Financial
Highlights
GAAP disclosures:
- GAAP income before taxes of $48.4
million for the fourth quarter and $133.6 million for the year
ended December 31, 2017
- GAAP diluted EPS of $0.40 for the
fourth quarter and $1.13 for the year ended December 31,
2017
- After-tax GAAP return on average
equity of 12.2% for the fourth quarter and 8.6% for the year ended
December 31, 2017
- GAAP book value per share of $13.19
at December 31, 2017
Core (non-GAAP) disclosures:
- Core earnings of $60.4 million for
the fourth quarter and $178.8 million for the year ended
December 31, 2017
- Core EPS of $0.47 for the fourth
quarter and $1.54 for the year ended December 31,
2017
- After-tax core return on average
equity of 13.9% for the fourth quarter and 11.5% for the year ended
December 31, 2017
- Undepreciated book value per share
of $14.60 at December 31, 2017
Operating and financing statistics:
- Increased the quarterly cash
dividend rate for the third time in three years to $0.315/share of
Class A common stock in the fourth quarter to reflect the ongoing
growth trends in recurring interest and operating lease income,
bringing total dividends to $1.215/share of Class A common stock in
2017
- Announced today the declaration of a
first quarter 2018 dividend of $0.315/share of Class A common
stock
- Originated $1.1 billion of
commercial mortgage loans in the fourth quarter resulting in total
originations of $2.9 billion in 2017, composed of $1.5 billion of
mortgage loans held for sale and $1.4 billion of mortgage loans
held for investment
- Made $6.3 million of net leased and
other equity investments in the fourth quarter resulting in total
net leased and other equity investments of $236.9 million in
2017
- Contributed $851.1 million of loans
to 6 securitization transactions in the fourth quarter resulting in
a total of $1.5 billion of loans contributed to 7 securitization
transactions in 2017
- Executed 2 CLO securitization
transactions in the fourth quarter resulting in $689.6 million of
non-recourse, non-mark-to-market, matched-term funding
- Repurchased 189,897 shares of Class
A common stock at an average price of $13.61/share; to date, Ladder
has utilized $8.2 million of the $50.0 million stock repurchase
authority previously approved by the Board of Directors
Ladder Capital Corp (NYSE:LADR) (“we,” “Ladder,” or the
“Company”) today announced operating results for the quarter and
year ended December 31, 2017. GAAP income before taxes for the
year ended December 31, 2017 was $133.6 million compared to
$120.0 million for the year ended December 31, 2016. GAAP
income before taxes for the three months ended December 31,
2017 was $48.4 million compared to $72.4 million for the three
months ended December 31, 2016. The 2017 results reflect
higher gains on sales of loans and securities as well as increased
operating lease income, offset by lower gains on sales of real
estate. Diluted EPS for the three months and year ended
December 31, 2017 was $0.40 and $1.13, respectively, compared
to $0.63 and $1.06 for the three months and year ended
December 31, 2016, respectively. After-tax GAAP return on
average equity was 12.2% in the fourth quarter of 2017.
Core earnings, a non-GAAP financial measure, was $60.4 million
for the fourth quarter of 2017, compared to $44.6 million earned in
the fourth quarter of 2016. For the year ended December 31,
2017, core earnings was $178.8 million compared to $158.2 million
for 2016. The results reflect higher gains on sales of loans and
securities as well as an increase in operating lease income. We
believe core earnings, which adjusts GAAP income before taxes for
certain non-cash expenses, unrecognized derivative results, and the
economic gains on securitization transactions not recognized for
GAAP accounting for which risk has substantially transferred, is
useful in evaluating our earnings from operations across reporting
periods. Core EPS, a non-GAAP financial measure, was $0.47 for the
fourth quarter of 2017 and $1.54 for the year ended
December 31, 2017, compared to $0.37 and $1.48 for the three
months and year ended December 31, 2016, respectively.
Ladder Capital Corp today announced the declaration by its Board
of Directors of a first quarter 2018 dividend of $0.315 per share
of Class A common stock. The cash dividend is payable on
April 2, 2018 to stockholders of record as of the close of
business on March 12, 2018.
Portfolio Overview
The following table summarizes the book value of our investment
portfolio as of the dates indicated below ($ in thousands):
December 31, 2017 December
31, 2016 Loans Balance sheet
loans: Balance sheet first mortgage loans $ 3,123,268
51.9
% $ 1,832,626 32.9 % Other commercial real estate-related loans
159,194 2.6 % 167,469 3.0 % Provision for loan losses (4,000 ) (0.1
)% (4,000 ) (0.1 )% Total balance sheet loans 3,278,462
54.4
% 1,996,095 35.8 % Conduit first mortgage loans 230,180 3.8
% 357,882 6.4 % Total loans 3,508,642
58.2
% 2,353,977 42.2 %
Securities CMBS investments
1,066,570
17.7 % 2,043,566 36.6 % U.S. Agency Securities investments
39,947
0.7 % 57,381 1.1 % Total securities
1,106,517
18.4 % 2,100,947 37.7 %
Real Estate Real estate and related
lease intangibles, net 1,032,041 17.1 % 822,338 14.7
% Total real estate 1,032,041 17.1 % 822,338 14.7 %
Other
Investments Investments in unconsolidated joint ventures 35,441
0.6 % 34,025 0.6 % FHLB stock 77,915 1.3 % 77,915 1.4
% Total other investments 113,356 1.9 % 111,940 2.0 %
Total investments
5,760,556
95.6
% 5,389,202 96.6 % Cash, cash equivalents and restricted cash
182,683 3.0 % 64,017 1.1 % Other assets 82,376 1.4 % 125,118
2.3 %
Total assets $
6,025,615
100.0
% $ 5,578,337 100.0 %
Note: CMBS investments and U.S. Agency Securities are carried at
fair value.
Liquidity and Capital
Resources
During the fourth quarter of 2017, we consummated two
securitizations of floating-rate commercial mortgage loans through
a static collateralized loan obligation (“CLO”) structure. In the
first CLO transaction, we contributed over $456.9 million of
balance sheet loans and retained an approximately 18.5% interest,
and in the second CLO transaction, we contributed over $431.5
million of balance sheet loans and retained an approximately 25.0%
interest. Certain of the loans contributed to the CLOs have future
funding components that are retained by a subsidiary of ours in the
form of a participation interest or separate note. However,
for a limited period of time, to the extent loans in the CLOs are
repaid, the CLO trusts may acquire portions of the future fundings
from our affiliate.
On October 27, 2017, we amended our syndicated revolving credit
facility to increase the maximum funding capacity to $241.4
million.
The following table summarizes our debt obligations as of the
following dates ($ in thousands):
December 31, 2017 December
31, 2016 Committed loan repurchase facilities $ 398,653
$ 567,163 Committed securities repurchase facility — 228,317
Uncommitted securities repurchase facilities 74,757 311,705
Total repurchase facilities 473,410 1,107,185 Revolving credit
facility — 25,000 Mortgage loan financing 692,696 590,106 CLO
debt(1) 688,479 — Participation financing - mortgage loan
receivable
3,107
— Borrowings from the FHLB 1,370,000 1,660,000 Senior unsecured
notes(2) 1,152,134 559,847
Total debt obligations
$
4,379,826
$ 3,942,138 (1) Presented
net of unamortized debt issuance costs of $6.0 million as of
December 31, 2017. (2) Presented net of unamortized debt issuance
costs of $14.1 million and $4.0 million at December 31, 2017 and
December 31, 2016, respectively.
Conference Call and
Webcast
We will host a conference call on Tuesday, February 27,
2018 at 5:00 p.m. Eastern Time to discuss fourth quarter and year
end 2017 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 Tuesday,
February 27, 2018 through midnight Tuesday, March 13, 2018. To
access the replay, please call (844) 512-2921 domestic or (412)
317-6671 international, access code 13675098. The conference call
will also be webcast though a link on Ladder Capital Corp’s
Investor Relations website at ir.laddercapital.com. A web-based
archive of the conference call will also be available at the above
website.
Ladder Capital CorpConsolidated
Balance Sheets(Dollars in Thousands)
December 31, 2017 (1)
December 31, 2016 Assets Cash and cash
equivalents $ 76,674 $ 44,615 Restricted cash 106,009 44,813
Mortgage loan receivables held for investment, net, at amortized
cost: Mortgage loans held by consolidated subsidiaries 3,282,462
2,000,095 Provision for loan losses (4,000 ) (4,000 ) Mortgage loan
receivables held for sale 230,180 357,882 Real estate securities
1,106,517 2,100,947 Real estate and related lease intangibles, net
1,032,041 822,338 Investments in unconsolidated joint ventures
35,441 34,025 FHLB stock 77,915 77,915 Derivative instruments 888
5,018 Due from brokers — 10 Accrued interest receivable 25,875
24,439 Other assets 55,613 70,240
Total assets
$ 6,025,615 $ 5,578,337
Liabilities and Equity Liabilities Debt obligations,
net: Secured and unsecured debt obligations $ 4,379,826 $ 3,942,138
Due to brokers 14 394 Derivative instruments 2,606 3,446 Amount
payable pursuant to tax receivable agreement 1,656 2,520 Dividends
payable 30,528 24,682 Accrued expenses 59,619 66,597 Other
liabilities 63,220 29,006
Total liabilities
4,537,469 4,068,783 Commitments and
contingencies — —
Equity Class A common stock, par value
$0.001 per share, 600,000,000 shares authorized; 96,258,847 and
72,681,218 shares issued and 93,641,260 and 71,586,170 shares
outstanding 94 72 Class B common stock, par value $0.001 per share,
100,000,000 shares authorized; 17,667,251 and 38,002,344 shares
issued and outstanding 18 38 Additional paid-in capital 1,306,136
992,307 Treasury stock, 2,617,587 and 1,095,048 shares, at cost
(31,956 ) (11,244 ) Dividends in Excess of Earnings (39,112 )
(11,148 ) Accumulated other comprehensive income (loss) (212 )
1,365
Total shareholders’ equity 1,234,968
971,390 Noncontrolling interest in operating partnership
240,861 533,246 Noncontrolling interest in consolidated joint
ventures 12,317 4,918
Total equity
1,488,146 1,509,554 Total
liabilities and equity $ 6,025,615
$ 5,578,337 (1) Includes
amounts relating to consolidated variable interest entities.
Ladder Capital CorpConsolidated
Statements of Income(Dollars in Thousands, Except Per Share
and Dividend Data)
Year Ended December 31, 2017
2016 2015 Net interest
income Interest income $ 263,667 $ 236,372 241,539 Interest
expense 146,118 120,827 113,303
Net
interest income 117,549 115,545 128,236
Provision for loan losses — 300 600
Net
interest income after provision for loan losses 117,549
115,245 127,636 Other income Operating
lease income 89,492 77,277 80,465 Tenant recoveries 7,179 5,958
9,907 Sale of loans, net 54,046 26,009 71,066 Realized gain (loss)
on securities 17,209 7,724 24,007 Unrealized gain (loss) on Agency
interest-only securities 1,405 (56 ) (1,249 ) Realized gain on sale
of real estate, net 11,423 20,636 40,386 Fee and other income
18,341 21,365 15,205 Net result from derivative transactions
(12,641 ) (1,409 ) (38,937 ) Earnings (loss) from investment in
unconsolidated joint ventures 89 426 371 Gain (loss) on
extinguishment of debt (73 ) 5,382 —
Total other income
186,470 163,312 201,221
Costs and expenses Salaries and employee benefits 70,463
64,270 61,612 Operating expenses 21,421 20,552 25,103 Real estate
operating expenses 33,216 30,545 37,869 Fee expense 4,996 3,703
4,521 Depreciation and amortization 40,332 39,447
39,061
Total costs and expenses 170,428
158,517 168,166 Income (loss) before
taxes 133,591 120,040 160,691 Income tax
expense (benefit) 7,712 6,320 14,557
Net
income (loss) 125,879 113,720 146,134 Net
(income) loss attributable to noncontrolling interest in
consolidated joint ventures (226 ) 138 (1,568 ) Net (income) loss
attributable to noncontrolling interest in operating partnership
(30,377 ) (47,131 ) (70,745 )
Net income (loss) attributable to
Class A common shareholders $ 95,276
$ 66,727 $ 73,821
Earnings per share: Basic $ 1.16 $ 1.08 $ 1.43 Diluted $
1.13 $ 1.06 $ 1.42
Weighted average shares
outstanding: Basic 81,902,524 61,998,089 51,702,188 Diluted
109,704,880 107,638,788 51,870,808
Dividends per share of
Class A common stock: $ 1.215 $ 1.285 $ 2.225
Change in Accounting
Principle
On June 29, 2017, the Company transferred its interests in
$625.7 million of loans to the LCCM 2017-LC26 securitization trust.
In connection with this transaction, pursuant to the risk retention
requirement of the Dodd-Frank Act, the Company sold a restricted
“horizontal interest” to a “Third Party Purchaser” (“TPP”), which
must be held by the TPP for at least five years. The Company
initially concluded that the transfer restrictions placed on the
TPP of the risk retention securities, imposed by the risk retention
rules of the Dodd-Frank Act, precluded sale accounting under
generally accepted accounting principles and, accordingly, the
Company originally accounted for the transaction as a financing. As
a result of industry discussions, in November 2017, the Securities
and Exchange Commission staff indicated that, despite such
restrictions, they would not take exception to a registrant
treating such transfers as sales if they otherwise met all the
criteria for sale accounting. The Company believes treatment of
such transfers as sales is more consistent with the substance of
such transaction, and accordingly, changed its accounting
principles to treat such transfers as sales. In accordance with
generally accepted accounting principles, the Company reflected
this change in accounting principle retrospectively to prior
interim periods within 2017.
As a result of the change in accounting principle, the Company
recognized a gain of $26.1 million on the transaction when it
closed on June 29, 2017. In addition, upon consummation, the
Company recognized $12.9 million and $62.7 million in restricted
and unrestricted securities, respectively, which are included in
real estate securities, available-for-sale on the Company’s
consolidated balance sheets. The Company also recognized a
liability for $78.8 million for 23 intercompany loans with a
combined principal balance of $76.7 million. This change in
accounting principle had no material impact on previously reported
core earnings or core EPS.
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 consistent basis by excluding non-cash expenses and unrecognized
results from derivatives and agency interest-only securities, which
we believe makes comparisons across reporting periods more relevant
by eliminating timing differences related to changes in the values
of assets and derivatives. In addition, 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. Core earnings is also 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
agency interest-only securities, (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 one-time 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 on (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 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 agency interest-only
securities adjusts for timing differences between when we recognize
changes in the fair values of our assets. Set forth below is an
unaudited reconciliation of net income to after-tax core earnings
($ in thousands):
Three Months Ended December 31,
Year Ended December 31, 2017
2016 2017 2016 Net income
(loss) $ 45,370 $ 71,621 $ 125,879 $ 113,720 Income tax expense
(benefit) 3,058 773 7,712 6,320 Income
(loss) before taxes 48,428 72,394
133,591
120,040 Net (income) loss attributable to noncontrolling interest
in consolidated joint ventures and operating partnership (GAAP) (1)
(101 ) (306 ) (258 ) 109 Our share of real estate depreciation,
amortization and gain adjustments (2) 9,372 9,207 35,891 33,828
Adjustments for unrecognized derivative results (3) (3,651 )
(41,657 ) (10,139 ) (11,105 ) Unrealized (gain) loss on Agency IO
securities (371 ) 85 (1,405 ) 56 Adjustment for economic gain on
securitization transactions not recognized under GAAP for which
risk has been substantially transferred, net of
reversal/amortization (1,942 ) (509 ) 1,026 (482 ) Non-cash
stock-based compensation 8,621 5,512 20,043 19,039 One-time
transactional adjustments — (90 )
(4)
— (3,272 ) (4)
Core earnings 60,356
44,636
178,749
158,213 Core estimated corporate tax benefit (expense) (5)
(9,014 ) (4,202 ) (9,265 ) 627
After-tax core
earnings $ 51,342 $ 40,434
$
169,484
$ 158,840 (1)
Includes $8 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 fourth quarter and year ended December 31, 2017,
respectively. Includes $8 thousand and $29 thousand of net income
attributable to noncontrolling interest in consolidated joint
ventures which are included in net (income) loss attributable to
noncontrolling interest in operating partnership on the
consolidated statements of income for the fourth quarter and year
ended December 31, 2016, respectively. (2) The following is
a reconciliation of GAAP depreciation and amortization to our share
of real estate depreciation, amortization and gain adjustments
amounts presented in the computation of core earnings in the
preceding table ($ in thousands):
Three Months Ended December 31,
Year Ended December 31,
2017 2016 2017
2016 Total GAAP depreciation and amortization $
11,009 $ 10,658 $ 40,332 $ 39,447 Less: Depreciation and
amortization related to non-rental property fixed assets (23 ) (28
) (93 ) (114 ) Less: Non-controlling interest in consolidated joint
ventures’ share of accumulated depreciation and amortization (465 )
(726 ) (1,290 ) (2,519 ) Our share of real estate depreciation and
amortization 10,521 9,904 38,949 36,814 Realized gain from
accumulated depreciation and amortization on real estate sold (see
below) (818 ) (702 ) (2,277 ) (3,007 ) Less: Non-controlling
interest in consolidated joint ventures’ share of accumulated
depreciation and amortization on real estate sold 5 5
17 21 Our share of accumulated depreciation and
amortization on real estate sold (813 ) (697 ) (2,260 ) (2,986 )
Less: Operating lease income on above/below market lease
intangible amortization
(336
) — (798 ) —
Our share of real
estate depreciation, amortization and gain adjustments $
9,372
$ 9,207 $ 35,891
$ 33,828
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 gain/losses must also 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, 2017
2016 2017 2016 GAAP
realized gain on sale of real estate, net $ 3,633 $ 5,020 $ 11,423
$ 20,636
Adjusted gain/loss on sale of real estate
for purposes of core earnings
(2,820 ) (4,323 ) (9,163 ) (17,650 )
Our share of accumulated
depreciation and amortization on real estate sold $
813 $ 697 $ 2,260
$ 2,986 (3) The
following is a reconciliation of GAAP net results from derivative
transactions to our hedging unrecognized result presented in the
computation of core earnings in the preceding table ($ in
thousands):
Three Months
Ended December 31, Year Ended December 31, 2017
2016 2017 2016
Net results from derivative transactions $ 5,710 $ 64,739 $
(12,641 ) $ (1,409 ) Hedging interest expense 2,749 6,625
15,320
29,870 Hedging realized result (4,808 ) (29,707 ) 7,460
(17,356 )
Adjustments for unrecognized derivative results
$ 3,651 $ 41,657 $
10,139
$ 11,105 (4)
We recorded an additional $0.1 million and
$3.3 million income tax expense for the fourth quarter and year
ended December 31, 2016, respectively, a proposed tax settlement
for pre-acquisition liabilities on certain corporate entities
acquired in certain transactions effected immediately prior to our
initial public offering. We also recorded other income of $0.1
million and $3.3 million for the fourth quarter and year ended
December 31, 2016, respectively, relating to the expected recovery
of these amounts pursuant to an indemnification. While these items
are presented on a gross basis, there was no impact to either net
income or core earnings. Accordingly, since pre-tax income excludes
the tax effect but includes the recovery pursuant to
indemnification, the recovery amount must also be excluded from
core earnings.
(5) Core estimated corporate tax benefit (expense) based on
effective tax rate applied to core earnings generated by the
activity within our taxable REIT subsidiaries.
Core EPS
Core EPS is defined as after-tax core earnings divided by the
adjusted weighted average diluted shares outstanding during the
period. The adjusted weighted average diluted shares outstanding is
defined as the GAAP weighted average diluted shares outstanding,
adjusted for shares issuable upon conversion of all Class B shares,
if excluded from the GAAP measure because they would have an
anti-dilutive effect. The inclusion of shares issuable upon
conversion of Class B shares is consistent with the inclusion of
income attributable to noncontrolling interest in operating
partnership in core earnings and after-tax core earnings.
Set forth below is an unaudited reconciliation of weighted
average diluted shares outstanding to adjusted weighted average
diluted shares outstanding (in thousands):
Three Months Ended December 31,
Year Ended December 31,
2017 2016 2017
2016 Weighted average diluted shares outstanding
89,242 66,037 109,705 107,639 Weighted average shares issuable to
converted Class B shareholders 20,541 42,582 —
—
Adjusted weighted average diluted shares outstanding
109,783 108,619 109,705
107,639
Set forth below is an unaudited computation of core EPS ($ in
thousands, except per share data):
Three Months Ended December 31,
Year Ended December 31,
2017 2016 2017
2016 After-tax core earnings $ 51,342 $ 40,434 $
169,484
$ 158,840 Adjusted weighted average diluted shares outstanding
109,783 108,619 109,705 107,639
Core
EPS $ 0.47 $ 0.37
$ 1.54 $ 1.48
After-tax core ROAE
After-tax core ROAE is presented on an annualized basis and is
defined as after-tax core earnings divided by the average total
shareholders' equity and noncontrolling interest in operating
partnership during the period. The inclusion of noncontrolling
interest in operating partnership is consistent with the inclusion
of income attributable to noncontrolling interest in operating
partnership in after-tax core earnings. Set forth below is an
unaudited computation of after-tax core ROAE ($ in thousands):
Three Months Ended December 31,
Year Ended December 31,
2017 2016 2017
2016 After-tax core earnings $ 51,342 $ 40,434 $
169,484
$ 158,840 Average shareholders' equity and NCI in operating
partnership 1,472,845 1,500,134 1,477,479
1,486,772
After-tax core ROAE 13.9 %
10.8 % 11.5 % 10.7 %
Income from sales of securitized loans, net of hedging
We present income from sales of securitized loans, net of
hedging, a non-GAAP financial measure, as a supplemental measure of
the performance of our loan securitization business. Since our
loans sold into securitizations to date are comprised of long-term
fixed-rate loans, the result of hedging those exposures prior to
securitization represents a substantial portion of our
securitization profitability. Therefore, we view these two
components of our profitability together when assessing the
performance of this business activity and find it a meaningful
measure of our performance as a whole. When evaluating the
performance of our sale of loans into securitization business, we
generally consider the income from sales of securitized loans, net,
in conjunction with other income statement items that are directly
related to such securitization transactions, including portions of
the realized net result from derivative transactions that are
specifically related to hedges on the securitized or sold loans,
which we reflect as hedge gain/(loss) related to loans securitized,
a non-GAAP financial measure, in the table below.
Set forth below is an unaudited reconciliation of income from
sale of securitized loans, net to income from sale of loans, net as
reported in our consolidated financial statements and an unaudited
reconciliation of hedge gain/(loss) relating to loans securitized
to net results from derivative transactions as reported in our
consolidated financial statements ($ in thousands except for number
of loans and securitizations):
Three Months Ended December
31,
Year Ended December 31,
2017 2016 2017
2016 Number of loans 57 44 114 104 Face
amount of loans sold into securitizations $ 851,087 $ 663,798 $
1,476,741 $ 1,327,856 (1 ) Number of securitizations 6 3 7 6
Income from sales of securitized loans, net (2) $ 29,157 $ (4,088 )
$ 55,220 $ 23,098 Hedge gain/(loss) related to loans securitized
(3) 3,139 22,087 (5,929 ) 15,271
Income from sales of securitized loans, net of hedging
32,296 17,999 49,291 38,369 Adjustment
for economic gain on securitization transactions not recognized
under GAAP for which risk has been substantially transferred (1,695
) (275 ) 2,051 413
Core gain on sale of
securitized loans $ 30,601 $
17,724 $ 51,342 $
38,782 (1) Excludes one
$21.7 million loan acquired from a third party and sold into a
securitization at equal values. (2) The following is a
reconciliation of income from sale of loans, net, which is the
closest GAAP measure, as reported in our consolidated financial
statements to the non-GAAP financial measure of income from sales
of securitized loans, net ($ in thousands):
Three Months Ended December 31, Year Ended
December 31, 2017 2016 2017
2016 Income from sales of loans, net $
29,917 $ (4,256 ) $ 54,046 $ 26,009 Unrealized losses on loans
related to lower of cost or market adjustments — — 1,779 — (Income)
loss from sale of loans (non-securitized), net (760 ) 168
(605
) (2,911 )
Income from sales of securitized loans, net
$ 29,157 $ (4,088 )
$
55,220
$ 23,098
(3) The following is a reconciliation of net results from
derivative transactions, which is the closest GAAP measure, as
reported in our consolidated financial statements to the non-GAAP
financial measure of hedge gain/(loss) related to loans securitized
($ in thousands):
Three Months Ended December 31,
Year Ended December 31, 2017
2016 2017 2016 Net
results from derivative transactions $
5,710
$ 64,739 $
(12,641
) $ (1,409 ) Hedge gain/(loss) related to lending and securities
positions
(2,615
) (42,307 )
8,130
15,971 Hedge gain/(loss) related to loans (non-securitized) 44
(345 )
(1,418
) 709
Hedge gain/(loss) related to loans securitized
$ 3,139 $ 22,087 $
(5,929
) $ 15,271
Undepreciated book value per share
We present undepreciated book value per share, which is a
non-GAAP financial measure, as a supplemental measure of our
financial condition. We believe undepreciated book value per share
assists investors in comparing our financial condition across
reporting periods on a consistent basis by excluding accumulated
depreciation on real estate, which implicitly assumes that the
value of our real estate diminishes in value predictably over time,
whereas real estate values have historically risen or fallen with
market conditions.
We consider the Class A common shareholders of the Company and
Continuing LCFH Limited Partners to have fundamentally equivalent
interests in our pre-tax earnings and net income. Accordingly, 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.
We define undepreciated book value per share as the sum of total
shareholders' equity, noncontrolling interest in operating
partnership, and our share of accumulated real estate depreciation
and amortization, divided by the total Class A and Class B shares
outstanding. Set forth below is an unaudited reconciliation of
total shareholders' equity to undepreciated book value, and an
unaudited computation of undepreciated book value per share ($ in
thousands except per share date):
December 31, 2017 December
31, 2016 Total shareholders' equity $ 1,234,968 $
971,390 Noncontrolling interest in operating partnership 240,861
533,246 Our share of accumulated real estate depreciation and
amortization (1) 149,494 112,606 Undepreciated book value
1,625,323 1,617,242 Class A shares outstanding 93,641 71,586
Class B shares outstanding 17,667 38,002 Total shares
outstanding 111,308 109,588
GAAP book value per share
$ 13.19 $ 13.57 Undepreciated book
value per share $ 14.60 $ 14.76
(1) The following is a reconciliation of GAAP accumulated real
estate depreciation and amortization to our share of accumulated
real estate depreciation and amortization presented in the
computation of undepreciated book value per share in the preceding
table ($ in thousands):
December 31, 2017 December
31, 2016 GAAP accumulated real estate depreciation and
amortization $ 161,063 $ 122,007 Less: Noncontrolling interest in
consolidated joint ventures' share of accumulated real estate
depreciation and amortization (11,569 ) (9,401 )
Our share of
accumulated real estate depreciation and amortization $
149,494 $ 112,606
Core gain on sale of loans
We present core gain on sale of loans, which is a non-GAAP
financial measure, as a supplemental measure of our performance. We
define core gain on sale of loans as income from sales of loans,
and the economic gains on the transfer of loans not considered sold
for accounting purposes, net of the realized hedging result related
to the hedging of loans sold or transferred. We believe core gain
on sale of loans assists investors in comparing our performance
across reporting periods on a consistent basis by eliminating
timing differences related to changes in values of assets and
derivatives.
Set forth below is an unaudited reconciliation of GAAP sale of
loans, net to core gain on sale of loans ($ in thousands):
Three Months Ended December 31,
Year Ended December 31, 2017
2016 2017 2016 GAAP sale
of loans, net $ 29,917 $ (4,256 ) $ 54,046 $ 26,009 Adjustment for
economic gain on securitization transactions not recognized under
GAAP for which risk has been substantially transferred (1) (1,695 )
(275 ) 2,051 413 Hedging gain/(loss) related to loans securitized
and other loan activity 3,095 25,027 (2,732 ) 17,156
Core gain on sale of loans $ 31,317
$ 20,496 $ 53,365
$ 43,578 (1) For core gain on
sale of loans, we include adjustments for economic gains on
securitization transactions not recognized for GAAP accounting.
Management believes recognizing these amounts for core purposes in
the period of economic transfer of risk is a reasonable
supplemental measure of our performance.
Core gain on sale of securities
We present core gain on sale of securities, which is a non-GAAP
financial measure, as a supplemental measure of our performance. We
define core gain on sale of loans as income from sales of
securities net of the realized hedging result related to the
hedging of securities sold. We believe core gain on sale of
securities assists investors in comparing our performance across
reporting periods on a consistent basis by eliminating timing
differences related to changes in values of assets and
derivatives.
Set forth below is an unaudited reconciliation of GAAP realized
gain (loss) on securities to core gain on sale of securities ($ in
thousands):
Three Months Ended December 31,
Year Ended December 31, 2017
2016 2017 2016 GAAP
realized gain (loss) on securities $ (1,973 ) $ (1,800 ) $ 17,209 $
7,724 Plus: Other than temporary impairment, net of hedging 694 59
1,254 643 Hedging realized result - security sales 1,713
4,680 (4,728 ) 200
Core gain on sales of securities
$ 434 $ 2,939 $
13,735 $ 8,567
Net rental income
We present net rental income, which is a non-GAAP financial
measure, as a supplemental measure of our performance. We define
net rental income as the total of operating lease income and tenant
recoveries, less real estate operating expenses, all of which are
disclosed on our consolidated statements of income. We present net
rental income as a measure of the recurring income from our real
estate investments before non-recurring items such as gains on sale
or fee income, which we believe assists investors in analyzing our
performance across reporting periods.
Set forth below is an unaudited reconciliation of operating
lease income to net rental income ($ in thousands):
Three Months Ended December 31,
Year Ended December 31, 2017
2016 2017 2016 Operating
lease income $ 24,751 $ 19,432 $ 89,492 $ 77,277 Plus: Tenant
recoveries 2,058 2,113 7,179
5,958
Less: Real estate operating expenses (8,355 )
(7,301
) (33,216 ) (30,545 )
Net rental income $
18,454 $
14,244
$ 63,455 $
52,690
Adjusted leverage
We present adjusted leverage, which is a non-GAAP financial
measure, as a supplemental measure of our performance. We define
adjusted leverage as the ratio of debt obligations, net of deferred
financing costs, adjusted for non-recourse debt obligations related
to securitizations that are consolidated on our GAAP balance sheet.
We believe adjusted leverage assists investors in comparing our
leverage across reporting periods on a consistent basis by
excluding non-recourse debt related to securitized loans.
Set forth below is an unaudited computation of adjusted leverage
($ in thousands):
December 31, 2017
December 31, 2016 GAAP debt obligations, net $
4,379,826 $ 3,942,138 Less: CLO debt (688,479 ) (1) — Adjusted debt
obligations 3,691,347 3,942,138
GAAP total equity
1,488,146 1,509,554
Adjusted leverage
2.5 2.6 (1) As discussed
above, we contributed over $888.4 million worth of balance sheet
loans into two CLO securitizations that remain on our balance sheet
for accounting purposes, but are excluded from debt obligations for
adjusted leverage calculation purposes.
Non-GAAP Measures -
Limitations
Our non-GAAP financial measures have limitations as analytical
tools. Some of these limitations are:
- core earnings, core EPS and after-tax
core ROAE do not reflect the impact of certain cash charges
resulting from matters we consider not to be indicative of our
ongoing operations and are not necessarily indicative of cash
necessary to fund cash needs;
- core EPS and after-tax core ROAE are
based on a non-GAAP estimate of our effective tax rate, including
the impact of Unincorporated Business Tax and the impact of our
election to be taxed as a REIT effective January 1, 2015, assuming
the conversion of all shares of Class B common stock into shares of
Class A common stock. Our actual tax rate may differ materially
from this estimate;
- undepreciated book value per share
excludes accumulated real estate depreciation and amortization and
may not reflect an accurate measure of the value of our real
estate; and
- other companies in our industry may
calculate non-GAAP financial measures differently than we do,
limiting their usefulness as comparative measures.
Because of these limitations, our non-GAAP financial measures
should not be considered in isolation or as a substitute for net
income (loss) attributable to shareholders, earnings per share or
book value per share, or any other performance measures calculated
in accordance with GAAP. Our non-GAAP financial measures should not
be considered an alternative to cash flows from operations as a
measure of our liquidity. Undepreciated book value per share should
not be considered a measure of the value of our assets upon an
orderly liquidation of the our company.
In the future, we may incur gains and losses that are the same
as or similar to some of the adjustments in this presentation. Our
presentation of non-GAAP financial measures should not be construed
as an inference that our future results will be unaffected by
unusual or non-recurring items.
For additional information about our non-GAAP financial
measures, please refer to the disclosures available on our website
or our Annual Report on Form 10-K.
About Ladder
Ladder is an internally-managed real estate investment trust
that is a leader in commercial real estate finance. Ladder
originates and invests in a diverse portfolio of commercial real
estate and real estate-related assets, focusing on senior secured
assets. Ladder’s investment activities include: (i) direct
origination of commercial real estate first mortgage loans; (ii)
investments in investment grade securities secured by first
mortgage loans on commercial real estate; and (iii) investments in
net leased and other commercial real estate equity. Founded in
2008, Ladder is run by a highly experienced management team with
extensive expertise in all aspects of the commercial real estate
industry, including origination, credit, underwriting, structuring,
capital markets and asset management. Led by Brian Harris, the
Company’s Chief Executive Officer, Ladder is headquartered in New
York City and has branches in Los Angeles and Boca Raton.
Forward-Looking Statements
Certain statements in this release may constitute
“forward-looking” statements. These statements are based on
management’s current opinions, expectations, beliefs, plans,
objectives, assumptions or projections regarding future events or
future results. These forward-looking statements are only
predictions, not historical fact, and involve certain risks and
uncertainties, as well as assumptions. Actual results, levels of
activity, performance, achievements and events could differ
materially from those stated, anticipated or implied by such
forward-looking statements. While Ladder believes that its
assumptions are reasonable, it is very difficult to predict the
impact of known factors, and, of course, it is impossible to
anticipate all factors that could affect actual results. There are
a number of risks and uncertainties that could cause actual results
to differ materially from forward-looking statements made herein
including, most prominently, the risks discussed under the heading
“Risk Factors” in the Company’s Annual Report on Form 10-K for the
year ended December 31, 2016, as well as its consolidated
financial statements, related notes, and other financial
information appearing therein, and its other filings with the U.S.
Securities and Exchange Commission. Such forward-looking statements
are made only as of the date of this release. Ladder expressly
disclaims any obligation or undertaking to release any updates or
revisions to any forward-looking statements contained herein to
reflect any change in its expectations with regard thereto or
changes in events, conditions, or circumstances on which any such
statement is based.
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