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On Friday, BTIG research firm maintained a Buy rating and a $13.50 price target for Ladder Capital Corp (NYSE:LADR), following a credit rating upgrade by Fitch. Ladder Capital is recognized as the first commercial mortgage real estate investment trust (cmREIT) of this cycle to achieve an investment grade rating. Fitch upgraded the company’s credit rating to BBB- with a stable outlook. According to InvestingPro data, the company maintains strong financial health with a current ratio of 15.61, indicating robust liquidity with assets well exceeding short-term obligations.
The upgrade comes after Moody’s, in June 2024, affirmed Ladder Capital’s Ba1 rating, which is one notch below investment grade, and revised its outlook to Positive. BTIG noted that if Moody’s were to upgrade the company’s rating to Baa3, it would transform Ladder’s $850 million revolving credit facility into an unsecured investment grade agreement without altering the commitment level. With a market capitalization of $1.32 billion and analyst price targets ranging from $11.50 to $14.00, InvestingPro analysis suggests the stock is currently undervalued, presenting potential upside opportunity.
This shift to an investment grade rating is significant for Ladder Capital as it could lead to lower-cost and more flexible financing options. The company has recently shifted its strategy to a more offensive approach, investing significantly in the first quarter of 2025. Ladder Capital’s CEO, Brian Harris, highlighted the importance of this rating upgrade, stating it would decrease their reliance on secured warehouse lines and collateralized loan obligations (CLOs).
BTIG’s analysis pointed out Ladder’s strategic goals, which include achieving an investment-grade rating, increasing leverage, expanding the loan book, and growing the quarterly dividend. The firm emphasizes that dividend growth is a key differentiator and indicator of a REIT’s health and investment outlook. InvestingPro data reveals that Ladder Capital has maintained dividend payments for 11 consecutive years, currently offering an attractive 8.93% yield. Despite the challenges facing the cmREIT sector, such as a lack of positive capital flows, BTIG believes that Ladder’s recent investments, coupled with the new credit rating, position the company for sustainable growth. For deeper insights into Ladder Capital’s financial health and growth prospects, investors can access the comprehensive Pro Research Report, available exclusively to InvestingPro subscribers.
In other recent news, Ladder Capital Corp. reported its first-quarter 2025 earnings, revealing a notable miss in both earnings per share (EPS) and revenue compared to analyst forecasts. The company posted an EPS of $0.09, falling short of the $0.24 anticipated by analysts, while revenue reached $51.2 million, below the expected $68.98 million. Despite these misses, Ladder Capital maintains a strong liquidity position with $1.3 billion in cash, liquid assets, and undrawn committed facilities. Fitch Ratings upgraded Ladder Capital’s Long-Term Issuer Default Ratings to ’BBB-’ from ’BB+’, citing an improved funding profile and a decrease in reliance on confidence-sensitive funding. The rating agency also highlighted Ladder Capital’s solid risk management and conservative underwriting culture. Additionally, Ladder Capital’s debt to tangible equity ratio decreased to 1.6x, down from 2.2x the previous year, due to the company using excess liquidity to pay down secured bank lines. Despite the challenging real estate market, Ladder Capital has originated over $30 billion in commercial real estate loans since its inception, with losses of less than 0.1%.
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