Ladder Capital(US:LADR)2023-07-26 22:46Financial Data and Key Metrics Changes - For Q2 2023, the company generated distributable earnings of $41.5 million or $0.33 per share, reflecting an after-tax return on equity of 10.8% [13] - The adjusted leverage ratio stood at 1.7 times, with $777 million in cash and cash equivalents, representing 14% of total assets [3][51] - The company increased its CECL reserve to $32 million due to the current market outlook [50] Business Line Data and Key Metrics Changes - The real estate segment generated $16 million in net rental income, with over 70% of the larger portfolio comprising 156 net lease properties [16] - The balance sheet loan portfolio decreased by $309 million due to loan paydowns, with an average loan size of $25 million [19][45] - The company added a $35 million loan on a mixed-use property to nonaccruals, which is being pursued for remedies [15][20] Market Data and Key Metrics Changes - The corporate credit rating was reaffirmed at one notch below investment grade by two of three rating agencies [7] - The carrying value of the securities portfolio was $458 million, with 82% rated AAA and 99% investment-grade [10] - The unencumbered asset pool stood at $2.9 billion, representing over 52% of the balance sheet [11] Company Strategy and Development Direction - The company is focusing on investing in AAA-rated securities from new issue CLOs, expecting to ramp up investments in the second half of 2023 [24] - There is an intention to explore mezzanine loans and refinancing floating rate loans with fixed rate components [41][69] - The company aims to take advantage of dislocations in the commercial real estate sector while maintaining a conservative balance sheet [48][80] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the capital markets improving post-regional banking issues, with expectations for increased loan origination activity [54][66] - There are anticipated challenges in the syndicated equity structure and loans secured by large buildings in high-crime areas [27] - The company believes that there may be surprising gains in the future if interest rates fall and capital markets recover [59] Other Important Information - The company repurchased $2.3 million of its common stock year-to-date, with a remaining capacity of $44 million on its $50 million buyback authorization [22] - The dividend remains well covered, with a declared dividend of $0.23 per share paid on July 17, 2023 [53] Q&A Session Summary Question: Will borrowers consider locking in higher fixed rates now? - Management noted that the conduit business is improving, with more deals being done, primarily in 5-year loans [32] Question: What is the loan origination environment like? - Management indicated that while there are challenges with over-leveraged refinances, they are seeing a sense of seriousness in loan quotes and expect to start writing loans soon [37][38] Question: Are there plans for mezzanine loans or expanding the real estate portfolio? - Management is exploring refinancing options and sees potential in purchasing multifamily properties due to current market conditions [40][70] Question: How flexible is the company regarding managing dividends? - Management confirmed that they have the ability to carry forward excess dividends and do not foresee issues complying with REIT rules [72][74] Question: What is the outlook for the dividend and stock performance? - Management expressed confidence in the company's ability to raise dividends in the future, contingent on market conditions and performance [82]