Ladder Capital: Quality Has Its Price

Core Viewpoint - Ladder Capital Corporation has successfully maintained its dividend coverage with distributable earnings in Q2 2024, showcasing stability in its book value despite challenges in the commercial real estate market [1][5][12] Financial Performance - In Q2 2024, Ladder Capital reported distributable earnings of $0.31 per share, leading to a dividend payout ratio of 74%, slightly up from 72% over the last twelve months [7][10] - The trust's book value remained stable at $13.71 per share, showing only a minor decrease from $13.72 per share year-over-year, contrasting with Blackstone Mortgage Trust's 4% decline in book value [10][12] Portfolio Composition - Ladder Capital primarily invests in Balance Sheet First Mortgage Loans, which constituted 50% of its total assets in Q2 2024, generating recurring interest income for the trust [3][4] - The trust's portfolio also includes net-leased commercial real estate assets and commercial real estate securities, with cash making up 24% of total assets [4] Market Position - Ladder Capital's 8% yield is considered one of the safest in the commercial real estate sector, especially in light of the recent dividend cut by Blackstone Mortgage Trust due to insufficient distributable earnings [1][12] - The market currently values Ladder Capital at a 2% discount to its book value, indicating confidence in its portfolio quality [1] Risk Management - The company added only $5.1 million to its loan loss reserves in Q2 2024, the lowest level in a year, reflecting improved credit quality [5][10] - Ladder Capital's lower dividend payout ratio compared to peers suggests a more conservative approach to dividend sustainability [10][12]