Earnings call transcript: Ladder Capital Q3 2025 misses EPS, revenue forecasts

Ladder Capital Corp (LADR) reported its third-quarter 2025 earnings, revealing a miss on both earnings per share (EPS) and revenue forecasts. The company posted an EPS of $0.15, falling short of the anticipated $0.23, marking a negative surprise of 34.78%. Revenue also lagged, coming in at $57.44 million against a forecast of $63.05 million, resulting in an 8.9% shortfall. Despite these results, Ladder Capital’s stock experienced a modest increase, with a 1.46% rise, closing at $10.97. According to InvestingPro data, the company maintains a robust financial health score of 2.52 (rated as "Good"), with particularly strong cash flow metrics.

Key Takeaways

• Ladder Capital’s Q3 2025 EPS and revenue both missed analyst expectations.
• The company maintained a strong liquidity position with $879 million available.
• Ladder Capital’s loan portfolio continued to grow, reaching $1.9 billion.
• The firm plans to expand its loan portfolio to $3.4 billion by year-end.
• Stock price increased by 1.46% despite earnings miss.

Company Performance

Ladder Capital demonstrated resilience in its Q3 2025 performance despite the earnings miss. The company originated $511 million in new loans across 17 transactions, contributing to a loan portfolio that expanded to $1.9 billion. The firm also completed its inaugural $500 million investment-grade bond offering and successfully reduced its office loan exposure to 14% of total assets. These strategic moves underscore Ladder Capital’s focus on strengthening its financial position and competitive edge in the market.

Financial Highlights

• Revenue: $57.44 million, down from the forecast of $63.05 million.
• Earnings per share: $0.15, below the expected $0.23.
• Distributable earnings: $32.1 million, or $0.25 per share.
• Return on Equity: 8.3%.
• Dividend: $0.23 per share, yielding 8.5%.

Earnings vs. Forecast

Ladder Capital’s Q3 2025 earnings fell short of expectations, with a 34.78% negative surprise in EPS and an 8.9% revenue shortfall. This performance contrasts with previous quarters where the company often met or exceeded forecasts. The magnitude of this miss may influence investor sentiment and future market performance.

Market Reaction

Despite the earnings miss, Ladder Capital’s stock saw a 1.46% increase, closing at $10.97. This movement places the stock within its 52-week range of $9.68 to $12.10, suggesting that investors may have factored in the company’s strategic initiatives and future growth potential. The stock’s performance aligns with broader market trends, indicating a level of investor confidence. Based on InvestingPro Fair Value analysis, the stock appears slightly undervalued at current levels, with analysts setting price targets ranging from $11.50 to $13.50. The company’s strong liquidity position is evidenced by a current ratio of 11.48, significantly exceeding its short-term obligations.

Outlook & Guidance

Looking ahead, Ladder Capital is optimistic about its growth prospects. The company expects fourth-quarter loan originations to surpass Q3 levels, with a target to grow the loan portfolio to $3.4 billion. Additionally, Ladder Capital anticipates a profit margin improvement of 3-4% and plans to reinvest in higher-yielding loans, potentially enhancing its financial performance in future quarters. InvestingPro subscribers can access detailed analysis of Ladder Capital’s growth trajectory through comprehensive Pro Research Reports, which provide deep-dive analysis of the company’s financial health, market position, and growth potential among 1,400+ top US stocks.

Executive Commentary

Pamela McCormack, President of Ladder Capital, stated, "We expect fourth quarter loan originations to exceed third quarter production." Executive Brian Harris added, "Our game plan is to write more loans," emphasizing the company’s strategic focus on loan growth. Harris also noted, "Credit is very stable. We like what we’re seeing," reflecting confidence in the company’s credit quality and market positioning.

Risks and Challenges

• Economic Uncertainty: Potential fluctuations in interest rates could impact loan demand and profitability.
• Market Competition: Increased competition in the loan market may pressure margins.
• Regulatory Changes: Changes in financial regulations could affect operational flexibility.
• Office Loan Exposure: Although reduced, office loan exposure remains a potential risk.
• Macroeconomic Factors: Broader economic conditions could influence the company’s growth trajectory.

Q&A

During the earnings call, analysts inquired about Ladder Capital’s investment opportunities in office and real estate equity, the company’s loan origination strategy, and market positioning. Executives addressed these concerns by highlighting their focus on less competitive loan markets and the potential for securities fund expansion, underscoring their strategic initiatives for sustained growth.

Full transcript - Ladder Capital Corp Class A (LADR) Q3 2025:

Conference Operator/Moderator: Good morning and welcome to Ladder Capital Corp’s earnings call for the third quarter of 2025. As a reminder, today’s call is being recorded. This morning, Ladder released its financial results for the quarter ended September 30, 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-K 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-K 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 third quarter, Ladder generated distributable earnings of $32.1 million or $0.25 per share, delivering a return on equity of 8.3% with modest adjusted leverage of 1.7 times. Credit performance remained stable, and the quarter was marked by three notable developments: a significant acceleration in loan originations, continued progress in reducing office loan exposure, and the successful closing of our inaugural investment-grade bond offering. These results reflect our disciplined business model and conservative balance sheet philosophy, positioning Ladder for continued earnings growth and greater capacity to capitalize on investment opportunities across market cycles. Loan portfolio activity. Origination activity accelerated in the third quarter, with $511 million of new loans across 17 transactions at a weighted average spread of 279 basis points, our highest quarterly origination volume in over three years.

The spread reflects the mix of assets originated, which were predominantly multifamily and industrial, consistent with our focus on stable income-producing collateral. Net of $129 million in paydowns, the loan portfolio grew by approximately $354 million to $1.9 billion, now representing 40% of total assets. Year to date, we originated over $1 billion in new loans, with an additional $500 million under application and in closing. Notably, the full payoff of our third largest office loan, a $63 million loan secured by an office property in Birmingham, Alabama, reduced office loan exposure to $652 million, or 14% of total assets. Approximately 50% of the remaining office loan portfolio consists of two well-performing loans secured by the Citigroup Tower in downtown Miami and the Aventura Corporate Center in Aventura, Florida. Securities portfolio. As of September 30, our securities portfolio totaled $1.9 billion, representing 40% of total assets.

During the quarter, we acquired $365 million in AAA-rated securities, received $164 million in paydowns through amortization, and sold $257 million of securities, generating a $2 million net gain. Paydowns and sales exceeded purchases, resulting in a modest net reduction in securities holdings this quarter. This reflects our disciplined approach to capital allocation, as we did not replace certain securities that ran off, consistent with our view that spreads may widen in the mortgage market given recent volatility and the Federal Reserve’s ongoing runoff of mortgage-backed securities. Consistent carry income from our real estate portfolio. Our $960 million real estate portfolio generated $15.1 million in net operating income during the third quarter. The portfolio primarily consists of net lease properties with long-term leases to investment-grade rated tenants and continues to deliver stable, predictable income. Capital structure and liquidity.

During the third quarter, we closed our inaugural $500 million five-year investment-grade unsecured bond offering at a rate of 5.5%, representing a 167 basis point spread over the benchmark Treasury. This was the tightest new issuance spread in Ladder’s history. The offering was met with strong demand, and the bonds have since traded tighter in the secondary market, reaching spreads as low as 120 basis points. This transaction validates the strength of our conservative balance sheet philosophy and disciplined business model. As one of our premier debt capital markets bankers noted, it also firmly planted Ladder’s flag in the investment-grade market. The continued tightening of our bonds positions us to lower borrowing costs, stronger execution, and improved shareholder returns. As of quarter end, 75% of Ladder’s debt consisted of unsecured corporate bonds, and 84% of our balance sheet assets remain unencumbered.

We maintain $879 million in liquidity, including $49 million in cash and $830 million of undrawn capacity on our unsecured revolver, which provides same-day liquidity at highly competitive rates. Outlook. Ladder’s unique investment-grade balance sheet, disciplined use of unsecured debt, and robust origination platform positions us to capitalize on investment opportunities while maintaining prudent credit risk management. We expect fourth quarter loan originations to exceed third quarter production. Recent credit rating upgrades and our successful inaugural investment-grade bond issuance have lowered our cost of debt and expanded our access to a deeper, more stable capital base that remains consistently available across market cycles. Over time, we expect our strong balance sheet, modest leverage, and reliable funding profile to position Ladder alongside a broader set of high-quality peers, including equity REITs, rather than solely within the commercial mortgage REIT space.

As investors increasingly recognize the strength of our senior secured investment strategy and conservative capital structure, we believe our equity valuation will reflect this alignment. Combined with our disciplined credit risk management and ability to deploy capital with speed and certainty, these attributes reinforce our capacity to deliver strong, stable returns for shareholders across market cycles. With that, I’ll turn the call over to Paul.

Paul, Financial Executive, Ladder Capital Corp: Thank you, Pamela. In the third quarter of 2025, Ladder generated $32.1 million of distributable earnings, or $0.25 per share, achieving a return on average equity of 8.3%. In the third quarter, we closed our inaugural investment-grade bond offering of $500 million five-year bonds at 5.5%. The proceeds were partially used to call the remaining $285 million of bonds that were maturing in October and fund loan originations. As of quarter end, $2.2 billion, or 75% of our debt, is comprised of unsecured corporate bonds across four issuances, with a weighted average remaining term of four years and a weighted average coupon of 5.3%. Our next corporate bond maturity is now in 2027.

The offering strengthened our balance sheet and affirmed our commitment to the investment-grade bond market as our primary source of capital. We are encouraged by the bond’s strong trading performance in the secondary market and believe our bonds offer attractive relative value to fixed-income investors, with meat on the bones and tightened further as the market continues to recognize Ladder’s distinct longstanding investment strategy, anchored by conservative lending attachment points, AAA-rated securities, and high-quality real estate equity investments. As of September 30, 2025, Ladder’s liquidity was $879 million, comprised of cash and cash equivalents, and our undrawn capacity on our $850 million unsecured revolver. Total gross leverage was 2.0 times as of quarter end, below our target leverage range. Overall, our balance sheet remains strong and primes for continued growth as our investment pipeline continues to build.

As of September 30, 2025, our unencumbered asset pool stood at $3.9 billion, or 84% of total assets. 88% of this unencumbered asset pool is comprised of first mortgage loans, investment-grade securities, and unrestricted cash and cash equivalents. As of September 30, 2025, Ladder’s undepreciated book value per share was $13.71, which is net of a $0.41 per share CFO reserve established. In the third quarter of 2025, we repurchased $1.9 million of common stock, or 171,000 shares, at a weighted average price of $11.04 per share. Year to date in 2025, we’ve repurchased $9.3 million of common stock, or 877,000 shares, at a weighted average price of $10.60 per share. As of September 30, 2025, $91.5 million remains outstanding on Ladder’s stock repurchase program. In the third quarter, Ladder declared a $0.23 per share dividend, which was paid on October 15th, 2025.

As of today, our dividend yield is approximately 8.5%, with a stock price that we believe has been pulled down by the broader market concerns around private credit. We’ll note that our dividend remains stable, and our asset base continues to turn over into freshly originated loans, AAA securities, and high-quality real estate equity investments. With a stable earnings base complemented by our investment-grade capital structure, we believe there’s ample room for our dividend yield to tighten, specifically when compared to other investment-grade REITs with similar credit ratings to Ladder. We continue to expand our investor outreach efforts now as an investment-grade company, and we look forward to further educating the market on our story. Building on Pamela’s overview of our performance, I’ll highlight a few additional insights to how each of our segments fared in the third quarter.

As of September 30th, 2025, our loan portfolio totaled $1.9 billion, with a weighted average yield of approximately 8.2%. As of quarter end, we had three loans on non-accrual, totaling $123 million, or 2.6% of total assets. In the third quarter, we resolved two non-accrual loans, first through the payoff at par of a $16 million loan through the sale by a sponsor of two mixed-use properties in New York City, and the second via foreclosure of a loan collateralized by an office property in Maryland with a carrying value of $22.7 million. No new loans were added to non-accrual in the third quarter. Our CFO reserve remains steady at $52 million, or $0.41 per share. We believe this reserve is adequate to cover any potential losses in our loan portfolio, including consideration of the ongoing macroeconomic shifts in the U.S. and global economy.

As of September 30th, 2025, our securities portfolio totaled $1.9 billion, with a weighted average yield of 5.7%, of which 99% was investment-grade and 96% was AAA-rated, underscoring the portfolio’s high credit quality. As of quarter end, approximately 80% of the portfolio was almost entirely AAA securities, unencumbered and readily financeable, providing an additional source of liquidity complementing our same-day liquidity of $879 million. In the third quarter, our $960 million real estate segment continued to generate stable net operating income. The portfolio includes 149 net lease properties, primarily investment-grade credits committed to long-term leases, with an average lease term of seven years remaining. For further information on Ladder’s third quarter 2025 operating results, refer to our earnings supplement presentation, which is available on our website, and our quarterly report on Form 10-Q, which we expect to file in the coming days.

With that, I will turn the call over to Brian.

Brian Harris, Executive, Ladder Capital Corp: Thanks, Paul. The third quarter was a particularly gratifying one, highlighted by the successful completion of our first corporate unsecured issuance as an investment-grade issuer. We now have access to a much larger investor base in the investment-grade market than the high-yield market where we had issued our prior seven offerings over the last 13 years. Having access to this larger pool of capital should allow us to further optimize our liability management in the years to come. We believe that by being a regular issuer in the investment-grade corporate bond market, we will be able to lower our overall interest expense to a greater extent than what we could expect in the secured repo and high-yield markets.

We prioritized getting to investment-grade ratings several years ago, so having that distinction today from two of the three major rating agencies is very satisfying, and we plan to maintain or improve our ratings over time. While Ladder has historically been grouped into a peer group of other commercial mortgage REITs, we believe we are more properly comped against other investment-grade rated property REITs who finance their operations like we do, primarily with the use of corporate unsecured debt and large unsecured revolvers. If we succeed in curating an equity investor base that views us more in line with investment-grade property REITs, we think our stock price will start to reflect a lower required dividend yield, more in line with how these investment-grade property REITs with lower leverage are valued.

In the fourth quarter and beyond, we expect to continue adding to our inventory of higher yielding balance sheet loans while staying nimble enough to pivot into securities acquisitions during periods of high volatility, when these investments provide extraordinary opportunities to add safer, more liquid investments as market turbulence flares up. We are hopeful that the yield curve will steepen much more next year as the Fed makes good on market predictions of several cuts to the Fed funds rate. This, in turn, should pave the way for more regular contributions to securitizations. We are always on the lookout for opportunities to own more real estate, but we expect most of the lift to earnings next year to come from organic growth of our loan portfolio.

We’re expecting to finish this transformational year on a positive note, as market conditions do appear to favor our business model as we head into 2026. We can take some questions now.

Conference Operator/Moderator: Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment, please, while we pull for questions. Thank you. Our first question comes from a line of Jade Rahmani with Keefe, Bruyette & Woods. Please proceed with your question.

Jade Rahmani, Analyst, Keefe, Bruyette & Woods: Thank you very much. I’m interested to know if you’re doing anything differently on the origination side from prior to the investment-grade rating. Perhaps that has opened you up to deals that are closer to stabilization or perhaps larger in size. Clearly, the investment-grade rating might give you a competitive advantage over non-bank lenders. If you could provide any color on that, it’d be helpful.

Brian Harris, Executive, Ladder Capital Corp: Sure. Thanks, Jade. I would say we’re looking at some slightly larger transactions, and it’s just a lot more stability around it, financing it this way. You don’t have to go about trying to figure out if an individual lender will see the asset the same way you do. I wouldn’t call it anything wholesale in difference. Slightly larger, yes. Everything is a little bit more profitable when your cost of funds go down. For the most part, if the one real change that I see in this part of the cycle versus the last time is the assets on which we’re lending are of much, much better quality than the garden apartment buildings and older warehouse properties. We seem to, when I take a look at the assets that we’re lending on, they’re really newly built class A apartment complexes, resort style almost.

A lot of the industrial portfolios are also quite new, as a result of all the onshoring that took place.

Jade Rahmani, Analyst, Keefe, Bruyette & Woods: On the origination side, I noticed a difference between fundings and commitments upfront that seemed, at least from the outside, a little larger than historically. Were there any construction loans in there or any large CapEx projects in those deals? If you could provide any color.

Brian Harris, Executive, Ladder Capital Corp: I wouldn’t say as a rule, but we generally don’t write construction loans. There are no construction loans in that portfolio that you’re looking at. As far as heavy CapEx work, if you’re gravitating towards a slightly wider spread than maybe you’re expecting, I don’t think it’s as a result of a higher construction component or a lot of TI hammer swinging. It really is just, we’re just getting a little bit better, I think. The portfolio doesn’t look like it’s changing meaningfully. Right now, most of the assets are industrial and multifamily. I’m not sure it’ll stay that way. We haven’t been avoiding hotels. We put one under AF recently, but we just haven’t run across too many of them. As I said, we try to focus more importantly, rather than property types, on acquisitions where the borrower is buying something usually at a reset basis.

Some of these resets are quite remarkable. As opposed to cash-out refinances, the only real cash-out refinances that we’re doing is if a guy is coming off a construction loan on an apartment building and he’s only 50% leased now. Those oftentimes have 30% or 40% equity in them. Sometimes there’s a cash-out refi because the property is now complete and half leased. Other than that, it’s pretty straight down the middle lending on apartments and industrial properties.

Jade Rahmani, Analyst, Keefe, Bruyette & Woods: Thanks a lot.

Conference Operator/Moderator: Our next question comes from a line of Steve Delaney with Citizens JMP Securities. Please proceed with your question.

Steve Delaney, Analyst, Citizens JMP Securities: Good morning, everyone, and congrats on the strong quarter. I’m curious, let’s start with lending. You seem to like the market. You have plenty of capacity. Let’s talk about just the $1.9 billion rather than the $5 billion overall portfolio, focusing on the loan portfolio because you appear to be increasingly active there. Do you see, looking at that portfolio, who to look at over the next year? Do you see further growth and, you know, meaningful growth in that $1.9 billion loan portfolio? Can you give us some idea of a range with your current capital base, how large the loan portfolio might be able to grow? Thank you.

Brian Harris, Executive, Ladder Capital Corp: Sure. Thanks, Steve. Let’s start with capital first because if you remember, in the second half of 2024, we took in over $1 billion in loan payoffs. While we began originating loans more frequently, we were not originating at that pace. What was happening is each quarter, the loan book would get a little bit smaller. This is really the first quarter in a while where we’ve originated more than has paid off. We expect that to continue. The fourth quarter is off to a very good start. I would expect, or as I said originally, the organic side of growth will come from just building up the bridge book. I think that’s the place where we’re focused right now. We’re pretty happy with where spreads are.

They’re a little bit less competitive than they were, really, I would say just a couple of months ago, which tends to happen after you hit the midpoint of the year. I would expect that $1.9 billion portfolio to go up by a billion dollars in all likelihood. Maybe I would, if I had to take the over-under on that billion, I would take the over. We’re quite active right now, and business begets business. I think that when we had a pretty strong origination quarter, that gets noticed by borrowers as well as brokers, and the phone rings a little bit more. As Pamela mentioned, we have over $500 million in loans under application right now.

You never really know how many of these are going to close depending on what happens with the volatility sometimes coming out of the political picture, as well as the geopolitical side of things. Generally, I would expect that we, I think we had that loan book up to around $3.4 billion a couple of years ago, and I would like to get back there. I think that’ll come from a few places. One, we have a larger revolver that’s mostly undrawn. We have a lot of securities. Securities are paying off at a much more rapid clip than loans right now. I think that’s a testimony to the payoffs that have been coming in and the capital markets becoming more welcoming to single asset transactions. As you pay down those AAA-rated in a CLO, the financing becomes quite unpopular.

They’ve been calling a lot of those bonds, and we’ll expect that to continue. I think that our securities portfolio will, through attrition, pay off, but also we will sell them. As we said in the quarter, we sold a little over $250 million. We own over, I think we own over $2 billion today. I would expect that number to go down, but I would expect the loan inventory book to go up.

Steve Delaney, Analyst, Citizens JMP Securities: That’s really helpful color, Brian. Thank you. In terms of, especially the comparison, you mentioned the property REITs and their valuation is something that, you know, you would be envious of, you know, whether it’s on a PE or a dividend yield. Looking at the ROE at 8.3%, I would say it kind of strikes me as being solid, but, you know, in terms of valuation and where the stock is trading relative to book, that, you know, some improvement to that, maybe in the 9 to 10% range might be, you know, very beneficial to, you know, the stock price, and therefore, you know, your valuation relative to book. Is improving the ROE, but in a prudent manner, part of your vision for the next one to two years? Do you think the strategy you have in place will necessarily take your ROE some higher? Thanks.

Brian Harris, Executive, Ladder Capital Corp: I would say yes to all of those parts of that question. The game plan is to write more loans, and we’ll get through the cash component of our liquidity. As you remember, we had a lot of T-bills when T-bills were yielding 5.5%, and that kept us away from very tight mortgage loans, because if it wasn’t at the margin worth sacrificing liquidity and safety of the securities, we really didn’t do it. Now with the Fed cutting rates and promising to cut further, we have a nice mix of floating rate and fixed rate liabilities. We would expect our cost of funds to be going down. That revolver, I’ll remind you, is now priced at SOFR plus 125.

If I am of the opinion the Fed is going to cut rates 100 basis points, usually probably bridging over Powell’s last few stands as well as the next Fed official that comes in. If that happens, you get SOFR down around 3%. We can borrow unsecured at 4.25% at that point. That should all bode well. We’ve got floors in our bridge loan portfolio, up around 6%, 6.25%. The rates we’re able to write loans at these days have actually gone up, not down, in the last quarter anyway. We’re going to continue doing that. After we get through the cash component of our liquidity, we’ll then begin to sell down or pay down the securities.

The way it comes out on paper, we’re hoping to add $1 billion to $2 billion of assets net on the balance sheet, and we’re hoping to pick up 3% to 4% of profit margin. If we can take a security that we’re earning 5.5% on and pay that security off, and then redistribute, reinvest that money into a loan portfolio that’s earning 8.5%, we think that bodes very well for dividend, ROE, as well as earnings. It’s not a hard ping-pong ball to follow. That is going to be what we’re going to do. It’s what we’ve been saying we’re going to do. The one thing that has really masked all the work that we’ve done has been the very rapid pace of payoffs.

Those are high-yielding instruments, and we hate to see them go, but when they’ve been around for a little bit past their expiration date, you do want them to pay off, and we’ve been pretty successful at that. Credit is very stable. We like what we’re seeing. The quality is good. The borrowers are good. They’ve been patient. They’re not in difficult financial binds as a result of owning too many over-levered properties. It looks strong. You know, you got the stock market at all-time highs, spreads low, rates low, Fed cutting. These are all good conditions on the weather map for a successful lending business at Ladder.

Steve Delaney, Analyst, Citizens JMP Securities: Great. Thank you, Brian, for all the helpful comments.

Conference Operator/Moderator: As a reminder, if you would like to ask a question, press star one on your telephone keypad. Our next question comes from the line of Tom Catherwood. Please proceed with your question.

Tom Catherwood, Analyst: Thanks, and good morning, everyone. Brian, I just wanted to go back to something that you said in response to Steve’s question, and I want to make sure I heard it right. Did you mention that I thought you said rates we can get on loans have gone up, not down. Did I hear that right?

Brian Harris, Executive, Ladder Capital Corp: The ones we’re looking at, yes.

Tom Catherwood, Analyst: I think they’re...

Brian Harris, Executive, Ladder Capital Corp: You are seeing credit. I mean, I’m not immune to looking at corporate spreads, credit spreads, mortgage spreads, but there’s a couple of things going on more recently in the last, literally the last 60 days, I would say. The Fed is letting the mortgage-backed securities portfolio run off. The agency securities market is actually not as tight as you would think on spread, and the reason why is the Fed is effectively letting $30 billion roll off. I think it’s $30 billion. I’m not a Fed watcher, so if I have that wrong, please don’t send me a bunch of emails.

After April, when the tariff talks started and now the back and forths that go on, you know, the commercial sector was, as it always does, and I’ve said this to you probably several times, in January, every year we go to a convention down in Miami called Crepsi. Everyone is a bull. Everyone comes out. It’s going to be the best year ever. They put a carry trade on until the middle of June. Around the middle of June, they think maybe we pay too much for these things, and they start to sell them, and they’re less aggressive. At Ladder, we have found a nice little seam, I think, in loan sizes. We traditionally like loans at $25 to $30 million and on middle-market lenders by choice. However, we’ve dabbled occasionally in larger loans. The banks are not really writing loans in the $100 million range.

That’s a little too small for them to put on their balance sheet and then try to securitize. They’ll write a billion-dollar loan with a consortium of banks, but a $100 million loan is under their radar, and $100 million is probably a little too big for a lot of the CLO issuers that are out there that we mainly compete with. We are actually very happy in our $50 to $100 million range right now, and we’ll try to stay there. Do not think that we’ve changed our stripes if we start picking up loans that are a little larger than average. We’re still doing plenty of smaller loans too. The $100 million type loan is a better asset. It’s newer. It’s got better financial characteristics to it. It is higher rate because the competitive landscape is just not as bad as it was.

Keep in mind, I’m talking about the last 60 to 90 days. The first half of the year was very, very tight, and we were not originating a lot for that reason. In fact, we were buying a lot of securities. Another good proxy, Tom, if you want to take a look at it, is the CLO market. There are a lot of CLOs coming to market, and they’re in the 145, 155, 160 area for AAA-rated. That’s wider than they were just a few months ago. It’s not extraordinarily wider, but you’re also seeing the VIX tick up. I think it was around 25 the other day after being at 15 for a month. When you see the VIX ticking up like that and all the volatility around the rhetoric and the political circles, we’re able to find things that are pretty attractive.

I also think we have a reputation as being very reliable. As we get to the year-end here, we tend to do better in the second half of the year than the first half of the year when it comes to production. That has been something that has followed me around through my whole career. I think it has more to do with seasonality and what happens. As you know, insurance companies allocate money into fixed income. Usually, by June or July, they’re fully invested. Even that competitive force kind of backs off a little bit too. We actually prefer to fatten up going into the end of the year.

Tom Catherwood, Analyst: Got it. Really appreciate that answer, Brian. If I think about sources and uses, and again, I know you laid it out before, you know, how you think about funding things, if the spreads in securities are somewhat widening and the revolver is priced at S plus 125, wouldn’t it make sense to just put everything on the revolver and then term it out with unsecured once you get to $400 million, $500 million and just keep wash, rinse, repeat that? Do you think selling down securities along with using the revolver gives some other benefit?

Brian Harris, Executive, Ladder Capital Corp: I think it’s almost like we have several companies at Ladder with the products that we dabble in. On the floating rate side, on the security side, if you take a look at the rating agency REITs, the agency buyers like Agenci and Analy and a couple of others, these guys are throwing off dividends of 14, 15%. They’re levered, I don’t know, seven, eight times in many cases. That’s way too hot for us on leverage, but with government-guaranteed paper, with a lot of duration, I think your risk is in the duration side of that. At where we are, these securities, if we levered them up and easily can, the financing cost is around SOFR plus 50 on a AAA. If we’re buying things at 150, you can figure out that there’s a pretty good spread in there.

We can lever those up to about a 15, but it’s a lot of leverage. The road we’re on is not to just have a low cost of funds so we can lever things up. The game plan is to focus more and more in the years ahead on unsecured debt that we extend. The change at Ladder versus before we were investment-grade, we would normally be thinking about issuing another bond here because we’re growing rapidly. We’re going to need more capital. We’ve got sources of ability to get capital, but we might think about that. If you really think that the Fed is going to cut rates by 75 or 100 basis points, it would not go out and do a bond deal right now because that revolver is going to get down to a low 4% rate. That’s what we think will happen.

It doesn’t have to happen, but if it does, that’s probably the first thing we’ll do is draw that. We don’t want to draw all of that because that’s not what the agencies and investors want to see on the bond side. My guess is we’ll probably, I don’t think securities were ever meant to be a long-term hold for us. They’re kind of a parking spot for us while we’re waiting for better opportunities to combine the loan side. I think our patience has been rewarded because I think Paul mentioned that our spread on the loans we wrote in the $500 million or so was around 279. I think the spread on what’s coming in the fourth quarter is going to be wider than that.

Tom Catherwood, Analyst: Got it. All right. That makes sense. That’s it for me. Thanks, everyone.

Conference Operator/Moderator: Our next question is a follow-up from Jade Rahmani with Keefe, Bruyette & Woods. Please proceed with your question.

Jade Rahmani, Analyst, Keefe, Bruyette & Woods: Thanks. Just curious if you would contemplate launching a securities fund. If you can deliver 15% type returns with leverage, you could put the leverage in the fund, not on Ladder’s balance sheet, and create value for investors looking for that type of return profile. Of course, comparing to residential mortgage securities, commercial has a lot more predictable duration. You don’t have the prepayment volatility that the agency REITs deal with.

Brian Harris, Executive, Ladder Capital Corp: Yeah. I mean, we’ve done that before. When we first opened, we ran a few investment portfolios, even some individuals that we knew, because sometimes securities get cheap, but most people with a first and last name don’t know how to go buy them. Oftentimes we’ll get a call and say, "Why don’t you buy these?" We have an asset that’s yielding, you know, as I said, a levered yield of around 15%, I think. That’s generally attractive, but it does come with a lot of leverage. We’ve historically looked, we’ve looked at that. We’ve looked at stapling on a residential mortgage arm of things because we all understand that business also, but haven’t done it. The last thing we’ve looked at too is possibly spinning off our triple net portfolio because we don’t get much for that in valuation.

2026 is going to be a year about, you know, really fine-tuning the columns and what the right cap rate should be on those things. We have an internal manager that has no value, apparently. There are lots of things we can do now around the edges, but the first step was going to be becoming an investment-grade company. We still like the, given where we are in the cycle right now, we like the commercial mortgage business better than the residential side. The residential side could get very interesting, though, not from a loan side, but from a standpoint of if there’s too much supply due to the absence of the Fed. Those are very attractive, but they, as I said, do have a lot of duration on them.

We’re probably, we’re agnostic as to holding onto things that yield 15% or selling things that make one to two points and then recycling the money. I think that is an option open to us right now, as you saw in the small sales that we did in the third quarter.

Jade Rahmani, Analyst, Keefe, Bruyette & Woods: The New York office equity investment you made, how are you feeling about that? Is that a long-term hold? It looks like it was pretty prescient in terms of timing, but could you also remind us the size of that?

Brian Harris, Executive, Ladder Capital Corp: Sure. Our investment, we were a minority participant in the equity on that, but we may very well get involved in the debt side of that situation later on. We have a loan from an insurance company for now. That building, 783 Third Avenue, by the way, if anybody cares, we put in a $13 or $14 million investment. At the time, the building was about 50% occupied. I don’t know where we are on free rent, but I do believe we’ve now, the building has leased over 90% in just a short, under a year and a half. We do like that one. That’s a very high-quality building. Third Avenue is not known for high-quality buildings, but a lot of the lower quality is becoming residential. A lot of those poorly occupied office buildings that are becoming residential, those tenants are looking for space.

The real benefit we picked up was between JP Morgan and Citadel, Park Avenue is being, you know, just gobbled up on space. A lot of those tenants are also moving. We thought we were going to get Third Avenue tenants looking for an address. We wound up getting Park Avenue tenants that were being displaced by JP Morgan’s expansion. All going well. I wish we had done more of that. Do we like that? We’re looking at another situation right now of larger size than the one we did at 783 Third Avenue. We like it. These transportation hubs in New York City tend to do better. They come out a little bit quicker, especially when, you know, people have concerns around safety on mass transportation. I think that situation has largely corrected itself with the return of people. Our offices are full.

We haven’t ordered anybody to be in five days a week, but most of them are. We generally like pockets of the office market, but we do understand the obsolescence associated with, you know, some of the older ones. We like where we are. We’re happy to do more of those investments. That long-term hold is the last part of your questionnaire. I would say we’re going to hold that for a while. Yeah.

Jade Rahmani, Analyst, Keefe, Bruyette & Woods: Okay. Great. Thanks so much.

Conference Operator/Moderator: We have no further questions at this time. Mr. Harris, I’d like to turn the floor back over to you for closing comments.

Brian Harris, Executive, Ladder Capital Corp: Thanks, everybody, for listening and those who dial in afterwards. Good year. 2025, we’re in the fourth quarter. The reason I say that now is because we’re not going to talk again until after the new year comes and we get through the audited financials. A lot of this is just falling into place the way we largely expected it. The only real surprises were the rapid paydowns that took place in the second half of last year, but we’re catching up quickly. We’ve had an inflection point here in the last quarter where we originated more than paid off, and we think that is going to be a consistent theme over the next four or five quarters. Thank you for tuning in, and we’ll catch up with you after the new year.

Conference Operator/Moderator: Ladies and gentlemen, this does conclude today’s teleconference. You may disconnect your lines at this time. Thank you for your participation and have a wonderful day.

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