Ladder Capital Corp

Good afternoon and welcome to Ladder Capital Corp's earnings call for the second quarter of 2021. After the presentation, there will be an opportunity to ask questions. To join the question queue, you may press star then one on your telephone keypad. Should you need assistance during the conference call, you may signal an operator by pressing star and zero. As a reminder, today's call is being recorded. This afternoon, Ladder released its financial results for the quarter ended June 30, 2021. 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. We do not undertake any obligation to update our forward-looking statements or projections unless required by law. In addition, Ladder will discuss certain non-GAAP financial measures on this call, which management believes are relevant to assessing the company's financial performance. The company's presentation of this information is not intended to be considered in isolation or as a substitute for the financial information presented in accordance with the GAAP. These measures are reconciled to GAAP figures in our supplemental presentation, which is available in the Investor Relations section of our website. At this time, I'd like to turn the call over to LIDAR's President, Pamela McCormick.

Thank you, and good evening, everyone. I'm pleased to report that after successfully raising over $1.1 billion of unsecured and non-recourse debt by issuing unsecured corporate bonds and a managed CLO, We are flush with cash, modestly levered, and aggressively deploying our substantial liquidity. For the second quarter, Ladder produced distributable earnings of $13.4 million, or 10 cents per share. As of June 30th, we had total liquidity of $1.4 billion, and our adjusted net leverage stood at 2.5 times and 1.7 times net of cash. Year-to-date through June 30th, we've originated over a billion dollars of new loans, driving both portfolio and earnings growth. In the second quarter, we originated 22 balance sheet loans, totaling $800 million, and we funded $689 million, including in future advances on previously originated loans. New balance sheet originations during the quarter had a weighted average loan to value of 67% and a weighted average coupon of 4.91%. Since the end of the quarter, we originated an additional $190 million of new loans. The majority of loans closed are collateralized by multifamily, manufactured housing, mixed use, and office properties. In addition, we have a strong and growing pipeline with more than a billion dollars of additional loans under application. While we are now growing our balance sheet loan portfolio on a net basis as projected, we're continuing to experience a healthy level of payoff, demonstrating the underlying strength of credit in our assets. Consistent with our diverse business model, gains from the sale of conduit loans and select real estate are contributing to earnings again. In our conduit business during the second quarter, we sold $48 million of loans, which produced $2.6 million of distributable earnings. As Paul will discuss, in July we securitized $73 million of loans, for which the gain will be realized in Q3. In our real estate equity segment, the sale of a net lease property contributed $7 million to distributable earnings. As we've said before, We believe there's significant embedded value in our equity portfolio, and this gain on sale is illustrative of that. We expect additional sales from this portfolio to contribute to earnings to complement the net rental income it regularly generates. Separately, and as I previously mentioned, we've also been really active on the capital markets front, raising $1.1 billion of unsecured bonds and non-recourse CLO debt. In June, we issued $650 million of eight-year unsecured bonds at 4.75%, extending our debt maturities into 2029. Following this issuance, Moody's, Fitch, and S&P upgraded our outlook to stable, and S&P also upgraded Ladder's senior unsecured bond rating. Subsequently, in July, we raised $500 million of non-recourse, non-mark-to-market, match-funded debt in a managed CLO at an attractive cost of capital of less than 2%. Going forward, we expect to continue to complement our strong base of unsecured debt with additional CLO financings. Paul provided more details on these financing and our enhanced capital structure, but suffice it to say the right side of our balance sheet is in excellent shape, which allows us to remain squarely focused on deploying our excess liquidity and growing earnings. While doing so, we've also been actively adding additional personnel to meet the demand for our capital. We're excited about the quality and depth of opportunities we're seeing in our established investment products, and we look forward to sharing the results of our ongoing efforts in the quarters ahead. With that, I'll turn the call over to Paul.

Thank you, Pamela. As discussed in the second quarter, Ladder produced distributable earnings of $13.4 million, or $0.10 per share. Pamela provided an overview of our originations, loan payoffs, and pipeline, which were all strong. I will spend a moment providing some detail around our unsecured bond and CLO offerings, then discuss some balance sheet activity and review the performance of our three investment segments. As Pamela mentioned, in June, we closed the $650 million eight-year non-Call III unsecured bond offering, priced at a rate of 4.75 percent. The offering was heavily oversubscribed and benefited from rating agency upgrades as well as outlook. As a result of the strong demand, the offering was upsized from $400 million, with the final interest rate well below the low end of price talk. We now stand just one notch below investment grade from two of our rating agencies who have taken note of the latter's focus on long-term, well-staggered, unsecured borrowings complemented by non-recourse, non-mark-to-market financings. This offering provides liquidity to repay our $466 million, 5.25% 2022 bonds when they become prepayable at par this September. Once such bonds are repaid, our nearest bond maturity will be in October of 2025. Furthermore, in July, we closed the $600 million managed CLO at an 82% advance rate and a weighted average coupon of LIBOR plus 155 basis points. The CLO's expected weighted average duration is over four years and provides for a two-year reinvestment period. This offering was also heavily oversubscribed and attracted leading institutional investors and provides the latter a highly attractive cost of capital. Unsecured bonds and non-recourse funding sources continue to be foundational pieces of our capital base. And with these offerings, we have further solidified and lengthened our liability structure. These actions continue Ladder's progression towards our goal of being an investment-grade rated company. Pro forma for these offerings and the repayment of our 2022 unsecured bonds, approximately 87% of our capital structure is comprised of equity, unsecured bonds, and non-recourse, non-mark-to-market debt. Complementing the strength of our capital structure are our three segments, which continue to perform well. Our $2.5 billion balance sheet loan portfolio is primarily first mortgage loans, diverse in terms of collateral and geography with an average loan size of $21 million and a short two-year weighted average remaining duration. During the second quarter, loan origination activity outpaced payoffs as we added a net $524 million in balance sheet loans. Our balance sheet loan portfolio continues to perform well as we received 100% interest collections during the second quarter. The general portion of our CECL reserve decreased to 65 basis points as a result of new loan originations and an improved macroeconomic outlook. Furthermore, no new loans were added to non-accrual status in the second quarter. And in July, non-accrual loans were reduced by $12 million due to the successful resolution of a hotel loan at par, including the collection of all default interest and late fees due. As Pamela mentioned, our conduit business generated $2.6 million of distributable gains in the second quarter. And subsequent to quarter end, we participated in a securitization, contributing $73 million of loans for an estimated profit of $2.4 million. Our $1.2 billion real estate portfolio is diverse and granular and includes 165 net lease properties representing two-thirds of the segment and continued to perform well during the quarter with 100% collections. As Pamela mentioned, the sale of one of our net lease properties contributed $7 million to distributable earnings demonstrating the embedded value in our real estate portfolio. Finally, as of June 30th, Ladder's $719 million securities portfolio remains 89% AAA rated, almost entirely investment grade, with a weighted average duration of approximately two years. This portfolio continues to benefit from strong natural amortization and sales, resulting in a continued reduction in the portfolio size, as expected during the quarter. Also during the second quarter, our unencumbered asset pool increased to $3.3 billion, and is comprised of 83% cash and first mortgage loans. The size and quality of our unencumbered asset pool continues to provide Ladder excellent financial flexibility. Further, we declared a 20 cent per share dividend in the second quarter, which was paid on July 15th, and during the second quarter, we repurchased 100,000 shares of stock at an average purchase price of $10.98. We expect our dividends to remain unchanged in the third quarter. Undepreciated book value per share was $13.79 at quarter end, while GAAP book value per share was $12. This is based on 126.2 million shares outstanding as of June 30th. For further details on the second quarter 2021 operating results, please refer to our quarterly earnings supplement, which is available on our website, as well as our I'll now turn the call over to Brian.