Ladder Capital Corp.

11/07/2019 | Press release | Distributed by Public on 11/07/2019 16:36

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

NEW YORK--(BUSINESS WIRE)-- Ladder Capital Corp (NYSE: LADR) ('we,' 'Ladder,' or the 'Company') today announced operating results for the quarter ended September 30, 2019. GAAP income before taxes for the three months ended September 30, 2019 was $32.1 million, and diluted earnings per share was $0.26. Core earnings was $44.1 million, or $0.38 of core EPS. After tax GAAP return on average equity was 7.5% and after-tax core return on average equity was 10.9%.

'We're very pleased with our results in the third quarter,' said Brian Harris, Ladder's Chief Executive Officer. 'All of our products are delivering solid returns, and we continue to deliver industry-leading ROEs as we take advantage of our flexible investment platform to adapt to changing market conditions.'

Supplemental

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

Conference Call and Webcast

We will host a conference call on Thursday, November 7, 2019 at 5:00 p.m. Eastern Time to discuss third 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 Thursday, November 7, 2019 through midnight Thursday, November 21, 2019. To access the replay, please call (844) 512-2921 domestic or (412) 317-6671 international, access code 13695178. 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)

September 30, 2019(1)

December 31, 2018(1)

(Unaudited)

Assets

Cash and cash equivalents

$

83,097

$

67,878

Restricted cash

38,656

30,572

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

Mortgage loans held by consolidated subsidiaries

3,231,443

3,318,390

Provision for loan losses

(18,500

)

(17,900

)

Mortgage loan receivables held for sale

174,214

182,439

Real estate securities

1,911,456

1,410,126

Real estate and related lease intangibles, net

981,333

998,022

Investments in and advances to unconsolidated joint ventures

51,419

40,354

FHLB stock

61,619

57,915

Derivative instruments

22

-

Due from brokers

3,962

-

Accrued interest receivable

22,699

27,214

Other assets

78,454

157,862

Total assets

$

6,619,874

$

6,272,872

Liabilities and Equity

Liabilities

Debt obligations, net

$

4,860,687

$

4,452,574

Due to brokers

7,000

1,301

Derivative instruments

82

975

Amount payable pursuant to tax receivable agreement

1,559

1,570

Dividends payable

2,384

37,316

Accrued expenses

45,761

82,425

Other liabilities

63,151

53,076

Total liabilities

4,980,624

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 107,573,820
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

1,529,599

1,471,157

Treasury stock, 3,120,012 and 2,701,162 shares, at cost

(41,556

)

(32,815

)

Retained earnings (dividends in excess of earnings)

(39,860

)

11,342

Accumulated other comprehensive income (loss)

10,367

(4,649

)

Total shareholders' equity

1,458,670

1,445,153

Noncontrolling interest in operating partnership

171,731

188,427

Noncontrolling interest in consolidated joint ventures

8,849

10,055

Total equity

1,639,250

1,643,635

Total liabilities and equity

$

6,619,874

$

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 September 30,

Nine Months Ended September 30,

2019

2018

2019

2018

Net interest income

Interest income

$

82,251

$

90,386

$

254,040

$

253,822

Interest expense

51,397

51,476

155,015

144,606

Net interest income

30,854

38,910

99,025

109,216

Provision for loan losses

-

10,300

600

13,600

Net interest income after provision for loan losses

30,854

28,610

98,425

95,616

Other income (loss)

Operating lease income

24,405

24,997

81,106

79,306

Sale of loans, net

11,247

1,861

38,589

12,893

Realized gain (loss) on securities

3,396

(2,554

)

10,726

(4,896

)

Unrealized gain (loss) on equity securities

254

-

1,341

-

Unrealized gain (loss) on Agency interest-only securities

16

142

38

456

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

2,082

63,704

963

96,341

Impairment of real estate

-

-

(1,350

)

-

Fee and other income

5,166

4,851

17,047

17,579

Net result from derivative transactions

(9,465

)

7,115

(35,956

)

29,156

Earnings (loss) from investment in unconsolidated
joint ventures

1,094

401

3,617

466

Gain (loss) on extinguishment/defeasance of debt

-

(4,323

)

(1,070

)

(4,392

)

Total other income (loss)

38,195

96,194

115,051

226,909

Costs and expenses

Salaries and employee benefits

14,319

15,792

52,800

46,754

Operating expenses

5,314

5,464

16,727

16,608

Real estate operating expenses

6,270

7,152

17,776

23,806

Fee expense

2,056

1,311

4,951

2,953

Depreciation and amortization

9,030

10,417

29,192

31,896

Total costs and expenses

36,989

40,136

121,446

122,017

Income (loss) before taxes

32,060

84,668

92,030

200,508

Income tax expense (benefit)

1,112

1,204

478

5,679

Net income (loss)

30,948

83,464

91,552

194,829

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

(64

)

(7,843

)

691

(16,132

)

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

(3,308

)

(8,991

)

(10,247

)

(22,786

)

Net income (loss) attributable to Class A common shareholders

$

27,576

$

66,630

$

81,996

$

155,911

Earnings per share:

Basic

$

0.26

$

0.69

$

0.78

$

1.62

Diluted

$

0.26

$

0.67

$

0.77

$

1.61

Weighted average shares outstanding:

Basic

106,004,152

96,935,986

105,264,752

96,317,513

Diluted

106,603,713

110,650,253

106,232,581

110,482,991

Dividends per share of Class A common stock

$

0.340

$

0.325

$

1.020

$

0.965

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 September 30,

Nine Months Ended September 30,

2019

2018

2019

2018

Net income (loss)

$

30,948

$

83,464

$

91,552

$

194,829

Income tax expense (benefit)

1,112

1,204

478

5,679

Income (loss) before taxes

32,060

84,668

92,030

200,508

Net (income) loss attributable to noncontrolling interest
in consolidated joint ventures and operating partnership (GAAP)(1)

(71

)

(7,851

)

667

(16,155

)

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

6,741

(12,435

)

18,999

2,398

Adjustments for unrecognized derivative results(4)

1,889

(3,614

)

13,191

(16,320

)

Unrealized (gain) loss on fair value securities

(248

)

(142

)

(1,475

)

(456

)

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

(168

)

7

(817

)

(530

)

Non-cash stock-based compensation

3,918

2,763

19,383

8,186

Core earnings

44,121

63,396

141,978

177,631

Core estimated corporate tax benefit (expense)(5)

445

1,672

761

(2,425

)

After-tax core earnings

$

44,566

$

65,068

$

142,739

$

175,206

Adjusted weighted average diluted shares outstanding(6)

118,763

110,650

118,906

110,483

Core EPS

$

0.38

$

0.59

$

1.20

$

1.59

(1)

Includes $7 thousand and $8 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 September 30, 2019 and 2018, respectively. Includes $24 thousand and $23 thouand of net income attributable to noncontrolling interest in consolidated joint ventures which are included in net (income) loss attributable to noncontrolling interest in operating partnership on the consolidated statements of income for the nine months ended September 30, 2019 and 2018, respectively.
(2) The following is a reconciliation of GAAP depreciation and amortization to our share of real estate depreciation, amortization and gain adjustments presented in the computation of core earnings in the preceding table ($ in thousands):

Three Months Ended September 30,

Nine Months Ended September 30,

2019

2018

2019

2018

Total GAAP depreciation and amortization

$

9,030

$

10,417

$

29,192

$

31,896

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

(25

)

(18

)

(74

)

(56

)

Less: Non-controlling interest in consolidated joint
ventures' share of accumulated depreciation and
amortization and unrecognized passive interest in
unconsolidated joint ventures

(417

)

(1,076

)

(2,392

)

(2,447

)

Our share of real estate depreciation and amortization

8,588

9,323

26,726

29,393

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

(1,418

)

(22,066

)

(6,839

)

(27,553

)

Less: Non-controlling interest in consolidated joint
ventures' share of accumulated depreciation and
amortization on real estate sold

41

653

83

1,844

Our share of accumulated depreciation and
amortization on real estate sold

(1,377

)

(21,413

)

(6,756

)

(25,709

)

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

(470

)

(345

)

(971

)

(1,286

)

Our share of real estate depreciation,
amortization and gain adjustments

$

6,741

$

(12,435

)

$

18,999

$

2,398

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 September 30,

Nine Months Ended September 30,

2019

2018

2019

2018

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

$

2,082

$

63,704

$

963

$

96,341

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

(705

)

(42,291

)

5,793

(70,632

)

Our share of accumulated depreciation and
amortization on real estate sold

$

1,377

$

21,413

$

6,756

$

25,709

(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 were excluded from core earnings for the three months ended March 31, 2019 and have been included in core earnings for the nine months ended September 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 September 30,

Nine Months Ended September 30,

2019

2018

2019

2018

Net results from derivative transactions

$

(9,465

)

$

7,115

$

(35,956

)

$

29,156

Hedging interest expense

436

1,365

1,927

5,789

Hedging realized result

7,140

(4,866

)

20,838

(18,625

)

Adjustments for unrecognized derivative results

$

(1,889

)

$

3,614

$

(13,191

)

$

16,320

(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 September 30,

Nine Months Ended September 30,

2019

2018

2019

2018

Weighted average diluted shares outstanding

106,604

110,650

106,233

110,483

Weighted average shares issuable to converted Class
B shareholders

12,159

-

12,673

-

Adjusted weighted average diluted shares outstanding

118,763

110,650

118,906

110,483

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 September 30,

Nine Months Ended September 30,

2019

2018

2019

2018

After-tax core earnings

$

44,566

$

65,068

$

142,739

$

175,206

Average shareholders' equity and NCI in operating partnership

1,634,623

1,522,212

1,635,150

1,501,357

After-tax core ROAE

10.9

%

17.1

%

11.6

%

15.6

%

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.

View source version on businesswire.com : https://www.businesswire.com/news/home/20191107006032/en/

Investors
Ladder Capital Corp Investor Relations
(917) 369-3207
[email protected]

Source: Ladder Capital Corp