Financial
Highlights
Required GAAP disclosures:
- GAAP Net Income of $71.6 million for
the fourth quarter and $113.7 million for the year ended December
31, 2016
- GAAP Income before Taxes of $72.4
million for the fourth quarter and $120.0 million for the year
ended December 31, 2016
- Diluted EPS of $0.63 for the fourth
quarter and $1.06 for the year ended December 31, 2016
- After-Tax GAAP Return on Average
Equity of 18.0% for the fourth quarter and 7.7% for the year ended
December 31, 2016
- GAAP Book Value per Share of $13.57
at December 31, 2016
Core Earnings disclosures:
- Core Earnings of $44.6 million for
the fourth quarter and $158.2 million for the year ended December
31, 2016
- Core EPS of $0.37 for the fourth
quarter and $1.48 for the year ended December 31, 2016
- After-Tax Core Return on Average
Equity of 10.8% for the fourth quarter and 10.7% for the year ended
December 31, 2016
- Undepreciated Book Value per Share
of $14.76 at December 31, 2016
Ladder Capital:
- Declared a fourth quarter dividend
of $0.460/share of Class A common stock paid on January 24, 2017,
bringing total dividends to $1.285/share of Class A common stock in
2016
- Increased the cash component of the
quarterly dividend rate by 9.1% to $0.300/share
- Originated $701.6 million of
commercial mortgage loans in the fourth quarter resulting in total
originations of $2.1 billion in 2016, comprised of $1.1 billion of
mortgage loans held for sale and $969.4 million of mortgage loans
held for investment
- Contributed $663.8 million of loans
to 3 securitization transactions in the fourth quarter resulting in
a total of $1.3 billion of loans contributed to 6 securitization
transactions in 2016
Ladder Capital Corp (NYSE:LADR) (“we,” “Ladder,” or the
“Company”) today announced operating results for the quarter and
year ended December 31, 2016. GAAP Income before taxes for the year
ended December 31, 2016 was $120.0 million compared to $160.7
million for the year ended December 31, 2015. The annual results
reflect the unfavorable market trends prevailing in 2016 as
compared to 2015, which resulted in lower gains on sales of loans
and real estate as well as securities trading, offset by a more
favorable net result from derivative transactions. GAAP Income
before taxes for the three months ended December 31, 2016 was $72.4
million compared to $67.1 million for the three months ended
December 31, 2015. A larger increase in interest rates in the
fourth quarter of 2016 than in the fourth quarter of 2015 led to
lower gains on sales across all asset types offset by higher
derivative gains. The Diluted EPS for the three months and year
ended December 31, 2016 was $0.63 and $1.06, respectively, compared
to $0.50 and $1.42 for the three months and year ended December 31,
2015, respectively. After- tax GAAP return on average equity was
18.0% in the fourth quarter of 2016.
Core Earnings, a non-GAAP financial measure, was $44.6 million
for the fourth quarter of 2016, compared to $50.1 million earned in
the fourth quarter of 2015. For the year ended December 31, 2016,
Core Earnings was $158.2 million compared to $191.5 million for
2015. The results reflect lower securitization volumes due to
unfavorable market trends prevailing during the first half of 2016.
We believe Core Earnings, which adjusts GAAP income before taxes
for certain non-cash items including depreciation related to our
real estate equity portfolio and unrecognized derivative results,
is useful in evaluating our earnings from operations across
reporting periods. Core EPS, a non-GAAP financial measure, was
$0.37 for the fourth quarter of 2016 and $1.48 for the year ended
December 31, 2016, compared to $0.45 and $1.85 for the three months
and year ended December 31, 2015, respectively.
"We are pleased to report Core Earnings of $158.2 million and an
annualized after-tax core return on average equity of 10.7% for
2016," said Brian Harris, Ladder's Chief Executive Officer. “Loan
origination activity increased substantially in the second half of
2016, and we grew our portfolio of balance sheet loans and real
estate equity investments as well as contributed loans to multiple
profitable securitizations during the year."
As of December 31, 2016, we had total assets of $5.6 billion,
including $2.4 billion of commercial real estate loans, $2.1
billion of commercial real estate-related securities, $822.3
million of real estate, $64.0 million of cash and $237.1 million of
other assets. As of December 31, 2016, 78.0% of our total assets
were comprised of senior secured assets, including first mortgage
loans, commercial real estate-related securities secured by first
mortgage loans, and cash. During the fourth quarter, senior secured
assets comprised 98.6% of the total $889.7 million investment
activity.
During the quarter ended December 31, 2016, we originated $701.6
million of loans comprised of $263.2 million of commercial mortgage
loans held for sale and $438.4 million of commercial mortgage loans
held for investment. We participated in 3 securitization
transactions during the fourth quarter of 2016 contributing a total
of $663.8 million in face amount of commercial mortgage loans. The
sale of loans into these securitization transactions resulted in a
net loss from the sale of loans of $4.1 million in the fourth
quarter. After factoring in related hedging results and other
related adjustments, income from sales of securitized loans, net of
hedging during the fourth quarter was $18.0 million. We also
received $88.4 million from the repayment of mortgage loans during
the three months ended December 31, 2016.
In total, we contributed $1.3 billion of commercial mortgages to
6 securitization transactions during 2016, which resulted in net
income from the sale of loans of $23.1 million and income from
sales of securitized loans, net of hedging of $38.4 million for the
year ended December 31, 2016.
Our portfolio of CMBS and U.S. Agency Securities decreased by
$550.0 million during the fourth quarter to $2.1 billion as we
purchased $124.1 million and sold $230.9 million of securities
during the quarter. We also received $376.3 million of proceeds
from the repayment of securities.
Net interest income for the fourth quarter of 2016 was $28.5
million, compared to $33.4 million for the comparable period in the
prior year, primarily due to a decrease in the weighted average
coupon on mortgage loans receivable as well as higher interest
expense as a result of higher outstanding financing obligations and
an increase in prevailing market rates. Other income for the fourth
quarter of 2016 was $89.2 million compared to $72.2 million for the
comparable period in the prior year, which reflects an increase of
$49.1 million in the net result from derivative transactions,
offset by decreases in income from sales of loans and real estate,
net of $15.6 million and $14.0 million, respectively, as rising
interest rates during the quarter led to a decline in asset values
and an increase in hedge values. Costs and expenses totaled $45.3
million for the fourth quarter of 2016, a $7.0 million increase
compared to the fourth quarter of 2015.
During the fourth quarter of 2016, we acquired 4 single tenant
net lease and other properties for a total investment of $12.2
million. During the three months ended December 31, 2016, our
mortgage loan financing increased by $14.6 million primarily due to
the contribution of 8 loans secured by our real estate investments
to securitizations. We sold 31 condominium units for a total of
$13.7 million during the fourth quarter, which generated income
from the sale of real estate, net, of $5.0 million. Our total real
estate portfolio as of December 31, 2016 was $822.3 million.
Portfolio Overview
The following table summarizes the book value of our investment
portfolio as of the following dates:
December 31, 2016 December
31, 2015 ($ in thousands)
Loans Conduit first
mortgage loans $ 357,882 6.4 % $ 571,764 9.7 % Balance sheet first
mortgage loans 1,828,961 32.8 % 1,453,120 24.6 % Other commercial
real estate-related loans 167,134 3.0 % 285,525 4.8 %
Total loans 2,353,977 42.2 % 2,310,409 39.1 %
Securities
CMBS investments 2,043,566 36.6 % 2,335,930 39.7 % U.S. Agency
Securities investments 57,381 1.1 % 71,287 1.2 %
Total securities 2,100,947 37.7 % 2,407,217 40.9 %
Real
Estate Real estate and related lease intangibles, net
822,338 14.7 % 834,779 14.2 % Total real estate 822,338 14.7
% 834,779 14.2 %
Other Investments Investments in
unconsolidated joint ventures 34,025 0.6 % 33,797 0.6 % FHLB stock
77,915 1.4 % 77,915 1.3 % Total other investments
111,940 2.0 % 111,712 1.9 % Total investments
5,389,202 96.6 % 5,664,117 96.1 % Cash, cash equivalents and cash
collateral held by broker 64,017 1.1 % 139,770 2.4 % Other assets
125,118 2.3 % 91,325 1.5 %
Total assets
$ 5,578,337 100.0 % $
5,895,212 100.0 %
Note: CMBS investments and U.S. Agency Securities are carried at
fair value.
We originate conduit first mortgage loans eligible for
securitization that are secured by cash-flowing commercial real
estate properties. These first mortgage loans are structured with
fixed rates and five- to ten-year terms. As of December 31, 2016,
we held 10 first mortgage loans that were substantially available
for contribution into future securitizations with an aggregate book
value of $357.9 million. Based on the outstanding loan principal
balances at December 31, 2016 and the “as-is” third-party FIRREA
appraised values at origination, the weighted average loan-
to-value ratio of this portfolio was 62.9%.
We also originate and invest in balance sheet first mortgage
loans secured by commercial real estate properties that are
undergoing lease-up, sell-out, and renovation or repositioning.
These mortgage loans are generally structured with floating rates
and terms (including extension options) ranging from one to five
years. As of December 31, 2016, we held a portfolio of 84 balance
sheet first mortgage loans with an aggregate book value of $1.8
billion, 98.0% of which was floating-rate. Based on the outstanding
loan principal balances at December 31, 2016 and the “as-is”
third-party FIRREA appraised values at origination, the weighted
average loan-to-value ratio of this portfolio was 64.3%.
We selectively invest in other commercial real estate loans in
the form of note purchase financings, subordinated debt, mezzanine
debt, and other structured finance products related to commercial
real estate. We held $167.1 million of other commercial real
estate-related loans as of December 31, 2016, 100% of which were
fixed-rate. Based on the outstanding loan principal balances
through the mezzanine or subordinated debt level at December 31,
2016 and the “as-is” third-party FIRREA appraised values at
origination, the weighted average loan-to-value ratio of this
portfolio was 74.0%.
As of December 31, 2016, our portfolio of CMBS investments had
an estimated fair value of $2.0 billion and was comprised of
investments in 191 CUSIPs ($10.7 million average investment per
CUSIP), with a weighted average duration of 3.5 years.
As of December 31, 2016, our portfolio of U.S. Agency Securities
had an estimated fair value of $57.4 million and was comprised of
investments in 28 CUSIPs ($2.0 million average investment per
CUSIP), with a weighted average duration of 8.5 years.
As of December 31, 2016, we owned 7.2 million square feet of
real estate, comprised of 115 single tenant net lease properties, 5
individual office buildings, 3 portfolios of office buildings, 1
warehouse, 1 shopping center, 59 condominium units at Veer Towers
in Las Vegas, and 88 condominium units at Terrazas River Park
Village in Miami. Our total real estate portfolio had an aggregate
book value of $822.3 million. We typically originate internal non-
recourse mortgage loan financing secured by an individual property
or a group of properties in our real estate portfolio and
subsequently seek to securitize these loans. Once the loans have
been securitized, they are included on our balance sheet as
mortgage loan financing. As of December 31, 2016, we had $590.1
million of such mortgage loan financing, secured by certain of our
real estate properties.
Liquidity and Capital
Resources
We held unrestricted cash and cash equivalents of $44.6 million
at December 31, 2016. We had total debt outstanding of $3.9 billion
as of December 31, 2016, and we had an additional $1.7 billion of
committed financing available for additional investment through our
FHLB membership, our revolving credit agreements, and our committed
repurchase facilities.
During the year ended December 31, 2016, we retired $21.9
million of principal of the 7.375% senior notes due on October 1,
2017 and $33.8 million of principal of the 5.875% senior notes due
on August 1, 2021 for a total repurchase price of $49.7 million. We
recognized a $5.4 million net gain on extinguishment of debt after
recognizing $0.6 million of unamortized debt issuance costs
associated with the retired debt. During the same period, we
repurchased 424,317 shares of Class A common stock for an aggregate
price of $4.7 million or an average of $10.96 per share.
The following table summarizes our debt obligations as of the
following dates:
December 31, 2016 December 31,
2015 ($ in thousands) Committed loan facilities $ 567,163 $
704,149 Committed securities facility 228,317 161,887 Uncommitted
securities facilities 311,705 394,719 Total
repurchase agreements 1,107,185 1,260,755 Revolving credit facility
25,000 — Mortgage loan financing 590,106 544,663 Borrowings from
the FHLB 1,660,000 1,856,700 Senior unsecured notes 559,847
612,605
Total debt obligations $
3,942,138 $ 4,274,723
To maintain our qualification as a REIT under the Internal
Revenue Code of 1986, as amended, we must annually distribute at
least 90% of our taxable income. The REIT distribution requirements
limit our ability to retain earnings and thereby replenish or
increase capital for operations. We believe that our significant
capital resources and access to financing will provide us with
financial flexibility at levels sufficient to meet current and
anticipated capital requirements, including funding new investment
opportunities, paying distributions to our shareholders and
servicing our debt obligations.
Conference Call and
Webcast
We will host a conference call on Thursday, February 23, 2017 at
5:00 p.m. Eastern Time to discuss fourth quarter and year end 2016
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 Thursday, February 23,
2017 through midnight Thursday, March 9, 2017. To access the
replay, please call (844) 512-2921 domestic or (412) 317-6671
international, access code 13655415. 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.
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 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.
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:
Three Months Ended December 31, Year Ended
December 31,
2016
2015
2016
2015 ($ in thousands)
Net income (loss)
$ 71,621 $ 56,676 $ 113,720 $ 146,134 Income tax expense (benefit)
773 10,457 6,320
14,557 Income (loss) before taxes 72,394 67,133 120,040
160,691
Net (income) loss attributable to
noncontrolling interest in consolidated joint ventures and
operating partnership (GAAP) (1)
(306 ) (2,146 ) 109 (1,568 ) Our share of real estate depreciation,
amortization and gain adjustments (2) 9,207 3,905 33,828 28,704
Adjustments for unrecognized derivative results (3) (41,657 )
(20,717 ) (11,105 ) (10,213 ) Unrealized (gain) loss on Agency IO
securities 85 611 56 1,249 Premium (discount) on mortgage loan
financing, net of amortization (509 ) (982 ) (482 ) 802 Non-cash
stock-based compensation 5,512 2,338 19,039 10,277 One-time
transactional adjustments (90 ) (4) —
(3,272 ) (4) 1,509 (5)
Core Earnings
44,636
50,142
158,213
191,451
Core estimated corporate tax benefit (expense) (6) (4,202 )
(6,189 ) 627 (10,884 )
After-Tax
Core Earnings $ 40,434 $
43,953 $ 158,840 $
180,567 (1) Includes $7,639 and $29,036 of net
income attributable to noncontrolling interest in consolidated
joint ventures which are included in net (income) loss attributable
to noncontrolling interest in operating partnership on the combined
consolidated statements of income for the fourth quarter and year
ended December 31, 2016, respectively. (2) The following is
a reconciliation of GAAP depreciation and amortization to our share
of real estate depreciation, amortization and gain adjustments
amounts presented in the computation of Core Earnings in the
preceding table:
Three Months Ended December 31,
Year Ended December 31, 2016
2015 2016 2015 ($ in thousands) Total
GAAP depreciation and amortization $ 10,658 $ 9,823 $ 39,447 $
39,061 Less: Depreciation and amortization related to non-rental
property fixed assets (28) (28) (114) (108) Less: Non-controlling
interest in consolidated joint ventures’ share of accumulated
depreciation and amortization (726) (675)
(2,519) (2,830) Our share of real estate depreciation and
amortization 9,904 9,120 36,814 36,123 Realized gain from
accumulated depreciation and amortization on real estate sold (see
below) (702) (5,748) (3,007) (7,965) Less: Non-controlling
interests in consolidated joint ventures’ share of accumulated
depreciation and amortization on real estate sold 5
533 21 546 Our share of accumulated depreciation and
amortization on real estate sold (697) (5,215) (2,986) (7,419)
Our share of real estate depreciation
and
amortization and gain
adjustments
$ 9,207 $ 3,905 $ 33,828
$ 28,704
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, 2016 2015 2016
2015 ($ in thousands) GAAP realized gain on sale of
real estate, net $ 5,020 $ 19,039 $ 20,636 $ 40,386 Adjusted
gain/loss on sale of real estate for purposes of Core Earnings
4,323 13,824 17,650 32,967
Our share of accumulated depreciation
and
amortization on real estate
sold
$ 697 $ 5,215 $ 2,986
$ 7,419 (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:
Three Months
Ended December 31, Year Ended December 31, 2016
2015 2016 2015 ($ in thousands)
Net results from derivative transactions $ 64,739 $ 15,657 $
(1,409 ) $ (38,937 ) Plus: Hedging interest expense 6,625 6,490
29,870 26,820 Plus: Hedging realized result (29,707 )
(1,430
) (17,356 ) 22,330
Adjustments for
unrecognized derivative results $ 41,657
$ 20,717 $ 11,105
$ 10,213 (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, for 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)
One-time transactional adjustment for
costs related to restructuring the Company for REIT-related
operations. All costs were expensed and accrued for in the period
incurred.
(6) 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 shares outstanding (diluted) during the
period. The Adjusted weighted average shares outstanding (diluted)
is defined as the GAAP weighted average shares outstanding
(diluted), 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 shares outstanding (diluted) to Adjusted weighted average
shares outstanding (diluted):
Three Months Ended December 31, Year Ended
December 31, 2016 2015 2016
2015
(in thousands)
Weighted average shares outstanding (diluted) 66,037 97,975
107,639 51,871 Weighted average shares issuable to converted Class
B shareholders 42,582 — — 45,933
Adjusted weighted average
shares outstanding (diluted) 108,619 97,975
107,639 97,804
Set forth below is an unaudited computation of Core EPS:
Three Months Ended December 31, Year Ended
December 31, 2016 2015 2016
2015 ($ in thousands, except per share data)
After-Tax Core Earnings $ 40,434 $ 43,953 $ 158,840 $ 180,567
Adjusted weighted average shares outstanding (diluted)
108,619 97,975 107,639 97,804
Core EPS
$ 0.37 $ 0.45 $ 1.48
$ 1.85
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:
Three Months Ended December 31, Year Ended
December 31, 2016 2015 2016
2015 ($ in thousands) After-Tax Core Earnings $
40,434 $ 43,953 $ 158,840 $ 180,567 Average shareholders' equity
and NCI in operating partnership 1,500,134
1,488,864 1,486,772 1,498,268
After-Tax Core ROAE 10.8 %
11.8 % 10.7 % 12.1
%
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. Income from
sales of securitized loans, net is a key component of our results.
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
interest rate hedging. 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 the Company’s
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 combined consolidated financial statements included
herein and an unaudited reconciliation of hedge gain/(loss)
relating to loans securitized to net results from derivative
transactions as reported in our combined consolidated financial
statements:
Three Months Ended December 31, Year Ended
December 31, 2016 2015 2016
2015 ($ in thousands, except number of loans and
securitizations) Number of loans 44 57 104 210 Face amount of loans
sold into securitizations $ 663,798 $ 603,556 $
1,327,856
(1)
$
2,584,939
Number of securitizations 3 3 6 10
Income from sales of securitized loans,
net (2)
$ (4,088 ) $ 11,349 $ 23,098 $ 71,066
Hedge gain/(loss) related to loans
securitized (3)
22,087 1,605 15,271 (6,475 )
Income from sales of securitized loans,
net of hedging
$ 17,999 $ 12,954 $
38,369 $ 64,591
_______________________________
(1)
Excludes one $21.7 million loan acquired
from a third party and sold into a securitization at equal
values.
(2)
The following is a reconciliation of the non-GAAP financial measure
of income from sales of securitized loans, net to income from sale
of loans, net, which is the closest GAAP measure, as reported in
our combined consolidated financial statements:
Three Months Ended December 31, Year Ended December
31, 2016 2015 2016
2015 ($ in thousands) Income from sales of loans
(non-securitized), net $ (168 ) $ — $ 2,911 $ — Income from sales
of securitized loans, net (4,088 ) 11,349
23,098 71,066
Income from sales of loans, net
$ (4,256 ) $ 11,349 $
26,009 $ 71,066
(3)
The following is a reconciliation of the non-GAAP financial
measure of hedge gain/(loss) related to loans securitized to net
results from derivative transactions, which is the closest GAAP
measure, as reported in our combined consolidated financial
statements:
Three Months Ended December 31,
Year Ended December 31, 2016 2015
2016 2015 ($ in thousands) Hedge gain/(loss)
related to lending and securities positions $ 42,307 $ 14,052 $
(15,971 ) $ (32,462 ) Hedge gain/(loss) related to loans
(non-securitized) 345 — (709 ) — Hedge gain/(loss) related to loans
securitized 22,087 1,605 15,271
(6,475 )
Net results from derivative transactions $
64,739 $ 15,657 $ (1,409
) $ (38,937 )
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:
December 31, 2016 December 31,
2015
($ in thousands, except per share
data)
Total shareholders' equity $ 971,390 $ 828,215 Noncontrolling
interest in operating partnership 533,246 657,380 Our share of
accumulated real estate depreciation and amortization (1)
112,606 76,473 Undepreciated book value 1,617,242 1,562,068
Class A shares outstanding 71,586 55,210 Class B shares
outstanding 38,002 44,056 Total shares
outstanding 109,588 99,266
GAAP book value per share
$ 13.57 $ 15.00 Undepreciated book
value per share $ 14.76 $ 15.74
(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.
December 31, 2016 December 31,
2015 ($ in thousands) GAAP Accumulated real estate depreciation
and amortization $ 122,007 $ 83,056 Less: Noncontrolling interests'
share of accumulated real estate depreciation and amortization
(9,401 ) (6,583 )
Our share of accumulated real
estate depreciation and amortization $ 112,606
$ 76,473
Our non-GAAP financial measures, including Core Earnings, Core
EPS, After-Tax Core ROAE and Undepreciated book value per share
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 Ladder’s effective tax rate,
including the impact of Unincorporated Business Tax and the impact
of Ladder's 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. Ladder’s 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 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.
Ladder Capital Corp and
Predecessor
Combined Consolidated Statements of Income (Dollars in
Thousands, Except Per Share and Dividend Data)
Year Ended December 31,
2016 2015 2014 Net
interest income Interest income $ 236,372 $ 241,539 $ 187,325
Interest expense 120,827 113,303
77,574
Net interest income 115,545
128,236 109,751 Provision for loan losses 300
600 600
Net interest income
after provision for loan losses 115,245 127,636
109,151 Other income Operating lease income
77,277 80,465 56,649 Tenant recoveries 5,958 9,907 9,183 Sale of
loans, net 26,009 71,066 145,275 Realized gain (loss) on securities
7,724 24,007 26,977 Unrealized gain (loss) on Agency interest-only
securities (56 ) (1,249 ) 2,144 Realized gain on sale of real
estate, net 20,636 40,386 29,760 Fee and other income 21,365 15,205
11,704 Net result from derivative transactions (1,409 ) (38,937 )
(94,798 ) Earnings (loss) from investment in unconsolidated joint
ventures 426 371 1,990 Gain on assignment of mortgage loan
financing — — 432 Gain (loss) on extinguishment of debt
5,382 — (150 )
Total other
income 163,312 201,221
189,166 Costs and expenses
Salaries and employee benefits 64,270 61,612 82,144 Operating
expenses 20,552 25,103 25,398 Real estate operating expenses 29,953
35,886 32,670 Real estate acquisition costs 592 1,983 2,404 Fee
expense 3,703 4,521 3,023 Depreciation and amortization
39,447 39,061 28,447
Total
costs and expenses 158,517
168,166 174,086 Income (loss)
before taxes 120,040 160,691 124,231
Income tax expense (benefit) 6,320 14,557
26,605
Net income (loss) 113,720
146,134 97,626 Net (income) loss attributable to
noncontrolling interest in consolidated joint ventures 138 (1,568 )
370 Pre-IPO net loss attributable to predecessor unitholders — —
12,628 Net (income) loss attributable to noncontrolling interest in
operating partnership (47,131 ) (70,745 )
(66,437 )
Net income (loss) attributable to Class A common
shareholders $ 66,727 $
73,821 $ 44,187
Earnings per share: Basic $ 1.08 $ 1.43 $ 0.90 Diluted $
1.06 $ 1.42 $ 0.86
Weighted average shares
outstanding: Basic 61,998,089 51,702,188 49,296,417 Diluted
107,638,788 51,870,808 97,583,310
Dividends per share of
Class A common stock: $ 1.285 $ 2.225 $ —
Ladder Capital Corp Combined Consolidated Balance
Sheets (Dollars in Thousands) December 31,
2016 December 31, 2015 Assets Cash and
cash equivalents $ 44,615 $ 108,959 Cash collateral held by broker
19,402 30,811 Mortgage loan receivables held for investment, net,
at amortized cost 1,996,095 1,738,645 Mortgage loan receivables
held for sale 357,882 571,764 Real estate securities,
available-for-sale 2,100,947 2,407,217 Real estate and related
lease intangibles, net 822,338 834,779 Investments in
unconsolidated joint ventures 34,025 33,797 FHLB stock 77,915
77,915 Derivative instruments 5,018 2,821 Due from brokers 10 —
Accrued interest receivable 24,439 22,776 Other assets
95,651 65,728
Total assets $
5,578,337 $ 5,895,212
Liabilities and Equity Liabilities Debt obligations,
net $ 3,942,138 $ 4,274,723 Due to brokers 394 — Derivative
instruments 3,446 5,504 Amount payable pursuant to tax receivable
agreement 2,520 1,910 Dividends payable 24,682 17,456 Accrued
expenses 66,597 78,142 Other liabilities 29,006
26,069
Total liabilities
4,068,783 4,403,804
Commitments and contingencies — —
Equity
Class A common stock, par value $0.001 per
share, 600,000,000 shares authorized;
72,681,218 and 55,758,710 shares issued
and 71,586,170 and 55,209,849 shares
outstanding
72 55
Class B common stock, par value $0.001 per
share, 100,000,000 shares authorized;
38,002,344 and 44,055,987 shares issued
and outstanding
38 44 Additional paid-in capital 992,307 776,866 Treasury stock,
1,095,048 and 548,861 shares, at cost (11,244 ) (5,812 ) Retained
Earnings/(Dividends in Excess of Earnings) (11,148 ) 60,618
Accumulated other comprehensive income (loss) 1,365
(3,556 )
Total shareholders’ equity 971,390
828,215 Noncontrolling interest in operating partnership
533,246 657,380 Noncontrolling interest in consolidated joint
ventures 4,918 5,813
Total
equity 1,509,554 1,491,408
Total liabilities and equity $
5,578,337 $ 5,895,212
Ladder Capital Corp and
Predecessor
Combined Consolidated Statements of Cash Flows (Dollars
in Thousands)
Year Ended December 31, 2016
2015 2014 Cash
flows from operating activities: Net income (loss) $
113,720
$
146,134
$
97,626
Adjustments to reconcile net income (loss) to net cash provided by
(used in) operating activities: (Gain) loss on extinguishment of
debt (5,382 ) — 150 Depreciation and amortization 39,447 39,061
28,447 Unrealized (gain) loss on derivative instruments (4,224 )
(10,182 ) 14,378 Unrealized (gain) loss on Agency interest-only
securities 56 1,249 (2,144 ) Unrealized (gain) loss on investment
in mutual fund 14 — — Provision for loan losses 300 600 600
Amortization of equity based compensation 17,640 13,788 14,451
Amortization of deferred financing costs included in interest
expense 7,459 5,757 5,802 Amortization of premium on mortgage loan
financing (894 ) (902 ) (629 ) Amortization of above- and
below-market lease intangibles (108 ) (249 ) 652 Amortization of
premium/(accretion) of discount and other fees on loans (8,941 )
(12,241 ) (6,918 ) Amortization of premium/(accretion) of discount
and other fees on securities 76,475 87,906 91,306 Realized gain on
sale of mortgage loan receivables held for sale (26,009 ) (71,066 )
(145,275 ) Realized gain on disposition of loan — (820 ) — Realized
(gain) loss on real estate securities (7,724 ) (24,007 ) (26,977 )
Realized gain on sale of real estate, net (20,636 ) (40,386 )
(29,760 ) Realized gain on assignment of mortgage loan financing —
— (432 ) Realized gain on sale of derivative instruments 24 — —
Origination of mortgage loan receivables held for sale (1,128,651 )
(2,594,141 ) (3,345,372 ) Purchases of mortgage loan receivables
held for sale (73,421 ) — — Repayment of mortgage loan receivables
held for sale 1,768 2,308 1,293 Proceeds from sales of mortgage
loan receivables held for sale 1,440,195 2,509,090 3,523,689 Income
from investments in unconsolidated joint ventures in excess of
distributions received (426 ) (371 ) (1,990 ) Distributions from
operations of investment in unconsolidated joint ventures 1,017 294
1,957 Deferred tax asset 1,868 2,900 (7,175 ) Changes in operating
assets and liabilities: Accrued interest receivable (1,662 ) 621
(9,687 ) Other assets (3,673 ) (1,770 ) (17,446 ) Accrued expenses
and other liabilities (9,085 ) (12,985 )
22,126
Net cash provided by (used in) operating
activities 409,147 40,588
208,672 Cash flows from investing
activities: Reduction (addition) of cash collateral held by
broker for derivatives
7,616
16,918
(13,864
) Purchase of derivative instruments (73 ) — (7 ) Sale of
derivative instruments 39 — — Purchases of real estate securities
(977,062 ) (725,888 ) (2,157,391 ) Repayment of real estate
securities 684,143 186,902 186,310 Proceeds from sales of real
estate securities 539,295 845,648 768,590 Purchase of FHLB stock —
(7,984 ) (22,890 ) Sale of FHLB stock — 2,409 — Origination of
mortgage loan receivables held for investment (919,023 ) (963,023 )
(1,201,968 ) Repayment of mortgage loan receivables held for
investment 649,914 752,452 214,511 Reduction (addition) of cash
collateral held by broker 3,793 (5,291 ) (53 ) Addition (reduction)
of deposits received for loan originations 960 (2,368 ) (91 )
Escrow cash and title deposits included in other assets (4,014 )
5,375 (9,621 ) Capital contributions to investment in
unconsolidated joint ventures — (31,085 ) — Distributions received
from investments in unconsolidated joint ventures in excess of
income 48 3,747 3,255 Capitalization of interest on investment in
unconsolidated joint ventures (867 ) (341 ) — Capital contributions
to investment in mutual fund (10,001 ) — — Purchases of real estate
(62,495 ) (197,501 ) (254,497 ) Capital improvements of real estate
(10,640 ) (8,375 ) (5,192 ) Proceeds from sale of real estate
72,953
(1)
98,558 123,444
Net cash provided by
(used in) investing activities (25,414 )
(29,847 ) (2,369,464 )
Cash flows from financing activities: Deferred financing
costs paid (5,927 ) (2,330 ) (9,863 ) Proceeds from borrowings
under debt obligations 12,359,830 16,280,023 16,885,636 Repayment
of borrowings under debt obligations (12,689,064 ) (16,137,339 )
(14,907,233 ) Cash dividends paid to Class A common shareholders
(67,166 ) (39,934 ) — Partners’ capital distributions — — (369 )
Capital contributed by noncontrolling interests in operating
partnership 250 — — Capital distributed to noncontrolling interests
in operating partnership (39,805 ) (68,673 ) (47,926 ) Capital
contributed by noncontrolling interests in consolidated joint
ventures — 74 1,841 Capital distributed to noncontrolling interests
in consolidated joint ventures (757 ) (3,930 ) (2,207 ) Payment of
liability assumed in exchange for shares for the minimum
withholding taxes on vesting restricted stock (786 ) (4,897 ) (125
) Purchase of treasury stock (4,652 ) (994 ) — Issuance of common
stock — — 259,037 Common stock offering costs —
— (20,523 )
Net cash provided by (used in)
financing activities (448,077 )
22,000 2,158,268 Net increase
(decrease) in cash (64,344 ) 32,741
(2,524 ) Cash and cash equivalents at beginning of
period 108,959 76,218 78,742
Cash and cash equivalents at end of period $
44,615 $ 108,959 $
76,218 Supplemental information: Cash paid for
interest, net of amounts capitalized $ 115,246 $ 107,362 $ 63,171
Cash paid for income taxes $ 8,775 $ 7,306 $ 45,981
Non-cash investing and financing activities: Securities and
derivatives purchased, not settled $ (394 ) $ — $ — Securities
sold, not settled $ — $ 4 $ 3 Origination of mortgage loans
receivable held for investment $ 50,378 $ — $ — Repayment of
mortgage loans receivable held for investment $ (70,678 ) $ — $ —
Settlement of mortgage loan receivable held for investment by real
estate $ — $ 4,620 $ — Like-kind exchange of real estate:
Acquisitions $ — $ 15,249 $ — Dispositions $ — $ (62,093 ) $ —
Receivable from qualified intermediary - other assets $ — $ 6,483 $
— Real estate acquired in settlement of mortgage loan receivable
held for investment $ — $ 6,700 $ — Net settlement of sale of real
estate, subject to debt - real estate $ — $ (11,310 ) $ — Net
settlement of sale of real estate, subject to debt - debt
obligations $ — $ 51,060 $ — Exchange of noncontrolling interest
for common stock $ 145,841 $ 53,659 $ — Change in deferred tax
asset related to exchanges of noncontrolling interest for common
stock $ 980 $ (320 ) $ 1,014 Dividends declared, not paid $ 23,364
$ 17,456 $ — Stock dividends $ 64,100 $ — $ —
(1) Includes cash proceeds received in the current year that
relate to prior year sales of real estate of $6.5 million.
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InvestorsLadder Capital Corp Investor Relations,
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