Ladder Capital Corp

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. 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. This time last year, we described our goal for 2021, to restore our earnings back to a level that comfortably covered our cash dividends by deploying the outsized cash we built in 2020. While loan payoffs during that tumultuous year confirmed the strength of our underwriting and real estate valuation skills, our ample liquidity would limit earnings until those payoffs were replaced with new investments. Our disciplined deployment of that capital led to successive earnings growth in each quarter of 2021 and full dividend coverage by the fourth quarter. Today, 75% of our balance sheet loan portfolio is now comprised of newly originated loans We expect our strong loan originations momentum, accompanied by significant improvements in our capital structure, to benefit our shareholders in the quarters and years ahead. For the first quarter of 2022, Ladder generated distributable earnings of $31.5 million, or 25 cents per share. We continue to drive Ladder's earnings and portfolio growth with another strong quarter of balance sheet loan originations. In the first quarter, we originated $732 million of loans including 19 balance sheet loans totaling $677 million, with more than 25% of those originations made to repeat ladder borrowers. 80% of first quarter originations were either multifamily or mixed-use assets, with a significant portion of the mixed-use assets having a multifamily component. We also continue to have a strong pipeline of additional loans under application. As both Paul and Brian will discuss in more detail, ladder is positively correlated to a 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. Our balance sheet loan portfolio continues to be primarily comprised of lightly transitional middle market loans with a weighted average loan to value of 68% and a weighted average yield of 5.45%, excluding exit fees. Further, as a result of the significant loan payoffs we received, our hotel and retail concentrations in the balance sheet loan portfolio is now down to 5.5% and 5.6% respectively. As for our real estate portfolio, it continues to produce double-digit returns on equity from net operating income primarily generated from our net lease portfolio. Our distributable earnings in the first quarter were supplemented by a $15 million net gain from the sale of two net lease assets, representing a profit margin of over 20% over our undepreciated basis in these assets. As of March 31st, our securities portfolio totaled $663 million, down from over $700 million in the fourth quarter, as we continue to reallocate capital into our balance sheet loan business. As of quarter end, we have total liquidity of approximately $700 million, and our adjusted leverage stood at 1.6 times net of cash. 38% of our total debt is comprised of fixed-rate unsecured bonds, and 79% of our total debt is comprised of unsecured bonds and non-recourse financings. We continue to maintain a differentiated approach to our capital structure within the commercial mortgage rate space through our strategic use of unsecured corporate bonds and ongoing pursuit of becoming an investment-rated company. In conclusion, we believe Ladder has a simple and compelling story that offers a somewhat unique value proposition to our investors. So I want to leave you today with a few key highlights. First, we have a strong and conservative underwritten portfolio of balance sheet loans with more than half of the portfolio comprised of multifamily and mixed-use loans. Second, after demonstrating our strong credit skills and asset management skills through robust payoffs, over 75% of our $3.9 billion balance sheet loan portfolio is now comprised of new loans originated in the last 12 months with fresh valuations and business plans. Next, we are beginning 2022 with a significantly enhanced capital structure with the vast majority of our debt comprised of unsecured or non-recourse debt as we continue on our path to becoming an investment-grade company. And finally... We have positive earnings momentum from strong loan originations enhanced by a rising rate environment. With that, I'll turn the call over to Paul.

Thank you, Pamela. As discussed in the first quarter, Ladder generated distributable earnings of $31.5 million, or $0.25 per share. Our originations and pipeline remain very strong, and our capital structure remains anchored by a conservative combination of unsecured corporate bonds, non-recourse CLOs, and mortgage debt. Our best-in-class capital structure has been recognized by the rating agencies, with corporate credit ratings one notch from investment grade from two of the three rating agencies. As of March 31st, we had total liquidity of $698 million, and our adjusted leverage ratio stood at 1.6 times net of cash. Further, 85% of our capital structure was comprised of equity, unsecured bonds, and non-recourse, non-mark-to-market debt. Our three segments continued to perform well during the quarter. Our $3.9 billion balance sheet loan portfolio is 93% floating rate, diverse in terms of collateral and geography, with less than a two-year weighted average remaining maturity. During the first quarter, loan origination activity outpaced payoffs as we added a net $306 million in balance sheet loans. The portfolio continues to perform well, and we continue to feel positive about the underlying credit of our freshly originated loan portfolio. As Pamela discussed, over 75% of our balance sheet loan portfolio was originated in the last year, with floors set at the time of origination. Therefore, our interest income directly benefits from any rise in interest rates. This benefit is complemented by our liability structure, of which over 50% is fixed rate, including $1.6 billion of unsecured corporate bonds with our nearest maturity in October of 2025. Our $1.1 billion real estate portfolio continues to perform well and includes 158 net lease properties representing approximately two-thirds of the segments. Our net lease tenants are strong credits, primarily investment-grade rated, that are committed to long-term leases with an average remaining lease term of over 10 years. As Pamela discussed, the sale of two net lease properties during the first quarter produced a net gain of $15 million and generated a combined IRR of over 16% during their respective hold periods. Turning to our securities portfolio, as of March 31st, our $663 million securities portfolio was 86% AAA rated, 99% investment-grade rated, with a weighted average duration of approximately two years. 93% of our portfolio is floating rate, and therefore also positively correlated to a rising interest rate environment. Further, the portfolio continues to benefit from strong natural amortization, and therefore liquidity, as the majority of the positions are front pay bonds. As of March 31st, our unencumbered asset pool stood at $2.8 billion, and 77% of the pool is comprised of first mortgage loans and cash. thereby continuing to provide us excellent financial flexibility. During the first quarter, we repurchased 55,000 shares of common stock at a weighted average price of $11.13. We have $43.5 million remaining under our $50 million board authorized stock repurchase plan. Our undepreciated book value per share was $13.52 at quarter end, while gap book value per share was $11.81 based on 127.2 million shares outstanding as of March 31st. We declared a 20 cent per share dividend in the first quarter, which was paid on April 15th. And for more details on our first quarter operating results, please refer to our earnings supplement, which is available on our website, as well as our 10Q, which we expect to file tomorrow. With that, I will now turn the call over to Brian.