LADR - Earnings call transcript Q1 2022

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Operator

Good afternoon, and welcome to Ladder Capital Corp's Earnings Call for the First Quarter of 2022.

As a reminder, today's call is being recorded. This afternoon, Ladder released its financial results for the quarter ended March 31, 2022.

Before the call begins, I'd like to call your attention to the customary safe harbor disclosure in our earnings release regarding forward-looking statements. Today's call may include forward-looking statements and projections, and we refer you to our most recent Form 10-K for important factors that could cause actual results to differ materially from these statements and projections. any required update by undertake or forward-looking not unless projections law. do obligation our to statements We

the In addition, to the Ladder this in with GAAP on financial which this isolation will The information discuss certain turn accordance which Ladder's performance. in I'd GAAP. Relations in figures is our a to presented are time, believes to non-GAAP Pamela These President, our is management information reconciled or not are the be of presentation as financial presentation, in relevant company's assessing supplemental intended available this company's to website. Investor call section measures the McCormack. call At of financial over considered measures for to substitute like

Pamela McCormack

good by last our time cash and the you, a year restore earnings This dividend, everyone. for we goal in that back evening, cash deploying described level our our to to XXXX XXXX. outside built covered we comfortably Thank

payoffs during valuation skills, While estate the until limit liquidity with investments. with our ample those real that earnings of new confirm loan will and our replace underwriting tumultuous year payoffs strength

by XX% of loan capital discipline in fourth quarter Our successive dividend now comprised XXXX, is the portfolio loans. of Today, coverage earnings and originated that to quarter. our each balance full with growth deployment led of sheet newly of

and in quarters accompanied improvements our in the to ahead. significant our originations by We expect strong shareholders momentum loan our capital structure, benefit years

earnings share. $XX.X For the of generated or million first quarter per $X.XX Ladder of XXXX, distributable

with first Ladder made a significant XX% component. of of loan and having multi-family a we first or originations. quarter totaling balance quarter drive another balance assets portion to originated loans, sheet than strong mixed-use sheet XX% XX of quarter, earnings more million, originations Ladder's loans, with to the growth including the of assets were either multi-family $XXX mixed-use continued We originations $XXX with repeat those million borrows. portfolio In of

a pipeline under strong application. have continue also of loans to We additional

As rising and as Brian discuss in growing fixed of will to Ladder significant well a environment, more loans, rate by floating and our both liabilities. as way detail, of correlated base rate of large rate Paul both portfolio is positively our

primarily and portfolio loans, balance middle and down transitional loan with the to to continues as a loan sheet X.X%, lightly sheet respectively. weighted-average X.XX%, fees. concentrations to payoffs XX% value our and be a loan hotel balance excluding of comprised now Further, weighted-average of received, we in Our result market yield of X.X% is the significant loan exit a retail portfolio of

continues lease our operating on to for real estate from As portfolio, it produce portfolio. our generated net primarily net returns equity double-digit income, from

margin net earnings distributable two was Our basis over our profit from the the undepreciated $XX assets, of of a representing gain leased a quarter supplemented over by XX% these in in assets. first million net sale

As XX, $XXX from fourth down $XXX capital the into reallocate balance business. of March our quarter, over million, we million securities to as totaled loan our continue sheet portfolio in

of $XXX cash, is of end, bonds rate of total bonds and of of fixed adjusted of at net financings. XX% and are comprised stood have unsecured non-recourse quarter of debt As leverage total comprised liquidity approximately XX% our X.Xx is our we debt total and million unsecured

that bonds our offers an grade approach commercial differentiated through to somewhat company. to becoming of investment compelling of ongoing story, We space, to proposition value REIT use structure, believe we has strategic a continue and maintain a simple In our the a rated unique conclusion, corporate capital investors. within mortgage and pursuit Ladder our unsecured

today So key I few want to leave a with you highlights.

than the loans. more multifamily balance loans and and with strong portfolio a comprised underwritten First, mixed-use of conservative sheet we portfolio of half of have

billion $X.X loan and through business robust strong of valuations XX after our portfolio skills fresh now credit new with loans plans. and is skills in last Second, of asset months, originated our over the sheet management balance demonstrating XX% comprised payoffs,

a Next, becoming continue to of our I'll we company. debt, have over that, enhanced with the are or from XXXX an arising vast as majority capital our unsecured Paul. to of on positive significantly momentum environment. beginning non-recourse investment path finally, strong enhanced loan structure, we the grade earnings by And debt turn we comprised With with call originations, rate

Paul Miceli

Thank you, Pamela.

discussed Ladder earnings of or per share. generated in quarter, distributable $XX.X the first As million $X.XX

remains strong, by bonds, very corporate conservative structure a Our of CLOs and our originations non-recourse and and unsecured combination anchored pipeline debt. remain capital mortgage

ratings, agencies. by the credit one best-in-class with rating notch the recognized grade, agencies structure Our two investment has from corporate from of capital been rating three

XX, X.X times, March non-mark leverage comprised equity, at capital total XX% Further, of million stood bonds $XXX structure of we adjusted net and liquidity was ratio of had recourse, our our debt. to As cash. unsecured of on market of and

rate to during well billion is with floating geography and of segments a maturity. Our a year continue balance diverse two three less terms portfolio in weighted perform remaining the XX% quarter, than loan average collateral sheet $X.X

first well in the to sheet XXX we added The we and origination balance During loans. as continue portfolio. portfolio positive about freshly feel quarter, loan of payoffs, underlying net continues million credit originated the activity loan our to perform

net fixed includes in representing corporate is maturity XX% bonds to billion well, our the sheet directly floors interest $X.X X.X balance thirds Pamela of lease estate rise approximately origination. in with with including income any of As segment. interest from our over complimented This XX% last at billion of nearest benefits over rate, properties continues portfolio discussed, of unsecured time structure the XXXX. real set portfolio of liability rates. benefit two by was loan year in October the and is which our Therefore, XXX of our originated perform

are lease are term with lease tenants primarily investment net Our remaining leases long-term years. strong over grade rated that credits, an of average XX committed to

portfolio, over rate As March XX% XX% respective XX, our rate the the IRRs correlated to rated, portfolio AAA million first two XX% Earning continues as securities combined during portfolio of during of hold Further, lease of is rated the as securities and quarter Pamela from discussed, of generated net rising net produced therefore grade $XXX gain also sale bonds. of was environment. the interest the periods. of investment two a weighted approximately strong a the a floating positions and portfolio properties to our to XX% benefit million of $XX majority with and natural liquidity front average therefore, years. positively amortization duration are pay a

pool billion excellent mortgage As loans financial stood provide of to XX, us asset of our thereby cash, of pools March and the X.X flexibility. continuing XX% first comprised at unencumbered in

weighted we stock of a first During $XX.XX. the quarter, average common price repurchased shares XX,XXX of at

remaining authorized board plan. repurchase million XX.X under our have million XX We stock

value XXX.X And Brian. XX. website book was more Our underappreciated to of quarter over details that, our operating per well shares was book tomorrow. April XX-Q, share on first quarter, based which We which we results, as I at our call the file on for end, available to share XX. March first to while quarter declared on expect per on as in turn please our now refer supplement, as the $X.XX our which outstanding is $XX.XX million a per earning paid was dividend GAAP $XX.XX share value will With

Brian Harris

Thanks, Paul.

fourth quarter quarter, from seeing We increased first a distributable are of with happy the consecutive the earnings. results

and real on took As advantage full assets credit quality originating conditions seen XXXX, in by fourth in at focused newer secured of widened, starting and attractive prevailing most mortgages higher the spreads the of we yields estate market years. we've quarter

quarters would does we Fed over funds our month rising expect Fed the months, share continue Ladders the ahead. the positively several per one rate Assuming increases move are for ahead next LIBOR SOFR. narrative to to correlated into six in [fees] market earnings of the and with to rise the to earnings

math two XX points the month seems to Fed funds months now quarter, XX nearly point one it up hikes in moved a If LIBOR the consecutive basis the additional quarter quarter XX from rate likely. of first by unimaginable LIBOR basis hiked just while basis During index month point, second the a just three ago was Fed the one points, share. while note by third just weeks indicate month of has follow rise also quarter, basis also increased already X% quarter increase would to by that to per into X.XX%. It's by should interest second our one that X.XX%, that to net and XX $X.XX four LIBOR were points to end June, margin the logic the helpful about rough by

started in we quarter payoff since on we confident feel speaks our Moving essentially over the we our particularly new billion started billion pandemic sort this rise as having figure Over approximately bridge of credit our strong economy going XX to normal. we inventory as rates base new originated how we've into to in our years, the X.X had shorter first to skills because to loan received $X.X in just the so-called months, inflation the asset the out and $X.X higher, volumes and recalibrated products, last bridge rate loans, XXXX, and maturities XXXX, just last began post are. to

Our have retail we the hotel far origination capital had were with in supported multifamily properties than we loans our and efforts have enhanced more structure. Today, mixed highly and by used past less on loans.

under portfolio portfolio while shown reduced our ready resilience Our earnings a real been to loan step income To engine. difficult is expected, slow days greatly quarter market wrap If has the we interest curated rise our today, the in net as just things incredibly world. an may our rapidly, down real of tough incredible these in volatile portfolio think as I'll but highly conditions. ends, of do securities has second spot say rates increased workforce is after estate our estate sales Fed from that and in off up the is our paying

to the to component the an rates. earnings raise Given long Rate to but rate Ladder’s our dual very has of over shareholders add little the at years, allow earnings into now earnings unemployment is securitization from rate would and Ladder a rates at turn economy. that of interest I'll the to short loan more lowest rate get ahead. already the dated slowing term With of fixed it exploring seem any benefit rising XX we liabilities, picture. to and to inflation greatly hikes highest choice, help from that business, that the will Q&A. and large our their positioned the extension in what backdrop from by positive economy us call distribute mandate If should Fed ever, increase and a just all quarters in our Fed

Operator

KBW. Our from Jade Instructions] ahead. is first go Rahmani [Operator question of Please

Jade Rahmani

much. very you Thank

market Just year, uptick potential the in likelihood borrowers to as higher a in maturing estate expect $XXX rates commercial to commercial Wondering market your they face of thoughts your do commercial of estate typically this of defaults. the maturities year. billion there's real mortgage each debt about debt you the loan current able on state be handle about curious real view overall, the on

Brian Harris

This Jade. Brian. Thanks, is

able in it's controlled to rise the building rent controlled I housing doing can think make there don't shouldn't people world maybe. of country, estate. have be XX not the rents many existing as against other should that that side if kind. stay rent cost, a leaving newer it. Hotels mean, tailwind brush thought that X that, months that with at apartment delinquent apartment moratoriums. stabilized and okay. sense, is interest oddly, that shelter think they the in was buildings I cost were to as depressed also. that's a up Couple goes due all are almost prices of time. said, think from a unless period gasoline of rent that of haven't a those inflation think, rising, the what don't maturity And there the any That should real because the coming undergone become that, I have too of for lot it. that sector tenants doesn't have do it or the But rent at grid in a like due depends in lot It are really broad problems they'll change I a to problematic levels loans have extraordinarily an of but commercial we that going eviction extended I rates there's think could some that where handle a than is to part That And where I exceptions and place sometimes certain is any at rent problem like date Not paid. not be mean, comes rise, although or that up cities. affect it's what I are point. apartment this they the

that, to I trying so version market find between used be think that an point equilibrium the cash flowing should hybrid the of be buildings. place pizza occupied. downstairs a the And is market, am such about office the from delicate leased going to test being office the and market there the and drugstore the and I is think and probably being businesses office okay. little a and as concerned ancillary some I But in away

So will and winners it there will -- losers be really here.

the utility just to the gone people I up van. of an grocery everything delivering store in through think understand has as and most opposed value Amazon it

should so So, -- I think the lowest are I at rates is as If not be has unemployment Fed this Fed they the ever. terribly point, two got high, and they’ve unemployment the okay. said, one mandates,

price So, not under fine. even neighborhood and stability, control. that's are is in of the having And other they one the prices

around food portfolio, to all and far a road is look to goes bit, -- that, to are inflation with and I that as doesn't are than they the always answer, there work, house be consumer, a be their is that but the think hang if do significantly really fine, not a really is three and higher going those wealthy or is. know gas, when will interest me So If he very attack know rents he think I has because rich stock if of part in abilities I bothering to I this fine. And the and the short-term home there car as general of prices, energy headline rent. down another own they but is things little then and fine, X.X%. X.X%, the the who a I there owns consumers if a consumer public but don't say The rates, he's he's

Jade Rahmani

very you much. Thank

overall next Have you of surveillance, XX with any dialogue seems the In you terms How be to borrowers? of say, decent economic be would company outlook, management the recession probability the policies, there adjusted do a months. over increased asset a think positioned? increased

Brian Harris

of are We under some degree you've Unless means books, attached you lot we which do at that I'm about. aware happen. been it. recession, recession word don't believe talking a will and are expecting We to but know you of reading The that severe think this we're point to have needs if XX, what a don't probably not a bad If think echo business I to problematic. terribly thing. a goes this and if I or a fine a for that the recession pandemic may quarters, come isn't XXXX shrinks necessarily cycle downturn few of echo growth don't recession think of it's saw. or to normal part negative an it's an a that as we

is the at. one XXXX this around one for So look I be think, was really would XXXX, I the

is So dealt is feared, I something a it don't be think but yes, should should with. that recession be something that

returns debt pretty equity well. do well, don't recession a as think but to I tend do in returns

Operator

next Our of is Deutsche from question Bank. Ricardo Chinchilla

Ricardo Chinchilla

you of agencies stores have investment guys grade? please you, please conversations I if last comment that the was what you if over your on becoming goal could main couple the wondering with raising -- how milestone the that months? evolved have are And of

Paul Miceli

is Paul. This

days, frequently specifically them agencies, with of ongoing with have pretty rating We and Fitch. these Moody’s the two and conversations

are Our of as quantitative unsecured it primarily means generally our upgrade structure. our corporate more debt and nature, considerations -- liability on part in

in So use reasons. corporate and a big for we're of the flexibility debt various believer the other unsecured reasons

upgrade ownership. and So it's nature, like center our the considerations, and primarily quantitative structure also significant and internalized in they

and are holders. aligned, bond shareholders Our we with

to go like say and I'd agencies, well. on go rating three all with conversations the So continue to

Operator

Eric is question Instructions] [Operator BTIG. Our from next Hagen of

Eric Hagen

from me. couple a Just

say embedded portfolio, then if First, rent evolved a there? or increases is can most the net time? what would remind you us maybe and which discerning right little variables different in has with just over there's in lease respect to now, And underwriting regarding any credit, you you're which

Brian Harris

to the is I'll answer, going us I'm with management. asset – but Rob on start

just But him originating widen. So in I'm the I out quarters of the going how thought concerns. that's decision comfortably building -- newer too. ask lot a and able York that's was the didn't and ‘XX, and good of first tale feel are we've cautionary until avoiding get very the felt replacement that alternative were that before basics loans the originators the originating to but at either. to how too a quarter this look that net use right a far kind downstairs dollars CLOs. be to underlying to year of We into quarter and I meaning that as the you. being have bid been fourth foot go it think San which CLO we XXXX. we and need and well mixed multifamily Around recession of point, think they of that big as in we fourth multifamily, prior upstairs. make I are is a the a get supply going think be about think our considered, phenomenon in combination. to of been and we market We But going targeting. really that have way, elected in of elevate targeted we about the use, began We weren't value plenty we a our I felt questions ‘XX to the to they think apartments products, the starkly and back was with with changed matter, of but to the apartment side I with per as a and people Francisco, effort also lease -- it end And was targeting dealing as quarter to underwriting we're apartment by XX% weren't actually through economics of see land with like point including of at assume fit. beginning a simply this available XXXX, what be originated a part And moving economics, rents spread into than some much now does to seriously quarter, aggressively at also around as them, Los deliberately targeting that cities Angeles, Chicago kind target And you some we anytime three social way. New not we as had that you that And retail, loans pro But different city profile,

with always this, know So I at assumptions forward underwriting hasn't started perhaps I think we've familiar the you're the other going process but big Ladder don't that with Eric, if the filters, have changed changed. than

years, So whereas have now more where yes, to XX% cost We malls say that the hotel types. our acquisition triple a but last at point. we very might will because cyclical expecting where certainly completely done might say point is indicated like we're an to one, get on ownership it's we're And loan avoided very might a overbuilt hitting the type, I this that feel properties. necessity-based have years a some we XX industrial, probably with at would the and do done as net it's of it in but else and malls, most comfortable product we that to they're we'll I of before now, do And avoid everybody we wouldn't with that little for retail. comfortable too We point well. product

when loan today. the doesn't So we due. where for matters in three really comes years take It matter you part, we where the are are most

So to see do and ahead we as year. next believe mild we we've recession indicated, look have we a

terms LTV, mostly now portfolio expressing were, higher, conservative so So little multifamily might look little lower And shorter our a more you in than be it's in it but LTVs. mind, keep we're far now. we if of a it maturities, and at

bit an underwriting that. really the Rob, handle just doing And is about So that be to as move a too one basic to right slowdown. now. premium, that other at not real do for many And estate execution bumps? of would a usually explanation go you try stories where that's you want into we're And a right we're

Robert Perelman

rent in flat step, to Sure. net triple the steps book Perelman. years rent Eric, is varied leases. about under this half five and book half stepping is is has Robert certain annual The every

Brian Harris

else, Anybody Hello, operator? operator?

Operator

comes question next Our Riley. from Howlett Matthew B. with

Matthew Howlett

prevent here quarter, the bps two taking for question. with my in the what's basically Ladder quarter? my the raising more, Brian, second dividend, meetings expectations each, to not Fed during are -- five, XX Thanks from maybe

Brian Harris

do to has the questions other the attach it. two has to with an One There’s there. direction amount

that second basis ask call. might move The to think to stop than dividend are I we have one, the Board's But will does us? start actually a to But won't which other happen, XX stop in what for would obviously a points policy on I'd earning going to imagine I'd some communicate the distributions. I I May to the bomb extent imagine, of this and request. nuclear Fed the to in June, on raise approval and our that try adding dividend that, we XX

Matthew Howlett

So mean, investors should might think dividend -- EPS going it. of little tracking, a overtime lag EPS, to adjusted a I bit, adjusted equal it's but

Brian Harris

where shareholders and two to very have laid us mean, exactly I think almost we sure. have shareholders in are last our years. we maneuvers that we two ago shareholder conservative in the years be We today. Strangely we are friendly. with our is then out we plan been the taken Yes, patient try

covering, raise rates. interest are we now and we so, Fed And expect to the

Our rising margin quarter-after-quarter. net been interest has

don't in us I that $XX it's we as was, it is And if should set, rise. million benefit floating have this rate, big quarter, think which I liability obviously fixed rates top-line. know which

but which it go expect. low in as hand-off shape real that slow, estate. and earnings division. But are is we So would handle up, right were some you world expect gains as as in rates I'd is been loan it. but And is we we taking to a on portfolio, going Fed besides other goes bridge bit right of rates have hand-off session now. will on yes, little Obviously, imagine the the the our from terrific interest multifaceted interest time anticipate to having moving on I would there now earnings things a to in rates, the

we rate But in we steepens, long don't stage now used really I -- so, we could very that that's it very are And a expect mentioning And mentioned as the yield long conduit business duration be because a that time. money should big haven't much either, if we know at get Ladder. easily loans. the that, on very here. fixed back think And maker be curve to I that

Matthew Howlett

that hear, be Well, better to I how CMBS wide that develops. right guys. for you that be you to spreads the CLO would could certainly see that mentioned love would cooperated, be interesting now. The are market, you said if even

Just which it the Cash coming If a really as walk the look does, just me things thing. your how progress. at CLO if couple you is great in through cooperate. liquidity me look cash how here, market the grow generation. down, you walk is quarters you next through, doesn't about, portfolio How

Brian Harris

Well, question. a think it's I complicated that

the out CLOs are bank We of switched reason November. two home not the in CLO the in why federal we market did overly because the sort market. loan is now. for one And concerned We one about right CLO June,

other the ‘XX. due of lowest billion million. have XXX -- we of So that the obligations last now reasonable have XXXX, a coming where match X.XXX funded unsecured for got earliest year despite debt the two And is outstanding due, couple -- we've we it is that and years. are to call late back the due rate period One -- in of we've time of in a we due the added our fact ‘XX have which

big the six billion going average XXX that's out like And rate an five, at for about for continues, years a about just or that's inflation come Fed asset to into So if years. turn to of X.X%. it

now, to assets unencumbered as not market think we right the billion. to have -- And terribly important close $X.X is So us. CLO I we're

could rating we three those of grade think become we X,XXX credit, think to I a of [X,XXX]. want a that. keep feel we the agencies going our And lever versus and with the now, do than about times of mix three then they CLO where investment enter could scenario, to are also market more million are to enter lot how competitors secured So we're times we attention lot unsecured. a paying But do to – if obviously it I our significantly about to have leverage an

-- way, market that So assets large because this in also direction, out very Paul would that's I issue really entails. be would that But those unencumbered go point would did that unsecured bond we if keep another would what mentioned we a we with just offering. Fitch think Moody’s, on have that analytically to do that there but I watch what we us of unencumbered one and there, was understand a third yesterday. And get put to the positive those we result also assets. S&P, would just as

Matthew Howlett

certainly That's Just Was portfolio? the run time? can to security just that that need you Do going encouraging. over side curious on is down -- of it?

Brian Harris

world whip think in of out and like with the that it the We don't office They're this there's this, sawing people zero. few in a I where goes to need occasionally at all. I've times, said office. a market

know months can have But that million total the Sometimes -- in million pick with about a in And attractive - pieces up pretty obviously of XX last in two I lot. payoffs received, not XXX some million, XXX a you we that. don’t portfolio. I

this I don't here. where of And now quarters happen So point. most we catch is off right LIBOR with would [gap] they're up year based them. short LIBOR we two are really couple -- that'll it primarily suspect yes, to a see now, like to right in at from and there -- because XXXX, the

Operator

Securities. Muller of question JMP Our Chris from is next

Chris Muller

ask when estate dividend. of wanted where in the to gains considered real or estate comments is to you slightly at on I earnings And flowing item how sales earnings board Brian, recurring So think back exceeding obviously the they're considering XQ that it, on the at? to a one helpful the set dividend. see thinks of power level real when different are But great a to distributable the non-recurring looking a more these your have I to? going It's are to about the the covering and they're shift

Brian Harris

haven't and or for distributable its don't yes, of estate business board We differently estate, in the estate if million, sales. matter. end real gains amount that entirety have But the million I I allocated think $XX the to we for or the we made the the were at. portfolio. real to the $XX have And full-on entire a securities done in unless we view it's Yes, and here, earnings capital think quarters extensive that we market some board that, of we don't of sale the that row we estate cash of think we looks real think but from several on a gains, which in come based year at real amounts gains show our think certainly I last

sell due. without trying recurring portfolio actively this stream returns where think very it's a I keep are a don't we'll into exactly digit comes little see We and to time. recycle not year. having income like we and exceed now, couple but in generates mind. in that have probably think stable can We're I that bit to We double it refinance portfolio a that second all we here, as I that. know can quarter that of that I the sales

reluctant So seller call we very are us would at -- I a times.

would moving to no all. quite dividend to We two just bouncing by understandable. want to want wouldn't an be a I at earnings the forward one's forward, we single go the had don't company was in that if looks surprised That's timer. We we go the gain want And into -- the we distribution, a direction. so don't that obviously think factor that And unnatural predictable at Then it getting on of a around on dividends. much. that the board so unnatural one be

Operator

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

Brian Harris

now. but close ago interesting time what the I'll who thinks That'll rate coming Yes, be saying going and consider couple that a of we just by been that long entered that did. over tailwind it's be the a if would indicated, of pandemic, a knows – I time would the we out and pandemic coming think this is take I into virus I out higher thought of all another earnings. with say to our to it years during financing And we

singled that past. that I the signaled we've think in we've --

believe forward to positive we this rest to it, very positioned company very, year. and look we this We have Fed will benefit continue just not actually interest it. from do So of but to the rates survive a raising

correlated We we are in are lies positively really that forward direction ahead. and to looking what

with So year. us. you we hope And make again all very staying this thank for happy you to

Operator

This today's concludes conference.

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

Ladder Capital (LADR) 29 Apr 222022 Q1 Earnings call transcript