Ladder Capital Corp

Good morning and welcome to Ladder Capital Corp's earnings call for the first quarter of 2025. As a reminder, today's call is being recorded. This morning, Ladder released its financial results for the quarter ended March 31, 2025. 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.

Good morning. During the first quarter, Ladder generated distributable earnings of $25.5 million, or 20 cents per share, for a turn-on equity of 6.6%, with modest adjusted leverage of just 1.4 times. We remain pleased with Ladder's positioning in 2025, following our strong performance in 2024. Over $1.7 billion, or 51% of our balance sheet loans paid off in 2024, marking the highest annual payoff volume in Ladder's history. with nearly $600 million of proceeds from loan payoffs in the fourth quarter alone. While the timing of these payoffs temporarily muted earnings, reinvestment momentum is now building. Getting paid back is the most important part of the mortgage business, and we're excited to redeploy the liquidity generated from loan payoffs into new loans at lower, reset basis that better reflects current market conditions. During the first quarter, we originated $329 million in new loans, and acquired $521 million in AAA securities, bringing our total first quarter investment activity to over $800 million. Our disciplined model has firmly established our position as a leading middle market-focused commercial real estate finance REIT. Over the past several years, we have consistently delivered strong earnings, preserved book value, achieved record loan payoffs, avoided material losses, enhanced and extended our liability structure, and maintain the highest credit ratings in the sector, all amid a challenging macroeconomic backdrop. The strength of our platform was most recently evident through the return on equity ladder generated in 2024, one of the strongest in the sector. As we look ahead for the remainder of 2025, we recognize the continued possibility of market volatility and uncertainty. However, with substantial liquidity, modest leverage, and a robust balance sheet, including one of the lowest cost capital in our space, we're well prepared to navigate these challenges and capitalize on the opportunities they may create. Enhanced liquidity and credit ratings. As of March 31st, 2025, Ladder had $1.3 billion in liquidity, including $480 million, or over 10% of total assets comprised of cash and cash equivalents. 83% of our asset base was unencumbered as of quarter end, and 72% of Ladder's debt was comprised of unsecured corporate bonds. The latter remains on positive outlook from both Moody's and Fitch, with ratings just one notch below investment grade, while S&P upgraded our credit rating by one notch in 2024. The recent expansion and upsizing of our $850 million unsecured corporate revolving credit facility, coupled with our $500 million unsecured bond issuance in 2024, represent meaningful progress in our shift towards unsecured debt as our primary funding source. an important milestone on our path towards potential investment grade ratings. Loan portfolio overview. As of March 31st, 2025, our loan portfolio stood at $1.7 billion, representing 38% of total assets with a weighted average yield of 8.7%. Our future funding commitments remain minimal, totaling just $40 million. During the first quarter, new loan originations outpaced payoffs. we received $181 million in loan payoffs, including the full repayment of nine loans. In contrast, we originated $329 million of new loans consisting of a $64 million fixed rate conduit loan with a coupon of 6.8% and $265 million in balance sheet loans at a weighted average spread of 394 basis points. Notably, 74% of these originations were backed by multifamily or industrial assets. Additionally, our pipeline continues to grow with approximately $250 million in new loans currently under application. Given the robust payoffs achieved in 2024, we expect muted payoffs for the remainder of the year. Asset repositioning and risk management. During the first quarter, we placed two more loans totaling $38.7 million on non-accrual status, a $13.7 million hotel loan, and a $24.9 million office loan. Overall, our non-accrual loan balance represents only 2.6% of our assets. We did not take any impairments this quarter, and our CECL reserve remained at $52 million as of March 31, 2025. We continue to believe this reserve is sufficient to cover any potential losses we may incur, highlighting the strength of our underwriting and asset management, which remain a core driver of our success. Consistent carry income from our real estate portfolio. Our $892 million real estate portfolio generated $12.2 million of net operating income during the first quarter. The portfolio primarily consists of net lease properties with long-term leases to investment-grade rated tenants. In addition, we sold one net lease property, generating a $900,000 gain in distributable earnings during the quarter. Growing securities portfolio. During the first quarter, we acquired an additional $521 million in AAA-rated securities at a weighted average unlevered yield of 5.79%. As of March 31st, our portfolio totaled $1.5 billion, with a weighted average unlevered yield of 5.67%, primarily comprised of AAA-rated securities. As Brian will cover in more detail, we continue to invest in securities during the second quarter as spreads widened, ensuring stable earnings and enhanced liquidity for ladder, with the entire portfolio remaining unlevered. 2025 outlook. Ladder's business plan continues to prove effective amid a highly dynamic environment shaped by persistent interest rate volatility and geopolitical uncertainty, including the reemergence of tariffs. These trade tensions have contributed to uncertainty and impacted commercial real estate demand, especially in sectors tied to global supply chains. While this volatility may dampen price discovery and deal execution, it should also present attractive opportunities for well-capitalized platforms like Ladder. Our discipline, balance sheet strength, and real-time market intelligence gathered from our multi-cylinder business model are crucial in enabling us to proactively navigate market fluctuations and capitalize on opportunities with the best risk-adjusted returns when others may be constrained. In conclusion, we remain highly liquid and very well situated to act with certainty and speed to deploy capital into new investments that can drive earnings growth and deliver long-term value to our shareholders. With that, I'll turn the call over to Paul.

Thank you, Pamela. In the first quarter of 2025, Ladder generated $25.5 million of distributable earnings, or $0.20 per share of distributable EPS, achieving a return on average equity of 6.6%, as our balance sheet remained flush with liquidity and low leverage after ending 2024 with record payoffs. As of March 31, 2025, Ladder's balance sheet remained strong. It was primarily comprised of cash and a liquid AAA securities portfolio with room to grow leverage as we deploy our capital. As of March 31, 2025, Ladder's liquidity was $1.3 billion, comprised of cash and cash equivalents that are newly upsized and extended $850 million on secured revolver, which remains undrawn. Total growth leverage was 1.83 times as of quarter end, as we continue to delever, far from our target range of between two and three times leverage. As of March 31, 2025, 72% of our debt was comprised of unsecured corporate bonds with a weighted average remaining maturity of 3.5 years, an attractive weighted average fixed rate coupon of 5.2%. In the first quarter, we repurchased $20 million in principal value of our unsecured bonds, including $8 million of our 2025 bonds returning this October, which now have $288 million in principal that remains outstanding. In the first quarter, we called our FL2 CLO as it continued to advertise. In total, in the first quarter, we repaid $323 million of secured CLO debt. As Pamela noted, Ladder remains on positive outlook, one notch from an investment grade credit rating with two rating agencies. Ladder is currently running a balance sheet within many of the investment grade metrics of the rating agencies. Given our long track record as disciplined and prudent manager of capital, we are hopeful we will become an investment-rated company in the near term. As of March 31st, 2025, our unencumbered asset pool stood at $3.7 billion, or 83% of total assets. 85% of this unencumbered asset pool is comprised of first mortgage loans, securities, and unrestricted cash and cash equivalents. As of March 31st, 2025, Ladder's undepreciated book value per share was $13.66, which is net of 41 cents per share of Cecil General Reserve established. In the first quarter of 2025, we repurchased 71,000 shares of our common stock at a weighted average price of $11.42 per share. And as of March 31st, 2025, $66.8 million remains outstanding on Ladder's stock repurchase program. Subsequent quarter ends in April, Ladder's board of directors approved an increase to Ladder's share buyback authorization to $100 million. In the first quarter, Ladder declared a $0.23 per share dividend, which was paid on April 15, 2025. As we continue to deploy the liquidity we've amassed through successful payoffs in 2024 and begin to prudently add leverage to our delevered balance sheet, we are hopeful we return to consistent dividend coverage in the coming quarters. As Pamela discussed our performance in detail, I will highlight a few additional points regarding the performance of each of our segments from the first quarter. As of March 31st, 2025, our non-accrual loan balance was $116 million across four loans, and our CECL reserve was $52 million, or 41 cents per share, as I previously mentioned. We believe this reserve level is adequate to cover any potential loss in our loan portfolio, including consideration of the continued macroeconomic shifts ongoing in the global economy. As of March 31st, 2025, the carrying value of our securities portfolio is $1.5 billion, up 37% from year end. with a weighted average yield of 5.67% as we continue to rotate capital out of P-bills and into AAA securities while we allow for a loan pipeline to build. As of March 31st, 2025, 99% of the securities portfolio was investment grade rated, with 96% being AAA rated. As mentioned, the entire portfolio of predominantly AAA securities is unencumbered and readily financeable, providing an additional source of potential liquidity complementing the $1.3 billion of same-day liquidity we maintain. Our $892 million real estate segment continued to generate stable net operating income in the first quarter of 2025. The portfolio includes 149 net lease properties, primarily investment-grade credits, committed to long-term leases with a weighted average rating lease term of 7.5 years. In the first quarter, we sold one net lease property for $13 million of proceeds, generating a $0.9 million gain, for distributable earnings and a $3.8 billion gain for GAAP, which includes the recapture of previously recorded depreciation and amortization expense. In conclusion, looking back over the five years since the onset of COVID-19 in March of 2020, Ladder has maintained a remarkably steady book equity of approximately $1.5 billion. We believe this is a testament to our long-held focus of principal preservation first and return on equity second, with a consistent strategy of financing our three core businesses, primarily with unsecured debt and modest leverage. For further details on our first quarter 2025 operating results, please refer to our earnings supplement, which is available on our website, and the latter's quarterly report on Form 10-Q, which we expect to file in the coming days. With that, I'll turn it over to Brian.