Financial
Highlights
GAAP disclosures for the first quarter:
- GAAP Income before Taxes of $71.7
million and Diluted EPS of $0.53
- Up from $18.3 million and $0.18 in
the first quarter of 2017
- After-Tax GAAP Return on Average
Equity of 16.0%
- Up from 5.3% in the first quarter of
2017
- GAAP Book Value per Share of $13.37
at March 31, 2018
- Up from $13.19 at December 31,
2017
Core (non-GAAP) disclosures for the first quarter:
- Core Earnings of $63.8 million and
Core EPS of $0.55
- Highest quarterly earnings since
IPO
- After-Tax Core Return on Average
Equity of 16.3%
- Up from 9.0% in the first quarter of
2017
- Undepreciated Book Value per Share
of $14.82 at March 31, 2018
- Up from $14.60 at December 31,
2017
Operating and financing statistics for the first
quarter:
- Declared a first quarter dividend of
$0.315/share of Class A common stock paid on April 2,
2018
- Originated a total of $967.5 million
of commercial mortgage loans, including $434.6 million of mortgage
loans held for investment and $532.9 million of mortgage loans held
for sale
- Made $24.5 million in real estate
equity investments, and received $97.5 million of proceeds from
sales of real estate
- Contributed $436.5 million of loans
to 2 securitization transactions in the first quarter
Ladder Capital Corp (NYSE:LADR) (“we,” “Ladder,” or the
“Company”) today announced operating results for the quarter ended
March 31, 2018. GAAP Income/(loss) before taxes for the three
months ended March 31, 2018 was $71.7 million compared to
$18.3 million for the three months ended March 31, 2017. The
results for the first quarter of 2018 reflect higher net interest
income on our portfolio of loans and higher net rental income on
our real estate investments, higher gains on sale of loans and real
estate than in the prior year, and a favorable net result from
derivative positions. Diluted EPS for the three months ended
March 31, 2018 was $0.53 compared to $0.18 for the three
months ended March 31, 2017. After-tax GAAP return on average
equity was 16.0% in the first quarter of 2018.
Core Earnings, a non-GAAP financial measure, was $63.8 million
for the first quarter of 2018, compared to $31.6 million earned in
the first quarter of 2017. The results of the first quarter of 2018
reflect higher net interest income on our portfolio of loans and
higher net rental income on our real estate investments, as well as
higher gains on sale of loans and real estate than in the prior
year. 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 $0.55 for the first quarter of 2018 compared to $0.31 for the
three months ended March 31, 2017.
Portfolio Overview
The following table summarizes the book value of our investment
portfolio as of the dates indicated below ($ in thousands):
March 31, 2018 December 31,
2017 Loans Balance sheet loans: Balance
sheet first mortgage loans $ 3,370,086 54.1 % $ 3,123,268 51.9 %
Other commercial real estate-related loans 158,099 2.5 % 159,194
2.6 % Provision for loan losses (7,000 ) (0.1 )% (4,000 ) (0.1 )%
Total balance sheet loans 3,521,185 56.5 % 3,278,462 54.4 % Conduit
first mortgage loans 273,636 4.4 % 230,180 3.8 %
Total loans 3,794,821 60.9 % 3,508,642 58.2 %
Securities
CMBS investments 1,061,318 17.0 % 1,066,570 17.7 % U.S. Agency
Securities investments 38,787 0.6 % 39,947 0.7 %
Total securities 1,100,105 17.6 % 1,106,517 18.4 %
Real
Estate Real estate and related lease intangibles, net 980,859
15.7 % 1,032,041 17.1 % Total real estate 980,859
15.7 % 1,032,041 17.1 %
Other Investments Investments in
unconsolidated joint ventures 34,564 0.6 % 35,441 0.6 % FHLB stock
77,915 1.3 % 77,915 1.3 % Total other investments
112,479 1.9 % 113,356 1.9 % Total investments
5,988,264 96.1 % 5,760,556 95.6 % Cash, cash equivalents and
restricted cash 113,160 1.8 % 182,683 3.0 % Other assets 129,870
2.1 % 82,376 1.4 %
Total assets $
6,231,294 100.0 % $
6,025,615 100.0 %
Note: CMBS investments and U.S. Agency
Securities are carried at fair value.
Liquidity and Capital
Resources
The following table summarizes our debt obligations as of the
following dates ($ in thousands):
March 31, 2018 December 31,
2017 Committed loan repurchase facilities $ 550,523 $
398,653 Committed securities repurchase facility 98,762
—
Uncommitted securities repurchase facilities 105,092 74,757
Total repurchase facilities 754,377 473,410
Revolving credit facility
—
—
Mortgage loan financing 683,487 692,696 CLO debt(1) 683,095 688,479
Participation financing - mortgage loan receivable 2,815 3,107
Borrowings from the FHLB 1,348,000 1,370,000 Senior unsecured
notes(2) 1,152,834 1,152,134
Total debt obligations
$ 4,624,608 $ 4,379,826 (1)
Presented net of unamortized debt issuance costs of $5.4
million and $6.0 million as of March 31, 2018 and December 31,
2017, respectively. (2) Presented net of unamortized debt issuance
costs of $13.4 million and $14.1 million at March 31, 2018 and
December 31, 2017, respectively.
Conference Call and
Webcast
We will host a conference call on Wednesday, May 2, 2018 at
5:00 p.m. Eastern Time to discuss first quarter 2018 results. The
conference call can be accessed by dialing (877) 407-4018 domestic
or (201) 689-8471 international. Individuals who dial in will be
asked to identify themselves and their affiliations. For those
unable to participate, an audio replay will be available from 8:00
p.m. Eastern Time on Wednesday, May 2, 2018 through midnight
Wednesday, May 16, 2018. To access the replay, please call (844)
512-2921 domestic or (412) 317-6671 international, access code
13678564. The conference call will also be webcast though a link on
Ladder Capital Corp’s Investor Relations website at
ir.laddercapital.com/event. A web-based archive of the conference
call will also be available at the above website.
Ladder Capital CorpConsolidated
Balance Sheets(Dollars in Thousands)
March 31, 2018(1) December 31,
2017(1) (Unaudited)
Assets Cash and cash equivalents $
68,373 $ 76,674 Restricted cash 44,786 106,009 Mortgage loan
receivables held for investment, net, at amortized cost: Mortgage
loans held by consolidated subsidiaries 3,528,185 3,282,462
Provision for loan losses (7,000 ) (4,000 ) Mortgage loan
receivables held for sale 273,636 230,180 Real estate securities
1,100,105 1,106,517 Real estate and related lease intangibles, net
980,859 1,032,041 Investments in unconsolidated joint ventures
34,564 35,441 FHLB stock 77,915 77,915 Derivative instruments 92
888 Accrued interest receivable 27,225 25,875 Other assets 102,554
55,613
Total assets $ 6,231,294
$ 6,025,615 Liabilities and
Equity Liabilities Debt obligations, net: Secured and
unsecured debt obligations $ 4,624,608 $ 4,379,826 Due to brokers —
14 Derivative instruments — 2,606 Amount payable pursuant to tax
receivable agreement 1,570 1,656 Dividends payable 1,228 30,528
Accrued expenses 38,941 59,619 Other liabilities 61,655
63,220
Total liabilities 4,728,002
4,537,469 Commitments and contingencies — —
Equity
Class A common stock, par value $0.001 per
share, 600,000,000 sharesauthorized; 100,634,049 and 96,258,847
shares issued and 97,956,103 and93,641,260 shares outstanding
99 94
Class B common stock, par value $0.001 per
share, 100,000,000 sharesauthorized; 13,317,419 and 17,667,251
shares issued and outstanding
13 18 Additional paid-in capital 1,368,548 1,306,136 Treasury
stock, 2,677,947 and 2,617,587 shares, at cost (32,684 ) (31,956 )
Dividends in Excess of Earnings (18,659 ) (39,112 ) Accumulated
other comprehensive income (loss) (7,880 ) (212 )
Total
shareholders’ equity 1,309,437 1,234,968
Noncontrolling interest in operating partnership 184,201 240,861
Noncontrolling interest in consolidated joint ventures 9,654
12,317
Total equity 1,503,292
1,488,146 Total liabilities and equity
$ 6,231,294 $ 6,025,615
(1) Includes amounts relating to
consolidated variable interest entities.
Ladder Capital CorpConsolidated
Statements of Income(Dollars in Thousands, Except Per Share
and Dividend Data)(Unaudited)
Three Months Ended March 31, 2018
2017 Net interest income Interest
income $ 78,206 $ 57,512 Interest expense 44,713 31,415
Net interest income 33,493 26,097
Provision for loan losses 3,000 —
Net interest
income after provision for loan losses 30,493
26,097 Other income Operating lease income
24,560 19,630 Tenant recoveries 3,577 1,579 Sale of loans, net
4,888 (999 ) Realized gain (loss) on securities (1,099 ) 5,361
Unrealized gain (loss) on Agency interest-only securities 204 159
Realized gain on sale of real estate, net 31,010 2,331 Fee and
other income 6,252 4,466 Net result from derivative transactions
14,959 (1,981 ) Earnings (loss) from investment in unconsolidated
joint ventures 52 (74 ) Gain (loss) on extinguishment of debt (69 )
(54 )
Total other income 84,334 30,418
Costs and expenses Salaries and employee benefits
17,096 16,042 Operating expenses 5,548 5,479 Real estate operating
expenses 8,817 7,454 Fee expense 843 693 Depreciation and
amortization 10,823 8,592
Total costs and
expenses 43,127 38,260 Income
(loss) before taxes 71,700 18,255 Income tax
expense (benefit) 3,902 (1,375 )
Net income (loss)
67,798 19,630 Net (income) loss attributable to
noncontrolling interest in consolidated joint ventures (8,422 )
(322 ) Net (income) loss attributable to noncontrolling interest in
operating partnership (8,501 ) (5,838 )
Net income (loss)
attributable to Class A common shareholders $
50,875 $ 13,470
Earnings per share: Basic $ 0.53 $ 0.18 Diluted $ 0.53 $
0.18
Weighted average shares outstanding: Basic
95,187,316 72,871,990 Diluted 95,389,219 109,334,847
Dividends per share of Class A common stock: $ 0.315 $ 0.300
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 March 31, 2018
2017 Net income (loss) $ 67,798 $ 19,630 Income tax
expense (benefit) 3,902 (1,375 ) Income (loss) before taxes
71,700 18,255
Net (income) loss attributable to
noncontrolling interest in consolidated joint venturesand operating
partnership (GAAP) (1)
(8,430 ) (330 ) Our share of real estate depreciation, amortization
and gain adjustments (2) 6,058 7,795 Adjustments for unrecognized
derivative results (3) (8,110 ) (1,933 ) Unrealized (gain) loss on
Agency IO securities (204 ) (159 )
Adjustment for economic gain on
securitization transactions not recognized under GAAPfor which risk
has been substantially transferred, net of
reversal/amortization
(291 ) (226 ) Non-cash stock-based compensation 3,083 8,149
Core earnings 63,806 31,551 Core estimated corporate
tax benefit (expense) (4) (3,452 )
2,137
After-tax Core Earnings $ 60,354
$
33,688
(1)
Includes $8 thousand of net income
attributable to noncontrolling interest in consolidated joint
ventures which are included in net (income) loss attributable to
noncontrolling interest in operating partnership on the
consolidated statements of income for the three months ended March
31, 2018 and 2017.
(2) The following is a reconciliation of GAAP depreciation
and amortization to our share of real estate depreciation,
amortization and gain adjustments presented in the computation of
Core Earnings in the preceding table ($ in thousands):
Three Months Ended March 31, 2018
2017 Total GAAP depreciation and amortization $
10,823 $ 8,592 Less: Depreciation and amortization related to
non-rental property fixed assets (19 ) (23 )
Less: Non-controlling interest in
consolidated joint ventures’ share of accumulateddepreciation and
amortization
(358 ) (375 ) Our share of real estate depreciation and
amortization 10,446 8,194 Realized gain from accumulated
depreciation and amortization on real estate sold (see below)
(5,194 ) (402 )
Less: Non-controlling interest in
consolidated joint ventures’ share of accumulateddepreciation and
amortization on real estate sold
1,188 3 Our share of accumulated depreciation and
amortization on real estate sold (4,006 ) (399 ) Less:
Operating lease income on above/below market lease intangible
amortization (382 ) —
Our share of real estate
depreciation, amortization and gain adjustments $
6,058 $ 7,795 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 also must be adjusted. Following is a
reconciliation of the related consolidated GAAP amounts to the
amounts reflected in Core Earnings:
Three
Months Ended March 31, 2018 2017
GAAP realized gain on sale of real estate, net $ 31,010 $ 2,331
Adjusted gain/loss on sale of real estate for purposes of Core
Earnings (27,004 ) (1,932 )
Our share of accumulated
depreciation and amortization on real estate sold $
4,006 $ 399 (3)
The following is a reconciliation of GAAP net results from
derivative transactions to our unrecognized derivative result
presented in the computation of Core Earnings in the preceding
table ($ in thousands):
Three Months Ended
March 31, 2018 2017 Net results
from derivative transactions $ 14,959 $ (1,981 ) Hedging interest
expense 2,889 3,728 Hedging realized result (9,738 ) 186
Adjustments for unrecognized derivative results $
8,110 $ 1,933 (4)
Core estimated corporate tax benefit (expense) based on effective
tax rate applied to Core Earnings generated by the activity within
our taxable REIT subsidiary.
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 March 31,
2018 2017 Weighted average diluted
shares outstanding 95,389 109,335 Weighted average shares issuable
to converted Class B shareholders 14,901 —
Adjusted
weighted average diluted shares outstanding 110,290
109,335
Set forth below is an unaudited computation of core EPS ($ in
thousands, except per share date):
Three Months Ended March 31,
2018 2017 After-tax core earnings $
60,354 $
33,688
Adjusted weighted average diluted shares outstanding 110,290
109,335
Core EPS $ 0.55 $
0.31
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 March 31,
2018 2017 After-tax core earnings $
60,354 $
33,688
Average shareholders' equity and NCI in operating partnership
1,484,734 1,490,355
After-tax core ROAE
16.3 % 9.0 %
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 March 31,
2018
2017 Number of loans
28
— Face amount of loans sold into securitizations $ 436,547 $ —
Number of securitizations 2 — Income from sales of
securitized loans, net (1) $ 5,351 $ — Hedge gain/(loss) related to
loans securitized (2) 6,567 —
Income from sales of
securitized loans, net of hedging 11,918 —
Adjustment for economic gain on
securitization transactions not recognized under GAAPfor which risk
has been substantially transferred
(38 ) —
Core gain on sale of securitized loans $
11,880 $ — (1) The
following is a reconciliation of income (loss) from sale of loans,
net, which is the closest GAAP measure, as reported in our
consolidated financial statements included herein to the non-GAAP
financial measure of income from sales of securitized loans, net ($
in thousands):
Three Months Ended
March 31, 2018 2017 Income from
sales of loans, net $ 4,888 $ (999 ) Unrealized losses on loans
related to lower of cost or market adjustments 463 999 (Income)
loss from sale of loans (non-securitized), net — —
Income from sales of securitized loans, net $
5,351 $ — (2) The
following is a reconciliation of net results from derivative
transactions, which is the closest GAAP measure, as reported in our
consolidated financial statements included herein to the non-GAAP
financial measure of hedge gain/(loss) related to loans securitized
($ in thousands):
Three Months Ended
March 31, 2018 2017 Net results
from derivative transactions $ 14,959 $ (1,981 ) Hedge gain/(loss)
related to lending and securities positions (8,392 ) 3,130 Hedge
gain/(loss) related to loans (non-securitized) — (1,149 )
Hedge gain/(loss) related to loans securitized $
6,567 $ —
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 data):
March 31, 2018 December 31,
2017 Total shareholders' equity $ 1,309,437 $ 1,234,968
Noncontrolling interest in operating partnership 184,201 240,861
Our share of accumulated real estate depreciation and amortization
(1) 155,161 149,494 Undepreciated book value 1,648,799
1,625,323 Class A shares outstanding 97,956 93,641 Class B
shares outstanding 13,317 17,667 Total shares outstanding
111,273 111,308
GAAP book value per share $
13.37 $ 13.19 Undepreciated book value per
share $ 14.82 $ 14.60 (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):
March 31,
2018 December 31, 2017 GAAP accumulated real
estate depreciation and amortization $ 165,874 $ 161,063
Less: Noncontrolling interest in
consolidated joint ventures' share ofaccumulated real estate
depreciation and amortization
(10,713 ) (11,569 )
Our share of accumulated real estate
depreciation and amortization $ 155,161
$ 149,494
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 March 31, 2018
2017 GAAP sale of loans, net $ 4,888 $ (999 )
Adjustment for economic gain on
securitization transactions not recognized under GAAPfor which risk
has been substantially transferred (1)
(38 ) — Hedging gain/(loss) related to loans securitized and other
loan activity 7,030 2,148
Core gain on sale of
loans $ 11,880 $ 1,149
(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 March 31,
2018 2017 GAAP realized gain (loss) on
securities $ (1,099 ) $ 5,361 Plus: Other than temporary
impairment, net of hedging
134
— Hedging realized result - security sales 2,708 (2,333 )
Core gain on sales of securities $
1,743
$ 3,028
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 March 31,
2018 2017 Operating lease income $
24,560 $ 19,630 Plus: Tenant recoveries
3,577
1,579 Less: Real estate operating expenses (8,817 ) (7,454 )
Net
rental income $
19,320
$ 13,755
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):
March 31, 2018 December 31,
2017 GAAP debt obligations, net $ 4,624,608 $ 4,379,826
Less: CLO Debt(1) (683,095 ) (688,479 ) Adjusted debt obligations
3,941,513 3,691,347 GAAP total equity 1,503,292 1,488,146
Adjusted leverage 2.6 2.5
(1) In the fourth quarter of 2017, we
contributed over $888.4 million of balance sheet loans into two CLO
securitizations that remain on our balance sheet for accounting
purposes, but should be 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 in our Quarterly Report on Form 10-Q.
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 with a West Coast office in Santa Monica.
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, 2017, 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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