Ladder Capital Corp

Good morning and welcome to Ladder Capital Corp's earnings call for the second quarter of 2025. As a reminder, today's call is being recorded. This morning, Ladder released its financial results for the quarter ended June 30, 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. During the second quarter, Ladder generated distributable earnings of $30.9 million, or 23 cents per share, generating a return on equity of 7.7%, with modest adjusted leverage of just 1.6 times as of quarter end. The second quarter of 2025 marked a significant milestone for Ladder, as we achieved our longstanding goal of becoming an investment grade rated company, with Moody's and Fitch upgrading Ladder to BAA3, and BBB- respectively. This accomplishment is the culmination of a 13-year journey that began with our inaugural unsecured bond issuance and initial credit rating in 2012. The recent upgrades are a testament to LADA's consistent record of prudent balance sheets and credit risk management, our disciplined approach to leverage, emphasizing unsecured debt, and the strength and flexibility of our diversified business model focused on commercial real estate. In June, we successfully issued our inaugural $500 million five-year investment grade unsecured bond issuance with a fixed rate coupon of 5.5%, representing 167 basis points spread over the benchmark treasury, the tightest new issuance spread achieved in Ladder's history. The offering was met with exceptional demand, with the order book surpassing $3.5 billion shortly after launch and closing at 5.5 times oversubscribed. This strong response underscores investor confidence in our platform and sets a benchmark for future issuance as we aim to become a consistent presence in the investment-grade unsecured bond market. Enhanced liquidity. Pro forma for the offering, 74% of Ladder's debt consisted of unsecured corporate bonds and 83% of our balance sheet assets remain uncovered. As of June 30th, Ladder had a billion dollars in liquidity including our $850 million unsecured revolving credit facility that was fully undrawn. This facility provides same-day liquidity at a highly competitive rate, which was reduced to SOFR plus 125 basis points following our upgrade. Subsequent to quarter end, we also redeemed the remaining $285 million in unsecured bonds maturing in October of 2025. We remain highly liquid, positioning us well to deploy capital into new, higher-yielding investments. Second quarter and third quarter to date investment activity. During the second quarter and through July 23rd, we made over a billion dollars of investments, including acquiring over $600 million in AAA-rated securities at a weighted average unlevered yield of 6.1%. As of June 30th, our securities portfolio totaled $2 billion, representing 44% of total assets, and our loan portfolio totaled $1.6 billion, representing 36% of total assets. Loan origination activity remained relatively flat in the second quarter. We received $191 million in loan payoffs, largely offset by $173 million in new loan originations at a weighted average spread of 400 basis points. Following quarter end through July 23rd, we originated an additional $188 million in new loans, bringing total year-to-date origination activity to $690 million. Additionally, we have another $325 million of new loans currently under application. The majority of our loans originated in pipeline are secured by multifamily properties, reflecting continued demand in this sector. In addition, during the second quarter, we sold a $64 million conduit loan, generating a healthy gain and illustrating that conduit lending remains a complementary part of our diversified model and we are well positioned to participate in when market conditions warrant. We continue to focus on middle market lending, particularly light transitional assets, with an average loan size of $25 to $30 million. The granularity and diversity of our portfolio, reflected in an average investment size across all investment products of less than $15 million, enhances our credit profile by minimizing concentration risk to any specific borrower, geography, asset type, or product across the commercial real estate space. Consistent carry income from our real estate portfolio. Our $936 million real estate portfolio generated $15.1 million in net operating income during the second quarter. The portfolio primarily consists of net lease properties with long-term leases to investment-grade rated tenants and continues to generate stable income. 2025 outlook. Our recent credit rating upgrades and successful bond issuance have already started to reduce our cost of debt capital. We saw spreads tighten on our June bond issuance, and we would anticipate continued tightening as we become more widely recognized in the investment grade bond community. As Brian will allude to shortly, we also anticipate that our equity valuation will begin to reflect this shift. As an investment grade issuer, we believe we should increasingly be compared to a broader set of high quality peers, including equity REITs, rather than solely within the commercial mortgage REIT space. We believe this can help lower our cost of equity capital over time as the market gains a deeper appreciation for our senior secured investment strategy and investment grade capital structure. With over 11% insider ownership, management and the board are highly aligned with all stakeholders. We remain well positioned with strong liquidity and a conservative balance sheet to continue to deploy capital into new opportunities as they arise, with a focus on delivering strong and stable returns to shareholders. With that, I'll turn the call over to Paul.

Thank you, Pamela. In the second quarter of 2025, Ladder generated $30.9 million of distributable earnings, or 23 cents per share of distributable EPS, achieving a return on average equity of 7.7%. As Pamela discussed, the second quarter marked a milestone in NIDRR's history, with our upgrade to investment grade from Moody's and Fitch, followed by our inaugural investment grade-rated bond issuance. The $500 million five-year issuance priced at a coupon of 5.5% in June and settled in July. Subsequent to quarter end, we called the remaining $285 million of our 2025 bonds that were maturing in October. The new bond offering further strengthened our balance sheet, and we are pleased that the bonds have traded well in the secondary markets since their issuance. Proforma for the issuance and redemption of our 2025 maturity in July, $2.2 billion, or 74% of our debt, is comprised of unsecured corporate bonds across four issuances with a weighted average remaining maturity of over four years and an attractive weighted average fixed coupon rate of 5.3%. Our next maturity is now in 2027. As of June 30th, 2025, Ladder's liquidity was $1 billion, comprised of cash and cash equivalents, and our $850 million unsecured revolver, which remains undrawn. As Pamela discussed, cost of the facility automatically reduced by 45 basis points, down to SOFR plus 125 basis points, achieving our investment grade ratings. This reduced cost makes using the facility to finance our operations an attractive option on a fully unsecured basis. In the second quarter, we also called our FL3 CLO as a continue to amortize. Total gross leverage was 1.9 times as of quarter end, below our target range of between two and three times. Overall, Batter's balance sheet remains strong, with room to grow leverage as we deploy our capital. As of June 30, 2025, our unencumbered asset pool stood at $3.7 billion, or 83% of total assets. Eighty-eight percent of this unencumbered asset pool is comprised of first mortgage loans, securities, and unrestricted cash and cash equivalents. As of June 30, 2025, LIDAR's undepreciated book value per share was $13.68, which is net of 41 cents per share of CECL General Reserve established. In the second quarter of 2025, we repurchased $6.6 million of common stock, or 635,000 shares, at a weighted average price of $10.40 per share. As of June 30, 2025, $93.4 million remains outstanding on Ladder's stock repurchase program. In the second quarter, Ladder declared a $0.23 per share dividend, which was paid on July 15, 2025. As Pamela discussed our performance in detail, I will highlight a few additional points regarding the performance of each of our segments in the second quarter. As of June 30th, 2025, our loan portfolio totaled $1.6 billion with a weighted average yield of approximately 9%. As of June 30th, 2025, we have five loans on non-accrual totaling $162.3 million, representing 3.6% of total assets. During the quarter, we added one $50 million loan to not accrual, collateralized by a multifamily asset for which we are pursuing foreclosure. Our CECL reserve was $52 million, or 41 cents per share, as previously mentioned. We believe this reserve level is adequate to cover any potential losses in our loan portfolio, including consideration of the continued macroeconomic shifts ongoing in the global economy. As of June 30th, 2025, the carrying value of our securities portfolio was $2 billion, up 82% from the end of last year, with a weighted average yield of 5.9%, as we further rotated capital out of T-bills and into AAA securities while our loan pipeline continues to close. As of June 30, 2025, 99% of the securities portfolio was investment-grade rated, with 97% being AAA rated. Eighty-one percent of the portfolio of an almost entirely AAA securities is unencumbered and readily financeable, providing additional source of potential liquidity, complementing our $1 billion of same-day liquidity. Our $936 million real estate segment continued to generate stable net operating income in the second quarter of 2025. The portfolio includes 149 net lease properties of primarily investment-grade-rated credits, committed to long-term leases with a weighted average remaining lease term of over seven years. Portfolio now includes an office property in Carmel, Indiana, which we foreclosed on during the quarter at a basis of $112 per square foot. The property is 82% occupied and generates an over 11% return on our equity on an unlevered basis. For further details on our second quarter 2025 operating results, please refer to our earnings supplements which is available on our website, and Lanner's quarterly report on Form 10-Q, which we expect to file in the coming days. With that, I will turn the call over to Brian.