

set space lucrative share, spreads this of the compress create standpoint been put that rather there just it So, you really a than of up spreads because companies REITs that market. that volumes what billions and to pretty But left call try in dollars posts address lot instead into competitors respond the have way goal from make I been the more we’re and and keep opinions market we And decided competitors you’re harder to seeing space place. --and wider. many borrowing of in to the compress market protect in repo actually so of would right is you to work that’s the either of have to our

some So, raised we’re refinance in space causing the ahead years also probabilities were last market, in they we’re that of the structuring. so categories we’re are capital but do the that we compression the probably confident now enough CLO little robust that’s be into getting a so much higher in spread that less the because that bit the all than liquid activity convinced year will refinance

they XX that three-year provided a loan XXX we loan. for a it’s selling was a large rather fortune but where transaction, years and and we heavy lease Company property fairly for financing instance did signed on So, a a

the of because quite provided lot So, maturity the date. of we year like we years because nine the safe, at though XXX we’re of hangover end cash a a borrower, of we’re fortune of the our end leverage LTC the a from of feel convinced and at Company nine that got lot maturity, flow even we’ve to

loan. we one go our I charge to spreads leverage they fact, little like So, up that’s point are the necessarily to And not and it. are a we in But, wouldn’t widening. felt could bit for more individual in want higher tightening, theme,

Steve Delaney

of on all in quick you benefit of portfolio comment LIBOR rate Interesting. also And economic leased my impact this inflation the We that type least really environment positive not market here. with -- floating How those be type as loans. respect follow-up those border with might rates? to senior to the in on -- escalators condition returns higher loans. portfolio growth, or along net higher something Can your understand clear of strong your higher of do your net on I’m what

So, thank you.

Brian Harris

the me, I do triple look net I lease a from average note it’s might lease it’s, at occupied and variety we’re have lease We Marc streams. place. XX XX From -- term, better years. believe and our But, of we our XXX% properties sorry, than it staying but believe credit over perspective, in years really

So, homework. we do a lot of credit

you well also want We perform in your environments. vacating But, going look how have they have in to believe don’t a that various to you they are going to building. because stay in to XXX% are place,

will have we years flat have sometimes we or loans so. So, else five will leases that adjust every or

really better you year time. ones one buy that adjust what you because rate better, then so, do the is a and ultimately over do inflation you And don’t years, every to do you five cap need

flat However, like people well some reasons, leases. of the don’t some

pretty oh, We’re actually is that Because them. own assets okay I price, the foot, parents’ like inflation that said, square you you time. and heard of what their it’s was put cheap that when on for XXX your you house a at they X% that sort of these at with the box and at when have then, years that but house if you are you it $XXX might believe on is, foot XX looked we it for like when sounded if horizon paid inflation were do, XX,

estate exposure real will So, that inflationary you benefit. some where market. do to actual benefits is of greatly an the And to one ownership want the places market have you

Steve Delaney

income a term, Got current it. your will end should so we coming property it? through the way the but lease think inflation a driving It’s higher not about of that is at as there value be

Brian Harris

end. the assets. is the a It’s our keep in locked of both. those on lease, at But we’ve value rate financing flat There come in all mind, will

we’ve on XX of at a So, them fixed financing years most rate. got

against fixed we’re So, fixed.

So, lease will payment. flat they our cash flows leases won’t change increase on on and variable

Operator

of comes Our KBW. line the next Jade Please question Rahmani, your question. from proceed with

Jade Rahmani

Thanks very much.

side, With increased. estate least And seemingly you views around your underwriting What participating the the on interest are terms expectations the in of you’re market of cap in in real seeing at rate rate rates? the buyers assumptions? lending deals cap their alter that having are

Brian Harris

Because real of rises product the called interest interest estate. will rates. is the raw in affect cap certainly purchase rate Longer term, a material

pay it, So, it’s going if for steel you have in just more project. a construction to like up

look the times of On rate company rising often point do the real were a XX%, care because like. a you begins Carter XX%, I’ll hand is cap that that’s rates were to inflation reason go to back ‘XXs, far commodity back rates, if the and estate into rates you you Jimmy days, more the XX%. point interest for XX% to which hit not where interest where other rise,

I -- cap -- because starts because to switches would to estate a And to have I for And instrument. commodity-like rise a think if they rates expectations adjust an like said. seen widening for their that they period it’s is But they XX-year lower like starts interest So, go that when my XX% what trade rapidly instrument effectively so value it do But, falling like to extended rise. of too. own like rates it think not owners a it you bond the better rise to what XX%, time, rates real don’t go don’t cap feel rates doing we have commodity, as a as reason. over should I in estate then economy ultimately bond-like better, And is to be product. then, is doing interest real the very were as

seen into with widening have business economy hotel cap reasonably And a other now because We they business, foreigners doing tightening in are than in elastic for especially gateway the doing better We’ve some seen reasons. hotels before. much retail back in pricing. the were the hotel cap most healthy the cities, has coming

I all. some do rates cap don’t that with know supply for has if we hotels being mostly. not but are paid and answers So, tighter you, demand to but it obviously seeing

Jade Rahmani

the terms reasonable say in to an do as expect far next outlook of as you And XX adjustment months, cap is what in to think X the over rates?

Brian Harris

think that going help where you of be me period XX-year tell the in time? and is Can you me

Jade Rahmani

with to not that moves say in parallel mean, I -- yes, it I LIBOR.

Brian Harris

Okay.

rate. So, if move at that XXX to points people -- fairly estate basis that a would on we’ll cap think significant. a it times, think lot will of costs, move that’s XX call Financing basis would mostly LIBOR. Fed in XX I real points four

Jade Rahmani

it take mean, And more the to that I raise won’t you willing of like in a doing, you’re mentioned risk. Steve you answer four think times sounds types bit that loans guess, you’re and to the Fed I credit your

cap So, risk risk? activity with more the and to credit I weigh rates of a you how the refinancing your willingness would higher guess you expect little take

Brian Harris

I correct think don’t to credit that. I want a more take risk. we little

But, structured these CLOs, do prepayments on we keep LTC that that’s on risk financing cycles replace a credit penalty taking that. goes compromise and sweep, would easy liquidity seen with more of will we don’t say, we as And fund a structure time we’re with very system it That the I a pouring you side. hand liquidity get that some that of be into fees. think, a a item the different we’ll suspect that dollars very But the billions enough at of little rapid think standards to don’t immediately. into product because I’ve I to of and take out -- higher experience of Because a yes, little very we like credit I risk. flow I all. may extent into cash be more kind

really setting what we’re up that’s for. So,

able B ability our a to our bit CLO is -- comfortable we’re we to with liquidity. feel do but we’re that So always because note spaces, given liquidity need note little there could the sell take the But the land XXX we like -- a pretty and in we with risk, feel we LIBOR were didn’t XXX, the onto dealing to more returns marginal A felt of we step credit the really and and certain safely that. with. hang plus finance with But

is economy long of what flat is I rising, near interest But, growth. think. that’ll curve now end happen will -- because now and the So, highs well don’t a that we’ve much as as inflation right it be you so of doesn’t it me because fairly economic because that convinced, rebounding where I the got will believe officials inflation have think markets the yield worldwide curve Fed lot with stock with unemployment of a to their worldwide be up dots reasonably as the I it’s don’t rates think I’m growing as again. think economic growth would telling

that’s default. a lenders. So, to not And happens. real be mortgage for defaults for well, will environment I couple erode will interest lender estate credit The result time. it’s problem kept real bay the a It’s rate. suspect before commercial And that usually at of here. takes as biggest lower over is -- think commercial I good estate, it that a And standards years

Jade Rahmani

year? gain what’s view on than happened there? steady rates? in last spread Are outlook being what’s any more the year more the of Have sale And a terms business seen that in this in you business, your confident fixed with volatility little you of

Brian Harris

Yes.

tipoff think the correction that High didn’t I little the credit technical which all, stock was, moved yield told you bit was correction, move of really see the didn’t widening. market credit. one at for and not a you mortgages spreads really kind technical but

that’s so, always reassuring sign. And a

too July go typically concerned many before in you although overly risk not a I’m right around time about short-term when frames, spread there’s Xth into there So, deals done being is now, right the problem summer. of always

moves supply there and bond been table. amount spreads a can last stock What a it it points, much you’ll up just -- the off think demand X.XX day, market the or certain two. market stock market consistently issue expect as the goes of I here comes into and just the every again. have XXX money a So, because rises And movement fair for is But so, tightening much the doesn’t surprised product. feel And XX-year, pretty for XX-year receive, I basic I though year maybe spread right worth I do the yields, A mortgage, now absolute of a government. amount seem yield where sense two-year spread am little is demand with is you from you that buy that better. to be of yields the that the the a there

think held when tighter market, as more demand what months you’ve spreads the market the in allocations but and of the year get portfolios even high bond stock got they come time And be that’s corrected. you tightening. in. initial we’re the you I why So, I tighter rebalance stock very when the in year they wider spread think in That’s that of market. this at experiencing. think see Especially a new they’re should And typically I

Jade Rahmani

the funds of we In CLOs as two completed, increase do two a function of think terms when cost should de-leveraging? expect of for those the to

Brian Harris

You mean CLO? another do if we

Jade Rahmani

when be you funds sequential No, some in the the guess, year start anticipate structure, or in later But, go you mentioned. than Would second you like that? pay this of up? of to replacement just terms of the is that I recognize cost once you it would period, half repayments, there receiving

Brian Harris

So, these opinion. as cost obviously forces get that your instruments think, only of up, a shorter, I would because of AAAs. being anyway, overlooked, as tier maybe in fund pick your rid couple are say that there’s our work up, of you I prepayments But,

really lot there a a don’t cycle, loans. it’s also that as maybe prepayments. forget in fees there So, call the XX-month a exit is have up of a prepay, extent is and pick loans you feature that actually our And we have to because XX, a

over means fees and So loading that origination you’re the amortizing time. shorter just front fees the exit you’re period of

see two expect any result fees rapid increase much think I because a prepayment greater years over will really don’t earlier periods. the time funds of much cost I to So, in next at

kind stick XX%, we line of XX.X%. So, to the of base

Jade Rahmani

assuming And follow-on you market’s which remains insurances? replacing the think expect, people anticipate s CLO liquidity that of availability lot strong, or would those I with a

Brian Harris

We Maybe. twice. Yes, I will certainly use did it it.

The all financing is rates. additional really it private. that one raising a was with expenses. of to second has you more does bond a And deal; what a raise was one for the does, some But really first it capital do your by

There lowers the got and X. and I think, Company cash a of level always rates need no outstanding like is we rates. in raises it leverage But, to your generally your bonds between now. of sort too, for yes, financing keep we’ve advanced X

that another and I some we which the see to that any quarter; through CLO. don’t might of And is just earnings in do cash. fourth And then, raise when that is thing first have REIT. the billion one get And the see do in so, pressing near-term. us we adds do to about place conduit pile reasons takes the you deals cash, will not six to TRS But, I in the conduit thing that retained will the extent think deals, that we wanted to we second securities raise the is in $X see the also did the you the because rest

Operator

Rahmani, [Operator your Jade Instructions] with Please question. comes KBW. question proceed from next Our

Jade Rahmani

loan number? was Do the the during the rate you I average Sorry. interest catch on originations quarter. fourth thing didn’t that One sheet balance have

Brian Harris

also you. him Marc Yes first give think can give can you that I question. And to the

Marc Fox

said about quarter, the we’re during we taking What XXX points was during the basis the And fourth it exactly. over XXX was over. month, through index. points the Yes that basis script this

And so, been that’s we’ve what with more in line historically.

Brian Harris

more Jade, it see you spreads, loans Typically, there. multifamily because usually when LIBOR Yes. is lower apartments there in and is

Operator

Ladies and for to question-and-answer back would reached gentlemen, Harris have Brian And to remarks. like closing the call we session. the of end I turn

Brian Harris

in forward to strong forward the talking tonight staying listening months. at to part. year the everybody of liabilities now And and couple And again with we’re fixed again. look us. quarter. most I the place -- our Thanks to strong a in a with you cost looking us very It Thank very was to for for you

Operator

This concludes today’s conference.

may your for time. Thank you your this at disconnect participation. lines You

Ladder Capital (LADR) 4 Mar 182017 Q4 Earnings call transcript