LADR - Earnings call transcript Q4 2018

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Operator

Good afternoon and welcome to the Ladder Capital Corp’s Earnings Call for the Fourth Quarter of 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 call is being recorded. At this time, I would like to turn the conference over to Ladder’s Chief Compliance Officer and Senior Regulatory Counsel, Ms. Wallach. Michelle Ms. ahead go Please Wallach.

Michelle Wallach

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

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

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

Brian Harris

Michelle. see you, and up. In an I'll the we quarter the data changes note as quarter, ahead how or $XX.X in some the fourth XXXX well as some through year non-GAAP a of average for I'll earnings on full Thank the then took tax in that per in of investment walk quarter fourth return Today, This results. $X.XX interesting year shaping place core XX.X%. produced core Ladder measure fourth resulted equity share. the earnings, million preferences after

performance the our earnings return XXXX. full-year core $XXX.X with we per We on share million were as this increased after XX.X% core earnings XX.X%. particularly XXXX, year of core per share pleased and average had tax of $X.XX equity by or For versus

value after cash book by un-depreciated per year during increases during X.X% dividend the $XX.XX the increased our quarterly announcing Our year. two to to share,

balance portfolio real well sheet to for investment income, of net of loan XX% Our investment served in our XXXX, model contributed us XX% net estate while earnings. our multi-product another inventory to as core accounted income

liquid into Bank recall pick up voiced general to overly we likely we year our call, about market may was our Chairman You volatility complacency Federal concerns last end. that in some hawkish that and view very Reserve to expected as earnings progress and and in excellent selling caused volatility redemptions produced high-quality and short XXXX duration securities, in opportunity as many make securities safe an the of was CMBS. CLOs particularly December The in witnessed forced investments ramp

average and by of million a Bank million purchased securities X.XX%, large million. quarter, of maturity into with average rate these years. at par We the an discount of two than many volatility, the amount high adding of at prone far relatively funded have purchased we less We additional an a of of to assets weighted $XXX a average year. match the totaling to purchase continued fixed are periods As the due, XXXX, an first months these three in during we $XXX.X Home borrowing years. quarter over first Loan $XXX Federal securities We've two from to this purchases maturity of they thus

from towards acquiring sheet loan acquisition. While witnessing also shifting securities lending in focus balance we origination securities, spreads were our we our business, credit and compression further of were away

fourth in bridge a we loan normally the in what received roughly quarter. portfolio times expect $XXX.X quarter, During our payoff would three we of loan million,

on balance held While at what terms felt have collected of capital proceeds lower usually of to the seem reward loans our XXX.X and average the terms in didn't into proposition our relationship, right was a lender, shareholders. weighted and we loans sheet refinancing million the for also of we our a with by the offered in first these many interest with the higher originated rates to held so could securitization. we reallocated offer loans with originate of simply exit risk our fees matching quarter million better payoff we We did rate mortgage X.XX% value for being XXX

of however, is the credit repayments before We've million yet. receiving of have volatility that contributed result pleased XXXX, volatility I'm During We quarter, at earning securitization quarter. also the and million market world in markets three of $XXX.X to we securitization first in the the not spreads of slowdown XX payoffs million. we that of completed $XXX has pace in just securitizations, participated balance a in CLO our in This widening contributed point the fourth loans million quarter in in in the $X loans report loans December. a sheet of the probably the also to seen all settled seen of this in December.

quarter balance aggressive of after years two of loans, first XXXX inventory, on in loan quarter, more our originate that anticipating for to of in but the balance sheet billion. end of at we $X.X of higher securities the fell rate would year how move have changing our that X.XX illustrates time we quickly product different were into lower is is time rates upon fourth XX-year to inventory interest February The XXXX our shaped in increased This investment was XXXX, plan while quarter. recovery embarked building to into as in pivot after flexible inventory not on have quarter still the While over conditions At and in quarter Treasury billion our the floating opportunities XXXX. rates own we the an XX% mark XXXX, about bridge investment yield by sheet able XXXX, than first loans the loans, it over the XX seem we ending quarter, XXXX of November platform years, types still produce note V basis of still witnessed to nimble into As different a I returned US from November. to where December like they in ahead points market

the that what curve Treasury up commentary the chalk when also may economy. patients rates we recent cautious us quite more about expresses we raising the would inverted two-year this rates, many yield makes that and said in flat. is US And note against still five-year interest to lies rate the ahead While think more is that

growing be real Russia. tax a to policies possible stable, while global with and support flows the to have with peaked. and valuations may that about that future we extension, concerned continue growth, somewhat of slowing by we wars don't Brexit, hard tensions China, feel economy economy, talk think seem trade is And We cash emerging estate

that positioned slowing illiquidity. cautious during like economy. wrap of occur tend now thank company. to employees approach happy I our I'll we've the slightly execution to when that a I'd thin and saying up more sell December will supported liquidity the the Marc We try now high-quality Fox. loans that by sellers witnessed to to taking for the don't who We We investors in and position how to redemption to the performance am be I'll of think require you ourselves invariably the that ahead. themselves on forward present are in transitional of timing year seen to forced with turn a and is throughout our will XXXX look periods last exploit assets lending confident investment volatility and we're over meet us XXXX well we demands to opportunities year. to

Marc Fox

during of $XXX.X time the On XXXX. taxes balance GAAP of total XXXX balance $XXX ongoing conduit securities average per $XXX.X $X.XX us XXXX compared XXXX. million and quarterly six income $XXX.X equity Ladder’s that ended earnings In most on inception. principal allowed share income the generating performance quarter of core million an Ladder coincide of the our of $XXX.X of Ladder XXXX, fourth an earned quarter bringing in in million year for hedged to largest to XXXX loan succeeded million the was rate trend before a a $XX.X $X. of than recognition origination per over After for since XX the XXXX realization results the to and stood in net tax held income core core three ROAE totaled XXXX times sheet and $XXX.X investments income million Also disposition origination origination higher loans loan $XX.X XXXX. about Thank gains. financial share for return December quarter, the billion. will end the for fourth review now the $X securitization in Capital’s for generated sheet EPS core fourth in of and year million of earnings core XXXX, ended ended fourth you, reported of XX, XXXX, Ladder Ladder quarter Brian. and billion loan basis, on loan quarter, in loans year securitization of to EPS of sale, million, resulting Ladder I at calendar from The quarter after XXXX. to the to $X.XX In of tax of and XX/XX/XX. Ladder’s surpassed balance of earnings been first the increase gains XX.X%. fourth estate quarter in The compared was of results Ladder’s the of GAAP transactions generated and million loans net in contributed four XX% have assets. which $XXX.X Increases At with hedge XX/XX/XX. since Ladder a XXXX course of recurring income originated from earned balance investments the timing loan cash interest recently $X.X has sources of million total real million million. $XXX.X in net IPO $X.X the to and fourth judiciously dividend years, rental for XX.X% the from adjustment XX.X%. conduit totaled total the related year losses of

the calendar in principal For a a loans of total of securitization a generating with of million Ladder balance securitized XXXX XXX transactions, $X.X year, of total gains. $XX total securitization billion nine

$X.X the fourth sales lease received also company. real of $X.X leased to secured of of net commercial Finally, mortgage $X.X Turning focus for estate and other were an is million of the to loans to Total which at in quarter, XXXX, including $XXX.X net fourth higher stood debt of condominium the of X.XX base. plus asset the and times. assets estate XXXX. key $XXX.X unencumbered asset X.X% billion unsecured total XX% unencumbered to $X.XX cash investments asset comprised were line end cash sheet The secured sheet balance securities XX, the real prior side end XXXX, million equity by and secured XX% XXXX, senior which at the reflecting in billion, and The stood were of to Ladder loan December quarter debt estate made from was bringing assets of as fourth at real balance outstanding secured in of is of metrics, total average proceeds loans $X.X quarter at at Total proceeds year of commercial sheet the consistent investments, Ladder most of investment during XXXX. senior backed ratio total than unsecured balance in mortgage the Senior debt equity with of weighted XX.X% our investments including sales million the meaningful net ratio loans value of resulting other with in and sheet December year loan first and the our changes securities portfolios. quarters. balance XX, first activity mortgage approximately million our from the investments billion, on

income At key widening XX.X% basis in During the metrics to months months compares rate and had a responded year and general and $XXX.X the at the line the a remains was at Ladder securities fourth balance government backed billion of securities XX portfolio markets prior spread acquired compared comprised portfolio sheet million year $X.XX net The purchasing by portfolio portfolio basis the the December fixed a by million preceding quarter, end $X.X portfolio the three prior. the of with X/XX/XX was in points norms at million weighted the to end was sheet the risk The during XX volatility of than loans securities Also, by XXX spread more floating billion repayments increased the end. triple points year. loan portfolio quarter. result the the XXX instead in of during balance $XXX.X to to versus Ladder than was $XXX.X XX company end more of months, the average months XX, the this which XXXX quarter. or received year, weighted duration of A originations securities of US the billion as in and balance of the the year historic rated agency, average loan offsetting sheet at loan LIBOR, X/XX/XX. quarter, $X.X at

total capital of $X.XX for sources year an comprised as financing, debt. of XX, at On equity, financing of At billion $XXX liabilities, we in up end, offering, debt billion and into issued million with stock and value in proceeds is end value. of the to committed that $X.X of X.XX first But per financing Ladder’s to shares another side, agreement non-recourse in of bank mortgage finance of XX% Ladder’s financing market billion X.X mortgage billion and at XXXX, cost When was major had price million weighted first of over $XXX of is of the The outstanding public This loans. an adjusted with a agreement a estate $XX.XX of underwritten and $X.X financing additional share, of this XX% new premium a long-term expands $XXX.X facility our $X.XX Ladder of XX% both our availability outstanding new year, over XXXX, approximately book diversified permanent $X.X GAAP premium equity million. year funding the and underappreciated that provides CLO equity billion from and In non-recourse November, new entering issued and Ladder million comprised to access million XXXX XX/XX/XX, non-recourse and shares non-mark-to-market resulting mezzanine other real unsecured was Ladder combined class and successfully time IPO. average also the base availability our at since holdings; XXXX; XXXX. of of to X/XX book billion end A of and loan unsecured debt end of million quarter undepreciated We repurchase reflecting maturing book or December Ladder [indiscernible]. At primary $XXX.X a a accessed $X.X were for a investments. further the $XX.XX the gross with had maturity bond up borrowings average common $XX.XX of X.XX%. debt from debt XXXX, committed FHLB its at debt. value $XXX.X

payout grew or shares equity in share $X.XX in at conservative increase the a $X.XX Ladder’s common the reflected $XXX.X billion the fourth reflecting to base to end per an dividend a class XX.X%. to of recurring in average in totaled increased of end $X.XXX in the entered equity form years. that dividend core quarter, XXXX, asset in earnings X.XX which cash $X.XX X% of of take resulting to four time. opportunity dividend of liquidity issuance of $X.XX a all million stock. per of of $X.XX portion A common by share performance adjustable in stock Finally, in Class used over ratio to Ladder’s primary November. XXXX. payout additional Ladder in and dividends earnings, be per paid to stock quarterly this in the thus growing million year of approximately billion million adherence cash, increase $XX is a equity. In including $X XX% the from XXXX advantage cash dividend equity XXXX XXXX Ladder per supported with cash sixth could by $XXX.X of a with $X.XX of and instead the modest this since resulted share the strong continued sheet November, $XXX available ratio, of Dividends base increase of million The XXXX on in in Ladder’s rate, a cash $XXX dividend, of million our result over the balance base investment meantime, share lowest assets available of election when cited in result retaining Applying we The times, the X.X% level year pay $X.X leverage issued funding that XXXX billion leverage can A

A million and resulting up, bringing $XXX.X originated XXXX, this million fourth Ladder for core class a core after questions tax summing XXXX. EPS, million of per EPS. of core loans to share share earnings We open common stock in $X.XX loans quarter million securitized stock total the paid XXXX per Public answers. $X.XXX of our share proceeds gains. $X.XX $X At dividend, ROAE We core of $XXX dividends and $XX.X of X.X of and XXXX in of million underwritten first it's resulting $X.XX of time Primary of to XXXX million of gross approximately generated in a we $XXX.X of issued class core resulting line point, the in per a IPO, shares So, million XX.X% common bringing per the $XXX.X A share fixed net total earnings, since in or rate in securitization Offering

Operator

Instructions] Our question DeLaney of with JMP first Steve [Operator comes Securities. the from line

Steve DeLaney

Obviously, about at the end of thing a being your didn't great XXXX. list. that since you anything top though, missed my was report. stock say up XX% of the you of And One sort

is the that. the real really your thing of Recently also they to be the estate because any prices. you to I’d investments other year, you, capital that whether chance of you one of with were far what on any Brian, appreciate about who peers has opportunistic didn't investment last a the able real but CMBS, talking like value sets you outlook this congrats of put work to I just down had investments. hot on couple the talk as So and Seriously, makes your ability And to us created think as you be you'll think obviously you told Thanks. curious was special really just find any over about recent years. lot still estate because if

Brian Harris

the would were acquisitions the Sure. our in Thanks, not that the for for the I active we say estate out recent quarter. real announcer. of and hope pointing But, thanks Steve in space success, curse I that's not

active terribly it the business. in -- been first core really haven't We that's quarter our not either, and isn't

and -- And isn't better. of it don't bad given think [indiscernible]. little there more be question we I picky, economy know, things expensive going you just of couple very to the of it's we're that will there's capital opportunities, years. always it's and to think I there's the We One, a two, be our going to some think think that twofold. And necessarily. probably the I is we're lot around a the over but think view are As think answer we next that be

managing today that think real today, later raising a flows on rents rather investment on. or to you make than better would we cash based So have estate

real as real So interesting owning set is of an more the door not we estate think for couple the through be might strong opportunity proposition. debt the asset class a next as estate years much however, today, in

Steve DeLaney

percentage on normal. year. and have sounds spreads almost somewhat almost on Wells tighter, CMBS CLOs, back your seen might you loan we've I it mean, And execution last your back even with be commented week, it. everything a seems CMBS, you though the feels to bigger and being spreads securities like be this me, did come that continue to to to Got

see we you a but care on we grow curious you that volatility to Just to would XQ, if it continue on that. the comment almost in book. relative had like sounds And basis, could

Brian Harris

that's that had were We be accurate. tell to you into you January of to of I continued can December, think that. we take think dry do that February. moving advantage have that. I like And and quickly powder. has opportunities thankfully, plenty I to And able

think that February worth million purchased I to $XXX of securities January we've another date. in and

get four close would So probably a the last five in $XXX to us around for million months. up or to that That's months lot us.

short mainly the with end, we that flow on curve, a be things gets the to a cash rates buying are little interest all hedging flat because don't We and of difficult. with want yield bit

really where into took to frankly, market all reason understanding in would the It not those are I last what where And way. the year year really come very a thought that couple managers right? pretty goes back market June a back of instrument, broadly distributed. paper then of CLO our But So say was a any too it's aggressive. it shaped it think was two want I into that things. July I bid would and a for And is, you CLO salient there the money think but though, buy, I in attractive has of December. little that's recovery, is, up tightly of the think are hands capable in look it don't the it's year The CLO differences. a is and And I you few area, a almost if was down right I financial and went three February. into V be we've at efforts. two say the concentrated

right that like do we So now.

spreads relatively it's based We compared are especially cycle. late in of active relatively making to at cheap, purchasers tight paper. think CLO AA loans LIBOR the and when We AAA

the originating maybe that will presents -- of we were that opportunity more of at far cycle. there's not so with comfortable when long we're We're business where still a to plenty okay. as But as the we as itself. And the as do continue in little pace opportunities. at just And originating loans, feels felt rest we the

I just better of But in attempting securities, was two value to a and I about to it tighter capital a might little to think higher bit one a trade. also amounts, that allocated be some the of loan money where we paid we're back get we think now a lending people at at spreads reasons cautious to downturn. three years in

are are. a securities. space as flexibility of our we're does can that conduit lending who to. that rates money I So now buying the well we very we we're as securitization aggressive to than people. about easily business to and model our the little shift like out And right it in about lend selective bit more we're owe competitors of to where money to selective the over charge many peers very seem we’ll And what in

we were buy AAA a December, loans. on looks the XXX at LIBOR value XXX which we proposition if better competitor, So can then of that plus XXX a CLO doing a in and like DM, paper from

Operator

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

Jade Rahmani

a the Brian, of third for to on model, could share business much if something as your like by the taken accounts wanted storm have leasing and I you as, ask I don't activity. market seems to co-working know, leasing thoughts

and reporting traditional clear year-on-year lease growth at sector volumes XX% that look it's of occupancy growing not estate brokers, leasing of north commercial the that you for If the is real occupiers rate. at they're office

find to out wanted about that? do what think So you

Brian Harris

do clearly first Sure. they of a it's nearly place. taking office the office space at are [indiscernible] the renewing tenants lot all, I used agree to. I'm and it, buildings not an but that expert of not of on And the sizes that

there, you for these of into moving do you you don't in because to new adapt. a really have it's all companies. have very And that, I think the, companies, attractive feature, do have assistance So especially

I you WeWorks stay two behind greatly think the if expand little but space know money, names cautious plan, being bit. building. a I always a a that's business a is, in and And see three the XX always don't in and what of the you a but far of or sense. headline when concerns makes that's making that as that new world hope that's a accounts lender the and them building, company leased you idea they're into think like oftentimes that put I as doing, So by me really not

So other financials you that guaranteeing doing and to estate and they're see have company who's signing is into that model, some master to they're I ideas, they're dig think real companies, little overdone what the portable, more that's temporary strong most yeah, largest makes is a would and New flash and very fine. caution I if associated has enough in space they that. would flows suspect a York tenant If get but estate real seller the estate smaller lease space heavily cash it's LLC a when company, too an the But a idea. relying real city at leasing of it's it's that like as and would I cautious with and to obsolete I effectively business Like but because that that that a as just nothing on fine technology around it, good that. be

Jade Rahmani

change you the quarter, on Can update any notable the look in didn't provision. like credit loss both migration there's an give in

on but is stable I experienced, those what So you've the assume status quarter, credit loans? also credit the the in issues on update of couple was

Brian Harris

ones bubbling similar very any up credit the problems say seen to before. credit, would are that we've I

that non-cash being I occurring, think problems flowing also are businesses in credit and are particular repositioned. like in businesses hotels in operating

let's expensive very to flow, equity when do of there's rate, it's I put So you've you if have cash that's at not and that ROEs if overbuilt. loan into have that, hotels it out more. year of year, said But it a million problems. call if a Having I given limited got because and loan proposition, know, reserves need up and you XX you full no a X.X as a at a the outstanding there construction that's years I X.X say, I ago, another don't LIBOR it's $XXX bit mostly interest think was causing where said, think point necessarily instead quite probably this service debt at biting are and

as -- whole the that it that real there But think do fine. I think doing all there a is hotel are businesses are operating estate. reminders is out business not I

to during fourth make quarter, actually So quarter, did hotels have Texas were on direction. thought we some in began that in going the to a foreclose we in moves that the we we on situation it,

ultimately also became into a That we fact a conversation, became That full doing lot the that in However, in paid due get did is problem. it the a in right the quarter. December. of went the became in there's and of then it Texas beginning off a now trip and payoff to well, a very before difficult turned capital conversation fourth round world

So I was particularly of is capitalized. stable, to anything would well distress not the borrower where signs but on showing say credit needs that extended, be

too know, as change office The been and there. in It's we're we've now soon. bit Delaware Wilmington, part other that building We an of wave reserve had, a little you on much situations not

a system. term in a stack one was is & here on I XXX% that, it still think credit in capital given occupied for but Broadway the But and it's Bath way particular Food that still, out we’re and it long Beyond lease. by waiting flow that receivership, it Emporium not we're is restructured the us. Manhattan payments, understand Bed we whole other bankruptcy is sort the itself why really is We're of for through to that under -- don't I concern cash receiving still just in a bankruptcy to bankruptcy.

Jade Rahmani

loan and date purchases far? in mentioned first and about to quarter to thus mentioned bridge date. the loan repayments You you conduit What originations securities

Brian Harris

quick a take a Let me look. good of other the idea got that. I've pretty Yeah, panel.

Michelle Wallach

Yeah, from expecting towards regular I a you. we maybe us, to million roughly -- can XXX can more say balance you for think towards you look tell time on sheet. quarter would see on I to now, can I a broken XXX million, to more balance slightly average do see XX-XX, Right expect pace us. But we're heavier

Brian Harris

we so have months, but two and worth breakout we don't have first closed, the in far, loans million have I so you closed the tell would conduit, of $XXX far. between I bridge And

Marc Fox

of XXX loans. sheet Yeah. million balance

Operator

comes Laws James. with of Stephen Our from question Raymond next the line

Stephen Laws

was in the and you to differences or the into put maybe about plan that? I Following up into start for think guess that loans you on a the on -- bit last maybe question, volumes put can with about you answer balance those sheet Jade's the the little the how the you underwriting talk conduit versus the to

Brian Harris

cash people both others. categories obviously flows underwriting difference, process, than has of underwrite one them Same no here more there's same and

one you’re rating would. you assets there's the agency opposed to conduit around Whereas guideline the than them, as it, of of business, wouldn't bit bit an kind that model, rating you conduit, the for to rating to but predictive certain little go little can agency really have have So variation a better a much. this overlook maybe or the item a underwriting but not against of might ability and you into more that fully can also things balance stabilized penalize agency sheet that decide

I loans XX we if but We're higher a on years down XX in use the the and we're the business, months. expectation process, underwriting underwriting and possibly not as of that next you same loan over So, opposed we our cash tell cash bridge flows would ago, stability to are of flows. of not the today cautious couple all to

live first but go And get only to things be has helps refinanced. in to to if cap I it the we a And So we until think of up, they do And don't date. might you going maturity that necessarily world LIBOR might. have transitional they they to think think interest then then are a in where rates loan, better. get all, we won't,

to have there's So little you liquidity a a in think bit more, the world. more lot

flow more out. probably plan, So you a bit XX% I hasn't volatile in cash But if borrower of he risk, his a where business up get you and can the does borrower didn't you're to equity, in such because straightened payoffs a of you're the if quarter in an lot have to can with payoffs on was execute going you in ask I'll take refinance December that little the execution, refinance you'd check extension pipeline, dries though the tell got think, it given fourth because even liquidity all $XXX a quarter. then to write -- conversation million additional he a a

was payoffs of to because date. our to lot that think in only as December existence in relative I that, that, of the CLO a a that out far So quarter, a real and only first hell widen that in quite as bit. said, in Having said quarter. I put $XX did -- And model, a result million we've payoffs we're a received of so spreads hole

are too from conduit So we loans. I any underwriting on but loans much wouldn't as quarter, well going bridge as cautiously forward one conclusion draw

Stephen Laws

mix could January the portfolio And to basket, we will side, higher, that gears your the if the do it to add about CMBS that X big to environment the for year, given like billion CMBS, current environment? mean, is go how of, moving and it how will CMBS kind you or portfolio reach stays continue I envision was in getting? you market switching think through February, the

Brian Harris

happen not to into see oftentimes volatility. tell in you a try our And next during I we of the answer. to desire periods high leads that transaction to I calendar would to December. do put securities our

billion I I might over point. you I of quote see on mark, CMBS think help. we'll but again, had to able we a it be $X one at portfolio don't this believe

Marc Fox

Yes. approaching $X billion. were Yeah, we

Brian Harris

the make everything me AA, minus normal own loan, to and the really else goes the the BBB that So securitization. AAA, A when again, into you you a and a

so and can securities term, that differentiate they and securities. a What and much degree produce XX% easily a easily short levered that are well returns because that better investment they loans to levered, and financed, sold, not X% be making term than might loans are of So too safety area, degree assets do that liquid. you it yield between liquidity isn't, is in high you with short those very X% when buy quality an provide the don't loans a of very I

always, may little safely. might in it sometimes so bit less to And yield take intuitive, but more not a be a live little we we bit

do I question a to another don't getting bout there's bouts watch is of but So of plenty volatility That billion? that today few X TV if you cause billion see and all do these day volatility, the of $X get had that. number realize it is, and to things can billion. XX to you your there's there $X could unless was to go we

Operator

Tim Our FBR. with next line of the from comes question Hayes

Tim Hayes

to does credit Brian, but earlier, view? just everyone. commentary in quality on or in a credit how evening, this play view your rates little in your pickup portfolio more comments directly. provisions wanted I on good Fed losses the anticipate bit appreciate your year? pick you Hey, of And Do a or this and to

Brian Harris

hear that. repeat I that? I'm Tim. sorry, you didn't Can

Tim Hayes

Yeah, I a more wanted directly. kind sure. just – just was pick of No, little credit bit to on

and/or Just your wondering if just you provisions into view plays this expect how maybe increase in then to the year portfolio rates and around losses that?

Brian Harris

may economy chasing our there particular because but a that’s there things I I much be will unusual little comment, I an that's next is problematic. just be transaction. problematic liquidity fed’s see now see in right too portfolio. in the not again, And think that isn't I Again, down, anything know in that it think more move think stress. that I CPU bit up. are the I personally

of So often right interest get might But a now. typically into don't trouble. that the little by, over there might be couple a show in have years ago principal column, leverage something until is because bit reserves up construction loans they those

I So we're answer it we see think or saying, less any by the increases real don't unusual going think to don't but general, see estate I I portfolio will difficulty would that in question either. our in in

reasonably there's transactions. that been over reasonable the these underwriting the have equity done that So loan last in saying, few years,

or that necessarily easily defaults seeing So with I without it. restructuring maturity see could some associated you some loss a think

Tim Hayes

And to margin to transactions line just improve directionally the transaction margin be low compared on with expect the on conduit in sale then, gain in wondering was and if levels? the level more XQXX XQ historical on to pretty the and historical you

Brian Harris

Okay.

we settled. it securitization first get can't detail, into because hasn’t did, much I The too

through fourth of tell June from I'll spreads XXXX widened June, I However, month. every go you till even can quarter credit the that in December, and almost back

a we would and of So as hoped every in may some were my securitization absorb three second profitable securitizations very they we didn't -- think the you X.X% you're the were but well. margin around we were and And do we not I widening, because the three all they build spread made money, why make year, they on bigger as of we were we them while did market. them did be. money half made opinion quarter that's again, can profitable, have we in there in and in of in all in But you the fourth out had

they're the lot intermediate quarter, do funds. flows bond those and see a first into into we XX the flows Going to going year of X funds, There's in area. of

there's of tells even the investors Fed not are a buy afraid afraid of rates, me and longer paper, they're a So that though that raising to not flat lot yield curve.

get January. their to before have companies summer. like allocations in addition allocations arrived their They with to through fresh In the that, generally insurance the

in lenders. really bit seasonally year, of is so period up little the lighten X. the a in aggressive quarters, the a tends after competition first for There's and half second to this of And a lot July second

will terribly a demand But market for term. it's for think margins profit loan So of fear the I say do little do is curve think that me least there flat be. at not yield hard lack has to think a near I I what the left is the strong. that supply,

were XXXX give little fell -- and that Interest January that I -- also they obviously they returned were. a did have year was ’XX. in factoid where I'll and XX in rates loans the the the we securitization dramatically closed to you on before So not

lower than back US on today year November. the XX it in Treasury points rate was the interest XX So about basis is

effectively be so And usually good rates spreads that's high he our not, closing but widening dramatically market, when your hand, like was though for us, low invite you that, other your loans we profit more that floors even have a in create loans are which which demand as December loan when them, you're margins. when should the it wider but fall on floors and have competition, would in does -- in

Tim Hayes

Got it? Okay.

or of of trends putting Ladder volatility, just the kind year kind look obviously say this you've so in seeing taking would lot year more expressed conduit of how you like given last caution do versus year? volumes that now, a you're the altogether, share you And market see and so this

Brian Harris

Yeah. of Volume concern ours. a not for. profitability we search that is It’s

conduit can business I only like a tell really now. say look right would will quarter, I I the So you, out I

I think BP’s we're going seem on recently. be past supply to going are find, in of good acceptable, to more and did partners buyers are demand there, to easy it there do Margins aggressive. the seems we than now

sheet you reasons good the loans honestly, I sheet, if of go side aggressive Fed the there's you So balance probably in optimistic think to I've that that's rates, part like think on see, they years, XXXX, the do. rates, of business. other why down that in as plenty too. in an in been that two as campaign you and when that add they embarked were And our adding business. we they I adding might adding, And what that LIBOR probably on balance this would the coin based of raising floaters last of have hoped Today, anticipation is fear onto and to had we did exactly and

those in you making of concern, when liked up, it maybe loans late especially down the slowing definition little if down is a going LIBOR think you the If cycle. going bit, was they're a

relative So I securities loved especially this we you, like I and real during volatile we times. we the love loved conduit value year, year, estate, love real loans. a business, we on tell basis, told bridge estate and would last you we

products on volume participation a is a estimate Ladder, at model the the are to dime. moved the wheel give We and I we you for don't estimate on that's have or can full right. around we the and turn reason the we -- So rotate year want

And up with so, for loans. and worth conduit of the then show we XX billion can on be days buying and focusing $X securities bridge business

Tim Hayes

drop me, portfolio estate That relatively just the of that. sense. for one a of quarter-over-quarter, lot with around what a being wondering from the just more decent And operating flat? comments Appreciate real makes down balance the amount then accounted were the expenses

Marc Fox

consolidation Yeah. combination the the is that had last also things, HOAs the condominium our Lafayette the us of a also property aftermath investments year. are accounting to respect That changed surrounding of see to selling that’s involved with what has with you of do and the

Operator

next with question of comes Shane line the Rich Our from JP Morgan.

Rich Shane

One the to I'll transition that two-fold. want when that to I inflection? you’ve done execution you make selling, it to buyer. deploy to that's stuff a I is say fair towards Brian, drives try looked the is be in on you securities And realized to that Look, of good you I time better was job you think just keep it a at of describing sure quick. simply understand the were sort it the, terms -- want securities, capital. just a where transition the

Brian Harris

was Categorically enough have we made The we fine. no. didn't execution them. of was, only mistake The

while However, millions of invest whole a in it's a very short easy world transaction of a very of hundreds seller. the period time, dollars to is

say CUSIPs, those on. estate one real was liking the It I not the that of wouldn't It of really world product now, investment. took right less I we When at they So are -- called of us was were another attractive. I this that reason, simply conduit was all wasn't products like products because now. CUSIP our the rest just cheap. got attractive. got advantage loans, every the tell you it of will right that more them I bridge look and

you you about they exit concerned the loan expression tightening that rise, maybe think a widening as up. quarter. competition think I'm that is portfolio the it. Credit hearing spreads capital a are opposed you're lot can from is and fall if chasing I of heated be one little me going to -- has might where There's into market should in on that only bridge LIBOR a and that to

we're resumption a in because start about to to have first signal suspect want of see years cautious to payoffs, plenty add sheet originating not don't loans, I advance. I’d we're that but that we we you the a because thinking net little quarter, You are our lot in balance bridge you'll loans not experiencing a portfolio but that are of more writing in on of area. the

Rich Shane

conduit that you quarter. to the the And the again, first in business expect conduit am rebound you I business -- indicated curious.

the what look deploy Is into more So and is the capital of into that way being function at diversified compelling? quickly chunks to it of with securities a durations. short to pools able the attractiveness this, made was larger

Brian Harris

you redemptions, a rates There's do where one short this a a all you're happens there's being and to time the of a airplane we redemption AAAs. benefits less insurance and problem. on. Yes, passive the few of analysis cycle find security. used It There's paid investing. inflows fund lot when buying What out funds, going outflows you'd see having to could was look much really you on see forced through And calls to hedge a was at volatility, of would is, you you lot around town and just see interest what be of less had and and make hedge don't. hedge

it's usually. ETF Now, an

not we're And many of that when own there's people them. that types bonds, a AAA so lot buying CLO whole

old. very it's that only is to, they're years things? have sell And said, because And their they because they two And answer of them one people would they So, the why just to me, cheap. bought originators well, funds. look in my those said taking who's they're They the I redemptions said, them? selling

moment so, looked like look ever or Anytime saw question, we we a take And is a one. liquidity is that. And a if spike, ask this we basic very problem, a problem? like see that and to us this volatility really we like we problem credit a liquidity a

Rich Shane

the more call. of was tactical than a it strategic So call much

Brian Harris

opportunistic was Yes. It call. an

Rich Shane

Okay.

Operator

[Operator question Instructions] of from comes next Our [indiscernible] line the

Unidentified Analyst

now, you to course of those were You leverage you’ve to all expanded capital out management thought going things where be? you you wondering capital stayed and were raise raised at opportunities like of you feel in that with that stake, just for equity I'm opportunistic which marketplace. terms and raised after sales, in some it, if that the

Brian Harris

year powder. two inverted out the Washington rhetoric dry reasonable that a five the of don't problems We is We coming potentially cue amount of necessarily December have We year that ahead right now. as from think and some situation of over. our and take

by So will I rates quarter, was a as simply there and Federal buying we originally about call were we of in or I almost Loan that be small from thought that drag low $XXX was securities no volatility we'd and because there securities we hybrid the felt J third other quarter fundings is I did XXX amount and million. increasing borrowed no really some million curve is on fixed did talking the wait we buying that of we effects took capital, that, to the we we when Well, borrowing, in it opportunities think until to rate for a million think call unpacked, we on original reasons. the had And those hold of that we so also. the mentioned over that as secured it all we that we that because Have Home Bank be raise we payoffs thought thought but even borrowed, $XXX other not have long we it be happen. expanded funds would borrowed it? few One we said we like started

Loan $XXX Home we've the expanded Federal million borrowings that So the borrowed the Bank, at that. with plan original we of yes, the coupled

it of loan don't right we However, in cash too a will some with it'll on portfolio, payoffs $XXX have quarter, hard. be now. take I – bridge million think we the around. plenty opportunities may There's But but

Unidentified Analyst

[Technical in looking a terms there's of you of of the curious extensive, has just you're capital way then lot marketplace? things what are of said, off in kind in available the And terms into Difficulty] playing played

Brian Harris

where things I on the of is main to reason say are has place selling. increased Well, rates now. being in going are funds add those relative whole the of right that And marketplace many cap a a dramatically think, lease, cost your you're to to of the lot net difficult

have the the space. lease the those that about General argue one space, Generals. where taking there's trying One of be effect Amazon hundreds there net that not buy I to now. it right is are prefer And the you Amazon rather with we favorite of talking do lot a General you Dollar than selective Dollar why Prime Dollar of would General our them, around is buy talk rather is the is Dollar want rather Two can some customer. You about to companies I'd And place reasons customer retailers. to necessarily of word and that them. delicately,

the because and -- customer. And mostly know lot to we And are likely they're areas out into oftentimes so So be they're their right to another they what around of Dollar as that shrinking that less like across and inline in for of a that the Dollar General is by like areas, General has And been big less expanding populated a their the to we retailers standalone stores doing long that. trafficked is like thing into time. moving street we do is know that moving opposed source.

Dollar to it. could they buying is wouldn't they be there because lastly, Generals, average understood they support high costs that And Dollar the million. General barrier So making a $X.X about unless move entry to

pretty a bill So legal environmental and and asset. get and through you you through lawyers, by on a appraisers can with big engineers million $X.X time the get

one quite slightly you them, if wider of do. the rate So a other them, don't when absorb that wouldn't get with of But XXX expenses at proposition the people factor attractive were very expense of you that's because because goes it. buy I We them that cap we buying do do it. a

Unidentified Analyst

looked I at I the pretty pretty that do for and those portfolio Dollar about the And General feel appreciate Right. reasons. you and way General it's all same I've wise. Dollar same extensively

a capital. run Just a environment you wondering just in you’re we had we really off where happened and to what's get where into loan if an hadn't last need book then quarter future but where question first if I’m redeploy the loan loan saw is, you the about keep kind despite my that book you quarters off, core enter guys you and have your areas off, these wondering of if thought you having -- will a like other loan into runoff, able you say if book growth rotating if that, replacing other be to going? when rotate the how feel areas, runs into just run and to book

Brian Harris

a those it last to. during were – shareholders be best the Those feel XX.X back the year, by down, where we market, developed but -- mean it Well, if a be can were don't able like down, to, we're point cash always return delivering on to digit opportunities. shoot considered on, able delivered One, we things we times going I can mix. can as was we this, will rotating we ROE. at that but there's that determine When we our like that this we for, We give but think keep if bonds investment we'll a continues an even do equity, stocks ROE we’re just easily but we said year where doesn't if determined anyway, fancy as we do. and are do other make will we or we rather can from our as anything like tend what we've tell it around many can we to can investing XX% product if double and X% that, to long without

think would fund than for where that, start probably rather our point to some a loans opt giving got to dividend. money didn't that like if return shareholders it we didn't cover deliver we trying reason back to the However, could we to

Unidentified Analyst

marketplace Okay. you in are areas. really many into bringing because too seeing other that we're guys Appreciate conservatism the the not

Operator

Rahmani Jade comes line question from of the KBW. Our final with

Jade Rahmani

the the of now right Just demand, to York how is be market, do could the wanted Ladder? that New condo And opportunity your City a ask it much distressed decline an concern in and anticipate in thoughts oversupply on to for you projects? result

Brian Harris

I question. are. interesting know an it than how negative don't we be it more That’s will on

condos won't it become comfortable attractive as are New doesn't investment not City York mean very right investment. an now, with they We a

could in has and easily that restored, event if or instead state could were quickly it tax that even if and deduction is our reversed. alone XX,XXX, very thing raised we really one local that that we be space be mind think big fact, change In XX,XXX think of it might the the was problem and to caused a

know but if So sure. very concerned, that I And don't condition or it I housing. I call a I think, condition, about that's where market a residential legal is am problematic for

condos. not New York talk about City Let's

of states positive view towards Connecticut about are concerned about to talk New would now York, I form very there Jersey, New Because property residential think Let's at California. work many cause factors any that in values. me those right and that be

Operator

our question-and-answer turn company's Officer. session. call concludes back Chief the This to Executive And like over the to Harris, Brian would I

Brian Harris

tonight. up the and We'll and in on everybody first too a getting Thanks us of for call call quarter be distant the -- future not back coming the staying on because with up.

listening if So feel to you Thanks a in thanks again for always, free us. and supporting have dial to again. good today. to year directly as And questions, us us in

Operator

teleconference. concludes today's This

participation and You for day. may at wonderful lines a you this We time. your your now have disconnect thank

Ladder Capital (LADR) 27 Feb 192018 Q4 Earnings call transcript