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Ladder Capital Corp Reports Results for the Quarter and Year Ended December 31, 2023

Ladder Capital Corp (NYSE: LADR) (“we,” “our,” “Ladder,” or the “Company”) today announced operating results for the quarter and year ended December 31, 2023. GAAP income before taxes for the three months ended December 31, 2023 was $18.4 million, and diluted earnings per share (“EPS”) was $0.15. Distributable earnings was $40.0 million, or $0.32 of distributable EPS. GAAP income before taxes for the year ended December 31, 2023 was $104.7 million, and diluted earnings per share (“EPS”) was $0.81. Distributable earnings was $167.7 million, or $1.34 of distributable EPS.

“2023 was another positive year for Ladder, as we generated both double-digit earnings growth and returns on equity with a smaller asset base and lower leverage than the previous year. With $1.3 billion of liquidity and our unique liability structure anchored by long-term, fixed-rate, unsecured corporate bonds, we remain well-positioned to capitalize on new investment opportunities.” said Brian Harris, Ladder’s Chief Executive Officer.

Supplemental

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

Conference Call and Webcast

We will host a conference call on Thursday, February 8, 2024 at 10:00 a.m. Eastern Time to discuss fourth quarter and full year 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 until midnight on Thursday, February 22, 2024. To access the replay, please call (844) 512-2921 domestic or (412) 317-6671 international, access code 13743559. 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 $5.5 billion of assets as of December 31, 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 11% of the Company’s equity. Ladder is headquartered in New York City with regional offices in Miami, Florida and Los Angeles, 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)

 

 

December 31,

 

December 31,

 

 

2023(1)

 

 

 

2022(1)

 

 

(Unaudited)

 

 

Assets

 

 

 

Cash and cash equivalents

$

1,015,678

 

 

$

609,078

 

Restricted cash

 

15,450

 

 

 

50,524

 

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

 

 

 

Mortgage loans receivable

 

3,155,089

 

 

 

3,885,746

 

Allowance for credit losses

 

(43,165

)

 

 

(20,755

)

Mortgage loan receivables held for sale

 

26,868

 

 

 

27,391

 

Securities

 

485,533

 

 

 

587,519

 

Real estate and related lease intangibles, net

 

726,442

 

 

 

700,136

 

Investments in and advances to unconsolidated ventures

 

6,877

 

 

 

6,219

 

Derivative instruments

 

1,454

 

 

 

2,038

 

Accrued interest receivable

 

24,233

 

 

 

24,938

 

Other assets

 

98,218

 

 

 

78,339

 

Total assets

$

5,512,677

 

 

$

5,951,173

 

Liabilities and Equity

 

 

 

Liabilities

 

 

 

Debt obligations, net

$

3,783,946

 

 

$

4,245,697

 

Dividends payable

 

32,294

 

 

 

32,000

 

Accrued expenses

 

65,144

 

 

 

68,227

 

Other liabilities

 

99,095

 

 

 

71,688

 

Total liabilities

 

3,980,479

 

 

 

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 126,911,689 and 126,502,049 shares outstanding as of December 31, 2023 and December 31, 2022, respectively.

 

127

 

 

 

127

 

Additional paid-in capital

 

1,756,750

 

 

 

1,826,833

 

Treasury stock, 1,115,789 and 1,525,429 shares, at cost

 

(12,001

)

 

 

(95,600

)

Retained earnings (dividends in excess of earnings)

 

(197,875

)

 

 

(177,005

)

Accumulated other comprehensive income (loss)

 

(13,853

)

 

 

(21,009

)

Total shareholders’ equity

 

1,533,148

 

 

 

1,533,346

 

Noncontrolling interests in consolidated ventures

 

(950

)

 

 

215

 

Total equity

 

1,532,198

 

 

 

1,533,561

 

Total liabilities and equity

$

5,512,677

 

 

$

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

 

Year Ended

 

December 31,

 

September 30,

 

December 31,

 

December 31,

 

 

2023

 

 

 

2023

 

 

 

2023

 

 

 

2022

 

Net interest income

 

 

 

 

 

 

 

Interest income

$

100,569

 

 

$

101,090

 

 

$

407,284

 

 

$

293,520

 

Interest expense

 

60,747

 

 

 

62,259

 

 

 

245,097

 

 

 

195,602

 

Net interest income (expense)

 

39,822

 

 

 

38,831

 

 

 

162,187

 

 

 

97,918

 

Provision for (release of) loan loss reserves, net

 

6,006

 

 

 

7,473

 

 

 

25,096

 

 

 

3,711

 

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

 

33,816

 

 

 

31,358

 

 

 

137,091

 

 

 

94,207

 

Other income (loss)

 

 

 

 

 

 

 

Real estate operating income

 

23,103

 

 

 

24,761

 

 

 

96,950

 

 

 

108,269

 

Net result from mortgage loan receivables held for sale

 

596

 

 

 

(629

)

 

 

(523

)

 

 

(2,511

)

Realized gain (loss) on securities

 

 

 

 

23

 

 

 

(276

)

 

 

(73

)

Unrealized gain (loss) on securities

 

49

 

 

 

(42

)

 

 

29

 

 

 

(86

)

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

 

 

 

 

8,808

 

 

 

8,808

 

 

 

115,998

 

Fee and other income

 

2,192

 

 

 

1,829

 

 

 

9,178

 

 

 

15,020

 

Net result from derivative transactions

 

(5,199

)

 

 

4,773

 

 

 

1,481

 

 

 

12,360

 

Earnings from investment in unconsolidated ventures

 

(155

)

 

 

479

 

 

 

758

 

 

 

1,410

 

Gain on extinguishment of debt

 

118

 

 

 

921

 

 

 

10,718

 

 

 

685

 

Total other income (loss)

 

20,704

 

 

 

40,923

 

 

 

127,123

 

 

 

251,072

 

Costs and expenses

 

 

 

 

 

 

 

Compensation and employee benefits

 

13,006

 

 

 

14,285

 

 

 

63,618

 

 

 

75,836

 

Operating expenses

 

4,485

 

 

 

4,775

 

 

 

19,503

 

 

 

20,716

 

Real estate operating expenses

 

8,516

 

 

 

9,456

 

 

 

37,587

 

 

 

38,605

 

Investment related expenses

 

2,388

 

 

 

2,279

 

 

 

8,847

 

 

 

7,235

 

Depreciation and amortization

 

7,770

 

 

 

7,144

 

 

 

29,914

 

 

 

32,673

 

Total costs and expenses

 

36,165

 

 

 

37,939

 

 

 

159,469

 

 

 

175,065

 

Income (loss) before taxes

 

18,355

 

 

 

34,342

 

 

 

104,745

 

 

 

170,214

 

Income tax expense (benefit)

 

(670

)

 

 

3,147

 

 

 

4,244

 

 

 

4,909

 

Net income (loss)

 

19,025

 

 

 

31,195

 

 

 

100,501

 

 

 

165,305

 

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

 

211

 

 

 

124

 

 

 

624

 

 

 

(23,088

)

Net income (loss) attributable to Class A common shareholders

$

19,236

 

 

$

31,319

 

 

$

101,125

 

 

$

142,217

 

 

 

 

 

 

 

 

 

Earnings per share:

 

 

 

 

 

 

 

Basic

$

0.15

 

 

$

0.25

 

 

$

0.81

 

 

$

1.14

 

Diluted

$

0.15

 

 

$

0.25

 

 

$

0.81

 

 

$

1.13

 

 

 

 

 

 

 

 

 

Weighted average shares outstanding:

 

 

 

 

 

 

 

Basic

 

124,713,728

 

 

 

124,730,343

 

 

 

124,667,877

 

 

 

124,301,421

 

Diluted

 

125,077,085

 

 

 

124,968,545

 

 

 

124,882,398

 

 

 

125,823,671

 

 

 

 

 

 

 

 

 

Dividends per share of Class A common stock

$

0.23

 

 

$

0.23

 

 

$

0.92

 

 

$

0.88

 

 

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

 

Year Ended

 

December 31,

 

September 30,

 

December 31,

 

December 31,

 

 

2023

 

 

 

2023

 

 

 

2023

 

 

 

2022

 

Income (loss) before taxes

$

18,355

 

 

$

34,342

 

 

 

104,745

 

 

 

170,214

 

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

 

211

 

 

 

124

 

 

 

624

 

 

 

(23,088

)

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

 

7,273

 

 

 

(2,016

)

 

 

18,602

 

 

 

(29,188

)

Adjustments for derivative results (2)

 

5,149

 

 

 

(3,969

)

 

 

716

 

 

 

(9,381

)

Unrealized (gain) loss on fair value securities

 

(49

)

 

 

42

 

 

 

(29

)

 

 

86

 

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

 

(152

)

 

 

(152

)

 

 

(604

)

 

 

1,356

 

Adjustment for impairment (3)

 

6,006

 

 

 

7,473

 

 

 

25,096

 

 

 

6,816

 

Non-cash stock-based compensation

 

3,202

 

 

 

3,205

 

 

 

18,577

 

 

 

31,584

 

Distributable earnings

 

39,995

 

 

 

39,049

 

 

 

167,727

 

 

 

148,399

 

Estimated corporate tax (expense) benefit (4)

 

198

 

 

 

(274

)

 

 

(496

)

 

 

(2,002

)

After-tax distributable earnings

$

40,193

 

 

$

38,775

 

 

$

167,231

 

 

$

146,397

 

Weighted average diluted shares outstanding

 

125,077

 

 

 

124,969

 

 

 

124,882

 

 

 

125,824

 

Distributable EPS

$

0.32

 

 

$

0.31

 

 

$

1.34

 

 

$

1.16

 

(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

 

Year Ended

 

December 31,

 

September 30,

 

December 31,

 

December 31,

 

 

2023

 

 

 

2023

 

 

 

2023

 

 

 

2022

 

Total GAAP depreciation and amortization

$

7,770

 

 

$

7,144

 

 

 

29,914

 

 

$

32,673

 

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

 

(110

)

 

 

(110

)

 

 

(431

)

 

 

(42

)

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

 

50

 

 

 

(581

)

 

 

(1,068

)

 

 

(1,943

)

Our share of real estate depreciation and amortization

 

7,710

 

 

 

6,453

 

 

 

28,415

 

 

 

30,688

 

Accumulated depreciation and amortization on real estate sold (a)

 

 

 

 

(8,016

)

 

 

(8,016

)

 

 

(58,113

)

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

 

(437

)

 

 

(453

)

 

 

(1,797

)

 

 

(1,763

)

Our share of real estate depreciation, amortization and gain adjustments

$

7,273

 

 

$

(2,016

)

 

$

18,602

 

 

$

(29,188

)

 

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

 

Three Months Ended

 

Year Ended

 

December 31,

 

September 30,

 

December 31,

 

December 31,

 

 

2023

 

 

 

2023

 

 

 

2023

 

 

 

2022

 

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

$

 

 

$

8,808

 

 

$

8,808

 

 

$

115,998

 

Adjusted gain/loss on sale of real estate for purposes of distributable earnings

 

 

 

(792

)

 

 

(792

)

 

 

(57,885

)

Accumulated depreciation and amortization on real estate sold

$

 

 

$

8,016

 

 

$

8,016

 

 

$

58,113

 

(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

 

Year Ended

 

December 31,

 

September 30,

 

December 31,

 

December 31,

 

 

2023

 

 

 

2023

 

 

 

2023

 

 

 

2022

 

Net results from derivative transactions

$

5,199

 

 

$

(4,773

)

 

$

(1,481

)

 

$

(12,360

)

Hedging interest income (expense)

 

414

 

 

 

175

 

 

 

1,220

 

 

 

(1,652

)

Other hedging related activity (a)

 

(464

)

 

 

629

 

 

 

977

 

 

 

4,631

 

Adjustments for derivative results

$

5,149

 

 

$

(3,969

)

 

$

716

 

 

$

(9,381

)

 

(a) Includes unrealized lower of cost or market adjustments of $(0.6) million and $0.6 million for the three months ended December 31, 2023 and September 30, 2023, respectively and $0.5 million and $4.8 million for the twelve months ended December 31, 2023 and December 31, 2022, 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

 

Year Ended December 31,

 

December 31,

 

September 30,

 

December 31,

 

December 31,

 

 

2023

 

 

 

2023

 

 

 

2023

 

 

 

2022

 

After-tax distributable earnings

$

40,193

 

 

$

38,775

 

 

$

167,231

 

 

$

146,397

 

Average shareholders’ equity

 

1,536,012

 

 

 

1,535,488

 

 

 

1,533,307

 

 

 

1,506,810

 

After-tax distributable ROAE

 

10.5

%

 

 

10.1

%

 

 

10.9

%

 

 

9.7

%

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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