Ladder Capital Corp

Good afternoon and welcome to Ladder Capital Corp's earnings call for the third quarter of 2021. As a reminder, today's call is being recorded. This afternoon, Ladder released its financial results for the quarter ended September 30th, 2021. Before the call begins, I'd like to call your attention to the customary safe harbour 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 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 Ladder's President, Pamela McCormick. Please go ahead.

Thank you, and good evening, everyone. For the third quarter, Ladder generated distributable earnings of $17 million, or 14 cents per share. I'm pleased to report that we had another quarter of strong loan originations supplemented by additional gains from our conduit securitization and real estate equity businesses. After resuming making loans in March, we expect to end this year by having originated the highest annual volume of balance sheet loans in Ladder's history. Year to date through September 30th, we originated $1.5 billion of balance sheet loans, driving both portfolio and earnings growth. Approximately one-third of our loan originations were made to repeat ladder borrowers, reflecting the value of our franchise and strength of our relationship. In the third quarter, we originated 23 balance sheet loans totaling $578 million. Seventy-five percent of those loans are collateralized by multifamily, manufactured housing, industrial, and suburban office properties. In addition, we have a strong and growing pipeline with over $1.2 billion of additional loans under application. The composition of our balance sheet loan portfolio remains consistent with prior quarters, and we ended September with a $2.8 billion portfolio, primarily comprised of lightly transitional balance sheet loans with a weighted average loan to value of 67%. Furthermore, we continue to expect our loan production to comfortably outpace repayments over the coming quarters. After experiencing robust payoffs last year, 45% of our balance sheet loan portfolio is now comprised of post-COVID originations. Our remaining loan portfolio is performing very well with 100% collections, demonstrating the strength of our conservative underwriting and the success of our proactive asset management process. We continue to focus on the middle market where we're seeing constructive credit trends and opportunities to lend in high-growth markets that are experiencing positive demographic shifts and strong fundamentals. Our strategy allows us to achieve compelling risk-adjusted returns while building a diverse loan portfolio comprised of granular loans with an average loan size of approximately $20 million. In our conduit business during the third quarter, we originated $50 million of new loans and securitized $73 million of loans for a gain of $2.4 million. We are also continuing to build our pipeline of conduit loans, which we will target for sale of securitization over the coming quarters. In our real estate equity segment, we sold three assets generating $8.4 million of gains above undepreciated book value. Further illustrating the embedded value in our real estate portfolio. Turning to our capitalization, as of September 30th and after buying back $7.6 million of stock, we had total liquidity of over a billion dollars and our adjusted leverage stood at 1.6 times net of cash and 1.1 times net of cash and securities, which we intend to continue to amortize down and or sell. During the quarter, we closed a $600 million amount of CLO at a cost of LIBOR plus 155 basis points. While we plan to continue to take advantage of the CLO market as an additional source of attractive financing available to ladder, we remain committed to the unsecured corporate bond market, which commitment is accompanied by our high quality pool of unencumbered assets, primarily comprised of cash and first mortgage loans. Looking forward, we expect continued portfolio and earnings growth, In addition, we are well positioned to benefit from a potential rising rate environment, both by way of our large and growing portfolio of floating rate loans, as well as our significant base of fixed rate liabilities. In short, we expect our strong originations, momentum, and the long-term investment in our capital structure to bode well for Ladder in the coming quarters and years. With that, I'll turn the call over to Paul.

Thank you, Pamela. As discussed in the third quarter, Ladder generated distributable earnings of $17 million or 14 cents per share. As Pamela mentioned, our originations and pipeline are very strong and complemented by the $600 million managed CLO that we closed in the third quarter. The CLO financing has an 82% advance rate, a weighted average all-in cost of LIBOR plus 189 basis points, and provides for a two-year reinvestment period with an expected weighted average duration of approximately four years. The offering was heavily oversubscribed, attracted a broad range of leading institutional investors, and provides the latter a highly attractive cost of capital in a flexible non-recourse and non-mark-to-market format. Turning to our corporate bond financing, in September we redeemed $466 million of 5.25% bonds at par that were due to mature in 2022. The bonds were effectively refinanced with our June offering of $650 million that had an eight-year tenor, a 4.75% coupon with the ability to call the bonds after three years. Our nearest bond maturity is now October of 2025. Unsecured bonds and non-recourse funding sources continue to be a cornerstone of our capital structure. Our recent successful offerings in both markets have further solidified and lengthened our liability structure while reducing our usage of mark-to-market financing. We are one notch away from an investment-grade rating with two of the three major rating agencies. We remain committed to the unsecured bond market and conservative liability management as we continue our march towards becoming an investment-grade rating company. As of September 30, approximately 87% of our capital structure is comprised of equity, unsecured bonds, and non-recourse, non-mark-to-market debt. Furthermore, our more expensive crisis-era financing continues to amortize aggressively. Timing of this works well with our deployment of capital into new loan origination and our goal for a fully deployed balance sheet in the coming quarters. Complementing the strength of our capital structure are our three segments, which continue to perform well. Our $2.8 billion balance sheet loan portfolio is 97% first mortgage loans, diverse in terms of collateral and geography, with less than a two-year weighted average remaining duration. During the third quarter, loan origination activity outpaced payoffs as we added a net $280 million in balance sheet loans. Our balance sheet loan portfolio continues to perform well as we received 100% interest collections during the third quarter, and the general portion of our CECL reserve decreased to 50 basis points. The decrease was driven by a significant portion of our balance sheet loan portfolio now being comprised of 2021 originations with new valuations and the overall improvement in the macroeconomic outlook. Furthermore, we reduced our non-accrual loan balance by $12 million as one hotel loan paid off at par during the quarter. The payoff included the collection of all default interest and late fees due. Moreover, no new loans were added to non-accrual status. As Pamela mentioned, our condo business generated $2.4 million of distributable gains with the contribution of $73 million of first mortgage loans to a securitization during the quarter. Our $1.2 billion real estate portfolio is diverse and granular and includes 163 net lease properties, which represents two-thirds of the segment and continued to perform well during the quarter with 100% rent collections. The sale of two of our net lease properties contributed $6 million to distributable earnings, generating a combined return on equity of 16.7% over our hold period. The sales further demonstrate the embedded value in our real estate portfolio. Also during the third quarter, we successfully sold an REO student housing property, generating a $2.3 million gain above our original basis. And we acquired a student housing property with a joint venture partner for $20 million. Turning to our securities portfolio, As of September 30th, our $725 million securities portfolio is 85% AAA rated, almost entirely investment grade rated, with a weighted average duration of approximately two years. This portfolio continues to benefit from strong natural amortization and liquidity, as the majority of the positions are front pay bonds. Also, as of September 30th, our unencumbered asset pool stands at $2.8 billion, and it's comprised of 78% cash and first mortgage loans. The size and quality of our unencumbered asset pool continues to provide Ladder excellent financial flexibility. During the third quarter, we repurchased 694,000 shares of stock at an average price of $10.94, and our board of directors increased the authorization level of our share buyback program to $50 million, effectively adding $15 million in buyback ability to the previous outstanding authorization. Undepreciated book value per share was $13.78 at quarter end, while gap book value per share was $11.98, based on 125.5 million shares outstanding as of September 30th. We declared a 20 cent per share dividend in the third quarter, which was paid in October 15th. We expect our dividend to remain unchanged in the fourth quarter of 2021. For more details on our third quarter 2021 operating results, please refer to our quarterly earnings supplement, which is available on our website, as well as our 10-Q, which we expect to file tomorrow. I'll now turn the call over to Brian.