Ladder Capital Corp

Good morning and welcome to Ladder Capital Corp's earnings call for the first quarter of 2024. As a reminder, today's call is being recorded. This morning, Ladder released its financial results for the quarter ended March 31st, 2024. 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 Earnings Supplement 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 the ladder's president, Pamela McCormack.

Good morning. We are pleased to provide an overview of ladder's performance for the first quarter of 2024. Ladder generated distributable earnings of $42.3 million, or 33 cents per share, resulting in a 10.8% return on equity. As of March 31st, $1.2 billion, or 23% of our $5.3 billion balance sheet was comprised of cash and cash equivalents. During the first quarter, we increased liquidity over $1.5 billion up from $950 million last year. We reduced adjusted leverage to 1.5 times down from 1.8 times a year ago. We received approximately $400 million of payoffs in our loan and securities portfolio, including the full payoff of 15 balance sheet loans totaling $320 million. These payoffs represent the highest dollar amount of payoffs received since the first quarter of 2022. Following the end of the quarter, another five loans totaling $111 million paid off, bringing the latter's total loan payoffs over the last 12 months to over $1 billion across 48 loans. In February, we celebrated our 10th anniversary as a public company, and we are proud to note that we have not wavered from our commitment to our core objective, striving for the highest possible return on equity while prioritizing principal preservation and employing modest leverage. This disciplined strategy, supported by our diversified capital structure, has supported ladder with stability and flexibility across market fluctuations. At the end of the first quarter, our balance sheet loan portfolio totaled $2.8 billion with a weighted average yield of 9.42% and limited future funding commitments totaling $128 million. Our earnings for the first quarter included a $1.5 million or 3.7% gain from contributing approximately $40 million of fixed rate loans to a recent CMBS securitization and providing ladder with 10-year non-recourse financing on five triple net lease real estate assets. In addition, we have been pivoting back to offense. Our originators are actively quoting new investments and we are pleased to be back in the process of closing new loans under application. Given the historically high returns on equity generated by Ladder's conduit business, we are looking forward to capitalizing on opportunities presented by a steepening or at least uninverted yield curve, which is when this business works best. As forecasted during our fourth quarter earnings call, we successfully concluded foreclosure proceedings on a newly renovated Class A multifamily portfolio in Los Angeles, California. We own the asset, consisting of 28 units at a basis of $14 million or $500,000 per unit. Since assuming ownership in February, we successfully completed all renovations, obtained a certificate of occupancy for the property, and commenced leasing. We expect to lease the property to stabilization by the fall. Also in the first quarter, we placed two multifamily loans totaling $72.8 million on non-accrual. The first is a $60.8 million loan secured by a portfolio of recently constructed apartment buildings in Manhattan, New York. The loan defaulted after the mezzanine lender who made a $13.2 million loan behind our position failed to cure. Our current exposure for this loan stands at approximately $385,000 per unit. The second loan is a $12 million loan collateralized by a 56-unit multifamily portfolio in the San Fernando Valley of California. Our current exposure for this loan stands at approximately $215,000 per unit. A receiver has been appointed as we pursue foreclosure to take title to the assets and complete the business plan for renovations and lease up at the market rent. As Paul will address in more detail, there were no specific impairments identified during the quarter. We modestly increased our general CECL reserve to align with our assessment of current market conditions. We continue to believe that we are adequately reserved for any potential losses. We've often stated in the past that we distinguish between a default and a loss. Ladder's senior management team and board collectively own over 11% of the company, effectively making us Ladder's largest shareholder. In full alignment with our stakeholders, our goal is to protect our investments by promptly addressing defaults and seeking the best long-term value for the company. With robust capitalization and extensive real estate experience, we remain well-positioned to navigate challenges such as market downturns or asset depreciation while executing the necessary business plans to optimize the property's value. Regarding our securities and real estate portfolios, we ended the first quarter with a $467 million securities portfolio, primarily consisting of AAA securities earning an unlevered yield of 6.84%. Our $963 million real estate portfolio is mainly comprised of net lease properties with long-term leases to investment-grade credit and contributed $14.4 million in net rental income in the first quarter. The strength of our balance sheet and stability of our dividend are consistently reflected in our credit ratings from all three rating agencies, with two of the agencies rating Ladder just one notch below investment grade. It is worth noting that Ladder's two longer-dated unsecured bond issuances, which total $1.24 billion and comprise approximately one-third of our total debt outstanding, have an average remaining tenor of four years and a weighted average coupon of 4.5%, a rate that is lower than the entire current U.S. Treasury curve. We remain committed to financing our operations through the corporate unsecured bond market and stand prepared to issue new unsecured bonds when we believe the cost of capital is favorable. In conclusion, armed with ample dry powder, conservative leverage, and a well-covered dividend, we are primed to go on offense as 2024 unfolds. With that, I'll turn the call over to Paul.

Thank you, Pamela. In the first quarter of 2024, Ladder generated 42.3 million of distributable earnings, or 33 cents of distributable EPS, for a return on average equity of 10.8%. Earnings in the first quarter continue to be driven by strong net interest income from our loan and securities portfolios and stable net operating income from our real estate portfolio. Our balance sheet remains strong as the commercial real estate market continues to reset. As Pamela discussed, as of March 31st, 2024, That remains highly liquid with $1.2 billion of cash and cash equivalents, or 23% of our balance sheet, as our cash position continued its increase since year end. In addition, our $324 million unsecured revolver remains fully undrawn. The increase in cash was primarily driven by a healthy rate of loan payoffs in the first quarter, which totaled $357 million. Our loan portfolio totaled $2.8 billion as a quarter end across 100 balance sheet loans, representing 52% of our total assets. We did not record any specific impairments in the first quarter. However, we did increase our CFO reserve by $5.8 million, bringing our general reserve to $49 million, or approximately 175 basis points of our loan portfolio. The increase was driven by the continued uncertainty in the state of the U.S. commercial real estate market and overall global market conditions. Our $963 million real estate segment continues to generate stable net operating income and includes 156 net lease properties, representing approximately 70% of the segment. Our net lease tenants are strong credits, primarily investment-grade rated, and committed to long-term leases with an average remaining lease term of approximately nine years. As we have historically demonstrated, we have a long track record at Ladder of maximizing the value of assets we own and operate. This skill set as a current owner and operator of real estate combined with the strength and flexibility of our balance sheet provide latter a solid foundation from which to successfully manage our own real estate assets. As of March 31st, the carrying value of our securities portfolio was $467 million. 99% of the portfolio was investment grade rated with 84% being AAA rated. And over 76% of the portfolio was unencumbered and readily financeable, finding an additional source of potential liquidity complementing the $1.5 billion of same-day liquidity we had as a quarter end. The latter same-day liquidity simply represents unrestricted cash and cash equivalents of over $1.2 billion, plus our undrawn unsecured corporate revolver capacity of $324 million. As discussed in our prior call, in the first quarter of 2024, we extended our corporate revolver with our nine-bank syndicate to a new five-year term out to 2029. The facility carries an attractive interest rate of sulfur plus 250 basis points on an unsecured basis with potential rate reductions upon achievement of investment grade ratings. We believe this enhancement demonstrates the strength of our capital structure as well as Ladder's longstanding relationship with these financial institutions. As of March 31st, 2024, our adjusted leverage ratio is 1.5 times and has continued to trend down as we've delevered our balance sheet while producing steady earnings, strong dividend coverage, and an attractive double-digit return on equity in the first quarter of 2024. Unsecured corporate bonds remain the foundation of our capital structure, with $1.6 billion outstanding, or 43% of our total debt, a weighted average remaining maturity of nearly four years, and an attractive fixed-rate coupon of 4.7%. In the first quarter of 2024, we repurchased $2 million in principal of our unsecured bonds at 90% of par, generating $0.2 million of gains from the retirement debt. As Pamela discussed, we remain committed to the corporate unsecured bond market as our primary source of financing. We're prepared to issue new unsecured bonds when we believe the cost of capital is favorable. As of March 31st, our unencumbered asset pool stood at $3.0 billion, or 57% of our balance sheet. Eighty-one percent of this unencumbered asset pool is comprised of first mortgage loans, securities, and unrestricted cash and cash equivalents. Our significant liquidity position and large pool of high-quality unencumbered assets continue to provide Ladder with strong financial flexibility. We believe this is reflected in our corporate credit ratings, which are one notch below investment grade from two of three rating agencies. Ladder's underappreciated book value per share was $13.68 as of March 31, 2024, with 127.9 million shares outstanding. In the first quarter of 2024, we repurchased $647,000 of our common stock at a weighted average price of $10.78 per share. Subsequent quarter end in April, Ladder's board of directors approved an increase to Ladder's share buyback authorization to $75 million. Finally, our dividend remains well covered, and in the first quarter, LIDAR declared a 23 cent per share of dividends, which was paid on April 15, 2024. For details on our first quarter 2024 operating results, please refer to our earnings supplement, which is available on our website, and our quarterly report on Form 10-Q, which we expect to file on the coming days. With that, I will turn the call over to Brian.