Ladder Capital Corp

Greetings. Welcome to Ladder Capital Corp. Fourth Corner 2020 earnings call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. Please note this conference is being recorded. I will now turn the conference over to your host, Ladder's Chief Compliance Officer, Senior Regulatory Council, Ms. Michelle Wallach. Please go ahead, Ms. Wallach.

Thank you and good afternoon, everyone. I'd like to welcome you to Ladder Capital Corp's earnings call for the fourth quarter and year ended December 31st, 2020. With me this afternoon are Brian Harris, the company's chief executive officer, Pamela McCormick, the company's president, Mark Fox, the company's chief financial officer, and Paul Maselli, the company's director of finance and Chief Financial Officer commencing on March 1st, 2021. This afternoon, we released our financial results for the quarter and year ended December 31st, 2020. The earnings release is available in the investor section of the company's website, and our annual report on Form 10-K will be filed this week with the SEC. Before the call begins, I'd like to remind everyone that certain statements made in the course of this call are not based on historical information and may constitute forward-looking statements. These statements are based on management's current expectations and beliefs and are subject to a number of trends and uncertainties that could cause actual results to differ materially from those described in these forward-looking statements. I refer you to Ladder Capital Corps' 2020 Form 10-K for a more detailed discussion of the risk factors that could cause actual results to differ materially from those expressed or implied in any forward-looking statements made today. Accordingly, you are cautioned not to place undue reliance on these forward-looking statements. The company undertakes no duty to update any forward-looking statements that may be made during the course of this call. Additionally, Certain non-GAAP financial measures will be discussed on this conference call. The company's presentation of this information is not intended to be considered in isolation or as a substitute for financial information presented in accordance with GAAP. Reconciliation of these non-GAAP financial measures to the most comparable measures prepared in accordance with GAAP are contained in our earnings release. With that, I'll turn the call over to our president, Pamela McCormick.

Thank you, Michelle, and good afternoon, everyone. 2020 was an unforgettable year. All of us, including those in the financial markets, faced unprecedented challenges. Ladder met those challenges with quick and decisive actions, and the company is now well positioned for the opportunities we expect 2021 to bring. My remarks today will focus on the key actions we have taken since the onset of COVID. First, We quickly raised liquidity and reduced leverage. Next, we turned our attention to proactively managing our balance sheet in order to protect book value. And finally, we went back to originating new business and are pleased to share that we currently have over $200 million of new loans, both conduit and balance sheet, under application and in due diligence. Our deep in-house origination team is fully engaged in actively pursuing compelling opportunities And our multi-cylinder business model allows us to pivot quickly to take advantage of the best available risk adjusted returns. Before I begin, I'm excited to confirm our appointment of Paul J. Maselli as Chief Financial Officer effective March 1st, 2021. Paul will succeed Mark Fox, who after 12 and a half years will be moving on, but will remain with us through the beginning of May to help ensure an orderly transition. As many of you know, Paul joined Ladder nearly two years ago and is currently Ladder's Director of Finance. Since then, Paul has been working closely with Mark and the senior management team as part of Ladder's long-term succession plan. On a personal note, I want to thank Mark for being a great partner and a great friend to both Ladder and me personally and let him know how much we all value the contributions he has made to Ladder's success. Looking back at 2020, I'll start with a look at liquidity, leverage, and liability management. We increased our unrestricted cash balance to $1.25 billion as of December 31, 2020. Our ability to increase liquidity by monetizing assets was driven by strong asset performance, healthy repayments, and vigorous asset management efforts. Since the onset of COVID, we achieved a 99% collection rate of interest and rents across our entire portfolio of loan and real estate assets including 100% collections from our net lease portfolio. Our focus on a highly diversified and granular mid-market origination strategy enhanced the pace of our balance sheet loan repayments with a much larger base of capital available to refinance our smaller average loan sizes. Since the onset of COVID, we reduced our balance sheet loan portfolio by $1.4 billion to just 37% of our assets as of February 19th, 2021. More importantly, We are now in a strong position to reset our basis in this portfolio as we rebuild it with the origination of new loans reflecting current market conditions. In conjunction with these repayments, our hotel exposure decreased approximately 30% in 2020. As of February 19, 2021, hotel collateral represents only 14.5% of our significantly smaller balance sheet loan portfolio. Our approach to security investments was also validated during the pandemic. Our focus has always been on highly rated short duration liquid investments. The market for these super senior securities recovered quickly, and they are now regularly trading at or above par value as we expected. Since March, we reduced our securities portfolio by approximately $1.1 billion to a total of approximately $800 million outstanding as of February 19th, 2021. In total, we reduced our securities repo by over $800 million, or 68% since March. As a result, securities repo now only represents about 10% of our total debt outstanding as of February 19, 2021. We entered the new year with exceptional liquidity and a strong portfolio of loans, securities, and investments. We had over $2.8 billion of unencumbered assets, which is nearly half of our asset base. These assets are also a very high quality with over 80% comprised of cash and first mortgages. Our substantial unencumbered asset pool contributed greatly to our financial flexibility during this pandemic. These assets played a key role in our ability to raise liquidity quickly in disruptive market conditions and enabled us to reduce mark-to-market debt by raising a half a billion dollars of non-recourse, non-mark-to-market debt. As of today, and after paying off an additional $390 million of debt since the end of the fourth quarter, we still have over $1.3 billion in unrestricted cash on hand, and over 80% of our capital base is now comprised of unsecured bonds, non-recourse and non-marked market debt, and book equity. As of February 19, 2021, our adjusted levered ratio net of cash is 1.4 times, After further excluding our predominantly AAA-rated short-duration securities holdings, our leverage ratio was only 0.8 times, and our total mark-to-market debt is now less than a quarter of our total debt. We recently redeemed all of the remaining five and seven-eighths unsecured corporate bonds in advance of their due date this August. We see the unsecured market as a safe and prudent way to finance our business, and we expect to continue to be an active issuer in that market. While we are pleased that our stock price has recovered significantly from the lower levels we saw earlier last year, we remain committed to reclaiming the pricing on both our outstanding bonds and stocks that better reflect the intrinsic value of Ladder's platform. In the meantime, we are very happy to be back to the business of writing new loans at attractive, risk-adjusted returns. With that, I'll turn the call over to Mark.