Ladder Capital Corp

Good afternoon and welcome to Ladder Capital Corp's earnings call for the first quarter of 2023. As a reminder, today's call is being recorded. This afternoon, Ladder released its financial results for the quarter ended March 31st, 2023. 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. We also refer you to our Form 10-K and Earnings Supplement presentation for definitions of certain metrics which we may cite on today's call. At this time, I'd like to turn the call over to Ladder's President, Pamela McCormack.

Thank you, and good afternoon, everyone. We are pleased to report for the first quarter of 2023, Ladder generated distributable earnings of $47.2 million or 38 cents per share, reflecting an after tax return on equity of 12.3%. Our dividend remains well covered from net interest margin and net rental income. As of March 31st, Ladder had over $600 million or more than 10% of our assets in cash and cash equivalents. With $950 million of same day liquidity including our unsecured revolver. The latter remains modestly leveraged with an adjusted leverage ratio of 1.8 times and 1.1 times net of cash and securities at quarter end. Subsequent to quarter end, we furthered the leverage to the company by paying down loan and securities repo by $87 million, both bringing our adjusted leverage ratio down to 1.7 times and reducing our interest expense by approximately $1.2 million per quarter. In the first quarter, we originated a $15 million multifamily balance sheet loan and funded $19 million on existing commitments. In addition, we've continued to see liquidity for our existing loans. Repayments in the first quarter and through April totaled over $147 million with $72 million of repayments on office loans, including the full payoff of five office loans. As of March 31st, Ladder's balance sheet loan portfolio totaled $3.8 billion with a weighted average coupon of 8.72%. In addition to strong liquidity, we have modest future funding commitments of $290 million, and more than half of this commitment is contingent upon a creative good news leasing. We are well positioned to transact when activity resumes in the market. In the meantime, we've been keenly focused on asset management, and our significant insider ownership and latter helps ensure our full alignment with shareholders in proactively managing any potential risk on our balance sheet. We're currently seeing stable performance in our loan portfolio, including for our office loans, which currently comprise 24% of the portfolio. Notably, 76% of our office loans were originated post-COVID, and 56% are located in the Sun Belt. While we'll continue to monitor the pressures on real estate valuations, We did not have a need to take any specific impairments in the quarter. And as Paul will discuss, the increase in the general portion of our CECL reserve reflects our view of macro market conditions. Our focus on dollars per foot or basis lending in the middle market continues to allow us to both demonstrate a meaningful distinction between a default and a loss on a given loan, and further distinguish latter with sustained credit performance. Turning to our other business segments, Our real estate portfolio continues to contribute to distributable earnings by generating $13 million of net rental income in the quarter, and our securities portfolio ended the quarter with a balance of $520 million. In furtherance of our goal of becoming an investment-grade company, we have maintained a modest use of leverage coupled with a thoughtful composition of unsecured and non-recourse, non-mark-to-market debt, anchored by $1.6 billion of long-term unsecured bonds. Our nearest bond maturity is not until October of 2025. During the quarter, we repurchased $59 million of our outstanding bonds at a discount, resulting in a $9.2 million gain and highlighting the dynamic nature of our business model. In conclusion, we like our positioning. Our dividend is well covered from a primarily senior secured asset base that is demonstrating stable credit performance. and we delivered an ROE in excess of 12% with modest leverage and robust liquidity. With that, I'll turn the call over to Paul.

Thank you, Pamela. In the first quarter, Ladder's diverse business model performed well, generating distributable earnings of $47.2 million or $0.38 per share. Our net interest margin continued to increase and benefited from rising rates and a liability structure of which approximately 50% is fixed rate. Our $3.8 billion balance sheet loan portfolio is primarily floating rate and diverse in terms of collateral and geography. The portfolio decreased 97 million in the first quarter due to 131 million of proceeds received from loan paydowns, offset by 34 million from the origination of one loan, and funding on existing commitments. In the first quarter, we increased our CECL reserve by 25% to 25.5 million, driven by the current market outlook. Overall, we continue to believe the credit of our loan portfolio benefits from granularity, with an average loan size of $25 million, and vintage, with over 84% of the portfolio originated post-COVID, with limited exposure to any single sponsor or market. Our $900 million real estate segment also continues to provide stable net operating income to our earnings. The portfolio includes 156 net lease properties with strong investment-grade tenants that have long-term leases, representing 73% of the segment. As of March 31st, The carrying value of our securities portfolio was $520 million and was comprised of 84% AAA rated securities and 99.5% investment grade rated securities. In the first quarter, we received $60 million of pay downs on these positions as their seniority and short dated maturity continues to demonstrate steady amortization. As of March 31st, we had $950 million of same day liquidity and our adjusted leverage ratio was 1.8 times. This liquidity represents cash and cash equivalents plus our undrawn corporate revolver capacity of $324 million with a maturity in 2027. Unsecured corporate bonds anchor our capital structure with $1.6 billion outstanding or 38% of our debt. The weighted average maturity of these unsecured bonds is 4.5 years and they maintain an attractive fixed rate cost of capital at 4.7% average coupon. As Pamela discussed in the first quarter, we repurchased $58.7 million in principle of unsecured bonds at 83.6% of par. The retirement of such debt at a discount generated $9.2 million of gains. As of March 31st, our unencumbered asset pool stood at $2.9 billion, or over 50% of our balance sheet. 74% of this unencumbered asset pool was comprised of first mortgage loans and cash and cash equivalents. We believe our liquidity position and large pool of high-quality unencumbered assets continues to provide ladder with strong financial flexibility and is reflected in our corporate credit rating that is one notch from investment grades in two of three rating agencies. During the first quarter, we repurchased $2.3 million of our common stock at a weighted average price of $9.14. Our share buyback program authorization of $50 million has $44 million of remaining capacity as of March 31st, 2023. Our underappreciated book value per share was $13.64 at quarter end based on 126.9 million shares outstanding as of March 31st. Finally, our dividend remains well covered. And in the first quarter, Ladder declared a 23 cent per share dividend, which was paid on April 17th, 2023. 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. With that, I will turn the call over to Brian.