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Laddercapital
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- 2. 2 This presentation containsforward-looking statements regarding possible or assumed future results of the business, financial condition, plans and objectives of Ladder Capital Corp and its subsidiaries and affiliates (collectively, “Ladder Capital,” “Ladder,” “LADR,” or the “Company”). Any statement concerning future events or expectations, express or implied, is a forward-looking statement. Words such as “may,” “will,” “seek,” “should,” “expect,” “anticipate,” “project,” “estimate,” “intend,” “continue,” or “believe” or the negatives thereof or other variations thereon or comparable terminology are intended to identify forward-looking statements that are subject to risk and uncertainties. There can be no assurance that any expectations, express or implied, in a forward-looking statement will prove correct or that the contemplated event or result will occur as anticipated. In particular, there can be no assurance that Ladder will achieve any performance objectives set forth in this presentation. Further, any forward-looking statement speaks only as of the date on which it is made. New risks and uncertainties arise over time, and it is not possible for Ladder to predict those events or their effect on the Company. Except as required by law, Ladder is not obligated to, and does not intend to, update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. This presentation is strictly for informational purposes. It is not intended to be relied upon as investment advice and is not, and should not be assumed to be, complete. The contents herein are not to be construed as legal, business or tax advice, and each recipient should consult its own attorney, business advisor and tax advisor as to legal, business and tax advice. Certain information contained herein is based on, or derived from, information provided by independent third-party sources. Ladder believes that such information is accurate and that the sources from which it has been obtained are reliable. However, Ladder cannot guarantee the accuracy of such information and has not independently verified the assumptions on which such information is based. All data is presented as of September 30, 2016, unless otherwise indicated. This presentation includes certain non-GAAP financial measures. These non-GAAP financial measures should be considered only as supplemental to, and not as superior to, financial measures prepared in accordance with GAAP. Please refer to the Company’s September 30, 2016 Form 10-Q filing and earnings press release, which are available on Ladder’s website (www.laddercapital.com), for a reconciliation of the non-GAAP financial measures included in this presentation to the most directly comparable financial measures prepared in accordance with GAAP. Totals may not equal the sum of components due to rounding. DISCLAIMERS
- 3. LADDER OVERVIEW 3 (1) Allmetrics as of 09/30/2016 (2) Based on $13.24 LADR closing price on 09/30/2016. Equal to 11.9% of common equity outstanding (3) For a description of this non-GAAP financial measure, see Selected Definitions on page 21 Ladder Capital Corp is an internally-managed commercial real estate finance REIT 28 years average industry experience of senior managementExperienced $6 billion portfolio of commercial real estate debt & equity assetsBalanced 10.9% after-tax core return on equity(3) in the last twelve monthsProfitable Management and directors own $173 million of equity in the company(1) Aligned Disciplined credit culture with no credit losses since inceptionCredit-Centric
- 4. LADDER HISTORY 4 Ladder wasfounded by Brian Harris and partners in 2008 as a new breed of non- bank commercial real estate finance company Ladder contributes loans to the first post- crisis CMBS conduit securitization, demonstrating the Company’s credentials as an expert in commercial mortgage lending and related securities Ladder completes its first unsecured corporate bond issuance and receives ratings from Moody’s, S&P and Fitch; Ladder also becomes a member of the Federal Home Loan Bank (“FHLB”), gaining access to an additional source of attractive financing Ladder completes 40th securitization Ladder creates own securitization shelf Ladder launches its first mutual fund, Ladder Select Bond Fund (ticker=LSBIX) Assets: $232 million Equity: $229 million Assets: $2.6 billion Equity: $719 million Assets: $2.6 billion Equity: $1.1 billion 2008 2010 2012 2016 Ladder completes its initial public offering (IPO), establishing the company as a premier finance provider to the commercial real estate industry and a leading CMBS investor Assets: $5.8 billion Equity: $1.5 billion 2014 Assets: $6.2 billion Equity: $1.5 billion Note: Asset and equity figures are as of year-end, except for 2016 which is as of September 30, 2016
- 5. Lending 65% Real Estate Equity 19% Securities 15% COMPLEMENTARY BUSINESSLINES 5 (1) Based on core gross income contribution before overhead and other corporate expenses Stable and Diverse Income Streams from Commercial Real Estate LENDING Balance Sheet Loans / Loans held for investment Ladder directly originates and invests in mortgage loans secured by income-generating commercial real estate nationwide, earning net interest income for Ladder Conduit Loans / Loans held for sale Ladder periodically sells fixed-rate, 5 to 10-year mortgage loans into CMBS trusts (“securitizations”), earning a gain on sale of loans, net of associated hedging costs SECURITIES Ladder invests in short duration, investment grade rated commercial mortgage-backed securities (“CMBS”) to earn net interest income and manage liquidity REAL ESTATE Ladder owns 6.9 million square feet of real estate, including 4.1 million of net lease real estate, and 2.8 million of other office and multifamily real estate Net Revenue Contribution(1) Nine Months Ended 09/30/2016
- 6. Mezzanine/ Subordinate Loans 3% Balance Sheet First Mortgage Loans 25% Conduit Loans 13% Net Leased CREEquity 9% Other CRE Equity 4% Condominium Real Estate Equity 1% CRE Securities 45% DIVERSIFIED ASSETS Predominantly Senior Secured Asset Base of Commercial Real Estate-Related Investments Investment Asset Mix(1) Loan Portfolio Overview(1) $6.2 billion of total assets 81% senior secured assets Equity Portfolio Overview(1) (1) As of 09/30/2016 Northeast 33% South 26% West 12% Southwest 8%Midwest 7% Various 14% Hotel 35% Retail 13% Multifamily 18% Office 21% Mixed Use 5% MHP 7% Industrial 1% Office 28% Wholesale Club 18% Grocery Store 13% Drug Store 12%Dollar Store 9% Other Retail 7% Ware- house 7% Condo- minium 6% Northeast 22% South 31% West 4% South- west 7% Midwest 35% Various 1% 6
- 7. COMPELLING MARKET BACKDROP 7 CREMortgage Maturities Drive Refinancings Commercial Property Sales Drive Acquisition Financing Key Regulatory Dynamics Impact Bank Competitors Basel III Volcker Rule Risk Retention Rules Increased Regulatory Burden Reduces Bank Appetite $68b $147b $234b $297b $362b $424b $511b 2009 2010 2011 2012 2013 2014 2015 $364b $353b $399b $332b $338b $346b $324b 2015 2016E 2017E 2018E 2019E 2020E 2021E Source: Trepp and Real Capital Analytics
- 8. LENDING 8 $2.4 billion Loans onbalance sheet as of 9/30/2016 93.0% Of loans are first mortgages as of 9/30/2016 6.2% Weighted average yield as of 9/30/2016 66.8% Weighted Average LTV as of 9/30/2016 $125,000,000 Fixed rate conduit first mortgage Sanofi Headquarters, Bridgewater, NJ $11,250,000 Floating rate balance sheet first mortgage 300 Wyandotte, Kansas City, MO $88,000,000 Fixed rate conduit first mortgage Rolling Brook Village, Woodbridge, VA $45,000,000 Floating rate balance sheet first mortgage Washington Park Hotel, Miami Beach, FL Photographs and descriptions represent selected assets, not entire portfolio. Conduit loans have already been sold by Ladder into securitizations. $17.6 million Average loan size as of 9/30/2016
- 9. LENDING PROGRAMS 9 Lending Program Balance at 09/30/2016 LTVat 09/30/2016 Weighted-Avg. Coupon at 09/30/2016 Interest Rate Type Loan Term Business Plan Conduit Loans $784.2 million 65.6% 4.4% Typically fixed rate Typically five years or ten years Held for sale Balance Sheet First Mortgage Loans $1,473.9 million 66.6% 6.8% Typically floating rate, with a high floor Typically one to five years, including extension options Held for investment Mezzanine and Other Loans $169.2 million 74.2% 10.9% Typically fixed rate Typically five to ten years Held for investment Total Loans $2,427.2 million 66.8% 6.2%(1) 59.0% of loan portfolio is floating-rate 3.6 year weighted average remaining maturity (1) Represents total loan portfolio yield
- 10. Illustrative Securitization Example Originate mortgageloans secured by commercial real estate properties CONDUIT LOAN SECURITIZATION 10 Ladder equity Sell the loans to a CMBS trust for a profit on the principal loan amount Ladder recycles capital to originate new loans & drive higher ROEs Potential for strong return on equity Finance loans with one of Ladder’s credit line lenders or the FHLB Ladder has its own CMBS securitization shelf and its own risk retention solutions
- 11. SECURITIES 11 $2.6 billion CMBS onbalance sheet as of 9/30/2016 3.1 years Weighted average duration as of 9/30/2016 $13.0 million Average investment per CUSIP as of 9/30/2016 84% Rated AAA as of 9/30/2016 98% Investment grade rated as of 9/30/2016 HILT 2013-HLT AFX AAA-rated securities secured by a portfolio of cross-collateralized hotels representing the majority of Hilton owned assets LCCM 2014-PKMD A AAA-rated securities backed by a multi-family apartment community in San Francisco COMM 2015-3BP A AAA-rated securities backed by 3 Bryant Park, a Class A office building in New York City COMM 2016-CR28 XPA AAA-rated, interest-only securities backed by a diversified pool of commercial real estate loans Photographs and descriptions represent selected assets, not entire portfolio. Statistics on this page do not include Ladder’s U.S. Agency securities investments, which had a book value of $62.2 million as of 9/30/2016.
- 12. REAL ESTATE EQUITY 12 $826million(1) Real estate on balance sheet as of 9/30/2016 $241 million Office and other portfolio as of 9/30/2016 6.9 million Square feet as of 9/30/2016 $539 million Net lease portfolio as of 9/30/2016 $928 million Undepreciated value of real estate as of 9/30/2016 Net Lease Portfolio 4.1 million square feet featuring tenants such as Walgreens and Hy-Vee supermarkets Other Joint Ventures Ladder is invested in two unconsolidated real estate joint ventures, in NYC and MI Value-Add Portfolio 2.7 million square feet of office and other real estate for investment Condominiums Ladder owns residential condominiums in Las Vegas and Miami, which it is selling over time Photographs and descriptions represent selected assets, not entire portfolio. (1) Includes $539 million net lease, $241 million office and other, and $46 million condominiums. In addition, investments in unconsolidated joint ventures had a book value of $34 million at 9/30/2016.
- 13. 8.7% 10.8% 11.7% 12.8% 13.1% 16.2% 16.3%15.8% 13.6% 13.6% 13.8% 16.7% 16.9% 20.3% 20.1% 18.5% 17.2% 13.5% 14.3% 13.8% 15.3% 14.3% 13.5% 12.9% 12.7% 12.1% 10.8% 11.0% Q4'09 Q1'10 Q2'10 Q3'10 Q4'10 Q1'11 Q2'11 Q3'11 Q4'11 Q1'12 Q2'12 Q3'12 Q4'12 Q1'13 Q2'13 Q3'13 Q4'13 Q1'14 Q2'14 Q3'14 Q4'14 Q1'15 Q2'15 Q3'15 Q4'15 Q1'16 Q2'16 Q3'16 Pre-Tax Core ROAE(1) FINANCIAL PERFORMANCE 13 Core Earnings(1) 1.9x 2.6x 2.6x 2.6x 2.6x 2.4x 2.8x 2.3x 1.6x 1.5x 1.6x 1.1x 1.4x 1.1x 1.1x 1.0x 1.9x 1.4x 1.5x 2.1x 2.8x 2.8x 2.7x 2.8x 2.9x 2.8x 3.0x 3.0xLeverage : ($ in millions) (1) For a description of this non-GAAP financial measure, see Selected Definitions on page 21 (2) Represents Core Leverage Ratio. For a description of this non-GAAP financial measure, see Selected Definitions on page 21. (2) $1 $13 $4 $23 $17 $25 $19 $31 $40 $26 $17 $20 $51 $38 $58 $31 $93 $42 $46 $20 $55 $62 $49 $53 $48 $52 $41 $50 $38 $31 $44 Q1'09 Q2'09 Q3'09 Q4'09 Q1'10 Q2'10 Q3'10 Q4'10 Q1'11 Q2'11 Q3'11 Q4'11 Q1'12 Q2'12 Q3'12 Q4'12 Q1'13 Q2'13 Q3'13 Q4'13 Q1'14 Q2'14 Q3'14 Q4'14 Q1'15 Q2'15 Q3'15 Q4'15 Q1'16 Q2'16 Q3'16
- 14. Cash Dividends vs.Core EPS DIVIDEND COVERAGE 14 Ladder’s well-covered dividends have allowed for superior capital retention (1) The Company’s Q4 2015 dividend was subject to a cash/stock election. Represents cash dividend paid to shareholders electing cash. (1) $0.250 $0.250 $0.275 $0.335 $0.275 $0.275 $0.275 $0.48 $0.51 $0.40 $0.45 $0.38 $0.32 $0.40 Q1'15 Q2'15 Q3'15 Q4'15 Q1'16 Q2'16 Q3'16 Cash Dividend Core EPS
- 15. Note: As of09/30/2016 (1) Includes extensions at Company’s option (2) Maximum borrowings are the lesser of $2.85 billion, 40% of Ladder’s captive insurance subsidiary’s total assets or 150% of Ladder’s total book equity (3) Corporate family ratings: Moody’s: Ba2 / S&P: BB- / Fitch: BB. Corporate bond ratings: Moody’s: Ba3 / S&P: B+ / Fitch: BB Source Facility Size ($mm) Debt Outstanding ($mm) Remaining Term(1) Eligible CRE Collateral Bank A – facility 1 of 2 600 277 2.0+ years Conduit and balance sheet loans Bank B 450 187 3.5+ years Conduit and balance sheet loans Bank C 400 121 2.5+ years Conduit and balance sheet loans Bank D 100 – 2.5+ years Conduit and balance sheet loans Bank E 100 38 4.5+ years Conduit and balance sheet loans Bank A – facility 2 of 2 400 380 1.5+ years Securities Securities Repurchase Facilities – 455 1 – 3 months Securities Revolving Credit Facility 143 100 2.0+ years N/A (unsecured) Non-Recourse Mortgage Financing (3rd Party) 576 576 7.3 years Real Estate Equity Investments Non-Recourse Mortgage Loan Receivable Financing 63 63 N/A Conduit loan Federal Home Loan Bank 2,251 (2) 1,845 Member Conduit and balance sheet loans; securities Unsecured Corporate Bonds (3) 298 298 1.0+ years N/A (unsecured) Unsecured Corporate Bonds (3) 266 266 5.0+ years N/A (unsecured) Total $5,647 $4,601 DIVERSE FINANCING SOURCES 15
- 16. Core Leverage Ratio(1) LEVERAGEMATCHED TO ASSET LIQUIDITY 16 Ladder targets total company debt to equity of approximately 2.0x – 3.0x Ladder employs higher leverage on its portfolio of liquid, principally AAA-rated securities Excluding its securities portfolio, Ladder’s corporate leverage was 1.2x at 09/30/2016 3.0x 1.2x Total Company – with Securities Total Company – without Securities (1) For a description of this non-GAAP financial measure, see Selected Definitions on page 21
- 17. RISK MANAGEMENT OVERVIEW 17 LiquidityRisk Management Hedging Practices • Utilize standard interest rate and credit spread hedging tools with multiple ISDA counterparties • Gap and rate sensitivity analyses are performed and reviewed by the Risk and Underwriting Committee of the Board of Directors Limited Leverage with Multiple Committed Counterparties • Target debt-to-equity ratio of approximately 2x – 3x • Long-term leverage forecasting including various scenario analyses performed on a regular basis • FHLB membership, six committed term financing relationships with five leading financial institutions, corporate unsecured revolver and bonds, and non-recourse mortgage financing • Preponderance of assets are either senior secured or investment grade-rated • Emphasis on committed term funding with multiple counterparties (including FHLB) to manage duration risk and enhance diversity • Detailed cash and debt management forecast updated and reviewed by management daily
- 18. In arising interest rate environment, Ladder would expect to benefit from: ̶ $1.4 billion floating rate balance sheet loan portfolio ̶ $1.6 billion of fixed rate debt with remaining terms greater than one year ̶ $1.2 billion (notional value) of interest rate hedge positions that place Ladder in a position equivalent to that of a “fixed rate payer / floating rate receiver” ̶ The Company estimates that a 100 basis point increase in LIBOR would result in an increase in annual net interest income of approximately $2.4 million Change in LIBOR Projected Change in Annual Net Interest Income ($mm) Projected Change in Portfolio Value ($mm) Decrease of 100 Basis Points $1.5 $51.0 million (3.4% of book equity) Increase of 100 Basis Points $2.4 ($51.2 million) (3.4% of book equity) INTEREST RATE RISK MANAGEMENT 18 Note: All amounts as of 09/30/2016
- 19. BALANCE SHEET SUMMARY 19 Cash$97 Loans Held for Sale 784 Loans Held for Investment 1,643 Securities 2,651 Net Lease & Other Equity Investments 826 Equity Investment in Partnerships & JVs 34 Other Assets 181 Total Assets $6,216 Total Debt $4,601 Other Liabilities 114 Total Liabilities 4,715 Equity Capital 1,496 Non-Controlling Interest (Joint Ventures) 5 Total Equity Capital 1,501 Total Liabilities and Equity $6,216 (as of 09/30/2016; $ in millions) Consistent emphasis on senior secured assets, liquidity and moderate leverage
- 20. 20 (1) All metricsshown on a consolidated basis, except Weighted-Average % Owned by Ladder (2) Excludes two unconsolidated joint venture investments with total book value of $33.9 million as of September 30, 2016 (3) For a description of these financial measures, see Selected Definitions on page 21 (4) For a description of these non-GAAP financial measures, see Selected Definitions on page 21 (as of 09/30/2016; $ in millions, except per share amounts) LADDER SNAPSHOT Snapshot of Business Lines Other Assets, Financing, Book Equity and ROE Conduit Loans Net Leased Commercial Real Estate (100% Owned) Other Assets Carrying Value of Assets $784 Carrying Value of Assets $539 Cash & Cash Equivalents $60 Weighted-Average Yield 4.4% Undepreciated Book Value of Assets 591 Other Assets(3) 252 Origination Volume (LTM) 1,678 Total Square Feet 4,092,759 Securitization Volume (LTM) 1,268 Weighted-Average Occupancy 100% Financing Securitization Profit Margin (LTM) 2.6% In-Place Annual Net Operating Income (NOI) $38.7 Secured Debt $4,042 Number of Securitizations (LTM) 6 Accounting method: carried at depreciated book value Senior Unsecured Notes 559 Net Revenue Contribution (LTM) $44 Total Debt 4,601 Accounting method: carried at lower of cost or FMV Other Commercial Real Estate(1)(2) Other Liabilities(3) 114 Carrying Value of Assets $241 Balance Sheet Loans Undepreciated Book Value of Assets 295 Book Equity Value Carrying Value of Assets $1,643 Total Square Feet 2,665,579 Book Equity Value (excluding NCI in JVs) $1,496 % First Mortgage 90% Weighted-Average Occupancy 85% Total Shares Outstanding (mm) 109.6 % Other (Mezzanine/Subordinate) 10% In-Place Annual Net Operating Income (NOI) $24.3 GAAP Book Value per Share(3) $13.59 Weighted-Average Yield 7.1% Weighted-Average % Owned by Ladder 88.2% Undepreciated Book Value per Share(4) $14.58 Accounting method: carried at lower of cost or FMV Accounting method: carried at depreciated book value Leverage(4) Securities Condominium Residential Real Estate(1) Core Leverage Ratio 3.0x Carrying Value of Assets $2,651 Carrying Value of Assets $46 % First Mortgage Secured 100% Total Remaining Units 178 Return on Average Equity (based on Core Earnings)(4) % AAA-Rated 84% Total Remaining Square Feet 185,100 Core Earnings (LTM) $164 % Investment Grade-Rated 98% Unit Sale Price as % of GAAP Book Value (LTM) 150% Average Book Equity Value (LTM) 1,484 Weighted-Average Duration 3.2 Years Weighted-Average % Owned by Ladder 99.5% Pre-Tax Core ROAE (LTM) 11.0% Accounting method: carried at FMV Accounting method: carried at depreciated book value Core ROAE (After-Tax) (LTM) 10.9%
- 21. 21 SELECTED DEFINITIONS • CoreEarnings (non-GAAP) ̶ Income before taxes adjusted to exclude (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) the premium (discount) on mortgage loan financing and the related amortization of premium (discount) on mortgage loan financing recorded during the period, (v) non-cash stock-based compensation and (vi) certain one-time transactional items. • Core EPS (non-GAAP) ̶ After-tax Core Earnings divided by adjusted weighted-average shares outstanding. • Core Leverage Ratio (non-GAAP) ̶ Total debt obligations, adjusted to exclude non-recourse mortgage loan receivable financing, divided by total equity (capital). • Core Return on Average Equity (Core ROAE) (non-GAAP) ̶ After-tax Core Earnings divided by average book equity balance excluding total noncontrolling interest in consolidated joint ventures. • GAAP Book Value per Share ̶ Total shareholders’ equity divided by Class A common shares outstanding. • Other Assets ̶ Includes cash collateral held by broker, investments in unconsolidated joint ventures, FHLB stock, derivative instrument assets, amount due from brokers, accrued interest receivable and other assets. • Other Liabilities ̶ Includes amount due to brokers, derivative instrument liabilities, amount payable pursuant to tax receivable agreement, dividend payable, accrued expenses and other liabilities. • Pre-Tax Core Return on Average Equity (Pre-Tax Core ROAE) (non-GAAP) ̶ Core Earnings divided by average book equity balance excluding total noncontrolling interest in consolidated joint ventures. • Undepreciated Book Value per Share (non-GAAP) ̶ Total equity (capital), adjusted to exclude total noncontrolling interest in consolidated joint ventures and adjusted to include total real estate accumulated depreciation and amortization, divided by total diluted shares outstanding.