Ladder Capital Corp

Good afternoon and welcome to Ladder Capital Corp's earnings call for the fourth quarter and full year 2021. As a reminder, today's call is being recorded. This afternoon, Ladder released its financial results for the quarter and year ended December 31st, 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 McCormack.

Thank you and good evening, everyone. For the fourth quarter, Ladder generated distributable earnings of $27.7 million or 21 cents per share. For the full year 2021, Ladder generated distributable earnings of $61.3 million or 49 cents per share. In addition to having another quarter of strong loan originations, our earnings were supplemented by gains from our conduit securitization and real estate equity businesses. After initially emphasizing raising liquidity and reducing leverage earlier in the year, we began making new loans again in March of 2021. We ended the year by having originated a total of $2.9 billion of loans, including a record 92 balance sheet loans totaling $2.7 billion, resulting in the highest annual production of Ladder's balance sheet loans in Ladder's history. The growth in our portfolio led to strong earnings momentum over the course of the year, and we are pleased with the risk-reward profile of the resulting portfolio, which continues to reflect our rigorous credit standards and return expectations. As of December 31st, over 65% of our $3.5 billion balance sheet loan portfolio was comprised of post-COVID originated loans with fresh valuations and business plans. The composition of the portfolio remains consistent and continues to be primarily comprised of lightly transitional loans with a weighted average loan to value of 67%. In the fourth quarter, Ladder originated $1.3 billion of loans, including 43 balance sheet loans totaling $1.2 billion, with a weighted average loan to value of 64% and a weighted average coupon of 4.43%. Approximately one-third of our balance sheet loan originations were made to repeat ladder borrowers. Since the start of the new year, we closed an additional $300 million of new loans, and we continue to have a strong pipeline of additional loans under application. In our conduit business, we securitized or sold $131 million of loans during the fourth quarter for total gains of $2.7 million, and we are continuing to build our pipeline, which we will target for sale or securitization over the coming quarters. In our equity business, the majority of our $1.1 billion portfolio is comprised of net lease assets, leased primarily to investment-grade tenants with necessity-based businesses under long-term leases. The portfolio contributed nicely to earnings again during the quarter, with $7.3 million of net gains further illustrating the embedded value within the portfolio. As of year end, our securities portfolio totaled $703 million, down from over a billion dollars at the beginning of the year as we reallocated capital into our balance sheet loan business, which we continue to believe is currently offering the best risk-adjusted returns. Our loan origination business was supported by $1.7 billion of capital raised during the year through two managed CLOs and an unsecured bond issuance. including a second managed CLO we closed during the quarter, the details of which Paul will discuss. As of year end, we have total liquidity of over $800 million, and our adjusted leverage stood at 1.5 times net of cash. 39% of our total debt was comprised of unsecured bonds, and 83% of our total debt was comprised of unsecured bonds and non-recourse financing. We continue to maintain a differentiated approach to our capital structure within the commercial mortgage rate space through our exceptional use of unsecured corporate bonds. In our view, this is the best, most balanced, and safest way to finance a mortgage origination platform for the long term. With the highest corporate credit ratings in the space and ratings only one notch away from investment grade from two of the three agencies, we are making substantial progress on our path towards becoming an investment grade company. As Brian will elaborate on more later, we are well positioned to benefit from a potential rising interest 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 conclusion, we continue to expect our strong originations momentum and our long-term investment in our capital structure to benefit a lot of shareholders in the quarters and years to come. With that, I'll turn the call over to Paul.

Thank you, Pamela. As Pamela discussed in the fourth quarter, LIDAR generated distributable earnings of $27.7 million, or $0.21 per share. Originations and pipelines remained very strong and were accompanied by a CLO that generated $566 million of gross proceeds during the quarter. The CLO financing is a managed deal with a 78% advance rate on $729 million of collateral contributed. The CLO has a weighted average interest cost of LIBOR plus 165 basis points, and provides for a two-year reinvestment period and has an expected average duration of approximately four years. This type of match-funded, non-recourse, non-mark-to-market financing complements our strategy of utilizing long-term, unsecured corporate bonds to finance our business. Overall, 2021 saw significant and successful capital markets offerings in both the corporate unsecured bond market and the managed CLO market, which have further solidified and lengthened our liability structure while simultaneously reducing our use of mark-to-market financing as we continue to move towards our investment-grade rated goal. As of December 31st, we had total liquidity of over $800 million, and approximately 88% of our capital structure was comprised of equity, unsecured bonds, and non-recourse, non-mark-to-market debt. Our nearest bond maturity is in October of 2025. Our three segments continue to perform well during the fourth quarter, and the latter is well positioned as we head into 2022. Our $3.5 billion balance sheet loan portfolio is 91% floating rate, diverse in terms of collateral and geography with less than a two-year weighted average remaining maturity. During the fourth quarter, loan origination activity outpaced payoffs as we added $751 million in balance sheet loans. Our balance sheet loan portfolio continues to perform well and the general portion of our CECL reserve decreased to 34 basis points as two thirds of our balance sheet loan portfolio as of December 31st was comprised of 2021 originations with new valuations and sponsored business plans. In summary, we feel good about the underlying credit of our loan portfolio. As Pamela mentioned, our conduit business contributed $2.7 million of gains to distributable earnings in the fourth quarter, with the sale of $131 million of loans in two separate transactions. Our $1.1 billion real estate portfolio includes 160 net lease properties, which represents two-thirds of the segment. Seventy percent of our net lease portfolio is leased to investment-grade tenants with long-term leases, and the portfolio continues to perform well. During the fourth quarter, we sold four properties, contributing net gains of $7.3 million to distributable earnings, including three net lease properties sold significantly above our depreciated basis. In total, during 2021, we received $219 million in net proceeds from the sale of real estate properties, which contributed $23.6 million in net gains to distributable earnings. As we continue to demonstrate the embedded value in our real estate portfolio and to be consistent with our peers who own real estate equity assets, in addition to mortgage assets as we do. In the fourth quarter, we updated our definition of adjusted leverage to add back the impact of GAAP accumulated depreciation and amortization to equity. As of December 31st, 2021, our adjusted leverage ratio stood at 1.8 times. Turning to our securities portfolio, as of December 31st, our $703 million portfolio is 87% AAA rated, 99% investment grade rated, with a weighted average duration of approximately two years. portfolio continues to benefit from strong natural amortization and therefore liquidity, as the majority of these positions are front pay bonds. Further, as of December 31st, our unencumbered asset pool stood at $2.8 billion and is comprised of 76% cash and first mortgage loans, thereby continuing to provide us excellent financial flexibility. During the fourth quarter, we repurchased 8.5 thousand shares of common stock, bringing our share repurchases for 2021 to 823,000 at a weighted average price of $10.95. We have 44.1 million remaining under our $50 million Board-authorized stock repurchase plan. Our underappreciated book value per share was $13.79 at quarter end, while GAAP book value per share was $12.01. based on $125.5 million shares outstanding as of December 31st. We declared a 20 cent per share dividend in the fourth quarter, which was paid on January 18th. And for more details on the fourth quarter and 2021 full operating results, please refer to our earnings supplement, which is available on our website, as well as our 10-K, which we expect to file tomorrow. With that, I'll turn the call over to Brian.