INVESTOR RELATIONS

Press Release

Ladder Capital Corp Reports Results for the Quarter Ended June 30, 2019

Company Release - 7/31/2019 4:15 PM ET

NEW YORK--(BUSINESS WIRE)-- Ladder Capital Corp (NYSE:LADR) (“we,” “Ladder,” or the “Company”) today announced operating results for the quarter ended June 30, 2019. GAAP income before taxes for the three months ended June 30, 2019 was $38.3 million, and diluted earnings per share was $0.30. Core earnings was $51.0 million, or $0.43 of core EPS. After tax GAAP return on average equity was 8.9% and after-tax core return on average equity was 12.5%.

“Ladder reported another strong quarter, comfortably covering our dividend for the 18th straight period. Our results validate the strength of our multi-cylinder business model, which continues to deliver double-digit returns on equity while providing us with the flexibility to seek the best risk-adjusted opportunities for shareholders,” said Brian Harris, Ladder’s Chief Executive Officer.

Supplemental

The Company issued a supplemental presentation detailing its second quarter 2019 operating results, which can be viewed at http://ir.laddercapital.com/.

Conference Call and Webcast

We will host a conference call on Wednesday, July 31, 2019 at 5:00 p.m. Eastern Time to discuss second quarter 2019 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 31, 2019 through midnight Wednesday, August 14, 2019. To access the replay, please call (844) 512-2921 domestic or (412) 317-6671 international, access code 13692499. 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 over $6 billion of assets. 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) investing in investment grade securities secured by first mortgage loans on commercial real estate; and (iii) owning and operating commercial real estate, including net leased commercial properties.

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. Led by Brian Harris, the Company’s Chief Executive Officer, Ladder is headquartered in New York City with regional offices in California and Florida.

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. 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 the Company’s Annual Report on Form 10-K for the year ended December 31, 2018, 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, 2019(1)

 

December 31, 2018(1)

 

(Unaudited)

 

 

Assets

 

 

 

Cash and cash equivalents

$

126,529

 

 

$

67,878

 

Restricted cash

88,904

 

 

30,572

 

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

 

 

 

Mortgage loans held by consolidated subsidiaries

3,119,857

 

 

3,318,390

 

Provision for loan losses

(18,500

)

 

(17,900

)

Mortgage loan receivables held for sale

111,977

 

 

182,439

 

Real estate securities

1,788,415

 

 

1,410,126

 

Real estate and related lease intangibles, net

984,377

 

 

998,022

 

Investments in and advances to unconsolidated joint ventures

57,751

 

 

40,354

 

FHLB stock

61,619

 

 

57,915

 

Derivative instruments

536

 

 

 

Due from brokers

5

 

 

 

Accrued interest receivable

24,269

 

 

27,214

 

Other assets

61,036

 

 

157,862

 

Total assets

$

6,406,775

 

 

$

6,272,872

 

Liabilities and Equity

 

 

 

Liabilities

 

 

 

Debt obligations, net

$

4,613,088

 

 

$

4,452,574

 

Due to brokers

25,500

 

 

1,301

 

Derivative instruments

 

 

975

 

Amount payable pursuant to tax receivable agreement

1,559

 

 

1,570

 

Dividends payable

1,860

 

 

37,316

 

Accrued expenses

55,453

 

 

82,425

 

Other liabilities

61,241

 

 

53,076

 

Total liabilities

4,758,701

 

 

4,629,237

 

Commitments and contingencies

 

 

 

Equity

 

 

 

Class A common stock, par value $0.001 per share, 600,000,000 shares authorized;
110,693,832 and 106,642,335 shares issued and 107,550,933 and 103,941,173 shares outstanding

108

 

 

105

 

Class B common stock, par value $0.001 per share, 100,000,000 shares authorized;
12,158,933 and 13,117,419 shares issued and outstanding

12

 

 

13

 

Additional paid-in capital

1,526,469

 

 

1,471,157

 

Treasury stock, 3,142,899 and 2,701,162 shares, at cost

(41,535

)

 

(32,815

)

Retained earnings (dividends in excess of earnings)

(30,847

)

 

11,342

 

Accumulated other comprehensive income (loss)

12,171

 

 

(4,649

)

Total shareholders’ equity

1,466,378

 

 

1,445,153

 

Noncontrolling interest in operating partnership

172,466

 

 

188,427

 

Noncontrolling interest in consolidated joint ventures

9,230

 

 

10,055

 

Total equity

1,648,074

 

 

1,643,635

 

 

 

 

 

Total liabilities and equity

$

6,406,775

 

 

$

6,272,872

 

(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,

 

Six Months Ended June 30,

 

2019

 

2018

 

2019

 

2018

 

 

 

 

 

 

 

 

Net interest income

 

 

 

 

 

 

 

Interest income

$

85,322

 

 

$

85,230

 

 

$

171,789

 

 

$

163,437

 

Interest expense

52,369

 

 

48,417

 

 

103,618

 

 

93,130

 

Net interest income

32,953

 

 

36,813

 

 

68,171

 

 

70,307

 

Provision for loan losses

300

 

 

300

 

 

600

 

 

3,300

 

Net interest income after provision for loan losses

32,653

 

 

36,513

 

 

67,571

 

 

67,007

 

 

 

 

 

 

 

 

 

Other income (loss)

 

 

 

 

 

 

 

Operating lease income

27,780

 

 

26,171

 

 

56,701

 

 

54,310

 

Sale of loans, net

20,264

 

 

6,144

 

 

27,342

 

 

11,032

 

Realized gain (loss) on securities

4,464

 

 

(1,243

)

 

7,329

 

 

(2,342

)

Unrealized gain (loss) on equity securities

(990

)

 

 

 

1,088

 

 

 

Unrealized gain (loss) on Agency interest-only securities

11

 

 

110

 

 

22

 

 

313

 

Realized gain (loss) on sale of real estate, net

(1,124

)

 

1,628

 

 

(1,119

)

 

32,637

 

Impairment of real estate

 

 

 

 

(1,350

)

 

 

Fee and other income

7,196

 

 

6,477

 

 

11,882

 

 

12,728

 

Net result from derivative transactions

(15,457

)

 

7,081

 

 

(26,491

)

 

22,040

 

Earnings (loss) from investment in unconsolidated joint ventures

1,564

 

 

13

 

 

2,522

 

 

65

 

Gain (loss) on extinguishment/defeasance of debt

 

 

 

 

(1,070

)

 

(69

)

Total other income (loss)

43,708

 

 

46,381

 

 

76,856

 

 

130,714

 

Costs and expenses

 

 

 

 

 

 

 

Salaries and employee benefits

14,907

 

 

13,866

 

 

38,481

 

 

30,962

 

Operating expenses

6,012

 

 

5,597

 

 

11,413

 

 

11,144

 

Real estate operating expenses

6,032

 

 

7,836

 

 

11,506

 

 

16,654

 

Fee expense

1,183

 

 

799

 

 

2,895

 

 

1,641

 

Depreciation and amortization

9,935

 

 

10,656

 

 

20,162

 

 

21,479

 

Total costs and expenses

38,069

 

 

38,754

 

 

84,457

 

 

81,880

 

Income (loss) before taxes

38,292

 

 

44,140

 

 

59,970

 

 

115,841

 

Income tax expense (benefit)

2,219

 

 

573

 

 

(634

)

 

4,476

 

Net income (loss)

36,073

 

 

43,567

 

 

60,604

 

 

111,365

 

Net (income) loss attributable to noncontrolling interest in consolidated joint ventures

307

 

 

133

 

 

754

 

 

(8,289

)

Net (income) loss attributable to noncontrolling interest in operating partnership

(4,136

)

 

(5,294

)

 

(6,939

)

 

(13,795

)

Net income (loss) attributable to Class A common shareholders

$

32,244

 

 

$

38,406

 

 

$

54,419

 

 

$

89,281

 

 

 

 

 

 

 

 

 

Earnings per share:

 

 

 

 

 

 

 

Basic

$

0.31

 

 

$

0.40

 

 

$

0.52

 

 

$

0.93

 

Diluted

$

0.30

 

 

$

0.40

 

 

$

0.51

 

 

$

0.93

 

 

 

 

 

 

 

 

 

Weighted average shares outstanding:

 

 

 

 

 

 

 

Basic

105,511,385

 

 

96,810,266

 

 

104,888,925

 

 

96,003,151

 

Diluted

105,892,420

 

 

97,165,899

 

 

105,742,589

 

 

96,276,824

 

 

 

 

 

 

 

 

 

Dividends per share of Class A common stock

$

0.340

 

 

$

0.325

 

 

$

0.680

 

 

$

0.640

 

 

Non-GAAP Financial Measures

We present core earnings, core EPS, and after-tax core return on average equity (“after-tax core ROAE”), which are non-GAAP financial measures, as supplemental measures of our performance. We believe core earnings, core EPS and after-tax core ROAE assist investors in comparing our performance across reporting periods on a more relevant and consistent basis by excluding certain non-cash expenses and unrecognized results as well as eliminating timing differences related to securitization gains and changes in the values of assets and derivatives. We use core earnings, core EPS and after-tax core ROAE: (i) to evaluate our earnings from operations and (ii) because management believes that they may be useful performance measures for us. In addition, core earnings is used as a factor in determining the annual incentive compensation of our senior managers and other employees.

We define core 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 joint ventures, (iv) economic gains on securitization transactions 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) non-cash stock-based compensation and (vi) certain transactional items.

Core EPS is defined as after-tax core earnings divided by the adjusted weighted average diluted shares outstanding during the period. The adjusted weighted average diluted shares outstanding is defined as the GAAP weighted average diluted shares outstanding, adjusted for shares issuable upon conversion of all Class B shares, if excluded from the GAAP measure because they would have an anti-dilutive effect. The inclusion of shares issuable upon conversion of Class B shares is consistent with the inclusion of income attributable to noncontrolling interest in operating partnership in core earnings and after-tax core earnings.

Set forth below is an unaudited reconciliation of net income to after-tax core earnings, and an unaudited computation of core EPS (in thousands, except per share data):

Three Months Ended June 30,

 

Six Months Ended June 30,

 

2019

 

2018

 

2019

 

2018

 

 

Net income (loss)

$

36,073

 

 

$

43,567

 

 

$

60,604

 

 

$

111,365

 

Income tax expense (benefit)

2,219

 

 

573

 

 

(634

)

 

4,476

 

Income (loss) before taxes

38,292

 

 

44,140

 

 

59,970

 

 

115,841

 

Net (income) loss attributable to noncontrolling interest in

consolidated joint ventures and operating partnership (GAAP)(1)

299

 

 

126

 

 

738

 

 

(8,305

)

Our share of real estate depreciation, amortization and gain adjustments(2)(3)

6,590

 

 

8,777

 

 

12,257

 

 

14,835

 

Adjustments for unrecognized derivative results(4)

2,187

 

 

(4,596

)

 

11,302

 

 

(12,706

)

Unrealized (gain) loss on fair value securities

861

 

 

(110

)

 

(1,227

)

 

(313

)

Adjustment for economic gain on securitization transactions not recognized

under GAAP for which risk has been substantially transferred, net of reversal/amortization

(645

)

 

(246

)

 

(648

)

 

(538

)

Non-cash stock-based compensation

3,371

 

 

2,341

 

 

15,465

 

 

5,424

 

Core earnings

50,955

 

 

50,432

 

 

97,857

 

 

114,238

 

Core estimated corporate tax benefit (expense)(5)

22

 

 

(645

)

 

316

 

 

(4,097

)

After-tax core earnings

$

50,977

 

 

$

49,787

 

 

$

98,173

 

 

$

110,141

 

Adjusted weighted average diluted shares outstanding(6)

118,565

 

 

110,483

 

 

118,678

 

 

110,382

 

Core EPS

$

0.43

 

 

$

0.45

 

 

$

0.83

 

 

$

1.00

 

(1) Includes $8 thousand and $7 thousand of net income attributable to noncontrolling interest in consolidated joint ventures which are included in net (income) loss attributable to noncontrolling interest in operating partnership on the consolidated statements of income for the three months ended June 30, 2019 and 2018, respectively. Includes $16 thousand of net income attributable to noncontrolling interest in consolidated joint ventures which are included in net (income) loss attributable to noncontrolling interest in operating partnership on the consolidated statements of income for the six months ended June 30, 2019 and 2018.

(2) The following is a reconciliation of GAAP depreciation and amortization to our share of real estate depreciation, amortization and gain adjustments presented in the computation of core earnings in the preceding table ($ in thousands):

 

 

Three Months Ended June 30,

 

Six Months Ended June 30,

 

 

2019

 

2018

 

2019

 

2018

 

 

 

 

Total GAAP depreciation and amortization

$

9,935

 

 

$

10,656

 

 

$

20,162

 

 

$

21,479

 

 

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

(25

)

 

(19

)

 

(49

)

 

(37

)

 

Less: Non-controlling interest in consolidated joint ventures’ share of accumulated depreciation

and amortization and unrecognized passive interest in unconsolidated joint ventures

(1,070

)

 

(1,012

)

 

(1,976

)

 

(1,371

)

 

Our share of real estate depreciation and amortization

8,840

 

 

9,625

 

 

18,137

 

 

20,071

 

 

 

 

 

 

 

 

 

 

 

Realized gain from accumulated depreciation and amortization on real estate sold (see below)

(1,935

)

 

(292

)

 

(5,421

)

 

(5,486

)

 

Less: Non-controlling interest in consolidated joint ventures’ share of

accumulated depreciation and amortization on real estate sold

42

 

 

2

 

 

42

 

 

1,190

 

 

Our share of accumulated depreciation and amortization on real estate sold

(1,893

)

 

(290

)

 

(5,379

)

 

(4,296

)

 

 

 

 

 

 

 

 

 

 

Less: Operating lease income on above/below market lease intangible amortization

(357

)

 

(558

)

 

(501

)

 

(940

)

 

 

 

 

 

 

 

 

 

 

Our share of real estate depreciation, amortization and gain adjustments

$

6,590

 

 

$

8,777

 

 

$

12,257

 

 

$

14,835

 

GAAP gains/losses on sales of real estate include the effects of previously recognized real estate depreciation and amortization. For purposes of core earnings, our share of real estate depreciation and amortization is eliminated and, accordingly, the resultant gains/losses also must be adjusted. Following is a reconciliation of the related consolidated GAAP amounts to the amounts reflected in core earnings ($ in thousands):

 

 

Three Months Ended June 30,

 

Six Months Ended June 30,

 

 

2019

 

2018

 

2019

 

2018

 

 

 

 

GAAP realized gain (loss) on sale of real estate, net

$

(1,124

)

 

$

1,628

 

 

$

(1,119

)

 

$

32,637

 

 

Adjusted gain/loss on sale of real estate for

purposes of core earnings

3,017

 

 

(1,338

)

 

6,498

 

 

(28,341

)

 

Our share of accumulated depreciation
and amortization on real estate sold

$

1,893

 

 

$

290

 

 

$

5,379

 

 

$

4,296

 

(3) During the three months ended March 31, 2019 we recognized $5.7 million of operating lease income from prepayment of a lease, a $1.1 million loss on extinguishment of debt and a $1.4 million impairment of real estate related to a single-tenant two-story office building in Wayne, NJ. This property was sold on May 1, 2019. For core earnings, we recognize the net impact of these events in the period the sale was realized. Accordingly, the $3.3 million net impact of the income and losses discussed above have been excluded from core earnings for the three months ended March 31, 2019 and have been included in core earnings for the three and six months ended June 30, 2019.

(4) The following is a reconciliation of GAAP net results from derivative transactions to our unrecognized derivative result presented in the computation of core earnings in the preceding table ($ in thousands):

 

 

Three Months Ended June 30,

 

Six Months Ended June 30,

 

 

2019

 

2018

 

2019

 

2018

 

 

 

 

Net results from derivative transactions

$

(15,457

)

 

$

7,081

 

 

$

(26,491

)

 

$

22,040

 

 

Hedging interest expense

1,640

 

 

1,535

 

 

1,491

 

 

4,424

 

 

Hedging realized result

11,630

 

 

(4,020

)

 

13,698

 

 

(13,758

)

 

Adjustments for unrecognized derivative results

$

(2,187

)

 

$

4,596

 

 

$

(11,302

)

 

$

12,706

 

(5) Core estimated corporate tax benefit (expense) based on effective tax rate applied to core earnings generated by the activity within our taxable REIT subsidiary.

(6) Set forth below is an unaudited reconciliation of weighted average diluted shares outstanding to adjusted weighted average diluted shares outstanding (in thousands):

 

 

Three Months Ended June 30,

 

Six Months Ended June 30,

 

 

2019

 

2018

 

2019

 

2018

 

 

 

 

Weighted average diluted shares outstanding

105,892

 

 

97,166

 

 

105,743

 

 

96,277

 

 

Weighted average shares issuable to converted Class B shareholders

12,673

 

 

13,317

 

 

12,935

 

 

14,105

 

 

Adjusted weighted average diluted shares outstanding

118,565

 

 

110,483

 

 

118,678

 

 

110,382

 

After-tax core ROAE is presented on an annualized basis and is defined as after-tax core earnings divided by the average total shareholders’ equity and noncontrolling interest in operating partnership during the period. The inclusion of noncontrolling interest in operating partnership is consistent with the inclusion of income attributable to noncontrolling interest in operating partnership in after-tax core earnings. Set forth below is an unaudited computation of after-tax core ROAE ($ in thousands):

 

Three Months Ended June 30,

 

Six Months Ended June 30,

 

2019

 

2018

 

2019

 

2018

 

 

After-tax core earnings

$

50,977

 

 

$

49,787

 

 

$

98,173

 

 

$

110,141

 

Average shareholders’ equity and NCI in operating partnership

1,636,730

 

 

1,497,124

 

 

1,635,414

 

 

1,490,929

 

After-tax core ROAE

12.5

%

 

13.3

%

 

12.0

%

 

14.8

%

Non-GAAP Measures - Limitations

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

  • core earnings, core EPS and after-tax core 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;
  • core EPS and after-tax core 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, assuming the conversion of all shares of Class B common stock into shares of Class A common stock. 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 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.

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

Source: Ladder Capital Corp