Ladder Capital Corp

Good morning, and welcome to Ladder Capital Corp's earnings call for the fourth quarter of 2024. As a reminder, today's call is being recorded. This morning, Ladder released its financial results for the quarter and year-ended December 31, 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. 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 Ladder's President, Pamela McCormack.

Good morning. We are pleased with Ladder's performance in the fourth quarter and full year of 2024. During the fourth quarter, Ladder generated distributable earnings of $33.6 million for 27 cents per share, achieving a return on equity of 8.9%. For the full year, distributable earnings totaled $153.9 million, delivering a 9.9% return on equity while maintaining low leverage, robust liquidity, and stable book value. In 2024, Lattice's conservative business model reinforced its position as a leading middle market-focused commercial real estate finance REIT, supported by the highest credit ratings in the sector. Our disciplined credit underwriting delivered strong results despite the challenging macroeconomic environment. In addition, we believe the proactive steps we took to enhance our capital structure over the course of the year should position Lattice well for potential investment-grade ratings. Our key achievements in 2024 include strong financial performance. In 2024, we delivered strong earnings, attractive net interest margins, healthy loan repayments, and consistent net operating income from our real estate portfolio. Additionally, our credit underwriting expertise and conservative investment approach enabled us to maintain steady book value, setting us apart in the commercial mortgage rate space. Despite a period of rapidly rising interest rates, we successfully navigated the challenges and resumed originating loans by year end as the Fed began lowering interest rates and transaction volumes began to pick up. Enhanced liquidity and credit capacity. As Paul will cover in more detail, we recently extended and upsized our unsecured corporate revolving credit facility from $324 million to $850 million and secured an accordion to further upsize the facility to $1.25 billion. all at a reduced cost. This transaction marks a key milestone in LADA's ongoing efforts to streamline our balance sheet and transition to primarily using unsecured debt to finance our operations. As of December 31, 2024, LADA had $2.2 billion in liquidity, including $1.3 billion, or approximately 27% of total assets, comprised of cash and cash equivalents. Adjusted leverage remained modest at 1.4 times, with 77% of our asset base unencumbered and 65% of Ladder's debt comprised of unsecured corporate bonds. Enhanced credit ratings. In conjunction with a $500 million unsecured bond issuance completed in July of 2024, Ladder received a positive outlook from both Moody's and Fitch, who rate Ladder just one notch below investment rates, while S&P upgraded our credit rating by one notch. These achievements should move us closer to our goal of becoming an investment-grade company, which we expect will strengthen our market position, lower funding costs, and attract a broader base of investors. Loan portfolio overview. As of December 31, 2024, our loan portfolio stood at $1.6 billion, representing 33% of total assets, with a weighted average yield of 9.3%, and minimal future funding commitments of only $35 million. In the fourth quarter, our loan portfolio continued to pay down as we received $575 million in loan payoffs, including the full payoff of 11 loans. For the full year 2024, Ladder received $1.7 billion in proceeds from loan payoffs across 61 loan positions. This represents the highest annual payoffs in Ladder's history, underscoring the strength and consistency of the middle market lending strategy. In Q4, We originated six loans totaling $129 million, primarily focusing on multifamily industrial properties. Since quarter end, our pipeline has continued to build to over $250 million with an ongoing focus on new acquisitions with basis resets, along with select refinancing and recapitalization transactions for new and vintage properties and lease-ups. Our in-house asset management capabilities enabled us to continue to drive value through strategic sales and capital investments. In 2024, we opportunistically divested owned real estate. We sold four multifamily properties acquired through foreclosure, realizing $2.7 million in aggregate gains, including a multifamily property in Texas we sold during the fourth quarter for a $1.3 million gain above our $9.7 million carry value. Consistent carry income from our real estate portfolio. Our $904 million real estate portfolio generated $13.2 million in net rental income during the fourth quarter and $56.3 million for the full year 2024. The portfolio primarily consists of net lease properties with long-term leases to investment grade rated tenants. In addition, we sold five net lease properties generating $2 million in gains to distributable earnings. Growing securities portfolio. During the fourth quarter, we purchased $295 million of AAA-rated securities at a weighted average unlevered yield of 6.2%. By year end, our portfolio totaled $1.1 billion with a weighted average unlevered yield of 6%, primarily comprised of AAA-rated securities. This unlevered portfolio provides LADA with enhanced liquidity and stability without mark-to-market exposure. 2025 outlook. In conclusion, 2024 showcased the strength of Ladder's conservative approach and differentiated capital structure. As transaction volumes rebound, valuation clarity improves, and commercial real estate markets stabilize, we are well positioned to deploy our substantial liquidity prudently. Entering 2025 with optimism, we're prepared to capitalize on opportunities in a recovering market while maintaining our disciplined approach to risk and growth. With that, I'll turn the call over to Paul.

Thank you, Pamela. In the fourth quarter of 2024, Ladder generated 33.6 million of distributable earnings, or 27 cents per share of distributable EPS, achieving a return on average equity of 8.9%. For 2024, distributable earnings sold 153.9 million, or $1.21 per share of distributable EPS, achieving a 9.9% return on average equity. Our 2024 earnings were driven by net interest income on loans, securities, and cash. alongside stable net operating income from our real estate portfolio, delivering a strong return on equity. This performance was achieved while de-levering our balance sheet, maintaining steady book value and dividend coverage, and preserving a significant cash balance, allowing us to adopt an offensive strategy by the fourth quarter of 2024. As of December 31st, 2024, Ladder's balance sheet was comprised of 27% cash and cash equivalents, totaling $1.3 billion. with $2.2 billion of total liquidity. As Pamela discussed, we further fortified Ladder's balance sheet through the upsize of our unsecured revolver to $850 million, an over 2.6 times increase, including a reduced interest rate to SOFR plus 170 basis points, with a further reduction to SOFR plus 125 basis points upon achieving an investment grade credit rating from two rating agencies. We are pleased with this outcome and deeply appreciate the strong support from our 10-bank syndicate. We extend our gratitude to our banking partners. As of December 31st, 2024, our adjusted leverage ratio is 1.4 times with a total gross leverage ratio of 2.0 times. With a trend down in 2024, we levered our balance sheet and amassed a large liquidity position. Overall, in 2024, we paid down over $1.1 billion in secured debt and issued $500 million in unsecured corp funds. due in 2031. As of December 31st, 2024, 65% of our debt was comprised of unsecured corporate bonds with a weighted average remaining maturity of 3.7 years and an attractive weighted average fixed rate coupon of 5.2%. In the fourth quarter of 2024, we repurchased $26 million in principal value of our 2025 bonds, which mature in October, of which $296 million in principal remains outstanding. In 2024, both Moody's and Fitch placed Ladder on positive outlook, and Moody's upgraded and unnotched the rating on our bonds to BA1, aligning our bonds with our corporate credit rating, one notch from investment grade. S&P upgraded our credit rating in 2024 as well. We believe the rating agencies recognize Ladder's long track record as a disciplined and prudent manager of capital, demonstrated since the inception of our business, and specifically since we received our first credit rating over 12 years ago. We believe Ladder's business model is an internally managed company with an unwavering focus on three investment strategies within commercial real estate, coupled with our focus on financing with unsecured debt at modest leverage level, positioned us well for achieving our long-held strategic goal of becoming an investment-grade credit. We continue to believe an investment-grade credit rating will open Ladder up to broader opportunities for growth, along with access to the investment-grade capital markets, with the goal of achieving a more attractive cost of capital enhance return on equity to shareholders over time as pamela discussed our three segments perform well in 2024. our loan portfolio paid down meaningfully in 2024 and closed the year with 1.6 billion dollar with with a 1.6 billion dollar balance with a 9.3 percent yield that is mid-market lending focus and flexible balance sheet helped us achieve a 50 reduction of our loan portfolio through payouts generating meaningful liquidity and allowing for us to pivot to focus on origination in the bridge and conduit lending space. In 2024, Ladder originated $145 million of loans across seven positions, the majority of which was originated in the fourth quarter, where hopeful originations will outpace payoffs in the coming quarters. As of December 31st, 2024, we had two loans totaling $77 million on non-accrual, including the addition of a $16 million loan in the fourth quarter, collateralized by two residential and retail mixed-use properties in New York City. No specific impairments were identified in the fourth quarter, and our general CECL reserve remained at $52 million, unchanged from the prior quarter. We continue to hold this level of reserve given the continued macroeconomic shifts that persist in the global economy. We believe this reserve level is adequate to cover any potential loss in our loan portfolio. As of December 31st, 2024, the carrying value of our securities portfolio is $1.1 billion. In 2024, we rotated capital into AAA securities and more than doubled our holdings as our loan book continued to pay off par. We geared up for new lending opportunities by the fourth quarter. As of December 31st, 2024, 98% of the securities portfolio was investment grade rated, with 91% being AAA rated. The entire portfolio of predominantly AAA securities is unlevered and readily financeable, providing additional source of potential liquidity, complementing the $2.2 billion of same-day liquidity we maintained. Our $904 million real estate segment continues to generate stable net operating income in 2024. The portfolio includes 150 net lease properties, primarily investment credit credits committed to long-term leases with an average remaining lease term of 7.6 years. As Pamela discussed, in 2024, we executed the sale of four multifamily assets previously foreclosed on for sales proceeds of $43.6 million, generating a net gain of $2.7 million for distributable earnings. We sold six net lease properties in 2024 for $57.4 million of proceeds, generating $6.8 million of gains for distributable earnings and $22.3 million of net gain for GAAP, which includes the recapture of previously recorded depreciation and amortization of funds. As of December 31st, 2024, our unencumbered asset pool stood at $3.8 billion, or 77% of total assets. Eighty-one percent of this unencumbered asset pool is comprised of first mortgage loans, securities, and unrestricted cash and cash equivalents. Overall, we believe our significant liquidity position, which includes our recently upsized revolving credit facility, large pool of high-quality unencumbered assets, and best-in-class capital structure, one notch from investment grade, position Ladder with strong financial flexibility and ready access to capital as we focus on deployment within our three segments in 2025. As of December 31st, 2024, Ladder's undepreciated book value per share was $13.88. which is net of the $0.41 per share Cecil General Reserve established. In the fourth quarter of 2024, we repurchased $6 million or 532,000 shares of our common stock at a weighted average price of $11.27 per share. When the year ended, December 31st, 2024, we repurchased $8 million of our common stock or 711,000 shares at a weighted average price of $11.31 per share. As of December 31, 2024, $67.6 million remains outstanding on Ladder's current stock for purchase program. Finally, in 2024, our dividend remained well covered, and in the fourth quarter, Ladder declared a 23 cent per share dividend, which was paid on January 15, 2025. For details on our fourth quarter and full year 2024 operating results, please refer to our earnings supplement, which is available on our website, Ladder's annual report on Form 10-K, which we expect to file in the coming days. With that, I will turn the call over to Brian.