Earnings call transcript: Ladder Capital Q1 2025 misses EPS forecast

Ladder Capital Corp. (LADR) reported its first-quarter 2025 earnings, revealing a notable miss in earnings per share (EPS) compared to analyst forecasts. The company posted an EPS of $0.09, falling short of the $0.24 anticipated by analysts. Revenue also missed expectations, reaching $51.2 million against a forecast of $68.98 million. Following the earnings announcement, the stock price experienced a modest decline of 0.49%, closing at $10.22.

Key Takeaways

• Ladder Capital’s EPS and revenue missed expectations for Q1 2025.
• The company maintains a strong liquidity position with $1.3 billion.
• Interest rate volatility and trade tensions are impacting the commercial real estate market.
• The stock price showed a slight decline post-earnings announcement.

Company Performance

Ladder Capital’s performance in Q1 2025 was marked by a significant shortfall in both EPS and revenue compared to forecasts. Despite these misses, the company continued to demonstrate operational strength with a return on equity of 6.6% and a modest adjusted leverage ratio of 1.4x. The company’s focus on liquidity and asset management remains a key strategic priority.

Financial Highlights

• Revenue: $51.2 million (compared to a forecast of $68.98 million)
• Earnings per share: $0.09 (compared to a forecast of $0.24)
• Return on equity: 6.6%
• Undepreciated book value per share: $13.66
• Dividend declared: $0.23 per share

Earnings vs. Forecast

Ladder Capital’s actual EPS of $0.09 fell significantly short of the forecasted $0.24, marking a miss by $0.15 per share. Similarly, revenue came in at $51.2 million, below the expected $68.98 million. This substantial deviation from expectations highlights challenges the company faced during the quarter.

Market Reaction

Following the earnings release, Ladder Capital’s stock experienced a minor decline of 0.49%, closing at $10.22. This movement reflects investor concerns over the earnings miss, though the stock remains within its 52-week range of $9.68 to $12.48.

Outlook & Guidance

Looking forward, Ladder Capital anticipates that loan originations will exceed the pace of Q1 2025. The company also expects potential increases in conduit securitization activities and is preparing for possible investment opportunities amid market volatility. Despite the current challenges, the company remains optimistic about future prospects. InvestingPro data shows the company maintains strong financial health with a current ratio of 16.79x and an Altman Z-Score of 7.51, indicating solid financial stability. Three analysts have recently revised their earnings expectations downward for the upcoming period, though the company is still expected to remain profitable this year.

Executive Commentary

Pamela McCormack, President of Ladder Capital, emphasized the company’s strong liquidity position, stating, "We remain highly liquid and very well situated to act with certainty and speed." Executive Brian noted, "Our business plan is unfolding the way we’ve indicated it would," highlighting confidence in the company’s strategic direction.

Risks and Challenges

• Interest rate volatility continues to pose a risk to financial performance.
• Trade tensions are affecting the commercial real estate sector.
• Potential economic slowdown could impact future earnings.
• The company’s investment grade rating is one notch below, which could affect borrowing costs.
• Market volatility presents both challenges and opportunities for investment.

Q&A

During the earnings call, analysts inquired about Ladder Capital’s lending opportunities and net lease portfolio strategy. Discussions also covered potential interest rate scenarios and the company’s approach to securities investment, providing insights into future strategic initiatives.

Full transcript - Ladder Capital Corp Class A (LADR) Q1 2025:

Earnings Call Moderator, Ladder Capital Corp.: Good morning, and welcome to Ladder Capital Corp. Earnings Call for the First Quarter of twenty twenty five. As a reminder, today’s call is being recorded. This morning, Ladder released its financial results for the quarter ended 03/31/2025. Before the call begins, I’d like to call your attention to the customary Safe Harbor disclosure in our earnings release regarding forward looking statements.

Today’s call may include forward looking statements and projections, and we refer you to our most recent Form 10 ks for important factors that could cause actual results to differ materially from these statements and projections. We do not undertake any obligation to update our forward looking statements or projections unless required by law. In addition, Ladder will discuss certain non GAAP financial measures on this call, which management believes are relevant to assessing the company’s financial performance. The company’s presentation of this information is not intended to be considered in isolation or as a substitute for the financial information presented in accordance with GAAP. These measures are reconciled to GAAP figures in our earnings supplement presentation, which is available in the Investor Relations section of our website.

We also refer you to our Form 10 ks and earnings supplement presentation for definitions of certain metrics, which we may cite on today’s call. At this time, I’d like to turn the call over to Ladder’s President, Pamela McCormack.

Pamela McCormack, President, Ladder Capital Corp.: Good morning. During the first quarter, Ladder generated distributable earnings of $25,500,000 or $0.20 per share for a return on equity of 6.6% with modest adjusted leverage of just 1.4 times. We remain pleased with Ladder’s positioning in 2025 following our strong performance in 2024. Over 1,700,000,000 or 51% of our balance sheet loans paid off in 2024, marking the highest annual payoff volume in Ladder’s history with nearly $600,000,000 of proceeds from loan payoffs in the fourth quarter alone. While the timing of these payoffs temporarily muted earnings, reinvestment momentum is now building.

Getting paid back is the most important part of the mortgage business, and we’re excited to redeploy the liquidity generated from loan payoffs into new loans at lower reset basis that better reflects current market conditions. During the first quarter, we originated three twenty nine million dollars in new loans and acquired $521,000,000 in AAA securities, bringing our total first quarter investment activity to over $800,000,000 Our disciplined model has firmly established our position as a leading middle market focused commercial real estate finance REIT. Over the past several years, we have consistently delivered strong earnings, preserved book value, achieved record loan payoffs, avoided material losses, enhanced and extended our liability structure, and maintained the highest credit ratings in the sector, all amid a challenging macroeconomic backdrop. The strength of our platform was most recently evident through the return on equity Ladder generated in 2024, ’1 of the strongest in the sector. As we look ahead for the remainder of 2025, we recognize the continued possibility of market volatility and uncertainty.

However, with substantial liquidity, modest leverage and a robust balance sheet, including one of the lowest cost capital in our space, we’re well prepared to navigate these challenges and capitalize on the opportunities they may create. Enhanced liquidity and credit ratings. As of 03/31/2025, Ladder had $1,300,000,000 in liquidity, including four eighty million dollars or over 10% of total assets comprised of cash and cash equivalents. 83% of our asset base was unencumbered as of quarter end and 72% of Ladder’s debt was comprised of unsecured corporate bonds. Ladder remains on positive outlook from both Moody’s and Fitch with ratings just one notch below investment grade, while S and P upgraded our credit rating by one notch in 2024.

The recent expansion and upsizing of our $850,000,000 unsecured corporate revolving credit facility coupled with our $500,000,000 unsecured bond issuance in 2024 represent meaningful progress in our shift towards unsecured debt as our primary funding source, an important milestone on our path towards potential investment grade ratings. Loan portfolio overview. As of 03/31/2025, our loan portfolio stood at $1,700,000,000 representing 38% of total assets with a weighted average yield of 8.7%. Our future funding commitments remain minimal totaling just $40,000,000 During the first quarter, new loan originations outpaced payoffs. We received $181,000,000 in loan payoffs, including the full repayment of nine loans.

In contrast, we originated $329,000,000 of new loans, consisting of a $64,000,000 fixed rate conduit loan with a coupon of six point eight percent and $265,000,000 in balance sheet loans at a weighted average spread of three ninety four basis points. Notably, 74% of these originations were backed by multifamily or industrial assets. Additionally, our pipeline continues to grow with approximately $250,000,000 in new loans currently under application. Given the robust payoffs achieved in 2024, we expect muted payoffs for the remainder of the year. Asset repositioning and risk management.

During the first quarter, we placed two more loans totaling $38,700,000 on nonaccrual status, a $13,700,000 hotel loan and a $24,900,000 office loan. Overall, our non accrual loan balance represents only 2.6% of our assets. We did not take any impairments this quarter, and our CECL reserve remained at $52,000,000 as of 03/31/2025. We continue to believe this reserve is sufficient to cover any potential losses we may incur, highlighting the strength of our underwriting and asset management, which remain a core driver of our success. Consistent carry income from our real estate portfolio.

Our $892,000,000 real estate portfolio generated $12,200,000 of net operating income during the first quarter. The portfolio primarily consists of net leased properties with long term leases to investment grade rated tenants. In addition, we sold one net lease property generating a $900,000 gain in distributable earnings during the quarter. Growing securities portfolio. During the first quarter, we acquired an additional $521,000,000 in AAA rated securities at a weighted average unlevered yield of 5.79%.

As of March 31, our portfolio totaled $1,500,000,000 with a weighted average unlevered yield of 5.67, primarily comprised of AAA rated securities. As Brian will cover in more detail, we continue to invest in securities during the second quarter as spreads widened, ensuring stable earnings and enhanced liquidity for Ladder with the entire portfolio remaining unlevered. 2025 outlook. Ladder’s business plan continues to prove effective amid a highly dynamic environment shaped by persistent interest rate volatility and geopolitical uncertainty, including the reemergence of tariffs. These trade tensions have contributed to uncertainty and impacted commercial real estate demand, especially in sectors tied to global supply chains.

While this volatility may dampen price discovery and deal execution, it should also present attractive opportunities for well capitalized platforms like Ladder. Our discipline, balance sheet strength and real time market intelligence gathered from our multi cylinder business model are crucial in enabling us to proactively navigate market fluctuations and capitalize on opportunities with the best risk adjusted returns when others may be constrained. In conclusion, we remain highly liquid and very well situated to act with certainty and speed to deploy capital into new investments that can drive earnings growth and deliver long term value to our shareholders. With that, I’ll turn the call over to Paul.

Paul, Executive, Ladder Capital Corp.: Thank you, Pamela. In the first quarter of twenty twenty five, Ladder generated $25,500,000 distributable earnings or $0.20 per share of distributable EPS, achieving a return on average equity of 6.6% as our balance sheet remains flush with liquidity and low leverage after ending 2024 with record payoffs. As of 03/31/2025, balance sheet remained strong, was primarily comprised of cash and a liquid AAA securities portfolio with room to grow leverage as we deploy our capital. As of 03/31/2025, Ladder’s liquidity was $1,300,000,000 comprised of cash and cash equivalents and our newly upsized and extended $850,000,000 unsecured revolver, which remains undrawn. Total gross leverage was 1.83 times as of quarter end as we continue to delever far from our target range of between two and three times leverage.

As of 03/31/2025, ’70 ’2 percent of our debt was comprised of unsecured corporate bonds with a weighted average remaining maturity of three point five years, an attractive weighted average fixed rate coupon of 5.2%. In the first quarter, we repurchased $20,000,000 in principal value of our unsecured bonds, including $8,000,000 of our twenty twenty five bonds maturing this October, which now have $288,000,000 in principal that remains outstanding. In the first quarter, we called our FL2 CLO as it continued to amortize. In total, in the first quarter, we repaid $323,000,000 of secured CLO debt. As Pamela noted, Ladder remains on positive outlook, one notch from an investment grade credit rating with two rating agencies.

Ladder is currently running a balance sheet within many of the investment grade metrics of the rating agencies. Given our long track record as disciplined and prudent manager of capital, we are hopeful we will become an investment grade rated company in the near term. As of 03/31/2025, our unencumbered asset pool stood at $3,700,000,000 or 83% of total assets. 85% of this unencumbered asset pool is comprised of first mortgage loans, securities and unrestricted cash and cash equivalents. As of 03/31/2025, Ladder’s undepreciated book value per share was $13.66 which is net of $0.41 per share of CECL general reserve established.

In the first quarter of twenty twenty five, we repurchased 71,000 shares of our common stock at a weighted average price of $11.42 per share. As of 03/31/2025, ’60 ’6 point ’8 million remains outstanding on Ladder’s stock repurchase program. Subsequent to quarter end, in April, Ladder’s Board of Directors approved an increase to Ladder’s share buyback authorization to $100,000,000 In the first quarter, Ladder declared a $0.23 per share dividend, was paid on 04/15/2025. As we continue to deploy the liquidity we’ve amassed through successful payoffs in 2024 and begin to prudently add leverage to our delevered balance sheet, we are hopeful we return to consistent dividend coverage in the coming quarters. As Pamela discussed our performance in detail, I will highlight a few additional points regarding the performance of each of our segments for the first quarter.

As of 03/31/2025, our nonaccrual loan balance was 116,000,000 across four loans, and our CECL reserve was $52,000,000 or $0.41 per share, as I previously mentioned. We believe this reserve level is adequate to cover any potential loss in our loan portfolio, including consideration of the continued macroeconomic shifts ongoing in the global economy. As of 03/31/2025, the carrying value of our securities portfolio was $1,500,000,000 up 37% from year end, with a weighted average yield of 5.67% as we continue to rotate capital out of P bills and into AAA securities while we allow for our loan pipeline to build. As of 03/31/2025, ’90 ’9 percent of the securities portfolio was investment grade rated with 96% being AAA rated. As mentioned, the entire portfolio of predominantly AAA securities is unencumbered and readily financeable, providing an additional source of potential liquidity, complementing the $1,300,000,000 of same day liquidity we maintain.

Our $892,000,000 real estate segment continued to generate stable net operating income in the first quarter of twenty twenty five. The portfolio includes 149 net lease properties, primarily investment grade credits, committed to long term leases with a weighted average remaining lease term of seven point five years. In the first quarter, we sold one net lease property for $13,000,000 of proceeds, generating a $900,000 gain for distributable earnings and a $3,800,000 gain for GAAP, which includes the recapture of previously recorded depreciation and amortization expense. In conclusion, looking back over the five years since the onset of COVID-nineteen in March of twenty twenty, Ladder has maintained a remarkably steady book equity of approximately $1,500,000,000 We believe this is a testament to our long held focus on principal preservation first and return on equity second with a consistent strategy of financing our three core businesses, primarily with unsecured debt and modest leverage. For further details on our first quarter twenty twenty five operating results, please refer to our earnings supplement, which is available on our website and Ladder’s quarterly report on Form 10 Q, which we expect to file in the coming days.

With that, I will turn it over to Brian.

Brian, Executive, Ladder Capital Corp.: Thanks, Paul. At the end of twenty twenty four, we held about $1,300,000,000 in cash and T bills following a high volume of loan payoffs in the second half of the year. In the first quarter of twenty twenty five, we began to deploy that capital into new investments in a post pandemic, post election, higher interest rate environment. As the year began, we felt like loan requests coming out of the refi channel were unattractive and largely relating to older properties with broken business plans with too much existing leverage in place. We tried to focus on originating mortgage loans on new acquisitions and on newer properties where we could find them.

By the end of the first quarter, we were seeing much more attractive lending opportunities with acquisitions becoming more common along with newly built multifamily units coming off construction loans and in their initial lease up phase. We were pleased to have originated $265,000,000 of first lien balance sheet loans at credit spreads ranging from two seventy to 700 basis points and averaging three ninety four basis points over one month SOFR. We also originated the $64,000,000 fixed rate mortgage that we plan to securitize at some point this year when we accumulate enough of these kind of fixed rate loans to participate in a conduit securitization. This loan was a refinance of a $76,000,000 loan we made to the same sponsor ten years ago. Further investments in the first quarter included the addition of $521,000,000 of AAA securities.

And as volatility gripped capital markets as April began, we added over $160,000,000 more of AAA securities so far this month. For the remainder of the year, we expect to favor more investments in loans, but when volatility causes spikes in credit spreads as it did in early April, we benefit from the ability to pivot and add more highly rated liquid securities to our inventory. In short, we expect to add similar assets in the quarters ahead with a preference for higher yielding loans versus securities. On the right side of the balance sheet, we called one of our two CLOs issued in 2021 after payoffs in the pool of mortgage loans eliminated the A Class. Overall secured debt was paid down by $346,000,000 in the first quarter.

If market volatility decreases, we hope to issue another corporate unsecured bond as summer approaches. But I would note that with an undrawn revolver of $850,000,000 and $1,500,000,000 of unlevered securities, we are under no pressure to issue any new debt and will only do so if we believe conditions are attractive. To wrap things up today, looking forward, we expect the treasury curve to steepen with short term rates falling while longer term rates will be rising. This is not a great scenario for the overall economy as savers earn less interest and cost to service most forms of debt increase. We believe this scenario should be supportive of a larger opportunity to participate more meaningfully in conduit securitizations.

While it has been a while since we had meaningful earnings contribution from our conduit business owing in part to an inverted yield curve that persisted for years. This product is the highest ROE product in our product mix, and we would welcome the return of the conduit business at Ladder. We expect the Fed will start to cut short term rates in the near term, primarily because of where we see the two year treasury yield versus the Fed funds rate that the Fed controls. We believe the long end of the treasury curve will rise as inflation picks up and the deficit increases. While such rise would generally not be a great sign for the economy, we believe it would be an environment that an operation like ours can thrive in given the strength of our balance sheet and overall liquidity position.

Thanks for listening today. I think we can take some questions now.

Earnings Call Moderator, Ladder Capital Corp.: Thank

Call Operator: Our first question is from Randy Binner with B. Riley. Please proceed.

Randy Binner, Analyst, B. Riley: Hey, thanks. I guess I’ll start on the origination activity, which positive in the quarter and the the blended 394 basis point spread you noted. But it it was pretty wide, like two seventy by 700, I I think. And so the the the question is, you know, we we kind of thought of over of S plus 300,000,000 is a good level of where you’re able to put money to work. Do you was there exceptionally good activity in the first quarter that had that elevated?

Or can we think like three high 300s is where loan originations money can be put to work this year?

Brian, Executive, Ladder Capital Corp.: Randy. Thank you. This is Brian. The quarter as you can imagine, with all the volatility that commercial real estate has been going through in the last few years, not since the inauguration, there are difficult situations out there. There are lenders that want to be paid off and might be willing to take a discount they weren’t willing to take a while ago.

There are also a lot of acquisitions going on at different reset prices. And I think what happens sometimes in markets like that is I’ll call it special situations. They always pop up once in a while. But, I I would expect to see more coming out of a downturn. And sometimes what’s very important is that you move quickly.

And some when someone is buying something that they feel is very cheap and they wanna move fast on it, sometimes they’re not overly worried about what the rate is as long as you get them to the closing very quickly. So there were some situations like that. And we’re because we hold things on our balance sheet and we’re not beholden to BP’s buyers or rating agency subordination levels, you know, we can pretty much just make a credit decision. And because we’re all in one house, and we don’t there’s no third parties outside the building making the determination, you know, I think we can drive a premium cost once in a while on yield to us. And, also, the one thing I’ve been noticing, as I said, was we seem to be looking at a whole lot of brand new multifamily properties that are coming off construction loans and in lease up.

That market is $225,000,000 to $275,000,000 and depending on what state you’re in and what the leverage point is. So we do see that is the most prevalent product we’re seeing financing opportunities for. So but I don’t think I would try to indicate to you we’re going to start being at $2.50 to $2.70 most of the time because I do think that we will continue to see barbelling situations pop up. And, you know, I also hesitate to draw too many conclusions around a sample size of 200 and change million dollars, 2 hundred and 60 million dollars because one loan could really swing things around a little there. But, this is the kind of market where you will see opportunities to to to receive premium pricing for your liquidity and speed.

So hope that answers. Yes. That’s helpful. Just one quick clarification or follow-up is the I think of that origination in the

Randy Binner, Analyst, B. Riley: quarter, there was a percentage that was multifamily and industrial. I just I missed that. How much of it was in those two classes?

Brian, Executive, Ladder Capital Corp.: I think they said 74%, but I’m not sure. Craig, do you have Adam, if you know the answer? Yeah. 74%.

Randy Binner, Analyst, B. Riley: Yeah. It was 74 Okay. The old man got

Jade Rahmani, Analyst, KBW: it right.

Brian, Executive, Ladder Capital Corp.: Super. Okay. Thanks. Appreciate it.

Call Operator: Our next question is from Jade Rahmani with KBW. Please proceed.

Jade Rahmani, Analyst, KBW: Thanks very much. I was wondering if you expect originations to maintain or exceed the pace that, you generated in the first quarter?

Paul, Executive, Ladder Capital Corp.: I would expect them to exceed it.

Jade Rahmani, Analyst, KBW: Okay. Has there been any slowdown? I think you may have alluded to this, post quarter end.

Brian, Executive, Ladder Capital Corp.: Slowdown in which part of the Python? There’s a part where they’re signing applications and posting deposits or closings or securitizations because there’s definitely been a slowdown in securitizations with all the volatility. However, we were not looking to participate in in anything anyway. But, on the origination side, I think that they’re like many businesses, a lot of, borrowers are kind of freezing until they get a sense as to what’s going on here. And, you know, at 10:00 in the morning, it looks one way, and at 03:00, it looks different.

So there that will dampen activity. But coming off of what we’ve gone through in the last two years, where effectively we’re we’re an asset management operation trying to get capital back in the building, wildly successful in getting paid off. Then we turned on the jets the other way and started making investments of over $800,000,000 in the quarter. So while spreads have been widening out, I haven’t seen a falloff in activity. And but it’s not hard to see an acceleration of activity when you’re originating $300,000,000 in a quarter.

Right? I would expect us to originate in excess of that. So it was really a start, as opposed to average quarter, I think. So, I think you can expect us regardless of the volatility in the space. I mean, things can go too far.

But, I I think in general, you’ll see these numbers going up as we, and we’re planning to migrate out of those securities that we purchased, into the loan platforms.

Jade Rahmani, Analyst, KBW: Thank you. How are you thinking about the net lease portfolio longer term? Do you plan to grow it? Do you plan to sell continue to sell down properties before leases come due? Is there a core set of the portfolio where you will hold the properties even as lease maturity approaches?

Just overall, what are your views regarding that portfolio?

Brian, Executive, Ladder Capital Corp.: We we actually have a very nonproprietary view of holding on to those assets. They’re for sale every day, one and all. And oftentimes, people will call us. And sometimes if it’s a small asset, it’ll be somebody who knows the the neighborhood. I think we sold one supermarket in Oklahoma, and and it isn’t because we put it up for sale and marketed it.

We answered the phone. And it was somebody who had purchased another supermarket from us previously. So nice easy process, and it added a little bit to earnings and got some it it proves out that gap in book value, you know, from, from from what the undepreciated book value number. We are usually in act active discussions on people who wanna buy those things. Those conversations take place more when the stock market is higher for strange reasons.

But with stocks falling, people are less apt to be doing things. But I want you to know that we’re not actively managing trying to sell it. We’re prepared to hold all of them. And when we make that purchase, there’s always a price where we target a sale. In fact, the day we close, we have a targeted sale.

We have a date and a price that we’re we think we’re gonna sell it at. But after we write that down, we don’t, on that day, put the property up for sale at that price. We we just kinda use it as a guideline as to if we get a bid here, why don’t we try this? Because we’re not in any need of capital, there’s no active attempt to sell things. Happy to add to that portfolio.

Happy to grow it. But I think I’ve said on numerous calls like this, that will take place more frequently in a steep yield curve, where you can borrow money at lower the short end of the curve and and purchase long term cash flows on the long end of the curve, that creates a wonderful arbitrage. So, we’re not there yet. So we we’re not eyeing anything. We’ve there have been a couple of triple net portfolios that have come across our desks recently, but, we’re not active there.

But I suspect that portfolio will probably go down just a bit in the next two quarters, and I think it’ll probably go up after that. But precedent being the the yield curve is a little steeper.

Jade Rahmani, Analyst, KBW: Thank you very much.

Call Operator: Our next question is from Steve Delaney with Citizens JMP Securities. Please proceed.

Steve Delaney, Analyst, Citizens JMP Securities: Hey, good morning everyone. So Brian interesting, the ten year your comments about the steeper curve and it’s making that more attractive for net lease. So well, we’re down six basis points today to four thirty two on the ten year. In your crystal ball, like over the next six months, where you think it could rise to? And what are you looking for to take advantage of it?

Do you need up 50 basis points? Or is it something more modest than that? Thank you.

Brian, Executive, Ladder Capital Corp.: It actually, Steve, rather than, like, you know, trying to figure out I mean, I think the tenure is gonna go higher, first of all, because The US has a massive deficit, and they’re gonna have to fund it. And so much doll dollars are going into interest now that, that what we you’re old enough at this point to remember crowding out. So, you know, when the government is borrowing an enormous amount of money, there’s less credit available for people who want to do other things that are a little more productive than paying interest. So I think it would the ten year will go higher. I also think the short end will go lower.

We’re seeing an indication that right now if you look at where the two year is versus one month SOFR. Might remember a couple of years back where we got out in front of a scenario where we thought rates were going to rise rapidly and on the short end. And we I remember the day we were on a phone call. I think we had just borrowed money for seven years at 4.25%, and we were being chastised for paying too much interest because, LIBOR was at 25 basis points. And we indicated we would play the long game there, as opposed to where things were right now.

And, we felt LIBOR was going go up dramatically because the two year was rocketing higher. And so as much as the TVs like to talk about Trump and Powell and arguments and who does what, at the end of the day, the two year is driving where that short end is gonna go. And so I am now of the opinion that Powell will cut rates, and not because I think he wants to satisfy Trump. I think that Powell will cut rates because the two year is gonna force him into it. So the you can I think you can expect a short lower short end and a higher long end, which will create the differential is what we worry about there?

So I don’t care how much the two year goes down if the ten year goes up a lot. If the two year stays right where it is, it’s okay. But I don’t think that’s what’s going to happen. I do think, that we’re in for a little bit of a slowdown here, and that should precipitate the the Fed to make a move lower. And I think that’s what all the forward curves are saying anyway.

The real question is how much of a of a stomach does the administration have for a ten year at 5% or four seventy five? Throwing darts, not what I do for a living. I would probably tell you the, the ten year will probably get up around four seventy five. Okay. Six months.

Steve Delaney, Analyst, Citizens JMP Securities: Yeah. Optically, that’s a little more attractive, I think, especially for the real estate market than their five handle. You obviously, CMBS, RMBS, you’re nonagency, of course, you know, things have blown out, right, and and much wider. You put some money to work. Interestingly on that, and, I mean, I guess you’re looking when you step in there, you’re what are you looking at?

Five to seven year kind of durations? And how do you protect yourself if if you add a lot of CMBS, fixed rate CMBS, against the steepening, do you do you you put some swaps on? How do you how do you take advantage of the CMBS basis widening without taking interest rate risk?

Paul, Executive, Ladder Capital Corp.: I would say that

Brian, Executive, Ladder Capital Corp.: what we call the CMBS, the mortgage backed securities business, covers a lot of different products. And, CMBS, has widened really with the rest of the world. And if you take a look at some of the residential mortgage REITs, they’ve been suffering some book value declines, spreads are blowing out, and they keep issuing shares to buy more. So these are at very historically wide credit spreads. And so the way would I was taught a long time ago that the best hedge is is at the price you buy it at.

And Yeah. So the way we protect ourselves in an environment where we have said for a while, we we suspect, you know, rates will go up if the government doesn’t get the, the tenure on the sorry. I can’t remember the word now. The deficit on on at least under some kind of a game plan. And so we don’t really own a lot of tenure instruments except fixed rates that we plan on securitizing.

So right now, we own very little of that. And what we do have on, we do hedge with swaps. We don’t ever hedge one to one. The so we own that one loan that we did at 6.8%. So we we have that hedged about 50% right now.

And but that’s that’s a daily occurrence. We move that around often. The way we really avoid, you know, a credit blowout and a lot of volatility is you buy floating rate instruments that are two year triple a’s. And that leads you to another part of the mortgage backed security world, which is CLOs. And, the CLOs that are out there right now, there’s been a a slowdown in production of these also where people are just saying, you know, they’re gonna wait till volatility comes down.

All that translates to is I don’t like where I have to sell bonds. So, and that and you hear us expressing a view that we like buying bonds here, which is what you would expect. So, the way you know, we we don’t leverage ourselves aggressively at all. In fact, I think we have $1,500,000,000 of AAA securities with no leverage at all. So, we finance ourselves as we’re now at a mature phase of this company where we finance ourselves through long term corporate debt that does not have mark to market in its process.

So those are all vehicles that hedge you against volatility.

Steve Delaney, Analyst, Citizens JMP Securities: Appreciate the comments, Brian. Sounds like you’ve got some attractive opportunities here over the next quarter or two. Thank you.

Brian, Executive, Ladder Capital Corp.: Thank you.

Call Operator: Our next question is from John Nicodemus with BTIG. Please proceed.

John Nicodemus, Analyst, BTIG: Good morning, everyone. I was looking at your Slide six in the latest supplemental, just sort of the percentages between the different assets within your portfolio. Obviously, you’ve seen cash come down a bunch, securities go up a bunch and then also loans start to creep back up with loan portfolio growth returning. I’m just curious kind of how you’re envisioning this slide or just this allocation proceeding as the year goes on, given the $160,000,000 of AAA is being added in April alone? Also sounds like originations are going to keep ramping.

And then based on what you’re seeing right now, do you have a sort of steady state mix that you’re looking at for the different percentages allocated to each asset class? Thanks.

Brian, Executive, Ladder Capital Corp.: Sure. We don’t have any game plan as to, you know, what concentrations we want in anything. We run the company from a overarching perspective of we wanna have a lot of liquidity around during, anything that’s coming, but, particularly in the volatility we’ve been seeing here. So in that scenario, you know, we generally like having triple a securities, when they’re yielding if we were to lever them. And as I said, we have not, but we’re competing with people who do leverage them.

So we have to be mindful of that. But if we were to take our $1,000,000,000 of AAA securities and borrow $900,000,000 The hundred million dollars left would probably be yielding, you know, in the twelve, thirteen, 14 area depending on what the price was that we bought the securities at. But that to me is that’s a that’s an episodic relationship. If things tighten, we will sell all of the securities. And if things really widen a lot, then we’ll buy a lot more of them.

But, for the most part, we worry we know what our financing cost is. It doesn’t move around a lot because it’s fixed rate primarily 72% of our assets. Our liabilities are fixed rate, corporate debt. So I think our cost of funds there is 5.3%. And right now, we’re not having any trouble at all, you know, accomplishing an ARB there.

So but I would expect because we’re now coming out if the country goes into a recession, and I think it might, I don’t think it’ll be a horrific one, but I think it might go into one. Commercial real estate is still coming out of a recession. And, it was in three years ago, and it’s coming out first. So, we are seeing improvement in fundamentals. And I think that follows people who are concerned about possibly losing their jobs.

There’s a lot less moving around. And so and with when people start opening their four zero one k’s at the end of the quarter, they might decide to sell their house with the 3% mortgage and, move to Florida. So we we try to get in front of those things. But I for the company, having done this through many cycles, you will see more loans on our balance sheet going forward. You will see more participation in the conduit if the yield curve steepens, and you’ll see less securities and less cash on our balance sheet.

And the reason for the less cash, don’t think we’re becoming cowboys. We have an $850,000,000 revolver.

John Nicodemus, Analyst, BTIG: Great. That’s really helpful, Brian. I I appreciate that. Then other one for me is just the origination pipeline. I know Pamela said 74 percent of what came in, in the first quarter was either multifamily or industrial.

Is it a similar sort of balance you’re seeing with what you’re looking at for the rest of the year, or is that shifting at all, especially given the recent tariff news? Thanks.

Brian, Executive, Ladder Capital Corp.: I think, Pamela, if you, wanna take that one or I’m happy to

Pamela McCormack, President, Ladder Capital Corp.: okay. Again, because of the fallout right now, it’s it, you know, it it’s all subject to change. But right now, it looks like a very similar 70% multifamily contribution on what’s under app. But if we find these one off opportunities, the barbelling, that could change a little bit. But I think, generally speaking, I would expect it to be, you know, a a majority of our originations.

John Nicodemus, Analyst, BTIG: Great. Thanks a lot, Pamela. That’s all for me.

Call Operator: There are no further questions at this time. I would like to turn the floor back over to Brian Harris for closing remarks.

Brian, Executive, Ladder Capital Corp.: Okay. Thank you, for all listening live or later and, look forward to our next call. But our business plan is unfolding the way we’ve indicated it would. We migrated, cash out of cash and T bills and into securities where they’re waiting to be called upon to head for the runway as we write loans, that that are will be higher yielding. So we look forward to having shared that with you over the following three quarters, but it looks like we’ve got ourselves in a very good position with a lot of liquidity.

And at at a time where there’s a widespread and high rates and a lack of, competitiveness in the market. So I look forward to this,

Paul, Executive, Ladder Capital Corp.: and we’ll catch you next quarter.

Call Operator: Thank you. This will conclude today’s conference. You may disconnect your lines at this time, and thank you for your participation.

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