Ladder Capital Corp

Good morning and welcome to Ladder Capital Corp's earnings call for the third quarter of 2024. As a reminder, today's call is being recorded. This morning, Ladder released its financial results for the quarter ended September 30th, 2024. 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. 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 Ladder's President, Pamela McCormack.

Good morning. We're pleased with Ladder's results in the third quarter of 2024. During this period, Ladder generated distributable earnings of $37.7 million, or 30 cents per share, resulting in a return on equity of 9.8%, supported by modest adjusted leverage of 1.6 times. Ladder has maintained a steady book value throughout the broader volatile commercial real estate market, and our balance sheet remains robust. significant liquidity to pursue new investments. As of September 30, 2024, Ladder had $1.9 billion in liquidity with $1.6 billion, or approximately 30% of our balance sheet, comprised of cash and cash equivalents. We successfully closed a $500 million seven-year unsecured corporate bond offering in the third quarter. As of September 30, 57% of our total debt consisted of unsecured corporate bonds and $3.7 billion, or 68% of our total assets were unencumbered. Both Moody's and Fitch rate ladder just one notch below investment grade, and in conjunction with our latest bond offering, S&P upgraded our corporate credit rating by a notch, and both Moody's and Fitch revised letter's outlook to positive. We're optimistic about achieving investment grade status, which we believe will enhance our market position and attract a broader range of investors. Our loan portfolio continues to pay down, and as of quarter end, totaled $2 billion, or 38% of our total assets, with a weighted average yield of 9.33% and limited future funding commitments of $58 million. We've begun transitioning from Q-SIPS to loans, a typical approach at the start of a recovery, while remaining selective in our pursuits. In bridge lending, we're focused on two areas. New acquisitions with basis resets and attractive dollars per square foot for any asset class across the U.S. And second, on refinances or recapitalizations for new and vintage properties and lease-ups. Acquisition activity has increased significantly, and we are actively issuing term sheets and closing loans. While it will take time to gradually close these transactions and enhance earnings in the coming quarters, we are well-capitalized to pursue these new investments and our transition back to making new loans has begun. Additionally, we are quoting five and 10 year CMBS loans and special situation opportunities, including note unknown financing and triple net acquisitions. Given the increased transaction levels, improved clarity around valuation and underwriting, and reduced competition in the middle market, we are optimistic about the investment landscape. In the third quarter, we received $492 million of paydowns in our loan portfolio, representing the second highest quarterly payoff level in the company's history. After quarter end, we received an additional $64 million in loan repayments, and we originated a $24 million first mortgage loan secured by a multifamily property in Phoenix, Arizona. Year to date, we've received $1.1 billion in total loan paydowns, including the full repayment of 50 loans reflecting the credit enhancement and liquidity provided by our middle market lending strategy. In the third quarter, we took title to an office property in Oakland, California with a carrying value of $7.5 million, or $132 per square foot, representing 37% of the basis of our institutional sponsor. Before assuming title to the asset, we wrote off $5 million of the loan balance due to a specific loan impairment. As of September 30th, 2024, Our remaining general CECL reserves stood at $52 million, which we believe is adequate to cover any potential loan losses. We continue to monetize owned real estate. During the third quarter, we sold a multifamily property in Texas with a carrying value of $11.5 million for a $300,000 gain above our basis. In addition, we placed another $9.7 million multifamily property under contract for sale at a price above our basis that is expected to close in the fourth quarter. Turning to our securities and real estate segments, we continued to purchase AAA securities in the third quarter, acquiring $422 million with a weighted average yield of 7.1%. We ended the quarter with an $853 million securities portfolio, primarily consisting of AAA-rated securities, earning an unlevered yield of 6.8%. We further continued to add to this portfolio in the fourth quarter, purchasing an additional $57 million of AAA securities, As of September 30th, the portfolio was entirely unlevered. Our $946 million real estate portfolio generated $14.1 million in net rental income during the third quarter, mainly consisting of net lease properties with long-term leases to investment grade rated tenants. In conclusion, with significant liquidity, a strong balance sheet, conservative leverage, and a revitalized origination team, we believe we are well positioned to capitalize on the opportunities ahead. With that, I'll turn the call over to Paul.

Thank you, Pamela. In the third quarter of 2024, ladder generated $37.7 million of distributable earnings or $0.30 per share of distributable EPS for a return on average equity of 9.8%. Our earnings in the third quarter continue to be driven by net interest income with stable net operating income from our real estate portfolio, generating a strong return on equity while holding a significant cash balance. As of September 30th, 2024, Platter's balance sheet was comprised of 30% cash and cash equivalents, or $1.6 billion, with $1.9 billion of total liquidity, including our $324 million unsecured revolver, which remains fully ungrown. As of September 30th, 2024, our adjusted leverage ratio was 1.6 times, with total gross leverage of 2.3 times, which has trended down over the last 12 months. as we delivered our balance sheet and amassed a large liquidity position. Our loan portfolio totaled $2 billion as a quarter end across 62 balance sheet loans. The portfolio received meaningful paydowns during the quarter, totaling $492 million, and included the collection of deferred interest of $7.5 million upon the payoff of a loan collateralized by a mixed-use property. Separately, distributable earnings in the third quarter included the write-off of an allowance for loan loss of $5 million allocated to a loan on an office property we took title to during the quarter in Oakland, California, with a carrying value of $7.5 million. Additionally, in the third quarter, we increased our CECL reserve by $3 million to a CECL general reserve allowance of $52 million for an approximate 256 basis point reserve on our loan portfolio as of September 30, 2024. The carrying value of our securities portfolio was $853 million at quarter end, with net growth of 77% in the third quarter. 98% of the portfolio was investment-grade rated, with 91% being AAA rated. The entire portfolio of predominantly AAA securities is unencumbered and readily financeable, providing an additional source of potential liquidity, complementing the $1.9 billion of same-day liquidity as of quarter end. Our $946 million real estate segment continues to generate stable net operating income in the third quarter. The portfolio includes 155 net lease properties, over 70% of which are investment-grade rated tenants committed to long-term leases with an average remaining lease term of eight years. As Pamela discussed, Ladder issued $500 million of unsecured corporate bonds that closed in the third quarter. And as of September 30, 2024, 57% of our total debt was comprised of unsecured corporate bonds with a weighted average maturity of approximately four years at an attractive weighted average fixed coupon rate of 5.2%. With the closing of this capital raise, both Moody's and Fitch placed ladder on positive outlook. Moody's upgraded and unnotched the rating on our bonds to BA1, aligning our bonds with our corporate credit rating, one notch from the investment grade. We believe the rating agencies appreciate the prudent capital management Ladder has exhibited during the post-COVID inflationary period. With these actions, Ladder is closer to our long-held goal of achieving an investment-grade credit rating, which we believe will open Ladder up to broader opportunities, along with the access to the investment-grade bond market, with the goal of achieving a more attractive cost of capital and enhanced return on equity to shareholders over time. As of September 30th, our unencumbered asset pool stood at $3.7 billion. or 68% of total assets. 85% of this own-encumbered asset pool is comprised of first mortgage loans, securities, and unrestricted cash and cash equivalents. Overall, we believe our significant liquidity position, large pool of high-quality own-encumbered assets, best-in-class capital structure, one notch of investment grade, provide ladder with strong financial flexibility and meaningful access to capital to allow for focus on deployment of capital within our three segments, based on the best risk-adjusted returns. As of September 30th, 2024, Ladder's undepreciated book value per share was $13.81, which is net of 41 cents per share of CECL General Reserve established. In the third quarter of 2024, we repurchased $1.2 million of our common stock at a weighted average price of $11.91 per share. Year-to-date through September 30th, 2024, We have repurchased $2 million of our common stock at a weighted average price of $11.41 per share. Finally, our dividend remains well covered, and in the third quarter, Lattice declared a $0.23 per share dividend, which was paid on October 15, 2024. For details on our third quarter 2024 operating results, please refer to our earnings supplement, which is available on our website, a Lattice quarterly report on Form 10Q, which we expect to file in the coming days. With that, I will turn the call over to Brian.