LADR - Earnings call transcript Q2 2018

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Operator

Good afternoon and welcome to Ladder Capital Corp.'s Earnings Call for the Second Quarter 2018. 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, today's conference is being recorded. At this time, I would now like to turn the conference over to Ladder's General Counsel, Ms. Porcella. Kelly Ms. ahead go Please Porcella.

Kelly Porcella

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

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

in of contained presented call. or on as GAAP, substitute considered in in With measures that, the non-GAAP measures with certain company's not Officer, Harris. financial for is over Reconciliations a I'll to in to intended GAAP. Brian our presentation comparable call with information Executive turn of the will financial Additionally, release. be accordance measures financial this this accordance Chief most the are prepared information isolation discussed these conference non-GAAP be The our earnings to

Brian Harris

Thank we the earnings, measure to share. or core pleased $X.XX strong a Capital. quarter, of second I'm you, quarter report In had $XX.X Ladder non-GAAP at Kelly. million another per

For first in we've $XXX.X XXXX, months, our earnings reported XX $XXX.X of the core million. of earnings half we've million made trailing core and

Our ended annualized per and equity on return after-tax core value XX.X% share. at the average underappreciated the second share was book in quarter per quarter $XX.XX our

earnings of robust our recurring stream of quarter-after-quarter by supported spec-up growing continue earnings. We

benefit was expect has asset been interest two if positioned interest times positive Our results higher five With carefully now just to than to would rise, to our continue rates base rates. we surprising years half right it earnings ago, short-term these a from them. LIBOR are rise not and with rising and short-term almost along

is in as last XX% note first the months. revenues of for and be this been seen from focus quarter. $X.XXX revenues on XX% average in financing interest sheet this our we inventory favorable quarter, at have our XX the our and of loan quarter the the an second our sheet the billion more owned in $XX.X the bridge grown We last over loans inventory portfolio million of end Please balance costs loan approximately of inventory $XX.X earnings mortgages and quarter, cash couple mortgage loans roughly dynamic are that million our our loan to of comprised XX% are from this loans. of XX% bridge funding the flow of the rates up can X.XX%. interest the of first has of loans. emphasizing we portfolio substantially those years for of an of at rate increases, LIBOR fixed pay end originating in increases quarter cost contributed LIBOR-based as than balance tied Evidence Because

loans. for balance we of quarter, The average million XXX spread basis points. $XXX.X LIBOR the rate on funded During sheet loans new was floating

to also is good quarter a off start. third The

have million resulting loans total sheet $XXX.X LIBOR in originated balance points. rate of Of XXX.X spread average to-date. an interest a a total million from we funded have As basis of of X.XXX%, we commitment, to the at $XXX.XX

to rents sales we to While supplement sheet select our expect driver our also real of year activities us estate end, earnings. expect balance of with core primary our we business into from lending and be for earnings securitization assets quarterly the along

second the three contributor sale securitizations the margin of Our quarter. gain average to earning of We a on also total was earnings a of $XXX.X core net from loans. an these X.X% securitization contributed in million of into sale business loans profit

month originated loans we of of of for with intended interest a have securitization average the $XX.XX During weighted X.XX%. July, million rate fixed

as Southern well made California. an to On culture our new continue housing new Overall, interest maintaining rate to million we on including credit we the continue the real perform quarter inventory, $XX.X of front, estate student some with investment we increase along balance acceptable investments sheet second vigilant in while assets our in loans.

able on us levels. than loans on maintain smaller middle make causes many markets of loan acceptable the keeps our pricing well-diversified and But average us Our to count to larger more competitors. focus

earnings to short, continue U.S. stable, there of to earnings plenty by can and are rates, Federal economy margins optimism rates. with and are gone determined a has for benefits and Our given seemingly of continue future. growing that room grow foreseeable we for rising solid strong Reserve is earnings, interest hiking the up, are realizing short-term robust supported quarterly the thinking our stream and profit a our recurring In earnings up short-term of dividend with are results

loan to now to Fox. rate half over underwriters, and the XXXX. attorneys certainly And a task in growing forward a second experienced you up of I'll of safely team strong environment. originators, are to Our look turn interest We rising Marc

Marc Fox

and June quarter I per XX, Brian. XXXX. million, of resulting core and the In an of $XX.X return Ladder you, in $XX.X share in These on earnings of of review comparable measures in generated average core share, Capital's earnings performance $X.XX $X.XX ROAE Ladder ended core after-tax quarter, for XX.X%. Thank the million, financial a will second core the EPS EPS now to XX.X% results period XXXX. compared after-tax per equity of

of and year-over-year this growth $XX.X a recurring more was results For rental quarter. sum reflective earnings earned recurring capital estate the trends in are the the $XX.X requalified though growth in core sustainability four provided and included QX securitization were past of results rate income allowed investments even achieve QX more three reallocations million second of million twice times $XX.X increase than specifically, balance past XX.X% dividend years and net quarter XXXX, income of ongoing this the profitable of in More gains the XXXX, to much net a CMBS impetus million, screen and second quarterly quarter income an the than reflecting the XXXX, three income during The interest in sheet loan decisions from realized in and of the prior more the behind investments. company the EPS that increase on benefit the real half year to to of quarters. basis

the in million first points. before favorably $XX.X first of core On six a $XXX.X second $XXX.X to six of million GAAP does for percentage $X.XX QX and XXXX. reported respectively. last related of after-tax generated net full previous year. adjustment exceeded year share Ladder GAAP real by of of the per second basis, four six months $XX.X half the estate compares XXXX the XX.X% favorably first share million the the per ROAE investments. of in EPS which earned million quarter earnings, This and $X before the months earning six million to year the compares half taxes months performance of core income first $XX.X million more first the quarter months six and as Likewise, by net of depreciation in income than the year of For months the A of XX.X% Ladder $XX.X the amortization XXXX, taxes to earned largest prior core earnings prior results first the to first and the exceeded in XXXX of

this $X.XX rate sheet billion, The maturity average increased million of weighted with coupon of of financed sheet first of is billion million X.XX%. loan end. at decreased during During portfolio is XX. LIBOR first final This of at June component X.XX years. a million the sheet billion which to a average average XX million and of weighted $XX.X total The mortgage X.XX% with at advances, loans, $XXX.X which sheet of gains. components XX March total loan quarter, loans loan originated portfolio the which Those of securitizations June at had loan balance at balance past million repurchase core and floating is loans. plus fixed of while interest facilities. QX of portfolio represented of $X.X XX.X% component major loan quarter coupon unchanged principal mortgage earning $XXX.X balance was of in was mezzanine component weighted the the transactions. to $X.XX $X.XX conduit three of three million FHLB conduit was balance quarter the debt, and quarterly $XXX.X almost during The loan a of XX.XX% loans generate the and mortgage a $XXX.X growth this portfolio. stood average $XXX.X $XXX.X originated term at remaining by an balance from rate of by committed a CLO are of of Ladder Ladder up rate of over to contributing end There securitization portfolio, Ladder's Ladder's portfolio million the new balance loans, million combination portfolio

real of earnings. in sheet recent sources been investments steady recurring net increasing estate XXXX. in derived of in result ongoing IPO from XX% been into past net a a loans quarters revenues and have our of recurring As approximately since revenues of reallocation four in over for CMBS trend the has and Ladder's capital investments quarters, methodical balance This and

Finally, real estate we any the do not quarter. during sell non-condominium

units the end. We at remaining by condominium to sell expect tower year Veer seven

Veer through XXX have at sold We units XX. Tower June

months the XXX condominiums XX We next of sellout we remaining units Terrazas the XX an inventory also as expect units. from of so have the or original within

for -- million California. gains core -- remaining from portfolio five XXX-bed in housing QX, in least remaining million Southern units units terms a years total a XX% total During Ladder condominium student XX.X to averaging of In of acquired of $X while QX, in totaled interest net XX assets, $X.X equity $X with price addition the lease a property sales million.

Turning investment to sheet activity metrics. key balance and

unencumbered X.XX times. resulting in of at of assets end which loans were secured average of focus Total mortgage-backed first As weighted were mortgage at with securities by unsecured quarter debt-to-equity our June loan-to-value first the XXXX, total total at including balance of loans adjusted QX. debt to cash secured secured debt at line our assets X.XX unsecured an prior June consistent XX.X% $X.XX Senior The senior billion of loans, plus of assets assets approximately X.X% ratio mortgage to Total than sheet in an real XX.X% stood of comprise stood stood secured XX, debt and investments billion, on the reflecting XX%, company. $X.X the $X.X commercial estate is of our cash at investment outstanding end ratio the with including billion, end -- was is ratio Quarter and asset XXXX, quarters. equity billion, commercial unencumbered and XX, senior $X.X higher X. base.

billion and billion $X financing had the outstanding financing $X.X as debt investments. of June core additional XX, side, On of we committed for of availability XXXX,

and Over further debt debt, enhanced mortgage and the the to debt. the corporate with have comprised $X.XX the four diversity $XXX.X $X.X unsecured other unsecured combined of $X.X debt million or long-term equity quarters, percent addition real permanent through of capital non-mark-to-market non-recourse bonds, and When of funding base our of estate. non-recourse equity we billion of of base Ladder's CLO finance of billion past liabilities, the is issuances non-recourse

of financing the X/XX, facility are as syndicated extended facilities. our at XXXX of available the XX, addition existing to had and maturity revolving final In $XXX.XX upon facilities million Since be drawn those full two our March bank of unsecured credit maturities we XXXX needed. respectively. in capacity of The we've

of end, our As had that an borrowings cost the in in with continuing. At sheet reductions quarter we balance cost continued X.XX billion and case QX, to year to FHLB loan weighted funding be average from of was benefit trend maturity of seems favorable we $X.X average and notable spread X.XX%.

payments. Finally, Ladder's quarters our the cash the the we share dividend per XX initiated quarter, rate a $X.XX per share during increase second annual a $X.XXX we since reflecting quarterly increase EPS fourth paid dividend in $X.XXX dividend rate and the quarter dividend cash in ratio. marking resulting basis, XX% $X.XX paid at four earning rolling core per than payout in higher dividends, XX% a is XXXX. it share while Ladder of solid a of a was dividend now share, start On per dividend of

it's second up, securitized $X.X resulting EPS, million of summing return the $XXX.X gains. of $XXX.X quarter, resulting and we total in share in to At which in per $X.XXX to of EPS XX.X%, questions $X.XX core of the earnings, in core for of face estate. investments in the a So, after-tax selection securitization approach million continue time core and dividend line a core on average and Ladder leverage, XXXX paid quarter and equity to $XX.X disciplined We apply point, million capital share a per loans, million originated to generated of we on net of a longer cash of of in answers. the this the a loans and encounter, use term allocation real $X.XX open share the risk

Operator

first Instructions] of line Our comes Please James. your from [Operator Stephen question from the question. proceed with [Indiscernible] Raymond

Unidentified Analyst

Hi, year. afternoon. half Congratulations quarter of a and on nice strong the good first

Brian Harris

you. Thank

Unidentified Analyst

I'll new the the and as actually lot to quarter. but numbers originations? spread of like to higher a know the LIBOR there? and sounds origination peers double Again, are seeing seeing went I you're far loan have about you through wanted about market talk has spread seeing the guess could check what But competition talk as a out I you're it today some that. transcripts, quickly, little a to last to environment, I you what than portfolio need compression

Brian Harris

question. two Sure. that to parts There's

and bit the the of that loan market million. target $XX rates call than about little market So, the is is balance the portfolio, probably which balance sheet loan business, you some I'll average cover bridge other middle different a we that our are our only and

that a on the as competitive we So, result at feel all quite as side. don't of much pressure

the item less think CLO second a I that the we chase think We of price I sheet are on to in by do some that is the resurrection lenders compression them don't means, avoid we we've but targeting. assets. compression of CLO specifically. that targeting feel given causes types are the those any not lot them And we us and market, execution don't balance of seen

model. our conform the don't would we tell originate probably assets you of I However, that sheet XX% on balance to that

are true credit-based We sheet disciplined originators. balance really underwriter and a

side conduit assets, business, the securitizable competitive. of On is that the the

quarter We been quite business we really felt have -- because to it not kind was of because me like have on that had a pretty it focusing slow we competitive.

As out me. of which were the originators one we in contributors securitizations, as turned to non-banks I or space largest though, think go, surprised it frankly the

we that's end but wider spreads and the They the despite the of widened And second wider in that for credit little to the and -- three they on of deals into move a bit $XXX wider. this is the low that the us, However, saw continuously million the of you result out different fact the quarter, quarter, made second spreads we X.X%. because credit and in contributed quarter. quarter. average and dramatically, the That's why didn't widening that went beginning loans of but during from in

We're So, our lending, haven't earnings towards side. approach changed rates -- spreads. bridge the on our benefiting our really

in quarters. to versus per fundings, quarter. million in over last million going million four revenue we revenue $XX in we're million in the $XX I we quarter the mentioned $XXX net that $XXX think made this last up quarter On

again not at I we in off it's CLO the compression. And think paid originating targeting rate nearly have of we're we're a at spread we're really felt So, to addition And lot business. not because which not being that, the loans.

Unidentified Analyst

follow-up of Great. on I that. guess a each

Where of to You we're think and mentioned the that be there sheet that -- of, repayments going? you originations own do is the how portfolio about target sheet portfolio, seem balance X.X%. a where you adjusted outpacing here for see balance trending? at size leverage Or the kind do

Brian Harris

having to one different a on bit to phone trouble you we're there. hang of second, hearing going a because Stephen switch little we're

switch you Would and hear [Technical to that me. you going Okay. now? question tell us your we're Difficulty] you Can mind hear make if repeating So, Stephen? can

Unidentified Analyst

was a own X.X% was repayments. Where for be do sheet outpacing follow-up in from just how leverage seem portfolio, adjusted there the mind or see growing leverage the see balance to balance given on Sure, sheet think it headed? Is originations you the quarter. you target a I here? do

Brian Harris

We because two on -- bands securities we've times up more it's target three the but actually upper probably to generally. of are our also. mainly right been we that of leverage now, picking Our

purchasing But you the our some targets, been want AAAs. don't Marc, CLO within know those of I have but of We to add? bands towards LIBOR-based three. we're if

Marc Fox

X.XX times leverage on adjusted He which said is fine. X.X the ratio.

Unidentified Analyst

the a on conduit Yes. business. follow-up And then

quarter. July seeing this You month? environment? Have you mentioned trends those Or in through on continued the or have any anything that update new

Brian Harris

Sure.

seen a avoid we have -- feel going things around we transaction, in because are We like the too spreads with but stabilized. presently much market conversation I'm to do have

Unidentified Analyst

Great. on million source or I Expected California. in investments, returns you that maybe was color asset you you said those Brian estate housing how And investments? there, provide kind prepared in your investment? $XX one new remarks, of, there Can a in any on of more question. real the CRE Southern student new additional last details think that

Brian Harris

door situation We special that came with through partner. felt a a the that it was

the owner Santa and changed a JV XX since years we town school beautiful coast who like is southern there it a to is So, known to at it's because it an right go to the and up. pretty got there that of it's it UC There do a we with demand was felt it's were asset lot somebody for moat of specialized a along the it I and you've transaction moving bit targeted all and much time. out able was Barbara a It student were bulk has student purchase set students a student. and able was and that that waiting one a we've And housing lists. pick of the around is housing was concentrated

we because asset Ocean. So, possibly thought We to hold pretty Pacific the might sold onto. felt safe rates individually, overlooks was prevail if them low it it literally cap we pool

Unidentified Analyst

and for lot Thanks Sounds well, like a to student you Brian than speaking my questions as later. housing better forward a my taking to so. look

Brian Harris

Sure.

Operator

from JMP Securities. Steve next Our Please of your Delaney comes with proceed line from the question. question

Steve Delaney

are evening that good your Steve's are? on correct increase cannot down you balance that comments congrats to the new thing. the what balance as comes billion. XXst -- And tell one The level. in December question. am I your Marc, XX bank like advances you under at Hey, we I everybody. bout place, X.XX home your higher advances remaining from loan a have that on $X.XX million in to are $XXX rules back X.XX assuming I'd June just the strong at have your advances two-part average year-to-date it's a quarter. of to us Can down -- come

Marc Fox

Sure.

me to can that. up. No, Let back down last We're first. do permitted We and can't. then that pay start question with we borrow

Steve Delaney

can? You

Marc Fox

members to we end. the financed the There we Yes, other us ourselves through way flexibility that way not to -- all position who allowed the years, can. has are allow in that. over the do But are

Steve Delaney

finish, me again. not you what So, -- I -- I'll and -- go to ahead jump let your apologize,

Marc Fox

formula a the it's that math, but There's billion. approaching about Yes. $X

is what borrow. -- can Okay we

Steve Delaney

helpful. Okay. That's very

Marc Fox

Yes.

when so we're X.XX. today, X.XX, think see at us And I you at

average on approximately cost money down So, X.XX% goes our of up and rate. it is that today funds and

Steve Delaney

of Mel if and of Brian, matures, that advance seeing that from Bank guess we're that then, -- Chicago in residential once or banks the had with get will. news behind respect or the Well, things Watt. with the you've that's this and information it's heard And House Senate try Loan different think to about out whether We some Great. we in companies of the it is the Federal news real come flub actively whatever, the couple you the lobbying I what them lost unique the fake week. And your to news other is to rule. I course, changing Home legislation

lenders. curious given source leadership. leads that a change how to in whether view So, just important is non-bank all I'm your that funding to

any or play you two? all If view have updated how that out might the year on over next

Brian Harris

years I X.X are as There know another anything sides would than the straight far further we be speculation. are of there. fence for in that As two and

well Some to be think people think allowed stay in. extended that these captives not. Others very or may

far regulator, all. itself, have about no as it. at anything that I don't know As on I comment the

Steve Delaney

the comments guys. for Thanks Okay.

Operator

next question. question Please Tim of from Our proceed line Hayes your from Riley comes the with B. FBR.

Tim Hayes

good everyone. Hey, evening

is you're well first Just that question, increased average and may understand XQ wondering LIBOR timeframe yield way to the also the has the due you the any seemingly if characteristics that more the just portfolio has much following-up us the the versus so than of portfolio how of rates loans spread kind yield and is Stephen's average, widening on you moved higher above yield help on significantly be could over originations seeing far increase in originating? of or

Brian Harris

or to the million quarterly hesitate can are a draw one loans many the million addition $XXX would conclusions swing from that some of $XX they million quarter basis. where or $XXX million, net these too of so on $XX was number because effect I

been then doesn't our expansion fees. saying keep I and portfolio include overall consistent or LIBOR has mind, I origination X.XX exit think that fees fees it keep I the like -- or in that number feel and fees -- seems fairly over

effort to into conclusions that much of or pretty just So, We higher. we're we strong there assets in understand good ability a very at do price. loan look we lending sometimes is I to would under too say number certain to the And the the translates than we're these a that many number also. feel remain that But like targeted quality conditions earnings the assets that in our hesitate wouldn't is make and higher arguably indicate. making loans spread credit would yield direction. at that that rates. and I But draw we any is bit wouldn't very any the under quite about any our ultimately higher are at circumstances

think the everybody you our In noticing else talk think thing that our whereas you optical they're not are case, with I to is are. not. I falling, rates be almost may they

the We loan and that our feeling at this it's our smaller pressures some I because of much are point I've said competitive not and quarter-after-quarter size is average this than believe competitors.

Tim Hayes

for you there. Thanks Okay. the stuff us floater property a little origination give color the is sheet then more balance types like And bit can or so the detail first around mortgage, XQ the the geographies, just far, that.

Brian Harris

I funded of be couple refinance believe commissions were part numbers. XX was they and was our some these difference in years we a we The all that million of an it. lot where a was to there's asset $XXX know leasing did ago. prefunded. of think TIs it I but done almost from loans for a be $XXX there million, on of floaters, I requirement there would And only TI

rather So, when buildings. think short you reserved you I'd lease commissions to I for construction to leasing really funding, see up don't loans. TIs it's and the you office want think have that

Tim Hayes

side Are to amending talks the keep it. the work there's time are there's financing those in on you further more a got facilities? credit sheet? think more side, from balance the the little do to do FHLB obviously bit and on then but -- the terms do And you very advances, you think attractive those on actively sheet right improve your balance Okay, got be a with you to to counterparties cost done of about standpoint, you funds that

Marc Fox

diversity. more talks of our but know in in to Board and counterparties good. the secured and the funding We're aren't a of part talking the it's that's slow funds, add always compression that of some to sure parties our banks cost constant like of -- across or We're almost to funding. and it's We're part to couple we'd have seeing syndicate join enhance group the to our our about generally with diversity. of

good had a have eight credit We on a and of our relationship unsecured them. syndicate banks very revolving with facility

capacity, you $XX that $XXX As facility expanded from know now million million. has in

usually banks, hear you norm. if talking to us So, that's the about with activity

Brian Harris

also to of those the compressed, I'd lending banks add I from us, rates not like have that strong repo other been REIT competition to, the provide but necessarily think facilities that banks. because

which really of they cost And bit also driven now or convertible think gotten of little CLO fairly too. compressed has I of a also down like-minded funds cost market into alternative, -- because some the there. bond has the

of years really a expensive. fully lot because used were they're anymore, So, not frankly, those used too lines are in past that

get pressure cost the get to but lowering order in there up, been have fees utilization dramatic, So, has banks and of hasn't up downward been their It the been some. funds. a on

Tim Hayes

and helpful Got me That's all Thank Thanks. it. that's now. for for you.

Brian Harris

Sure.

Operator

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

Jade Rahmani

and the originations you XQ Could much. just repeat repeat post spread? the also very XQ Thanks

Brian Harris

right. All

we so of when loans with just on say originated, million an average go coupon by the mean these spread in All loans isn't closed basis we and at floating but average in $XXX.XX commitments. I July, okay. fixed This back was for a securitization $XXX them, and -- of in LIBOR funded The to close, find $XXX.X originated my yes, million -- X.XXX%, $XX.XX a are -- Let me I points. of I'll sheet rate that's those that million of right notes. July, second, balance average X.XX%. a is of side Of interest way. XXX hang rate was million the

Jade Rahmani

Okay.

the the was $XXX number that the So, XQ or July number? million,

Brian Harris

million, $XXX million. sorry, $XXX.X I'm

Marc Fox

Was of the in terms commitment. number

Brian Harris

All right.

Jade Rahmani

about relative to this Got it. the I a number? guess think grow exclude being your else? something earnings different positive commentary should Or anticipate we or to around maybe quarter's do relative earnings sales to XX% and condo you able dividends, number core it

Brian Harris

and our the I run has rate gone increased think reason just then. I net that up, think interest that for has our margin

a take to me think I because it's get minute important. this Let across

Loan We Bank. also market have our our loans unsecured cost in about borrowings of rate financing involved the over fixed with is XX% and Home the corporate because of bond Federal of large funds

talking half LIBOR when it pointed last and in increased does while was fivefold almost two has and So, actually the a I that I out go it there up years.

So, interest higher But we coming up, partially our when we I LIBOR-based at rate. of any based. cost other much funds we're because lender in the LIBOR of unlike don't have an as in LIBOR goes think incur only lot like of more other increase parties a

timed a differential as been unamplified fixed rate a stream so low quite Our result have net we a bonds of get funds our with cost probably really margins. stayed and and well interest income of

if for to say of the continues any goes a us. all would in think increase rates and in though they're earnings see that time corresponding again what So, front raise they're September even midterm elections LIBOR I go in going Fed you would it's from the I to would up, indicating

Jade Rahmani

Okay, that's helpful.

stabilized, about thinking round you a loan CMBS ask risk, see plan. how you yet on as properties not on result the other I are and the the as bridge business benefit the but originate. loans it Just Because differences to between the of is from do properties duration fresh those CapEx loan hand, wanted of credit bridge much book shorter one hand, the

book think types Or the in of comparable is think credit risk. having the aggregate. in loan you as should higher do loan different credit bridge So, we the risk

Brian Harris

and here. they're we think don't different two We don't. comparable. procedures cross have I I don't underwriting

So, I highly the they loans, leveraged. really feel like they're -- of conduit and again, don't most

particularly I/Os. don't year I XX them of the like Some

business risk really don't standpoint. see taking transitional had little good news I book, it's Whereas liked the what door from on those funds here and the bit the in months front. a of lot think XX go much about that even we can loan you leasing that's the unless out a

been which from form then in then were in five building XX those the borrower. and years original the that of for that CapEx deterioration marketplace so. for when of if really transactions ago, you're a it last the the loan it reserves well-capitalized then lack years a tenants reserves When these from done very oftentimes or buildings there's gets a enters in value especially, hasn't cause a been the in do will from doing originally amount come lot and the recapped So,

Jade Rahmani

practically a through benign is in been but obviously it's XXXX, they credit no market, XXXX what that the environment originations. don't were of terms in people just talk And about

the So, structurally. commercial mortgages we XX-year most haven't typical maturity balloon that yet hit involves

overall. you end pickup delinquency additional rates hikes rate year, the for notable market by year of anticipate with for would this the in Fed a So, next

Brian Harris

Notable interest not guess. is I'm obviously, higher going floaters, refinancing because because you get a looked you paper have that LIBOR the difficult. sure if But more great, be would question income, has if become but more are rates on

prevailing little excited wanted goes the interest the much too anticipates higher I to rates. underwriting you cash refinancing think I and are surely rates gets in normalization of of high flows. have Now, you -- takes that Yes, What and current a some rates most would some think. than the because if Fed place would difficulty relative

Jade Rahmani

factor you the the ago it, is the do production? anniversary or biggest think XX-year rate And hikes hitting save of of XX-year that the

Brian Harris

basis unless is wouldn't it's running a I would a now. the it it's it hikes cost basically that's component if problem. rate XXX think don't And anticipate building. The sure, problems. big of start than would going it doing higher but because you part business. points, a being I shocked to LIBOR But causing is be interest right I a much some I of

Jade Rahmani

over Wanted months. to the your and comfort equity sheet, mortgage any the issuance, the you have guys say capital appetite issuing of few for of how the current ask notably if size about you are availability, you is commercial many your up REITs think with equity balance one last of peers about quite and

So, that. could comment you make on any

Brian Harris

we where accomplishing. of plenty I we're for think that have capital

be to happy and we're at. at low pace very teens the are a running ROE We

Our point see opportunity the extraordinary is so two would amounts capital that we shape. in need at continue. the don't there. that loans to coming not of an even, holding I up maturities of book good We're rate we set this credit cycle some in fixed a difficulty is have having still, our one lot to But short-term next securities given and very years. in large

those quite low. rates are some And of

So, get bump rate a pay instruments. and lower we'll we off-a that lower as yielding from

sheet they're into the environment. financed Federal that asset balance lending that for on okay But set higher then rate a rate we'll they're Bank. now much financing be rolls Now, fixed Home our because with when with Loan

it's an tremendous lose be earnings we that [Indiscernible]. think company managed standpoint out comfortable I supplement will see place. you'd of that we But important Whereas, to pretty feel also we raise I So, and internally very will that so hesitant managed capital that think an point from to bit take unless little we're with opportunities. a externally discipline

Jade Rahmani

appreciate a But thanks it. So, I'm comments. going than for more little? to say Really the

Brian Harris

Okay.

Operator

Please from Zucker your Ben the from question. with proceed comes BTIG. of question line next Our

Ben Zucker

sort plus targeted at everyone for dollars have of for I high to just opportunistic a is the a you would are my how are comfortable guys it's trying and questions. taking evening opportunistic been and allocate of last to down anything to don't can thanks And gauge written regard. estate, you I or we your quarters of as book. capital amount but real any be strategy. there I around we don't or few of billion that Good see level -- acquirers holding part that targeted minus know eventually that amount. equity that you taking want in

we usually transactions their for you come partner. as and these know somebody looking wind As up through debt we said

estate. recurring wouldn't and But do understand it income we So, the certainly of we we have. a REIT I real run and value say is that

that standpoint and XX% in generally through REIT flow own loans and rate generate eligible. its return cash amount group that So, dollar enough. be banks at to non-recourse through securitization it if floating How really holdings our our trouble? from we of REIT typically of get look Because very lend enormous it we and into on finance estate an to if combined generate book it? securitized But value. of the with attractive also excess large we're rate this ought to -- we we a try a finance other that we debt willing Could cash can purchase and of with it we looks replacement willing real do our cash or just to really

perspective excellent. So, it's from a tax

would getting don't I estate amount intention of real but of capital. business, we out have a not it So, certainly we're with say any of certain targeting the

Ben Zucker

as and Brian project. condo sense a an update follow-up, you that could quick provide makes on That

when of second online. how half I units those York City, there New just a of think should are be many quick coming on there and reminder

Brian Harris

we XX to about lower there and it's for east near kind be of actually sold. XX I and They this say And from about meaning eight-minute units I walk NYU, XX right side small There's when of also take about of quarter. there same closings and expertise on, a And But here. of I'm much fourth place the to place to point. one an would expect a is expecting get which component start taking I'm one There around small. think are the at are the Sure. them spoken update a condominium, in getting actually out it's there's while. located is all we're units, my the retail closings no haven't that little which penthouses, I size heard are trying bit in to

not around that these that we're So, trying cheap nearly you're These like condominiums. we not expensive how not about some units, as of the are we're to some of they're not the when Park condominiums %XX wondering as uptown the well, on these doing, things that sell million. Central are but are if fact

Ben Zucker

are and York. expensive to all hear there; when cheap relative I New you it comes

Brian Harris

group to think NYU that with may foreign a four to targeted a to countries for buy students also house we up in And parents there's from that want years. of them

Ben Zucker

points. activity, result interest your more income total is looking variable carries like of I'm And and NOI a expenses? more that XQ bit being XQ comparing dropped while were little generated a it property securitization XXXX curious at margin to XXXX, real quickly little revenues revenues which bit of expenses the revenue and looks like maybe those your as operating just year-over-year, from a up percent five net rather statement just to than

Marc Fox

Yes, I think that's fair.

Ben Zucker

Thanks it Thanks nice quarter. for Marc. taking questions my guys. That's great. me for and Okay,

Brian Harris

you. Thank

Operator

of Shane JP Morgan. comes question next question. from Our from your with Please Rick the line proceed

Rick Shane

bit. is guys, but question going curious high execution talked to assets said talked conduit that, that spreads follow-up. competition say you'd Hey little you're the one and approach that and about widening and You responding didn't that to in about you is one I'm how a Brian, to what are your market? that for be? the business our

Brian Harris

the not didn't now. yes, was But what quarter that deal too because to takers. we're about we as I'm widening second a are Rick, have price by seeing duck throughout. in the I question, much we makers talk Well, going spreads we right marketplace. price characterized said

don't margin, if profit the activity. it's perspective, feel our just we'll right from So, curtail with that like we starting

Rick Shane

Got it.

that And follow-up answers you. Thank Okay. my too.

Operator

with Deutsche line your the next of Our question. from from Bahamondes proceed Please comes George question Bank.

George Bahamondes

Hi guys.

you around loans the If you're last targets no Curious you underwriting are or in, target underwriting seeing favoring year one issue any markets that around a and two? anymore? that be issues signs that loans over were Just credit just no if you any might quick or there's Brian. for the you to longer maybe color longer know related any comfortable profit

Brian Harris

you it's don't theory like hard brush mean with if leverage. broad to I in just the because Yes, them the paint a valuation, lower you

missing have. have we is and we've question think lowered that And are really the leverage so others not. there just we And because I

do sector, I than general can I a think right it's hotel now. doing don't better that That's the any think statement. it

or of I do I worse? getting what pace is as But a getting people do a they're true. worse the yet. perceptible I target any on in plans little bridge I executing, and far think or think business it's and have will softening we their you dozens dozens milestones. going goes. little We I when but it's getting generally anything the to world in in at which of whether portfolio as see what's think we not momentum, our because happened started it's and know problematic are loan know there for chance I do a unfolding better tell it we it's on think quarter-by-quarter execution call the wouldn't

the All so a result far of deterioration though default will the returns the problems so witnessing to not equity debt. of far we're of in the

So, are costs I think up. going

in gets doing higher. just much is condominium supply much Some imagine particular. up it of on it's going I to up get There those some can't But the can prices market think are interesting hotel cities, some commodity New gangbusters and the The prices out too. coming flat pretty softening and market. sector don't in going prices definitely I is York -- better is

Connecticut Florida. York, Jersey, New tax think New will the and whereas, I have going situation to be beneficiary is absolutely think the some impact, with I

is bit rents little it's a doing just danger It's kind not to too comment want market-centric perfectly. would it by So, Apartments, be and to country not in don't but driven I some a falling, of things. of any I rising, of on say but the you, Industrial a is fabulous. level. those performing are wonky

those around how office little leases bit have And just Certain there. is I I out market commissions. really are and you're get in the U-Haul moving capitalized. production been secondary to densification, spaces. leasing figure tenants all people in a too it's if can about think many much But cities you think signed you're well a TIs and really there's you

wider a rates. cap it's So, those But correspondingly little have harder. bit

George Bahamondes

to speaking the Appreciate color Great. look to and I forward shortly. you

Operator

I'll Q&A the our now company's call return concludes session. Officer. Brian to That Harris, Chief Executive the

Brian Harris

in just And touch and next the here again to the time quarter. hope you soon today. everybody to forward with reigns for us with at look optimism Ladder. we thanks Okay, to But want to spending be say

Operator

call. That concludes today's

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

Ladder Capital (LADR) 31 Jul 182018 Q2 Earnings call transcript