LADR Ladder Capital Corp

Ladder Capital Corp (NYSE: LADR) (“we,” “our,” “Ladder,” or the “Company”) today announced operating results for the quarter ended June 30, 2023. GAAP income before taxes for the three months ended June 30, 2023 was $28.1 million, and diluted earnings per share (“EPS”) was $0.23. Distributable earnings was $41.5 million, or $0.33 of distributable EPS.

“We are pleased to report another strong quarter for Ladder, where we generated a double-digit return on equity and maintained our strong dividend coverage. With over 50% of our assets unencumbered, low leverage, and robust liquidity, we believe we are well-positioned to capitalize on the opportunities we expect to see in our sector in the second half of 2023 and into 2024.” said Brian Harris, Ladder’s Chief Executive Officer.

Supplemental

The Company issued a supplemental presentation detailing its second quarter 2023 operating results, which can be viewed at http://ir.laddercapital.com.

Conference Call and Webcast

We will host a conference call on Wednesday, July 26, 2023 at 4:30 p.m. Eastern Time to discuss second quarter 2023 results. The conference call can be accessed by dialing (877) 407-4018 domestic or (201) 689-8471 international. Individuals who dial in will be asked to identify themselves and their affiliations. For those unable to participate, an audio replay will be available from 8:00 p.m. Eastern Time on Wednesday, July 26, 2023 through midnight on Wednesday, August 9, 2023. To access the replay, please call (844) 512-2921 domestic or (412) 317-6671 international, access code 13739730. The conference call will also be webcast though a link on Ladder Capital Corp’s Investor Relations website at ir.laddercapital.com/event. A web-based archive of the conference call will also be available at the above website.

About Ladder

Ladder Capital Corp is an internally-managed commercial real estate investment trust with $5.6 billion of assets as of June 30, 2023. Our investment objective is to preserve and protect shareholder capital while producing attractive risk-adjusted returns. As one of the nation’s leading commercial real estate capital providers, we specialize in underwriting commercial real estate and offering flexible capital solutions within a sophisticated platform.

Ladder originates and invests in a diverse portfolio of commercial real estate and real estate-related assets, focusing on senior secured assets. Our investment activities include: (i) our primary business of originating senior first mortgage fixed and floating rate loans collateralized by commercial real estate with flexible loan structures; (ii) owning and operating commercial real estate, including net leased commercial properties; and (iii) investing in investment grade securities secured by first mortgage loans on commercial real estate.

Founded in 2008, Ladder is run by a highly experienced management team with extensive expertise in all aspects of the commercial real estate industry, including origination, credit, underwriting, structuring, capital markets and asset management. Members of Ladder’s management and board of directors are highly aligned with the Company’s investors, owning over 10% of the Company’s equity. Ladder is headquartered in New York City with regional offices in Miami, Florida and Santa Monica, California.

Forward-Looking Statements

Certain statements in this release may constitute “forward-looking” statements. These statements are based on management’s current opinions, expectations, beliefs, plans, objectives, assumptions or projections regarding future events or future results. These forward-looking statements are only predictions, not historical fact, and involve certain risks and uncertainties, as well as assumptions. Actual results, levels of activity, performance, achievements and events could differ materially from those stated, anticipated or implied by such forward-looking statements. While Ladder believes that its assumptions are reasonable, it is very difficult to predict the impact of known factors, and, of course, it is impossible to anticipate all factors that could affect actual results on the Company's business. There are a number of risks and uncertainties that could cause actual results to differ materially from forward-looking statements made herein including, most prominently, the risks discussed under the heading “Risk Factors” in each of the Company’s Annual Report on Form 10-K for the year ended December 31, 2022, as well as its consolidated financial statements, related notes, and other financial information appearing therein, and its other filings with the U.S. Securities and Exchange Commission. Such forward-looking statements are made only as of the date of this release. Ladder expressly disclaims any obligation or undertaking to release any updates or revisions to any forward-looking statements contained herein to reflect any change in its expectations with regard thereto or changes in events, conditions, or circumstances on which any such statement is based.

Ladder Capital Corp

Consolidated Balance Sheets

(Dollars in Thousands)

 

 

June 30,

 

December 31,

 

2023(1)

 

2022(1)

 

(Unaudited)

 

 

Assets

 

 

 

Cash and cash equivalents

$

777,078

 

 

$

609,078

 

Restricted cash

 

96,856

 

 

 

50,524

 

Mortgage loan receivables held for investment, net, at amortized cost:

 

 

 

Mortgage loans receivable

 

3,501,235

 

 

 

3,885,746

 

Allowance for credit losses

 

(32,248

)

 

 

(20,755

)

Mortgage loan receivables held for sale

 

26,901

 

 

 

27,391

 

Securities

 

458,224

 

 

 

587,519

 

Real estate and related lease intangibles, net

 

686,701

 

 

 

700,136

 

Investments in and advances to unconsolidated ventures

 

6,553

 

 

 

6,219

 

Derivative instruments

 

1,853

 

 

 

2,038

 

Accrued interest receivable

 

23,646

 

 

 

24,938

 

Other assets

 

81,852

 

 

 

78,339

 

Total assets

$

5,628,651

 

 

$

5,951,173

 

Liabilities and Equity

 

 

 

Liabilities

 

 

 

Debt obligations, net

$

3,958,095

 

 

$

4,245,697

 

Dividends payable

 

31,289

 

 

 

32,000

 

Accrued expenses

 

49,308

 

 

 

68,227

 

Other liabilities

 

58,459

 

 

 

71,688

 

Total liabilities

 

4,097,151

 

 

 

4,417,612

 

Commitments and contingencies

 

—

 

 

 

—

 

Equity

 

 

 

Class A common stock, par value $0.001 per share, 600,000,000 shares authorized; 128,027,478 and 128,027,478 shares issued and 126,931,553 and 126,502,049 shares outstanding

 

127

 

 

 

127

 

Additional paid-in capital

 

1,839,003

 

 

 

1,826,833

 

Treasury stock, 1,095,925 and 1,525,429 shares, at cost

 

(105,738

)

 

 

(95,600

)

Retained earnings (dividends in excess of earnings)

 

(184,769

)

 

 

(177,005

)

Accumulated other comprehensive income (loss)

 

(16,524

)

 

 

(21,009

)

Total shareholders’ equity

 

1,532,099

 

 

 

1,533,346

 

Noncontrolling interests in consolidated ventures

 

(599

)

 

 

215

 

Total equity

 

1,531,500

 

 

 

1,533,561

 

Total liabilities and equity

$

5,628,651

 

 

$

5,951,173

 

(1) Includes amounts relating to consolidated variable interest entities.

Ladder Capital Corp

Consolidated Statements of Income

(Dollars in Thousands, Except Per Share and Dividend Data)

(Unaudited)

 

 

Three Months Ended

 

June 30,

 

March 31,

 

2023

 

2023

Net interest income

 

 

 

Interest income

$

101,829

 

 

$

103,796

 

Interest expense

 

61,342

 

 

 

60,749

 

Net interest income (expense)

 

40,487

 

 

 

43,047

 

Provision for (release of) loan loss reserves, net

 

6,881

 

 

 

4,736

 

Net interest income (expense) after provision for (release of) loan losses

 

33,606

 

 

 

38,311

 

Other income (loss)

 

 

 

Real estate operating income

 

25,887

 

 

 

23,199

 

Net result from mortgage loan receivables held for sale

 

(296

)

 

 

(194

)

Realized gain (loss) on securities

 

8

 

 

 

(307

)

Unrealized gain (loss) on securities

 

(95

)

 

 

117

 

Fee and other income

 

3,327

 

 

 

1,831

 

Net result from derivative transactions

 

4,149

 

 

 

(2,242

)

Earnings from investment in unconsolidated ventures

 

217

 

 

 

217

 

Gain on extinguishment of debt

 

462

 

 

 

9,217

 

Total other income (loss)

 

33,659

 

 

 

31,838

 

Costs and expenses

 

 

 

Compensation and employee benefits

 

14,242

 

 

 

22,084

 

Operating expenses

 

4,987

 

 

 

5,256

 

Real estate operating expenses

 

9,766

 

 

 

9,849

 

Investment related expenses

 

2,661

 

 

 

1,520

 

Depreciation and amortization

 

7,471

 

 

 

7,529

 

Total costs and expenses

 

39,127

 

 

 

46,238

 

Income (loss) before taxes

 

28,138

 

 

 

23,911

 

Income tax expense (benefit)

 

46

 

 

 

1,720

 

Net income (loss)

 

28,092

 

 

 

22,191

 

Net (income) loss attributable to noncontrolling interests in consolidated ventures

 

71

 

 

 

217

 

Net income (loss) attributable to Class A common shareholders

$

28,163

 

 

$

22,408

 

 

 

 

 

Earnings per share:

 

 

 

Basic

$

0.23

 

 

$

0.18

 

Diluted

$

0.23

 

 

$

0.18

 

 

 

 

 

Weighted average shares outstanding:

 

 

 

Basic

 

124,731,195

 

 

 

124,493,132

 

Diluted

 

124,827,596

 

 

 

124,656,102

 

 

 

 

 

Dividends per share of Class A common stock

$

0.23

 

 

$

0.23

 

Non-GAAP Financial Measures

The Company utilizes distributable earnings, distributable EPS, and after-tax distributable return on average equity (“ROAE”), non-GAAP financial measures, as supplemental measures of our operating performance. We believe distributable earnings, distributable EPS and after-tax distributable ROAE assist investors in comparing our operating performance and our ability to pay dividends across reporting periods on a more relevant and consistent basis by excluding from GAAP measures certain non-cash expenses and unrealized results as well as eliminating timing differences related to securitization gains and changes in the values of assets and derivatives. In addition, we use distributable earnings, distributable EPS and after-tax distributable ROAE: (i) to evaluate our earnings from operations because management believes that they may be useful performance measures; and (ii) because our board of directors considers distributable earnings in determining the amount of quarterly dividends.

We define distributable earnings as income before taxes adjusted for: (i) real estate depreciation and amortization; (ii) the impact of derivative gains and losses related to the hedging of assets on our balance sheet as of the end of the specified accounting period; (iii) unrealized gains/(losses) related to our investments in fair value securities and passive interest in unconsolidated ventures; (iv) economic gains on loan sales not recognized under GAAP accounting for which risk has substantially transferred during the period and the exclusion of resultant GAAP recognition of the related economics during the subsequent periods; (v) unrealized provision for loan losses and unrealized real estate impairment; (vi) realized provisions for loan losses and realized real estate impairment; (vii) non-cash stock-based compensation; and (viii) certain transactional items. For the purpose of computing distributable earnings, management recognizes loan and real estate losses as being realized generally in the period in which the asset is sold or the Company determines a decline in value to be non-recoverable and the loss to be nearly certain. Distributable EPS is defined as after-tax distributable earnings divided by the weighted average diluted shares outstanding during the period.

For distributable earnings, we include adjustments for economic gains on loan sales not recognized under GAAP accounting for which risk has substantially transferred during the period and exclude the resultant GAAP recognition of the related economics during the subsequent periods. This adjustment is reflected in distributable earnings when there is a true risk transfer on the mortgage loan transfer and settlement. Historically, this adjustment has represented the impact of economic gains/(discounts) on intercompany loans secured by our own real estate which we had not previously recognized because such gains were eliminated in consolidation. Conversely, if the economic risk was not substantially transferred, no adjustments to net income would be made relating to those transactions for distributable earnings purposes. Management believes recognizing these amounts for distributable earnings purposes in the period of transfer of economic risk is a reasonable supplemental measure of our performance.

We do not designate derivatives as hedges to qualify for hedge accounting and, therefore, any net payments under, or fluctuations in the fair value of, our derivatives are recognized currently in our GAAP income statement. However, fluctuations in the fair value of the related assets are not included in our income statement. We consider the gain or loss on our hedging positions related to assets that we still own as of the reporting date to be “open hedging positions.” While recognized for GAAP purposes, we exclude the results on the hedges from distributable earnings until the related asset is sold and/or the hedge position is considered “closed,” whereupon they would then be included in distributable earnings in that period. These are reflected as “Adjustments for unrecognized derivative results” for purposes of computing distributable earnings for the period. We believe that excluding these specifically identified gains and losses associated with the open hedging positions adjusts for timing differences between when we recognize changes in the fair values of our assets and changes in the fair value of the derivatives used to hedge such assets.

Our investments in Agency interest-only securities and equity securities are recorded at fair value with changes in fair value recorded in current period earnings. We believe that excluding these specifically-identified gains and losses associated with the fair value securities adjusts for timing differences between when we recognize changes in the fair values of our assets. With regard to securities valuation, distributable earnings includes a decline in fair value deemed to be an impairment for GAAP purposes only if the decline is determined to be nearly certain to be eventually realized. In those cases, an impairment is included in distributable earnings for the period in which such determination was made.

Set forth below is an unaudited reconciliation of income (loss) before taxes to distributable earnings, and an unaudited computation of distributable EPS (in thousands, except per share data):

 

Three Months Ended

 

June 30,

 

March 31,

 

2023

 

2023

Income (loss) before taxes

$

28,138

 

 

$

23,911

 

Net (income) loss attributable to noncontrolling interests in consolidated ventures (GAAP)

 

71

 

 

 

217

 

Our share of real estate depreciation, amortization and gain adjustments (1)

 

6,591

 

 

 

6,754

 

Adjustments for derivative results (2)

 

(3,161

)

 

 

2,698

 

Unrealized (gain) loss on fair value securities

 

95

 

 

 

(117

)

Adjustment for economic gain on loan sales not recognized under GAAP for which risk has been substantially transferred, net of reversal/amortization

 

(150

)

 

 

(150

)

Adjustment for impairment (3)

 

6,881

 

 

 

4,736

 

Non-cash stock-based compensation

 

3,046

 

 

 

9,124

 

Distributable earnings

 

41,511

 

 

 

47,173

 

Estimated corporate tax (expense) benefit (4)

 

(246

)

 

 

(174

)

After-tax distributable earnings

$

41,265

 

 

$

46,999

 

Weighted average diluted shares outstanding

 

124,828

 

 

 

124,656

 

Distributable EPS

$

0.33

 

 

$

0.38

 

(1) The following is a reconciliation of GAAP depreciation and amortization to our share of real estate depreciation, amortization and gain adjustments: ($ in thousands):

 

Three Months Ended

 

June 30,

 

March 31,

 

2023

 

2023

Total GAAP depreciation and amortization

$

7,471

 

 

$

7,529

 

Less: Depreciation and amortization related to non-rental property fixed assets

 

(108

)

 

 

(103

)

Less: Non-controlling interests in consolidated ventures’ share of depreciation and amortization and adjustment for passive interest in unconsolidated ventures

 

(319

)

 

 

(218

)

Our share of real estate depreciation and amortization

 

7,044

 

 

 

7,208

 

Realized gain from accumulated depreciation and amortization on real estate sold

 

—

 

 

 

—

 

Less: Non-controlling interests in consolidated ventures’ share of accumulated depreciation and amortization on real estate sold

 

—

 

 

 

—

 

Our share of accumulated depreciation and amortization on real estate sold (a)

 

—

 

 

 

—

 

Less: Our share of operating lease income on above/below market lease intangible amortization

 

(453

)

 

 

(454

)

Our share of real estate depreciation, amortization and gain adjustments

$

6,591

 

 

$

6,754

 

(2) The following is a reconciliation of GAAP net results from derivative transactions to our derivative results presented in the computation of distributable earnings ($ in thousands):

 

Three Months Ended

 

June 30,

 

March 31,

 

2023

 

2023

Net results from derivative transactions

$

(4,149

)

 

$

2,242

Hedging interest income (expense)

 

380

 

 

 

252

Other hedging related activity (a)

 

608

 

 

 

204

Adjustments for derivative results

$

(3,161

)

 

$

2,698

(a) Includes unrealized lower of cost or market adjustments of $0.3 million and $0.2 million for the three months ended June 30, 2023 and March 31, 2023, respectively.

(3) The adjustment reflects the portion of the loan loss provision that management determined to be recoverable. Additional provisions and releases of those provisions are excluded from distributable earnings as a result.

(4) Estimated corporate tax benefit (expense) is based on an effective tax rate applied to distributable earnings generated by the activity within our taxable REIT subsidiaries.

After-tax distributable ROAE is presented on an annualized basis and is defined as after-tax distributable earnings divided by the average total shareholders’ equity during the period. Set forth below is an unaudited computation of after-tax distributable ROAE ($ in thousands):

 

 

Three Months Ended

 

 

June 30,

 

March 31,

 

 

2023

 

2023

After-tax distributable earnings

 

$

41,265

 

 

$

46,999

 

Average shareholders’ equity

 

 

1,530,583

 

 

 

1,531,207

 

After-tax distributable ROAE

 

 

10.8

%

 

 

12.3

%

Non-GAAP Measures - Limitations

Our non-GAAP financial measures have limitations as analytical tools. Some of these limitations are:

• distributable earnings, distributable EPS and after-tax distributable ROAE do not reflect the impact of certain cash charges resulting from matters we consider not to be indicative of our ongoing operations and are not necessarily indicative of cash necessary to fund cash needs;
• distributable EPS and after-tax distributable ROAE are based on a non-GAAP estimate of our effective tax rate, including the impact of Unincorporated Business Tax and the impact of our election to be taxed as a REIT effective January 1, 2015. Our actual tax rate may differ materially from this estimate; and
• other companies in our industry may calculate non-GAAP financial measures differently than we do, limiting their usefulness as comparative measures.

Because of these limitations, our non-GAAP financial measures should not be considered in isolation or as a substitute for net income (loss) attributable to shareholders, earnings per share or book value per share, or any other performance measures calculated in accordance with GAAP. Our non-GAAP financial measures should not be considered an alternative to cash flows from operations as a measure of our liquidity.

In addition, distributable earnings should not be considered to be the equivalent to REIT taxable income calculated to determine the minimum amount of dividends the Company is required to distribute to shareholders to maintain REIT status. In order for the Company to maintain its qualification as a REIT under the Internal Revenue Code, we must annually distribute at least 90% of our REIT taxable income. The Company has declared, and intends to continue declaring, regular quarterly distributions to its shareholders in an amount approximating the REIT’s net taxable income.

In the future, we may incur gains and losses that are the same as or similar to some of the adjustments in this presentation. Our presentation of non-GAAP financial measures should not be construed as an inference that our future results will be unaffected by unusual or non-recurring items.

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Investors

Ladder Capital Corp Investor Relations (917) 369-3207 investor.relations@laddercapital.com