Ladder Capital Corp

Good afternoon, and welcome to Ladder Capital Corp's earnings call for the third quarter of 2022. As a reminder, today's call is being recorded. This afternoon, Ladder releases financial results for the quarter ended September 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 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.

Thank you and good evening, everyone. For the third quarter of 2022, latter generated distributable earnings of $34.3 million, or 27 cents per share. In September, following continued earnings and portfolio growth, we increased our quarterly dividend for the second straight quarter to 23 cents per share, representing a 15% increase to date this year. Our dividend was well covered by distributable earnings. The 9.1% ROE we generated this quarter was driven primarily by strong net interest margin and rental income. As of September 30th, our adjusted leverage ratio was only 1.8 times, and our undepreciated book value increased to $13.63 per share. As an internally managed company with high insider ownership, we run an inherently conservative and simple business that is primarily focused on senior secured assets and exclusively focused on domestic commercial real estate. Management and the board continue to own over 10% of the company, which we believe should give a lot of confidence to our fellow shareholders and partners, perhaps now more than ever. In the third quarter, we originated $159 million of balance sheet loans, 86% of which were either multifamily or manufactured housing, with our multifamily originations focused on newly constructed properties. As of September 30th, our balance sheet loan portfolio had a weighted average loan value of 68%, and the portfolio is primarily comprised of lightly transitional middle market loans with an average loan size of $25 million. We continue to believe that the granularity and diversity of our positions with limited exposure to any single sponsor, market, or asset serves as a credit enhancement to our portfolio. We experienced strong credit performance and loan repayments over the past several quarters. Consequently, 82% of our balance sheet loan portfolio is now comprised of post-COVID loans which were made on a conservatively reset valuation with newly capitalized business plans and ample reserves in place. Our real estate equity portfolio continues to contribute meaningfully to distributable earnings, not only from gains realized on periodic sales of assets at significant premiums to underappreciated book value, but also by generating strong and reliable net rental income that contributed to our distributable earnings every quarter. The portfolio is primarily comprised of necessity-based net lease properties under long-term leases to investment-grade tenants. These properties are financed with long-term, non-recourse, non-mark-to-market debt or held unencumbered. Our securities portfolio ended the quarter with a balance of $611 million and remains principally comprised of short-dated AAA-rated securities. On the asset and liability front, we maintain a strong balance sheet with modest leverage and a high degree of financial flexibility afforded by our differentiated liability structure and large, high-quality, unencumbered asset pool. Approximately 50% of our assets are fully unencumbered, and 75% of these assets are comprised of cash and senior secured first mortgage loans. Equity, unsecured bonds, and non-recourse, non-mark-to-market debt make up 84% of our capital structure. Also, as previously reported in the third quarter, and despite volatile market conditions and tightening credit standards, we successfully extended upside and reduced the cost of our revolving credit facility with our nine bank syndicates. Our facility does not require a dedicated borrowing base, unlike most other revolving credit facilities in our sector, which we believe is a testament to the strength of our corporate credit, conservative reputation, and market-leading credit rating. 100% of our bank group participated in this timely and important facility improvement, which now provides VLADA with $324 million of same-day funding for the next five years at a reduced rate of SOFR plus 250. In conclusion, following our robust pace of originations over the past 18 months, our distributable earnings are now comfortably covering our current quarterly dividends. We also remain positively correlated to rising rates. While all of this enables us to remain highly selective in further incremental capital deployment, Our strong balance sheet and ample liquidity leaves us well positioned to take advantage of the opportunities we expect we'll present as a result of any dislocation in our space. As a reminder, LADA was formed in 2008 at the height of the financial crisis and was built for precisely the type of disrupted financial market conditions we are currently experiencing. With that, I'll turn the call over to Paul.

Thank you, Pamela. As discussed in the third quarter, Ladder generated distributable earnings of $34.3 million, or $0.27 per share. Our three segments continued to perform well during the third quarter. Our $4 billion balance sheet loan portfolio is primarily floating rate and diverse in terms of collateral and geography. And as Pamela discussed, 82% of the portfolio is made up of 2021 and 2022 vintage loans. Our net interest margin continues to rise from increase in rates. which is enhanced by our liability structure, of which over 50% is fixed rate and anchored by $1.6 billion of unsecured corporate bonds, with our nearest maturity in October of 2025. Our unsecured bonds have an overall weighted average maturity of approximately five years and a weighted average coupon of approximately 4.7%. During the third quarter, balance sheet loan origination and funding was $182 million. And as Pamela discussed, we're primarily focused on multifamily and manufactured housing assets. We received loan payoff proceeds of $170 million during the period and an additional $78 million subsequent to quarter end. Our $1 billion real estate portfolio also continues to perform well, providing stable net operating income and includes 157 net lease properties, representing approximately two-thirds of the segments. Our net lease tenants are strong credits, primarily investment-grade rated and committed to long-term leases, with an average remaining lease term of 10 years. During the third quarter, we sold one net lease property, which generated $2 million gain, representing a 27% premium to undepreciated book value. As of September 30th, the carrying value of our securities portfolio was $611 million. The portfolio is 86% AAA rated, 99% investment grade rated, with a weighted average duration of approximately one year. Our assets are complemented by a best-in-class capital structure that remains anchored by a conservative combination of unsecured corporate bonds, non-recourse CLOs, and mortgage debt, with a corporate credit rating one notch from investment grade from two of the three rating agencies. As of September 30th, we had over $750 million of total liquidity, and our adjusted leverage ratio stood at 1.8 times. This liquidity is in addition to the undrawn capacity available to our seven committed loan warehouse facilities, which as of September 30th were only 42% utilized out of 1.3 billion of committed capacity. We were pleased with the upsized cost reduction and extension of our revolving credit facility in July. The facility was extended for five years to July of 2027 and upsized 22% to $324 million. And the interest rate was reduced to SOFR plus 250 basis points with further reductions upon achievement of an investment grade rating. We believe the combination of $750 million of liquidity along with our large pool of unencumbered assets provides Ladder with strong financial flexibility. As of September 30th, our unencumbered asset pool stood at $2.8 billion, 75% of which was comprised of first mortgage loans and cash. During the third quarter, we repurchased $2.6 million of our common stock at a weighted average price of $9.85. And year-to-date, we have repurchased $7.3 million of stock at a weighted average price of $10.09. As previously reported, in the third quarter, our board of directors increased the authorization level of our share buyback program to $50 million. Our underappreciated book value per share was $13.63 at quarter end, based on 126.6 million shares outstanding as of September 30th. Finally, as Pamela discussed in the third quarter, we declared a 23 cent per share dividend, a 5% increase from prior quarter's dividend, which was paid on October 17th. This dividend raise plus the prior quarter's dividend increase represented a 15% increase to our regular quarterly cash dividend so far this year. For more details on our third quarter operating results, please refer to our earnings supplement, which is available on our website, as well as our 10-Q, which we expect to file tomorrow. With that, I will turn the call over to Brian.