Ladder Capital Corp Reports Fourth Quarter and Full Year 2018 Results and Announces First Quarter 2019 Dividend to Holders of Class A Common Stock

Financial Highlights

GAAP disclosures:

  • GAAP income before taxes of $27.8 million for the fourth quarter
    and $228.3 million for the year ended December 31, 2018 compared to
    $48.4 million and $133.6 million for the fourth quarter and year ended
    December 31, 2017, respectively
  • GAAP diluted EPS of $0.24 for the fourth quarter and $1.84 for the
    year ended December 31, 2018 compared to $0.40 and $1.13 for the
    fourth quarter and year ended December 31, 2017, respectively
  • After-tax GAAP return on average equity of 6.9% for the fourth
    quarter and 13.5%
    for the year ended December 31, 2018 compared
    to 12.2% and 8.6% for the same periods in 2017, respectively
  • GAAP book value per share of $13.90 at December 31, 2018, up from
    $13.82 at September 30, 2018

Core (non-GAAP) disclosures:

  • Core earnings of $52.5 million for the fourth quarter and $230.1
    million for the year ended December 31, 2018 compared to $60.4 million
    and $178.8 million for the fourth quarter and year ended December 31,
    2017, respectively
  • Core EPS of $0.45 for the fourth quarter and $2.03 for the year
    ended December 31, 2018 compared to $0.47 and $1.54 for the fourth
    quarter and year ended December 31, 2017, respectively
  • After-tax core return on average equity of 12.9% for the fourth
    quarter and 14.9% for the year ended December 31, 2018 compared to
    13.9% and 11.5% for the fourth quarter and year ended December 31,
    2017, respectively
  • Undepreciated book value per share of $15.34 at December 31, 2018,
    up from $15.25 at September 30, 2018

Operating and financing statistics:

  • Increased the quarterly cash dividend rate for the sixth time since
    our IPO in 2014 to $0.34/share of Class A common stock as a component
    of a $0.57/share cash/stock dividend in the fourth quarter to reflect
    the ongoing growth trends in recurring interest and operating lease
    income, bringing total 2018 dividends to $1.535/share of Class A
    common stock in 2018

    • Announced today the declaration of a first quarter 2019
      dividend of $0.34/share of Class A common stock
  • Raised $99.0 million of gross proceeds in a primary equity offering
    in the fourth quarter of 2018
  • Originated $419.9 million of commercial mortgage loans in the
    fourth quarter resulting in total originations of $2.8 billion in
    2018, composed of $1.3 billion of mortgage loans held for sale and
    $1.5 billion of mortgage loans held for investment
  • Made $7.2 million of net leased investments in the fourth quarter
    resulting in total net leased and other equity investments of $122.7
    million in 2018
  • Received $5.5 million of net proceeds from sales of real estate in
    the fourth quarter resulting in total proceeds from sales of real
    estate in 2018 of $218.7 million and a $95.9 million GAAP gain on sale
    in 2018
  • Contributed $364.8 million of loans to 3 securitization
    transactions in the fourth quarter resulting in a total of $1.3
    billion of loans contributed to 9 securitization transactions in 2018

NEW YORK–(BUSINESS WIRE)–Ladder Capital Corp (NYSE:LADR) (“we,” “Ladder,” or the “Company”) today
announced operating results for the quarter ended December 31, 2018.
GAAP income before taxes for the three months and year ended
December 31, 2018 was $27.8 million and $228.3 million, respectively,
compared to $48.4 million and $133.6 million for the three months and
year ended December 31, 2017, respectively. The Diluted EPS for the
three months and year ended December 31, 2018 was $0.24 and $1.84,
respectively, compared to $0.40 and $1.13 for the three months and year
ended December 31, 2017, respectively. After-tax GAAP return on average
equity was 6.9% in the fourth quarter of 2018 and 13.5% for the year.

Core earnings, a non-GAAP financial measure, was $52.5 million for the
fourth quarter of 2018, compared to $60.4 million earned in the fourth
quarter of 2017. For the year ended December 31, 2018, core earnings was
$230.1 million compared to $178.8 million for the comparable period in
2017. Core EPS, a non-GAAP financial measure, was $0.45 for the fourth
quarter of 2018 and $2.03 for the year ended December 31, 2018, compared
to $0.47 and $1.54 for the fourth quarter and year ended December 31,
2017, respectively. We believe core earnings and core EPS are useful in
evaluating our earnings from operations across reporting periods as
discussed in the Non-GAAP Financial Measures section of this earnings
release.

The favorable calendar year over year earnings variances, on both GAAP
and core bases, reflect higher gains on sale of real estate partially
offset by lower realized gains (losses) on sale of loans and securities.
The quarterly results for the three months ended December 31, 2018
compared to the comparable period in the prior year reflect higher gains
on sales of loans in the fourth quarter of 2017, when we earned $29.9
million on a GAAP basis or $30.6 million on a core basis on sales of
loans in 6 securitization transactions.

Dividend Announcement

Ladder today announced the declaration by its Board of Directors
(“Board”) of a first quarter 2019 dividend of $0.34 per share of Class A
common stock. The cash dividend is payable on April 1, 2019 to
stockholders of record as of the close of business on March 11, 2019.

Portfolio Overview

The following table summarizes the book value of our investment
portfolio as of the dates indicated below ($ in thousands):

  December 31, 2018   December 31, 2017
Loans    
Balance sheet loans:
Balance sheet first mortgage loans $ 3,170,788 50.5 % $ 3,123,268 51.9 %
Other commercial real estate-related loans 147,602 2.4 % 159,194 2.6 %
Provision for loan losses (17,900 ) (0.3 )% (4,000 ) (0.1 )%
Total balance sheet loans 3,300,490 52.6 % 3,278,462 54.4 %
Conduit first mortgage loans 182,439   2.9 % 230,180   3.8 %
Total loans 3,482,929 55.5 % 3,508,642 58.2 %
Securities
CMBS investments 1,308,331 20.8 % 1,066,570 17.7 %
U.S. Agency Securities investments 36,374 0.6 % 39,947 0.7 %
Corporate bonds 53,871 0.9 % %
Equity securities 11,550   0.2 %   %
Total securities 1,410,126 22.5 % 1,106,517 18.4 %
Real Estate
Real estate and related lease intangibles, net 998,022   15.9 % 1,032,041   17.1 %
Total real estate 998,022 15.9 % 1,032,041 17.1 %
Other Investments
Investments in unconsolidated joint ventures 40,354 0.6 % 35,441 0.6 %
FHLB stock 57,915   0.9 % 77,915   1.3 %
Total other investments 98,269   1.5 % 113,356   1.9 %
Total investments 5,989,346 95.4 % 5,760,556 95.6 %
Cash, cash equivalents and restricted cash 98,450 1.6 % 182,683 3.0 %
Other assets 185,076   3.0 % 82,376   1.4 %
Total assets $ 6,272,872   100.0 % $ 6,025,615   100.0 %

Note: Securities are carried at fair value.

Liquidity and Capital Resources

On December 27, 2018, we executed a new $100.0 million committed loan
repurchase facility with a major banking institution to finance conduit,
balance sheet and mezzanine loans. The facility has a one-year initial
term and can be extended quarterly, subject to approval from the lender,
but at no time can the maturity of the facility exceed 364 days.

The following table summarizes our debt obligations as of the following
dates ($ in thousands):

  December 31, 2018   December 31, 2017
 
Committed loan repurchase facilities $ 497,531 $ 398,653
Committed securities repurchase facility
Uncommitted securities repurchase facilities 166,154 74,757
Total repurchase facilities 663,685 473,410
Revolving credit facility
Mortgage loan financing(1) 743,902 692,696
CLO debt(2) 601,543 688,479
Participation financing – mortgage loan receivable 2,453 3,107
Borrowings from the FHLB 1,286,000 1,370,000
Senior unsecured notes(3) 1,154,991 1,152,134
Total debt obligations, net $ 4,452,574 $ 4,379,826
(1)   Presented net of unamortized debt issuance costs of $0.7 million as
of December 31, 2018.
(2) Presented net of unamortized debt issuance costs of $2.6 million and
$6.0 million as of December 31, 2018 and December 31, 2017,
respectively.
(3) Presented net of unamortized debt issuance costs of $11.2 million
and $14.1 million at December 31, 2018 and December 31, 2017,
respectively.
 

Conference Call and Webcast

We will host a conference call on Wednesday, February 27, 2019 at 5:00
p.m. Eastern Time to discuss fourth quarter and year-end 2018 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, February 27, 2019 through midnight Wednesday, March
13, 2019. To access the replay, please call (844) 512-2921 domestic or
(412) 317-6671 international, access code 13686215. 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.

 
Ladder Capital Corp
Consolidated Statements of Income
(Dollars in Thousands, Except Per Share and Dividend Data)
 
  Year Ended December 31,
2018   2017   2016
 
Net interest income
Interest income $ 344,816 $ 263,667

$

236,372

Interest expense 194,291   146,118     120,827  
Net interest income 150,525 117,549 115,545
Provision for loan losses 13,900       300  
Net interest income after provision for loan losses 136,625 117,549 115,245
 
Other income
Operating lease income 96,506 89,492 77,277
Tenant recoveries 9,671 7,179 5,958
Sale of loans, net 16,511 54,046 26,009
Realized gain (loss) on securities (5,808 ) 17,209 7,724
Unrealized gain (loss) on equity securities (1,605 )
Unrealized gain (loss) on Agency interest-only securities 555 1,405 (56 )
Realized gain on sale of real estate, net 95,881 11,423 20,636
Fee and other income 26,285 18,341 21,365
Net result from derivative transactions 15,926 (12,641 ) (1,409 )
Earnings (loss) from investment in unconsolidated joint ventures 790 89 426
Gain (loss) on extinguishment/defeasance of debt (4,392 ) (73 )   5,382  
Total other income 250,320   186,470     163,312  
Costs and expenses
Salaries and employee benefits 60,117 70,463 64,270
Operating expenses 21,696 21,421 20,552
Real estate operating expenses 29,799 33,216 30,545
Fee expense 5,055 4,996 3,703
Depreciation and amortization 41,959   40,332     39,447  
Total costs and expenses 158,626   170,428     158,517  
Income (loss) before taxes 228,319 133,591 120,040
Income tax expense (benefit) 6,643   7,712     6,320  
Net income (loss) 221,676 125,879 113,720
Net (income) loss attributable to noncontrolling interest in
consolidated joint ventures
(15,864 ) (226 ) 138
Net (income) loss attributable to noncontrolling interest in
operating partnership
(25,797 ) (30,377 )   (47,131 )
Net income (loss) attributable to Class A common shareholders $ 180,015   $ 95,276  

$

66,727

 
 
Earnings per share:
Basic $ 1.85 $ 1.16

$

1.08

Diluted $ 1.84 $ 1.13

$

1.06

 
Weighted average shares outstanding:
Basic 97,226,027 81,902,524 61,998,089
Diluted 97,652,065 109,704,880 107,638,788
 
Dividends per share of Class A common stock: $ 1.535 $ 1.215

$

1.285

 
 
Ladder Capital Corp
Consolidated Balance Sheets
(Dollars in Thousands)
 
  December 31, 2018(1)   December 31, 2017(1)
 
Assets
Cash and cash equivalents $ 67,878 $ 76,674
Restricted cash 30,572 106,009
Mortgage loan receivables held for investment, net, at amortized
cost:
Mortgage loans held by consolidated subsidiaries 3,318,390 3,282,462
Provision for loan losses (17,900 ) (4,000 )
Mortgage loan receivables held for sale 182,439 230,180
Real estate securities 1,410,126 1,106,517
Real estate and related lease intangibles, net 998,022 1,032,041
Investments in unconsolidated joint ventures 40,354 35,441
FHLB stock 57,915 77,915
Derivative instruments 888
Accrued interest receivable 27,214 25,875
Other assets 157,862   55,613  
Total assets $ 6,272,872   $ 6,025,615  
Liabilities and Equity
Liabilities
Debt obligations, net $ 4,452,574 $ 4,379,826
Due to brokers 1,301 14
Derivative instruments 975 2,606
Amount payable pursuant to tax receivable agreement 1,570 1,656
Dividends payable 37,316 30,528
Accrued expenses 82,425 59,619
Other liabilities 53,076   63,220  
Total liabilities 4,629,237   4,537,469  
Commitments and contingencies
Equity

Class A common stock, par value $0.001 per share, 600,000,000
shares
authorized; 106,642,335 and 96,258,847 shares issued
and
103,941,173 and 93,641,260 shares outstanding

105 94

Class B common stock, par value $0.001 per share, 100,000,000
shares
authorized; 13,117,419 and 17,667,251 shares issued
and outstanding

13 18
Additional paid-in capital 1,471,157 1,306,136
Treasury stock, 2,701,162 and 2,617,587 shares, at cost (32,815 ) (31,956 )
Retained earnings (dividends in excess of earnings) 11,342 (39,112 )
Accumulated other comprehensive income (loss) (4,649 ) (212 )
Total shareholders’ equity 1,445,153 1,234,968
Noncontrolling interest in operating partnership 188,427 240,861
Noncontrolling interest in consolidated joint ventures 10,055   12,317  
Total equity 1,643,635   1,488,146  
 
Total liabilities and equity $ 6,272,872   $ 6,025,615  

__________________________

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

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 consider the Class A common shareholders of the Company and limited
partners of Ladder Capital Finance Holdings LLLP other than Ladder
Capital Corp (“Continuing LCFH Limited Partners”) to have fundamentally
equivalent interests in our pre-tax earnings and net income.
Accordingly, for purposes of computing core earnings, core EPS and
after-tax core ROAE, we start with pre-tax earnings or net income and
adjust for other noncontrolling interest in consolidated joint ventures
but we do not adjust for amounts attributable to noncontrolling interest
held by Continuing LCFH Limited Partners. Similarly, when calculating
undepreciated book value per share we include total shareholders’ equity
and the noncontrolling interest held by Continuing LCFH Limited
Partners, but exclude noncontrolling interest in consolidated joint
ventures.

Core earnings

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.

For core earnings, we include adjustments for economic gains on
securitization transactions not recognized under GAAP accounting for
which risk has substantially transferred during the period and exclusion
of resultant GAAP recognition of the related economics during the
subsequent periods. This adjustment is reflected in core earnings when
there is a true risk transfer on the mortgage loan transfer and
settlement. Historically, this 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 core earnings purposes. Management
believes recognizing these amounts for core 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 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 core earnings until
the related asset is sold and the hedge position is considered “closed,”
whereupon they would then be included in core earnings in that period.
These are reflected as “adjustments for unrecognized derivative results”
for purposes of computing core 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.

Core EPS

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
December 31,

  Year Ended December 31,
2018   2017 2018   2017
 
Net income (loss) $ 26,846 $ 45,370 $ 221,676 $ 125,879
Income tax expense (benefit) 964   3,058   6,643   7,712  
Income (loss) before taxes 27,810 48,428 228,319 133,591

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

261 (101 ) (15,895 ) (258 )
Our share of real estate depreciation, amortization and gain
adjustments(2)
7,536 9,372 9,935 35,891
Adjustments for unrecognized derivative results(3) 16,301 (3,651 ) (19 ) (10,139 )
Unrealized (gain) loss on fair value securities 1,506 (371 ) 1,050 (1,405 )

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

(258 ) (1,942 ) (788 ) 1,026
Non-cash stock-based compensation 1,807 8,621 9,994 20,043
Transactional adjustments(4) (2,488 )   (2,488 )  
Core earnings 52,475 60,356 230,108 178,749
 
Core estimated corporate tax benefit (expense)(5) (1,255 ) (9,014 ) (3,680 ) (9,265 )
After-tax core earnings $ 51,220 $ 51,342 $ 226,428 $ 169,484
Adjusted weighted average diluted shares outstanding(6) 113,683   109,783   111,280   109,705  
Core EPS $ 0.45   $ 0.47   $ 2.03   $ 1.54  
(1)   Includes $8 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 December 31, 2018 and 2017,
respectively. Includes $31 thousand and $32 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 year ended December 31, 2018 and 2017,
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
December 31,

  Year Ended December 31,
2018   2017 2018   2017
 
Total GAAP depreciation and amortization $ 10,063 $ 11,009 $ 41,959 $ 40,332
Less: Depreciation and amortization related to non-rental property
fixed assets

(19

) (23 ) (75 ) (93 )

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

(1,640 ) (465 ) (4,087 ) (1,290 )
Our share of real estate depreciation and amortization

8,404

10,521 37,797 38,949
 

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

(416 ) (818 ) (27,968 ) (2,277 )

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

2   5   1,845   17  

Our share of accumulated depreciation and amortization on real
estate sold

(414 ) (813 ) (26,123 ) (2,260 )
 
Less: Operating lease income on above/below market lease intangible
amortization
(454 ) (336 ) (1,739 ) (798 )
       
Our share of real estate depreciation, amortization and gain
adjustments
$

7,536

  $ 9,372   $ 9,935   $ 35,891  
 

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:

 

Three Months Ended
December 31,

  Year Ended December 31,
2018   2017 2018   2017
 
GAAP realized gain on sale of real estate, net $ (460 ) $ 3,633 $ 95,881 $ 11,423
Adjusted gain/loss on sale of real estate for purposes of core
earnings
874   (2,820 ) (69,758 ) (9,163 )
Our share of accumulated depreciation and amortization on real
estate sold
$ 414   $ 813   $ 26,123   $ 2,260  
 
(3)   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
December 31,

  Year Ended December 31,
2018   2017 2018   2017
 
Net results from derivative transactions $ (13,230 ) $ 5,710 $ 15,926 $ (12,641 )
Hedging interest expense 1,445 2,749 7,234 15,320
Hedging realized result (4,516 ) (4,808 ) (23,141 ) 7,460  
Adjustments for unrecognized derivative results $ (16,301 ) $ 3,651   $ 19   $ 10,139  
 

Contacts

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

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Ladder Capital Corp Reports Fourth Quarter and Full Year 2018 Results and Announces First Quarter 2019 Dividend to Holders of Class A Common Stock

Financial Highlights

GAAP disclosures:

  • GAAP income before taxes of $27.8 million for the fourth quarter
    and $228.3 million for the year ended December 31, 2018 compared to
    $48.4 million and $133.6 million for the fourth quarter and year ended
    December 31, 2017, respectively
  • GAAP diluted EPS of $0.24 for the fourth quarter and $1.84 for the
    year ended December 31, 2018 compared to $0.40 and $1.13 for the
    fourth quarter and year ended December 31, 2017, respectively
  • After-tax GAAP return on average equity of 6.9% for the fourth
    quarter and 13.5%
    for the year ended December 31, 2018 compared
    to 12.2% and 8.6% for the same periods in 2017, respectively
  • GAAP book value per share of $13.90 at December 31, 2018, up from
    $13.82 at September 30, 2018

Core (non-GAAP) disclosures:

  • Core earnings of $52.5 million for the fourth quarter and $230.1
    million for the year ended December 31, 2018 compared to $60.4 million
    and $178.8 million for the fourth quarter and year ended December 31,
    2017, respectively
  • Core EPS of $0.45 for the fourth quarter and $2.03 for the year
    ended December 31, 2018 compared to $0.47 and $1.54 for the fourth
    quarter and year ended December 31, 2017, respectively
  • After-tax core return on average equity of 12.9% for the fourth
    quarter and 14.9% for the year ended December 31, 2018 compared to
    13.9% and 11.5% for the fourth quarter and year ended December 31,
    2017, respectively
  • Undepreciated book value per share of $15.34 at December 31, 2018,
    up from $15.25 at September 30, 2018

Operating and financing statistics:

  • Increased the quarterly cash dividend rate for the sixth time since
    our IPO in 2014 to $0.34/share of Class A common stock as a component
    of a $0.57/share cash/stock dividend in the fourth quarter to reflect
    the ongoing growth trends in recurring interest and operating lease
    income, bringing total 2018 dividends to $1.535/share of Class A
    common stock in 2018

    • Announced today the declaration of a first quarter 2019
      dividend of $0.34/share of Class A common stock
  • Raised $99.0 million of gross proceeds in a primary equity offering
    in the fourth quarter of 2018
  • Originated $419.9 million of commercial mortgage loans in the
    fourth quarter resulting in total originations of $2.8 billion in
    2018, composed of $1.3 billion of mortgage loans held for sale and
    $1.5 billion of mortgage loans held for investment
  • Made $7.2 million of net leased investments in the fourth quarter
    resulting in total net leased and other equity investments of $122.7
    million in 2018
  • Received $5.5 million of net proceeds from sales of real estate in
    the fourth quarter resulting in total proceeds from sales of real
    estate in 2018 of $218.7 million and a $95.9 million GAAP gain on sale
    in 2018
  • Contributed $364.8 million of loans to 3 securitization
    transactions in the fourth quarter resulting in a total of $1.3
    billion of loans contributed to 9 securitization transactions in 2018

NEW YORK–(BUSINESS WIRE)–Ladder Capital Corp (NYSE:LADR) (“we,” “Ladder,” or the “Company”) today
announced operating results for the quarter ended December 31, 2018.
GAAP income before taxes for the three months and year ended
December 31, 2018 was $27.8 million and $228.3 million, respectively,
compared to $48.4 million and $133.6 million for the three months and
year ended December 31, 2017, respectively. The Diluted EPS for the
three months and year ended December 31, 2018 was $0.24 and $1.84,
respectively, compared to $0.40 and $1.13 for the three months and year
ended December 31, 2017, respectively. After-tax GAAP return on average
equity was 6.9% in the fourth quarter of 2018 and 13.5% for the year.

Core earnings, a non-GAAP financial measure, was $52.5 million for the
fourth quarter of 2018, compared to $60.4 million earned in the fourth
quarter of 2017. For the year ended December 31, 2018, core earnings was
$230.1 million compared to $178.8 million for the comparable period in
2017. Core EPS, a non-GAAP financial measure, was $0.45 for the fourth
quarter of 2018 and $2.03 for the year ended December 31, 2018, compared
to $0.47 and $1.54 for the fourth quarter and year ended December 31,
2017, respectively. We believe core earnings and core EPS are useful in
evaluating our earnings from operations across reporting periods as
discussed in the Non-GAAP Financial Measures section of this earnings
release.

The favorable calendar year over year earnings variances, on both GAAP
and core bases, reflect higher gains on sale of real estate partially
offset by lower realized gains (losses) on sale of loans and securities.
The quarterly results for the three months ended December 31, 2018
compared to the comparable period in the prior year reflect higher gains
on sales of loans in the fourth quarter of 2017, when we earned $29.9
million on a GAAP basis or $30.6 million on a core basis on sales of
loans in 6 securitization transactions.

Dividend Announcement

Ladder today announced the declaration by its Board of Directors
(“Board”) of a first quarter 2019 dividend of $0.34 per share of Class A
common stock. The cash dividend is payable on April 1, 2019 to
stockholders of record as of the close of business on March 11, 2019.

Portfolio Overview

The following table summarizes the book value of our investment
portfolio as of the dates indicated below ($ in thousands):

  December 31, 2018   December 31, 2017
Loans    
Balance sheet loans:
Balance sheet first mortgage loans $ 3,170,788 50.5 % $ 3,123,268 51.9 %
Other commercial real estate-related loans 147,602 2.4 % 159,194 2.6 %
Provision for loan losses (17,900 ) (0.3 )% (4,000 ) (0.1 )%
Total balance sheet loans 3,300,490 52.6 % 3,278,462 54.4 %
Conduit first mortgage loans 182,439   2.9 % 230,180   3.8 %
Total loans 3,482,929 55.5 % 3,508,642 58.2 %
Securities
CMBS investments 1,308,331 20.8 % 1,066,570 17.7 %
U.S. Agency Securities investments 36,374 0.6 % 39,947 0.7 %
Corporate bonds 53,871 0.9 % %
Equity securities 11,550   0.2 %   %
Total securities 1,410,126 22.5 % 1,106,517 18.4 %
Real Estate
Real estate and related lease intangibles, net 998,022   15.9 % 1,032,041   17.1 %
Total real estate 998,022 15.9 % 1,032,041 17.1 %
Other Investments
Investments in unconsolidated joint ventures 40,354 0.6 % 35,441 0.6 %
FHLB stock 57,915   0.9 % 77,915   1.3 %
Total other investments 98,269   1.5 % 113,356   1.9 %
Total investments 5,989,346 95.4 % 5,760,556 95.6 %
Cash, cash equivalents and restricted cash 98,450 1.6 % 182,683 3.0 %
Other assets 185,076   3.0 % 82,376   1.4 %
Total assets $ 6,272,872   100.0 % $ 6,025,615   100.0 %

Note: Securities are carried at fair value.

Liquidity and Capital Resources

On December 27, 2018, we executed a new $100.0 million committed loan
repurchase facility with a major banking institution to finance conduit,
balance sheet and mezzanine loans. The facility has a one-year initial
term and can be extended quarterly, subject to approval from the lender,
but at no time can the maturity of the facility exceed 364 days.

The following table summarizes our debt obligations as of the following
dates ($ in thousands):

  December 31, 2018   December 31, 2017
 
Committed loan repurchase facilities $ 497,531 $ 398,653
Committed securities repurchase facility
Uncommitted securities repurchase facilities 166,154 74,757
Total repurchase facilities 663,685 473,410
Revolving credit facility
Mortgage loan financing(1) 743,902 692,696
CLO debt(2) 601,543 688,479
Participation financing – mortgage loan receivable 2,453 3,107
Borrowings from the FHLB 1,286,000 1,370,000
Senior unsecured notes(3) 1,154,991 1,152,134
Total debt obligations, net $ 4,452,574 $ 4,379,826
(1)   Presented net of unamortized debt issuance costs of $0.7 million as
of December 31, 2018.
(2) Presented net of unamortized debt issuance costs of $2.6 million and
$6.0 million as of December 31, 2018 and December 31, 2017,
respectively.
(3) Presented net of unamortized debt issuance costs of $11.2 million
and $14.1 million at December 31, 2018 and December 31, 2017,
respectively.
 

Conference Call and Webcast

We will host a conference call on Wednesday, February 27, 2019 at 5:00
p.m. Eastern Time to discuss fourth quarter and year-end 2018 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, February 27, 2019 through midnight Wednesday, March
13, 2019. To access the replay, please call (844) 512-2921 domestic or
(412) 317-6671 international, access code 13686215. 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.

 
Ladder Capital Corp
Consolidated Statements of Income
(Dollars in Thousands, Except Per Share and Dividend Data)
 
  Year Ended December 31,
2018   2017   2016
 
Net interest income
Interest income $ 344,816 $ 263,667

$

236,372

Interest expense 194,291   146,118     120,827  
Net interest income 150,525 117,549 115,545
Provision for loan losses 13,900       300  
Net interest income after provision for loan losses 136,625 117,549 115,245
 
Other income
Operating lease income 96,506 89,492 77,277
Tenant recoveries 9,671 7,179 5,958
Sale of loans, net 16,511 54,046 26,009
Realized gain (loss) on securities (5,808 ) 17,209 7,724
Unrealized gain (loss) on equity securities (1,605 )
Unrealized gain (loss) on Agency interest-only securities 555 1,405 (56 )
Realized gain on sale of real estate, net 95,881 11,423 20,636
Fee and other income 26,285 18,341 21,365
Net result from derivative transactions 15,926 (12,641 ) (1,409 )
Earnings (loss) from investment in unconsolidated joint ventures 790 89 426
Gain (loss) on extinguishment/defeasance of debt (4,392 ) (73 )   5,382  
Total other income 250,320   186,470     163,312  
Costs and expenses
Salaries and employee benefits 60,117 70,463 64,270
Operating expenses 21,696 21,421 20,552
Real estate operating expenses 29,799 33,216 30,545
Fee expense 5,055 4,996 3,703
Depreciation and amortization 41,959   40,332     39,447  
Total costs and expenses 158,626   170,428     158,517  
Income (loss) before taxes 228,319 133,591 120,040
Income tax expense (benefit) 6,643   7,712     6,320  
Net income (loss) 221,676 125,879 113,720
Net (income) loss attributable to noncontrolling interest in
consolidated joint ventures
(15,864 ) (226 ) 138
Net (income) loss attributable to noncontrolling interest in
operating partnership
(25,797 ) (30,377 )   (47,131 )
Net income (loss) attributable to Class A common shareholders $ 180,015   $ 95,276  

$

66,727

 
 
Earnings per share:
Basic $ 1.85 $ 1.16

$

1.08

Diluted $ 1.84 $ 1.13

$

1.06

 
Weighted average shares outstanding:
Basic 97,226,027 81,902,524 61,998,089
Diluted 97,652,065 109,704,880 107,638,788
 
Dividends per share of Class A common stock: $ 1.535 $ 1.215

$

1.285

 
 
Ladder Capital Corp
Consolidated Balance Sheets
(Dollars in Thousands)
 
  December 31, 2018(1)   December 31, 2017(1)
 
Assets
Cash and cash equivalents $ 67,878 $ 76,674
Restricted cash 30,572 106,009
Mortgage loan receivables held for investment, net, at amortized
cost:
Mortgage loans held by consolidated subsidiaries 3,318,390 3,282,462
Provision for loan losses (17,900 ) (4,000 )
Mortgage loan receivables held for sale 182,439 230,180
Real estate securities 1,410,126 1,106,517
Real estate and related lease intangibles, net 998,022 1,032,041
Investments in unconsolidated joint ventures 40,354 35,441
FHLB stock 57,915 77,915
Derivative instruments 888
Accrued interest receivable 27,214 25,875
Other assets 157,862   55,613  
Total assets $ 6,272,872   $ 6,025,615  
Liabilities and Equity
Liabilities
Debt obligations, net $ 4,452,574 $ 4,379,826
Due to brokers 1,301 14
Derivative instruments 975 2,606
Amount payable pursuant to tax receivable agreement 1,570 1,656
Dividends payable 37,316 30,528
Accrued expenses 82,425 59,619
Other liabilities 53,076   63,220  
Total liabilities 4,629,237   4,537,469  
Commitments and contingencies
Equity

Class A common stock, par value $0.001 per share, 600,000,000
shares
authorized; 106,642,335 and 96,258,847 shares issued
and
103,941,173 and 93,641,260 shares outstanding

105 94

Class B common stock, par value $0.001 per share, 100,000,000
shares
authorized; 13,117,419 and 17,667,251 shares issued
and outstanding

13 18
Additional paid-in capital 1,471,157 1,306,136
Treasury stock, 2,701,162 and 2,617,587 shares, at cost (32,815 ) (31,956 )
Retained earnings (dividends in excess of earnings) 11,342 (39,112 )
Accumulated other comprehensive income (loss) (4,649 ) (212 )
Total shareholders’ equity 1,445,153 1,234,968
Noncontrolling interest in operating partnership 188,427 240,861
Noncontrolling interest in consolidated joint ventures 10,055   12,317  
Total equity 1,643,635   1,488,146  
 
Total liabilities and equity $ 6,272,872   $ 6,025,615  

__________________________

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

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 consider the Class A common shareholders of the Company and limited
partners of Ladder Capital Finance Holdings LLLP other than Ladder
Capital Corp (“Continuing LCFH Limited Partners”) to have fundamentally
equivalent interests in our pre-tax earnings and net income.
Accordingly, for purposes of computing core earnings, core EPS and
after-tax core ROAE, we start with pre-tax earnings or net income and
adjust for other noncontrolling interest in consolidated joint ventures
but we do not adjust for amounts attributable to noncontrolling interest
held by Continuing LCFH Limited Partners. Similarly, when calculating
undepreciated book value per share we include total shareholders’ equity
and the noncontrolling interest held by Continuing LCFH Limited
Partners, but exclude noncontrolling interest in consolidated joint
ventures.

Core earnings

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.

For core earnings, we include adjustments for economic gains on
securitization transactions not recognized under GAAP accounting for
which risk has substantially transferred during the period and exclusion
of resultant GAAP recognition of the related economics during the
subsequent periods. This adjustment is reflected in core earnings when
there is a true risk transfer on the mortgage loan transfer and
settlement. Historically, this 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 core earnings purposes. Management
believes recognizing these amounts for core 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 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 core earnings until
the related asset is sold and the hedge position is considered “closed,”
whereupon they would then be included in core earnings in that period.
These are reflected as “adjustments for unrecognized derivative results”
for purposes of computing core 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.

Core EPS

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
December 31,

  Year Ended December 31,
2018   2017 2018   2017
 
Net income (loss) $ 26,846 $ 45,370 $ 221,676 $ 125,879
Income tax expense (benefit) 964   3,058   6,643   7,712  
Income (loss) before taxes 27,810 48,428 228,319 133,591

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

261 (101 ) (15,895 ) (258 )
Our share of real estate depreciation, amortization and gain
adjustments(2)
7,536 9,372 9,935 35,891
Adjustments for unrecognized derivative results(3) 16,301 (3,651 ) (19 ) (10,139 )
Unrealized (gain) loss on fair value securities 1,506 (371 ) 1,050 (1,405 )

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

(258 ) (1,942 ) (788 ) 1,026
Non-cash stock-based compensation 1,807 8,621 9,994 20,043
Transactional adjustments(4) (2,488 )   (2,488 )  
Core earnings 52,475 60,356 230,108 178,749
 
Core estimated corporate tax benefit (expense)(5) (1,255 ) (9,014 ) (3,680 ) (9,265 )
After-tax core earnings $ 51,220 $ 51,342 $ 226,428 $ 169,484
Adjusted weighted average diluted shares outstanding(6) 113,683   109,783   111,280   109,705  
Core EPS $ 0.45   $ 0.47   $ 2.03   $ 1.54  
(1)   Includes $8 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 December 31, 2018 and 2017,
respectively. Includes $31 thousand and $32 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 year ended December 31, 2018 and 2017,
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
December 31,

  Year Ended December 31,
2018   2017 2018   2017
 
Total GAAP depreciation and amortization $ 10,063 $ 11,009 $ 41,959 $ 40,332
Less: Depreciation and amortization related to non-rental property
fixed assets

(19

) (23 ) (75 ) (93 )

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

(1,640 ) (465 ) (4,087 ) (1,290 )
Our share of real estate depreciation and amortization

8,404

10,521 37,797 38,949
 

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

(416 ) (818 ) (27,968 ) (2,277 )

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

2   5   1,845   17  

Our share of accumulated depreciation and amortization on real
estate sold

(414 ) (813 ) (26,123 ) (2,260 )
 
Less: Operating lease income on above/below market lease intangible
amortization
(454 ) (336 ) (1,739 ) (798 )
       
Our share of real estate depreciation, amortization and gain
adjustments
$

7,536

  $ 9,372   $ 9,935   $ 35,891  
 

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:

 

Three Months Ended
December 31,

  Year Ended December 31,
2018   2017 2018   2017
 
GAAP realized gain on sale of real estate, net $ (460 ) $ 3,633 $ 95,881 $ 11,423
Adjusted gain/loss on sale of real estate for purposes of core
earnings
874   (2,820 ) (69,758 ) (9,163 )
Our share of accumulated depreciation and amortization on real
estate sold
$ 414   $ 813   $ 26,123   $ 2,260  
 
(3)   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
December 31,

  Year Ended December 31,
2018   2017 2018   2017
 
Net results from derivative transactions $ (13,230 ) $ 5,710 $ 15,926 $ (12,641 )
Hedging interest expense 1,445 2,749 7,234 15,320
Hedging realized result (4,516 ) (4,808 ) (23,141 ) 7,460  
Adjustments for unrecognized derivative results $ (16,301 ) $ 3,651   $ 19   $ 10,139  
 

Contacts

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

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