Ladder Capital Corp

Good afternoon and welcome to Ladder Capital Corp's earnings call for the second quarter of 2022. As a reminder, today's call is being recorded. This afternoon, Ladder released its financial results for the quarter ended June 30, 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 gap 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 second quarter of 2022, Ladder generated distributable earnings of $43.7 million, or $0.34 per share. In June, following five successive quarters of earnings and portfolio growth, we increased our quarterly dividend by 10% to 22 cents per share. Rising rates continue to provide a strong tailwind to our earnings given our $4 billion predominantly floating rate loan portfolio and large component of long-term fixed rate unsecured bonds in our liability structure. As Paul will discuss in more detail, our earnings in the quarter were again supplemented by real estate sales, with our assets continuing to sell at a significant premium to undepreciated book value. In the second quarter, we originated $371 million of loans, including 17 balance sheet loans totaling $365 million. More than 40% of those loans were made to repeat ladder borrowers. 77% of our second quarter originations were either multifamily or manufactured housing, with our multifamily originations focused on newly constructed properties. 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%. Due to the significant loan payoffs we received and our recent focus on newly built multifamily assets, our hotel and retail concentration in the balance sheet loan portfolio ended the quarter at 5% and 6% respectively. Further, in July, we received an early repayment of our largest hotel loan of $57 million, reducing our hotel exposure to less than 4%. Our real estate portfolio continues to contribute meaningfully to distributable earnings by consistently producing double-digit returns on equity. The portfolio is primarily comprised of net lease properties with an investment grade tenants and is financed with long-term non-mark to market debt. Our securities portfolio ended the quarter with a balance of $617 million. On the asset and liability front, our balance sheet has never been stronger. The credit quality of our portfolio is very solid and 84% of our capital structure is comprised of equity, unsecured bonds, and non-recourse, non-mark-to-market debt. Approximately 50% of our assets are unencumbered, with 76% of those assets being comprised of cash and readily financeable senior secured first mortgage loans. Also in July, and despite volatile market conditions and tightening credit standards, We successfully extended, upsized, and reduced the cost of our evolving credit facility with our nine bank syndicate, which now stands at $324 million. With $2.9 billion of unencumbered assets, strong liquidity, a low 1.8 times adjusted leverage ratio, and 80% of our loan book now comprised of post-COVID originations, we are well positioned to continue to grow earnings by taking advantage of attractive opportunities in our space. In conclusion, Our multi-cylinder business model is working, and we are very pleased with our positioning from a credit, earnings, and dividend perspective as we head into the second half of the year with the wind at our back in a rising interest rate environment. With that, I'll turn the call over to Paul.

Thank you, Pamela. As discussed in the second quarter, Ladder generated distributable earnings of $43.7 million, or $0.34 per share. Our three segments continued to perform well during the second quarter. Our $4 billion balance sheet loan portfolio is primarily floating rate and diverse in terms of collateral and geography. During the second quarter, loan origination activity outpaced payoffs as we added a net $161 million in balance sheet loans. As Pamela discussed, approximately 80% of our balance sheet loan portfolio was originated in the last 15 months with floor set at the time of origination. Therefore, our interest income continues to rise from increases in 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. The second quarter also included a $3.1 million reversal of previously recognized provision upon the successful resolution of a non-accrual office loan in Delaware. Our $1 billion real estate portfolio also continues to perform well and includes 158 net lease properties, representing approximately two-thirds of the segment. 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 10 years. During the second quarter, we sold two properties, a multifamily property in Florida and a student housing property in Oklahoma, which produced a net gain of $15 million, and were sold at an aggregate 30% premium to undepreciated book value. Turning to our securities portfolio, as of June 30th, our $617 million portfolio was 85% AAA rated, 98% investment grade rated, with a weighted average duration of approximately one year. Moving to the right side of our balance sheet, our capital structure remains anchored by a conservative combination of unsecured corporate bonds, non-recourse CLOs, and mortgage debt, with the corporate credit rating one notch away from investment grade from two of the three rating agencies. As of June 30th, we had total liquidity of $483 million, and our adjusted leverage ratio stood at 1.8 times. As Pamela mentioned, in July we successfully extended, upsized, and reduced the cost of a revolving credit facility. The facility was extended for five years to July of 2027, upsized 22% from $266 million to $324 million. And furthermore, the interest rate was reduced to SOFR plus 250 basis points, with further reductions upon achievement of investment grade ratings. This upsize of our revolver adds an additional tool to our financial flexibility that complements our large pool of unencumbered assets. As of June 30th, our unencumbered asset pool stood at $2.9 billion, and 76% of the pool was comprised of first mortgage loans and cash. During the quarter, we repurchased $6 million of our unsecured corporate bonds at an average price of 88.6% of par. Also during the second quarter, we repurchased 400,000 shares of our common stock, at a weighted average price of $10.11. And in July, our board of directors increased the authorization level for our share buyback program to $50 million. Our underappreciated book value per share was $13.57, a quarter end, while GAAP book value per share was $11.84, based on 126.8 million shares outstanding from June 30th. Finally, as Pamela discussed, in the second quarter, we declared a $0.22 per share dividend, representing an increase of 10%, which was paid on July 15th. For more details on our second 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.