Transcripción procesada de la conferencia telefónica o presentación sobre el resultado LADR del 5 de mayo a las 8:00 p.m., 9:00 p.m. GMT

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Nueva York, 25 de mayo de 2020 (Thomson StreetEvents) – Acta de la conferencia telefónica o presentación sobre los resultados de Ladder Capital Corp. Martes 5 de mayo de 2020, 9:00 p.m. GMT

* Robert M. Perelman

JMP Securities LLC, Departamento de Investigación – MD, Director de Investigación Financiera Especializada y Analista de Investigación Senior

B. Riley FBR, Inc., Departamento de Investigación – Analista

Hola y bienvenidos a la convocatoria de ganancias de Ladder Capital Corp. para el primer trimestre de 2020. La conferencia de hoy está grabada.

En este punto, me gustaría entregar la conferencia a Michelle Wallach, Directora de Cumplimiento y Asesora Reguladora Senior. Por favor continua.

Michelle Wallach, Ladder Capital Corp – Directora de Cumplimiento y Asesora Reguladora Senior [2]

Muchas gracias y buen día a todos. Antes de comenzar la oferta de Ladder Capital Corp para el primer trimestre de 2020, no estaría seguro si no reconociera la pandemia y el impacto que estaba causando en todo el mundo. Seguimos esperando que todos se mantengan seguros y saludables en este momento verdaderamente sin precedentes.

En el curso de la crisis de salud, las prioridades corporativas a corto plazo de Ladder incluyeron el bienestar y la seguridad de nuestros empleados. Nos movimos rápidamente para activar nuestro plan de continuidad comercial, y todos los empleados de Ladder han estado trabajando remotamente desde mediados de marzo. A pesar del lugar de trabajo remoto, trabajamos de manera efectiva y eficiente.

Pasemos a nuestro llamado a resultados. Esta tarde estoy con Brian Harris, director ejecutivo de nuestra compañía. Pamela McCormack, nuestra presidenta; y Marc Fox, nuestro director financiero. Brian, Pamela y Marc compartirán sus comentarios sobre el primer trimestre y lo que están viendo actualmente en el segundo trimestre, y luego abriremos la convocatoria de preguntas.

Esta tarde, publicamos nuestros resultados financieros para el trimestre finalizado el 31 de marzo de 2020. Los resultados se publican en la sección de Relaciones con Inversores del sitio web de la compañía y en nuestro informe trimestral en el Formulario 10-Q, que presentaremos ante la SEC más adelante esta semana.

Antes de que comience la llamada, me gustaría recordarles a todos que esta llamada puede contener declaraciones a futuro. Los resultados reales pueden diferir materialmente de los expresados ​​o implícitos en esta convocatoria, y no tenemos la obligación de actualizar estas declaraciones. Lo remito a nuestro Formulario 10-K y Formulario 10-Q actuales para describir algunos de los riesgos que pueden afectar nuestros resultados.

En esta solicitud, también nos referimos a ciertas cifras clave no GAAP. Para obtener más información, incluida la conciliación de estas métricas no GAAP con las métricas GAAP más comparables, visite nuestro sitio web ir.laddercapital.com y nuestro informe de resultados.

Con eso, remitiré la llamada a nuestra Presidenta Pamela McCormack.

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Pamela Lynn McCormack, Ladder Capital Corp – cofundadora, presidenta y directora [3]

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Gracias Michelle y buenas tardes a todos. En primer lugar, estoy de acuerdo con lo que dijo Michelle. Espero que usted y sus seres queridos estén seguros y saludables y lo sigan siendo incluso en estos tiempos sin precedentes. Y un agradecimiento especial a todos los empleados clave en la línea del frente.

La escala global y la rápida propagación de COVID-19 cambiaron significativamente el entorno operativo de Ladder en el primer trimestre, ya que marzo fue muy diferente de enero. En el primer trimestre de 2020, Ladder generó ganancias básicas de $ 30.9 millones, o $ 0.26 por acción, lo que corresponde a una rentabilidad después de impuestos sobre el capital básico del 8%. Me complace anunciar que nuestro saldo de efectivo sin restricciones es de aproximadamente $ 830 millones y que tenemos activos libres de más de $ 2.6 mil millones. Sorprendentemente, nuestros activos no gravados, incluido dicho efectivo, actualmente representan aproximadamente el 40% de nuestros activos totales e incluyen préstamos hipotecarios iniciales no gravados de $ 1.25 mil millones. Solo el efectivo representa aproximadamente el 12% de nuestros activos. La calidad y la composición de nuestro grupo de riqueza sin gravámenes es un claro diferenciador para la escalera y un elemento clave de nuestro sólido balance.

Aunque las circunstancias especiales de hoy hacen difícil proyectar el futuro con certeza, confiamos en que el enfoque históricamente conservador de Ladder y las medidas proactivas recientes posicionarán bien a la compañía para gestionar los efectos de COVID-19 y aprovechar las oportunidades. que surgen de nuestra industria posibles interrupciones adicionales.

En vista de nuestra acumulación sustancial y nuestra liquidez, que trataremos más adelante en esta convocatoria, me gustaría señalar que la participación de Ladder se está negociando aproximadamente con su saldo de efectivo. Creemos que esto se debe en gran parte a la ansiedad especulativa del mercado sobre nuestras tenencias de valores con grado de inversión.

Es probable que los efectos de COVID-19 ocurran en dos ondas. La primera ola fue una fuerte contracción de liquidez. Sobrevivimos a esto a pesar de la financiación de mercado para nuestra gran cartera de valores. La segunda ola será a crédito. Estamos aún mejor posicionados para esto con la misma cartera. Nuestra cartera de valores de grado de inversión a corto plazo, casi exclusivamente con calificación AAA o respaldada por el gobierno, actualmente representa el 24% de nuestros activos. Nos hemos centrado deliberadamente en estos valores súper senior y seguimos esperando que esta cartera beneficie a nuestros accionistas en el entorno actual debido a su perfil crediticio estable, la liquidez mejorada en comparación con las hipotecas primarias y los préstamos intermedios y las ventajas estructurales sustanciales de los subyacentes. para estas clases de bonos senior.

Como se informó anteriormente, durante la gran agitación del mercado recientemente, Ladder ha llenado constantemente todas las llamadas de margen con efectivo disponible. Como gerentes de riesgo prudentes con una participación significativa en la empresa, adoptamos un enfoque equilibrado y ascendente para el apalancamiento. En combinación con nuestra cartera de valores, tenemos una cantidad sustancial de efectivo disponible y una cartera altamente líquida de primeros préstamos hipotecarios no gravados para estar preparados para las distorsiones del diferencial.

Seguimos bien posicionados, y nuestro efectivo disponible de $ 830 millones nos permite responder rápida y fácilmente a cualquier trastorno adicional. Hemos tenido y aún tenemos los recursos financieros para mantener nuestra cartera de valores vencida hasta que se paguen por completo.

En segundo lugar, decidimos no vender la mayoría de nuestra cartera de valores con pérdidas en las primeras etapas de COVID-19. Muchos de los valores AAA que poseemos también se benefician de los barridos de flujo de efectivo estructural y las provisiones de sobre-colateralización que en realidad aceleran el reembolso de nuestras posiciones cuando sea necesario al nivel de la garantía subyacente.

Con la recuperación de los precios AAA, se reforzó nuestra decisión de no liquidar nuestra cartera con pérdidas. Podemos optar por vender valores seleccionados de manera oportunista, pero creemos que, a pesar de ciertos temores del mercado, nuestras tenencias de valores son nuestras inversiones principales y más seguras. Esperamos que esta cartera sea una fuente confiable de flujos de efectivo mejorados, ya que nuestros AAA, por supuesto, pagarán y disminuirán con el tiempo.

Nuestro modelo de negocio de cilindros múltiples funciona. Además de nuestra importante posición de efectivo, el 24% de nuestros activos están actualmente invertidos en valores súper senior que se hiper amortizan en situaciones disruptivas. El 15% de nuestros activos son atribuibles a nuestra cartera de acciones, que está dominada por propiedades de arrendamiento neto triple a largo plazo con una lista envidiable de empresas esenciales y basadas en necesidades como inquilinos. Y solo el 46% de nuestros activos son préstamos de balance que contrastan con otros en nuestro campo, donde todo o casi todo el riesgo se concentra en este segmento.

Además, nuestra cartera de préstamos del balance general se beneficia de una granularidad y diversidad considerables. Debido a nuestro monto promedio de préstamo de $ 20 millones, nuestras inversiones se distribuyen en una amplia gama de prestatarios, tipos de propiedad y mercados geográficos. Y el 80% de nuestros préstamos del balance general son ligeramente temporales cuando los activos están a punto de estabilizarse y la renovación está completa.

Inicialmente, estos préstamos tenían un LTV promedio ponderado del 71%. Los mismos préstamos tienen actualmente un DSCR de 1.26 veces con reservas disponibles. El importante patrimonio de nuestros prestatarios a través de terceros los motiva fuertemente a proteger sus activos y proporciona a la empresa un capital de protección sustancial. Al igual que todos los prestamistas prudentes, nos enfocamos en gran medida en la gestión del patrimonio para proteger y agregar valor a nuestros préstamos.

Lo que a menudo se pasa por alto es que casi la mitad de nuestra cartera de préstamos no está gravada y, por lo tanto, no está sujeta a la aprobación de un tercero para cambiar o tomar cualquier forma de riesgo de margen. El tamaño, la calidad y la composición del fondo patrimonial sin gravámenes de Ladder es excepcional en el sector hipotecario REIT y nos posiciona de manera única para defender el valor de los accionistas con activos altamente líquidos, en oposición a los intereses de seguridad retenidos en las piezas B en CLO- y transacciones CMBS con liquidez extremadamente limitada.

Sin préstamos para la construcción, actualmente tenemos compromisos de financiamiento futuros modestos por un total de $ 290 millones en los próximos tres años. Y más de la mitad de ellos están sujetos a eventos predeterminados de buenas noticias, como mejoras de inquilinos y comisiones de arrendamiento en relación con nuevos arrendamientos o el logro de NOI, ocupación u otros obstáculos específicos basados ​​en el rendimiento.

Como señaló Brian en nuestra última llamada a ganancias, mucho antes de COVID-19, además de nuestro enfoque en valores, hemos comenzado a reducir nuestra exposición a préstamos respaldados por hoteles y propiedades minoristas, las clases de activos más afectadas por esta crisis. Al 31 de marzo, las propiedades hoteleras y minoristas representaban solo el 11% y el 8% de nuestra cartera de préstamos del balance, respectivamente. La singularidad de COVID-19 limita nuestra visibilidad normal de los resultados operativos esperados de la propiedad subyacente. En abril, alrededor del 99% de nuestra cartera de préstamos se mantuvo vigente. Esperamos que los resultados operativos disminuyan un poco en el futuro, pero creemos que la aplicación del seguro de desempleo y otros programas de estímulo, incluido el programa de protección de cheques de pago que ayudará a ciertos prestatarios a pagar sus salarios, mejorará el rendimiento.

También vemos fortaleza en ciertos negocios de prestatarios e inquilinos. Nuestra cartera de renta neta triple de $ 671 millones representa el 64% de nuestras propiedades. Por lo general, la cartera se ha financiado con hipotecas a largo plazo sin recurso y se arrienda principalmente a inquilinos de crédito con empresas anticíclicas basadas en necesidades, como supermercados y farmacias que tienen un plazo de arrendamiento neto restante promedio de más de 12 años.

Nuestros tres inquilinos más grandes incluyen Dollar General, BJ’s y Walgreens, todos los cuales son muy defensivos. La cartera ha sido una fuente confiable de ingresos en el pasado, y esperamos que continúe funcionando bien en estos tiempos turbulentos. Como se detalla en las llamadas de ganancias anteriores y mucho antes de la crisis, hemos comenzado a reemplazar la deuda garantizada con deuda no garantizada a largo plazo para fortalecer nuestro balance general al realizar una serie de emisiones de bonos corporativos no garantizados con vencimientos escalonados hasta 2027.

Actualmente hay $ 1.9 mil millones de bonos no garantizados pendientes en 4 emisiones, incluida la oferta de $ 750 millones por 7 años que cerramos en enero. Esta oferta fue particularmente oportuna dados los eventos recientes y nuestro uso de los ingresos para pagar una gran parte de la deuda garantizada de la compañía. Hasta la fecha, el 72% de nuestra base de capital consiste en financiamiento sin recurso, deuda no garantizada y capital contable. Desde el final del trimestre, hemos ampliado el uso de financiamiento sin recurso al 24% de nuestra estructura de pasivos y al mismo tiempo hemos reducido nuestro financiamiento al mercado en aproximadamente un 30%. Como resultado, casi la mitad de nuestros fondos garantizados son préstamos, y aproximadamente el 64% de nuestra deuda pendiente total ahora está completamente fuera de línea con el mercado. De hecho, solo la deuda repo asegurada de $ 414 millones está pendiente en toda nuestra cartera. Sin embargo, como otros, hemos reducido nuestro apalancamiento en estas instalaciones y nos complace anunciar que todo nuestro financiamiento de crédito al mercado de cualquier tipo relacionado con hoteles tiene un anticipo de $ 17.5 millones. Dos préstamos cruzados al mercado se limitan a hoteles garantizados.

Cuando se desarrolló la crisis y tratamos de maximizar la liquidez, de inmediato utilizamos nuestro revólver corporativo, extendimos los términos de financiamiento y cerramos dos nuevas facilidades de financiamiento estratégico. Como se informó anteriormente, contratamos a Moelis & Company para que nos ayudara a evaluar alternativas de financiamiento estratégico para posicionar a la compañía de la mejor manera posible y aprovechar las oportunidades de inversión que resultan de esta dislocación del mercado.

También hemos contratado nuevamente a nuestro antiguo colega y socio confiable Tom Harney y estamos felices de tenerlo nuevamente en el equipo de la escalera. Con el apoyo de Moelis, Ladder y Koch Real Estate Investments, LLC, una subsidiaria de Koch Industries, establecieron una nueva instalación de almacenamiento asegurado de $ 206 millones para financiar préstamos de balance. Sujeto a excepciones limitadas, la instalación está libre de recursos y no contiene ninguna disposición de marcado al mercado. La instalación también ofrece a Ladder un término adecuado y la posibilidad de cambiar, reestructurar y abstenerse de tomar medidas correctivas. En relación con este servicio, Ladder Koch otorgó el derecho de adquirir hasta el 3% de las acciones de la compañía por USD 32 millones. La Facilidad de Financiamiento de Koch nos proporciona efectivo ilimitado adicional en exceso de $ 200 millones y los términos de la facilidad brindan una flexibilidad significativa para mejorar y mantener el valor subyacente de nuestros préstamos.

Al mismo tiempo, la transacción alinea a la empresa con una relación estratégica prometedora que puede resultar útil cuando las oportunidades de inversión que esperamos debido a la interrupción estén disponibles. Koch tiene hasta diciembre de este año para comprar el capital a un precio igual a una prima del 30% cuando se cerró el acuerdo. Koch ha demostrado su compromiso a largo plazo con la escalera y su confianza en la escalera al aceptar un bloqueo razonable que le otorgaría a la escalera una liquidez adicional de $ 32 millones con una dilución de solo 1.1% si lo hiciera Haz una inversión.

También cerramos por separado el financiamiento privado de CLO con Goldman Sachs Bank, que generó ingresos netos de aproximadamente $ 300 millones. Este financiamiento tampoco está sujeto a recurso y no contiene ninguna determinación de valor de mercado. La transacción financió préstamos hipotecarios iniciales de $ 481 millones con un anticipo del 65% a plazo fijo. Ladder retuvo una participación mayoritaria del 35% en la garantía. La estructura también le da a la compañía una amplia discreción al hacer cambios en los préstamos. Ambas transacciones ayudan a facilitar el enorme progreso que hemos logrado en la expansión del uso de fondos sin recurso y en la reducción de nuestra exposición a la deuda del mercado.

Pasemos a nuestros dividendos. Pagamos nuestro dividendo trimestral en efectivo previamente anunciado el 1 de abril. Nuestro Consejo de Administración continuará tomando decisiones de dividendos en el mejor interés a largo plazo de la empresa y nuestros accionistas. Seguimos totalmente conectados con nuestros accionistas, ya que la gerencia y la junta directiva continúan teniendo 12.9 millones de acciones de Ladder o más del 10% de la compañía, que es uno de los más altos derechos de propiedad privilegiada de cualquier REIT de hipotecas comerciales. Ladder generalmente anuncia su dividendo del segundo trimestre a fines de mayo. Nuestro Consejo de Administración evaluará los hechos y circunstancias en este momento con el entendimiento de que proporcionar ganancias a nuestros accionistas sigue siendo una prioridad y un objetivo importante para nosotros.

En conclusión, y antes de entregar a Marc, me gustaría enfatizar que Ladder está diseñado para resistir las crisis y aprovechar las oportunidades que surgen, y esperamos hacerlo ahora. Espero que usted y sus familias se mantengan saludables, y gracias por su continuo apoyo.

Con esto le entrego la llamada a Marc.

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Marc Alan Fox, Ladder Capital Corp – CFO y Jefe de Banca Mercante y Mercados de Capital [4]

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Gracias Pamela Ahora revisaré nuestra actividad de inversión del primer trimestre y lo guiaré a través de algunos de los efectos específicos de la pandemia de COVID 19 en nuestra estructura de capital y los pasos para ajustarnos.

Al 31 de marzo, los préstamos del balance totalizaron $ 3.4 mil millones, lo que corresponde a un origen de $ 314 millones en el primer trimestre. Estos nuevos orígenes tuvieron un diferencial promedio ponderado de aproximadamente 464 puntos básicos por encima de LIBOR y una relación promedio ponderada de crédito / valor de 68.2%.

En relación con nuestro negocio de préstamos por conducto, Ladder ha prestado USD 213 millones a una tasa de interés promedio de 3.88%. Ladder titulizó y vendió $ 185 millones en préstamos en el trimestre. Al 31 de marzo, el saldo del préstamo de conducto de Ladder era de $ 147 millones.

Hubo $ 8 millones en cargos por deterioro de préstamos individuales en el trimestre, de los cuales $ 7.5 millones fueron para el préstamo Nemours, que anteriormente se amortizó en $ 10 millones en el tercer trimestre de 2018. Los $ 0.5 millones restantes en pérdidas por deterioro se relacionaron con un préstamo hotelero de $ 7.6 millones que se canceló en el cuarto trimestre del año pasado.

Durante el trimestre, Ladder adquirió $ 438 millones en inversiones en valores, parcialmente compensado por $ 151 millones en actividades de amortización y ventas. Al 31 de marzo, nuestra cartera de valores era de $ 1.93 mil millones. El 99.9% de estos valores eran de grado de inversión, el 91.6% AAA calificado o respaldado por una agencia gubernamental, y juntos tenían una duración promedio ponderada de 28 meses. Ladder también adquirió $ 6.2 millones en bienes raíces que consisten en 5 alquileres netos pequeños y vendió 2 inversiones en edificios de oficinas, lo que resultó en una ganancia central de $ 750,000 en el primer trimestre. Nuestra cartera de bienes raíces continúa siendo una fuente de ingresos y flujos de efectivo consistentes y una fuerte fuente de ganancias recurrentes.

Ladder terminó el trimestre con activos totales de $ 7.33 mil millones. El total de inversiones no gravadas, incluido el efectivo, fue de $ 2.59 mil millones al final del trimestre y la deuda no garantizada pendiente fue de $ 1.9 mil millones, lo que refleja una relación de activos no gravados a deuda no garantizada de 1.37x.

En línea con nuestro enfoque en los activos garantizados senior, el 98% de nuestra deuda estaba garantizada senior al final del trimestre, incluidos los préstamos hipotecarios iniciales y los valores respaldados por hipotecas comerciales respaldados por préstamos hipotecarios iniciales. Los activos garantizados senior más el efectivo representaron el 81% de nuestra base total de activos. Nuestra sólida posición de efectivo, nuestra gran cartera de activos no gravados y nuestro enfoque continuo en invertir en activos garantizados senior reflejan nuestro continuo énfasis en la liquidez y la estabilidad en nuestra cartera para mitigar el riesgo en el entorno actual.

Debido a la actividad de inversión de Ladder y la decisión de mantener saldos de efectivo sólidos durante el trimestre en respuesta a las condiciones adversas del mercado, Ladder finalizó el primer trimestre con un índice de deuda ajustado inusualmente alto de 3.79: 1, aumentado en un saldo de efectivo de $ 622 millones ha sido. De eso, $ 358 millones no estaban restringidos. Como resultado de las medidas que trataré de la misma manera, Ladder actualmente tiene efectivo sin restricciones de aproximadamente USD 830 millones en su balance general y un índice de deuda ajustado de aproximadamente 3.4: 1 El efectivo de la deuda sería aproximadamente 2.8 veces.

Como Pamela señaló parcialmente, en marzo, a raíz de la reciente volatilidad del mercado, Ladder eligió aprovechar al máximo la línea de crédito revolvente de 266,4 millones de dólares no garantizada de la compañía al comienzo de esta crisis. La compañía cumplió con todas las llamadas de margen de contrapartes de repositorio de valores y efectivo de manera oportuna y desde entonces ha recibido la gran mayoría de esos fondos en forma de descuentos de margen. La compañía extendió con éxito el plazo del repositorio y extendió el 41% del plazo hasta mediados de julio y otro 43% hasta septiembre y más allá, dejando a Ladder con $ 1.2 mil millones en deuda de repos al 31 de marzo Tiene.

Al final del trimestre, la compañía redujo el valor de su cartera de valores en $ 78.2 millones. Debido a la mayor incertidumbre del mercado al final del trimestre, la compañía aumentó su reserva de CECL 2.5 veces la estimación anunciada previamente a $ 30.1 millones, lo que redujo aún más el patrimonio de nuestros accionistas, si no no se realizó.

Debido a las partidas no monetarias relacionadas con la valuación de valores y el CECL, el capital contable GAAP disminuyó a $ 1.5 mil millones al 31 de marzo, lo que resultó en un valor contable GAAP de $ 12.31 por acción y un valor contable no escrito de $ 14.01 por acción. Con esto en mente, Ladder también ha comenzado a aprovechar las opciones de financiamiento alternativas que reducen el riesgo futuro de llamadas de margen e incertidumbres de financiamiento en el corto plazo y brindan a la compañía la flexibilidad que probablemente se requiera para permitir que los mercados de bienes raíces comerciales y de crédito se recuperen. En particular, se pagaron $ 210.5 millones en préstamos con vencimiento en abril, y se vendieron $ 409.4 millones en préstamos y valores con un descuento de 4 puntos, lo que resultó en una pérdida total de aproximadamente USD 16.7 millones. Es importante tener en cuenta que todas las transacciones de ventas a crédito se completaron en menos de 72 horas en efectivo sin el beneficio de las inspecciones de propiedades por parte de los compradores.

En abril, Ladder también redujo su financiación de repos para valores en $ 140 millones a $ 1.05 mil millones. Ladder estableció una nueva instalación de cocina de $ 206.5 millones y proporcionó fondos de CLO de $ 310 millones con Goldman Sachs Bank. En nuestros esfuerzos continuos para anticipar la fecha de vencimiento de la membresía de FHLB en febrero de 2021, hemos utilizado parte de los ingresos de la transacción CLO, además de los ingresos de las ventas de valores y créditos para compensar los adelantos pendientes de FHLB desde el 31 de marzo a 52 % de disminución Saldo actual de $ 487 millones.

Después de emitir $ 750 millones en bonos no garantizados en enero y nuestros esfuerzos recientes para reposicionar el balance de Ladder para liquidar el FHLB y aumentar el uso de valores de deuda garantizados y no garantizados con mayor flexibilidad, esperamos un aumento en Costo promedio total de capital de Ladder ponderado en 68 puntos básicos en comparación con nuestro costo promedio ponderado de capital al 31 de diciembre de 2019.

Como resultado de toda esta actividad financiera posterior al trimestre, nuestra deuda total disminuyó en $ 280 millones a $ 5.4 mil millones, mientras que nuestra posición de efectivo sin restricciones aumentó en aproximadamente $ 470 millones. Era igualmente importante que la deuda, que está sujeta a la determinación del valor de mercado, se redujera en un 29% o USD 783 millones. De la deuda de mercado restante, más de 2/3 se contabiliza financiando valores a corto plazo y de alta calificación que ya han experimentado el escenario de valoración a la baja que finalmente condujo a márgenes manejables que la escalera absorbió de manera oportuna en marzo.

Finalmente, en nuestros esfuerzos por abordar la preservación del capital, Ladder también redujo los costos al cambiar los contratos de proveedores seleccionados y los beneficios de los empleados y al reducir el número de empleados. Esperamos que estas medidas ahorren aproximadamente $ 3 millones al año.

Si bien continuamos enfrentando vientos en contra relacionados con la crisis de COVID 19, nuestra capacidad para ajustar y mantener la flexibilidad es una clara evidencia de la solidez de nuestro balance general y la importancia de nuestro enfoque histórico en mantener un patrimonio sustancial y una deuda y deuda sin garantía de una gran cantidad El conjunto de activos no gravados consiste principalmente en préstamos de primera hipoteca.

Ahora se lo voy a entregar a Brian.

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Brian Richard Harris, Ladder Capital Corp – Fundador, CEO y Director [5]

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Gracias Marc. Cuando pienso en lo que diría hoy aquí, nuestras ganancias centrales ciertamente parecen estar desvaneciéndose en el fondo para darle algunas de nuestras ideas sobre cómo queremos progresar en estos tiempos sin precedentes causados ​​por la propagación del virus corona posterior cierre de la economía estadounidense.

Primero, como trasfondo, permítanme recordarles que Ladder ha estado algo preocupado durante varios trimestres después de que la recuperación posterior a la crisis financiera se acerca al final del cuarto trimestre de 2019. Y hemos tomado medidas para posicionar a la empresa ante la posibilidad de una recesión. Aunque creíamos que podría llegar una recesión, no teníamos razón para creer que estaríamos en un entorno similar a la depresión hasta 90 días después de 2020.

A finales de 2019, comenzamos a examinar la posibilidad de emitir otro bono corporativo no garantizado para reducir aún más nuestra dependencia de las facilidades de valoración de depósitos a la vista como una continuación de nuestra planificación estratégica durante años antes de que los bonos no garantizados se usen con más frecuencia para financiar nuestra empresa. A fines de enero, apenas 8 semanas antes de que la pandemia tuviera un impacto negativo en los mercados mundiales, Pamela y Marc emitieron bonos corporativos a 7 años por $ 750 millones a una tasa de interés fija de 4.25%. Nuestro momento de suerte para este problema nos permitió entrar en esta fuerte recesión en marzo tan bien preparados como creo que podríamos habernos preparado para lo que estamos experimentando hoy en medio de la pandemia mundial, en poco más de 30 millones. Los trabajos se perdieron solo el mes pasado.

En los últimos años, nuestra atención constante a la gestión de responsabilidad civil ha demostrado ser muy útil en estos tiempos difíciles. Si bien nos hemos metido en la reciente recesión debido al grave impacto financiero negativo de esta crisis de salud en la economía, hemos tomado medidas críticas adicionales para fortalecer aún más nuestra liquidez y capacidad de aprovechar las diversas oportunidades que ofrecemos, ver hoy.

Fue una experiencia humillante ver a nuestro equipo de ejecutivos experimentados ejecutar plan por plan para mejorar nuestro perfil de liquidez durante lo que probablemente fue el mes más ilíquido en la historia del mercado de EE. UU. Y nuestro efectivo ilimitado disponible de $ 358 millones a fines de marzo a 358 $ Millones para recaudar Nuestra posición actual de efectivo de aproximadamente $ 830 millones. Obwohl wir in den letzten 7 Wochen nicht zusammen im Büro waren, konnten wir Kreditrückzahlungen verarbeiten, zahlreiche ganze Kredite verkaufen, Wertpapiere verkaufen, Schulden abbezahlen, Sicherheiten verschieben, um neue Kreditfazilitäten und einen CLO auszuführen, ohne dass eine einzige Person dies erhielt In einem Flugzeug. Worte können nicht ausdrücken, wie dankbar ich für ihre Bemühungen bin und mich während dieser Pandemie um die Sicherheit ihrer Familien kümmere.

Aufgrund unserer Kapitalstruktur verfügen wir auch über unbelastete Vermögenswerte in Höhe von über 2,6 Mrd. USD, die hauptsächlich aus ersten Hypothekendarlehen bestehen. Wenn sich eines unserer Darlehen auszahlt, besteht eine relativ hohe Wahrscheinlichkeit, dass die Rückzahlung zu einer weiteren Erhöhung unserer bereits ausreichenden uneingeschränkten Bargeldbestände führt. Wir planen, unsere Hebelwirkung im Laufe der Zeit methodisch zu senken, indem wir einen ausgewogenen Ansatz verfolgen, um auf höchst selektive Weise neue Investitionen zu tätigen. Unser kurzfristiges AAA-Wertpapierportfolio hat im März viel Aufmerksamkeit erhalten, aber wir gehen davon aus, dass die kurzfristige Auszahlung und der Verkauf dieses Vermögensbestands in den nächsten Quartalen Liquidität bereitstellen und die Verschuldung weiter reduzieren werden.

Ich möchte darauf hinweisen, dass unser Bestand an Wertpapieren im April um 248 Millionen US-Dollar gesunken ist. Und wenn die Ausfälle in den Hypothekenpools, die diese Wertpapiere unterstützen, zunehmen, ist es wahrscheinlich, dass die Auswirkungen der Beschleunigung der Ausfälle dazu führen, dass Schutzmaßnahmen ausgelöst werden, die als vorrangige Überbesicherungstests bezeichnet werden, und zusätzliche Cashflows umleiten, um diese AAA-Wertpapiere zu schützen und sie früher als ursprünglich zurückzuzahlen erwartet. Wir glauben, dass die Rückgabe des an diese AAA-Wertpapiere gebundenen Kapitals nahezu sicher ist, da diese bereits kurze Wertpapiersaison im Laufe der Zeit. Die meisten AAA-Wertpapiere, die wir besitzen, sind allein in der Schuldenstruktur zu etwa 50% untergeordnet, wobei das Eigenkapital der einzelnen Kreditnehmer für die Hypothekendarlehen einen zusätzlichen Puffer gegen potenzielle Verluste darstellt, der in der Regel um weitere 30% liegt.

Wenn wir in die Zukunft schauen, weiß keiner von uns, was zu erwarten ist, wenn die Wirtschaft versucht, sich wieder zu öffnen und hoffentlich allmählich über diese globale Gesundheitskrise hinauszukommen. Und obwohl wir bei Ladder vielleicht pessimistischer waren als die meisten, die in diese Krise geraten sind, vermute ich, dass wir in Bezug auf die Aussichten unserer Wirtschaft in den kommenden Jahren vorsichtiger optimistisch sind als die meisten anderen. Es hat sicherlich viel Schaden für die Wirtschaft gegeben, aber wir sind etwas ermutigt von der Größe der verschiedenen Regierungspakete, die umgesetzt wurden. Die Menge an Impulsen für die Wirtschaft ist enorm, und es scheint, dass bei Bedarf weitere Impulse auf dem Weg sind. Wir glauben, dass diese wirtschaftliche Unterstützung und eine Einstellung, die alles erfordert, sich im Laufe der Zeit durchsetzen und unsere Wirtschaft wiederherstellen werden, um die Stabilität zu stärken.

Während man davon ausgehen muss, dass es viele dauerhafte Veränderungen geben kann, wenn die Nation ein paar Monate zu Hause bleibt, denken wir, dass einige dieser Veränderungen für einige Immobilientypen in gewerblichen Immobilien sehr hilfreich sein könnten. Als die Bürger auf die Straße zurückkehrten, hatte sich die Bevölkerung viel mehr daran gewöhnt, Zoom für Gruppendiskussionen, Streaming-Unterhaltung und Online-Bestellungen zu verwenden. Und aufgrund der Knappheit in einigen wesentlichen Bereichen werden wir einen beschleunigten Marsch in Richtung E-Commerce erleben, wobei die Lieferketten in die USA zurückgebracht werden, was zu einer höheren Nachfrage nach Produktions- und Lagereinrichtungen führt. Dies ist kein gutes Zeichen für Einkaufszentren und Kinos, aber wir haben auch erfahren, dass die Lebensmittelgeschäfte, Convenience-Stores und Restaurants in der Nachbarschaft weitaus wichtiger in unserem Leben sind, als wir in den letzten Jahren gedacht haben.

Wenn sich die neue Normalität entfaltet, befinden wir uns in einer Welt mit viel niedrigeren Zinssätzen und viel niedrigeren Benzinpreisen und einer gewissen Zurückhaltung der Bevölkerung, auf Kreuzfahrtschiffe, Massentransits, Fluggesellschaften und Reisen außerhalb der USA zu steigen So können Durchfahrthotels möglicherweise das Aufenthaltsverhalten nutzen und sich schneller erholen, als viele denken. Geschäftsorientierte Hotels sehen möglicherweise weniger Nachfrage sowie Arztpraxen, da Arbeiter und Patienten jetzt alternative Methoden zur Durchführung von Gruppentreffen und zum Besuch von Ärzten eingeführt haben.

Vor ein paar Jahren hat Ladder unsere Präferenzen für die Kreditvergabe in Richtung Mehrfamilien-, Industrie- und Büroimmobilien und weg von Hotels, Großeinzelhandelsgeschäften und Einkaufszentren verlagert. Teilweise aufgrund dieser Veränderungen konnten wir Hypothekarkredite, die durch Mehrfamilienhäuser besichert waren, an starken Standorten mitten in der Marktvolatilität im März verkaufen. Diese vor langer Zeit vorgenommene Änderung ermöglichte es uns, Hypotheken schnell in Bargeld umzuwandeln, wenn wir wollten.

Obwohl dies wirklich herausfordernde Zeiten sind, hoffen wir, dass wir heute ein Gefühl des Optimismus vermittelt haben. We have taken many of the right steps to allow us to navigate through what is to come over the next couple of years. I’m enthusiastic about the potential of our new relationship with Koch Industries. They’re smart, and they recognize the inherent strength of our platform and our space and, like us, expect this to become a very target-rich investment environment in the foreseeable future.

I sometimes point out to our people that the U.S. has a very resilient population, and we will get through this. While we have never seen a global pandemic and a near-complete shutdown of the entire economy, we do know what the cause of the downturn was, and we have some idea that it will end at some point in the near term, hopefully as a result of efforts from our gifted scientists and doctors. We are all thankful that our biggest fears about this virus, its infection, hospitalization and mortality rates fortunately have been mitigated. While the unknown is always very scary, the worst of the health crisis is hopefully behind us. And we’re cautiously optimistic that the fears we have about economic collapse are also probably overstated. Let’s hope so.

Thank you for listening today. Bleib sicher. And now we’ll take some questions, and I’ll turn the call back to the operator.

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Fragen und Antworten

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Operator [1]

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(Operator Instructions) We’ll take our first question from Steve Delaney with JMP Securities.

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Steven Cole Delaney, JMP Securities LLC, Research Division – MD, Director of Specialty Finance Research & Senior Research Analyst [2]

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Congratulations on your defensive efforts. Brian, other than cash, which you’ve done a good job with, other than cash, if you had to put money to work near term, meaning 30 days or so, what do you see as the best opportunity in the market near term, next couple of months?

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Brian Richard Harris, Ladder Capital Corp – Founder, CEO & Director [3]

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Single-asset securities backed by AA, A and BBB bonds.

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Steven Cole Delaney, JMP Securities LLC, Research Division – MD, Director of Specialty Finance Research & Senior Research Analyst [4]

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SASB?

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Brian Richard Harris, Ladder Capital Corp – Founder, CEO & Director [5]

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Yes, AA, A and BBB.

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Steven Cole Delaney, JMP Securities LLC, Research Division – MD, Director of Specialty Finance Research & Senior Research Analyst [6]

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And that’s because you’re — essentially, the buyer is underwriting a loan, and you have less downgrade risk in a single-asset deal. Is that correct?

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Brian Richard Harris, Ladder Capital Corp – Founder, CEO & Director [7]

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We don’t know what’s going to happen. I think what you’re really seeing, though, is the BBBs got really low, like down to the 60s at one point. And if you go into a depression, that might very well be the right price. Right now, those BBBs are probably in the low 80s. They’ve rallied 30% in just a matter of weeks. And the 2 — I would say, a AAA on the exact same hotel, if it happens to be closed today, [Hotel Coronado], Maui Four Seasons, they’re $0.92 on the dollar. So if the BBBs are — if the hotel opens in the hands of a strong owner, somebody like Blackstone or a strong player, it’s very unlikely that they’re worth nothing. So the BBB maybe, yes, those will probably be more volatile than others. But these assets are pretty liquid, I think, and I find it — I think they got overcooked to the downside pretty hard.

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Steven Cole Delaney, JMP Securities LLC, Research Division – MD, Director of Specialty Finance Research & Senior Research Analyst [8]

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And one — my follow-up is quick. The new deal in the market this week in CMBS, the GSMS deal, how do you think it’s going generally? I know you don’t like to comment on other people’s deals. But how is it going in the sense of reopening new issue? How important is the Fed putting seasoned AAAs in TALF possibly benefiting the newish market just from a competitive standpoint?

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Brian Richard Harris, Ladder Capital Corp – Founder, CEO & Director [9]

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I think the TALF has done very little at this point by taking AAA CMBS. I am, frankly, a little surprised that they have decided to effectively orphan the commercial real estate business. I’m not at all sure why they did that. But I think AAA 10-year securities before TALF were trading at 190 over swaps. And when TALF announced that they would take them, they went 82 points to 160 over.

The current deal in the market is probably the dawning of what is to come. I mean a lot of these are pretty safe assets. They removed a lot of hotels and retail from these deals. It is also a small offering, but it is an unmitigated blowout. And it’s 10 — I think there were 26 of them done this morning on those bond classes, and they’re tightening them. So I suspect, and I can say this because I’m not part of that deal, but I think they’re going to get down at around 141, 145 on the 10-year. And so — but I don’t think it portends too much at all for the future because all it is, is the AAA portion of it.

So I think when you make a loan, you have to anticipate selling the whole thing. And while the TALF is very helpful on the AAA portion of it, it’s not at all helpful in any other part of it.

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Operator [10]

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And now we’ll take our next question from Jade Rahmani with KBW.

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Jade Joseph Rahmani, Keefe, Bruyette, & Woods, Inc., Research Division – Director [11]

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Starting with securities, could you give what the current carrying value of securities is? There was $1.931 billion at 3/31, and you noted the April sale of $200 million. So should we subtract the $200 million from the $1.9 billion or make some other adjustments with respect to mark-to-market?

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Marc Alan Fox, Ladder Capital Corp – CFO and Head of Merchant Banking & Capital Markets [12]

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Ja. That’s about right, Jade. You’re talking about a $1.7 billion portfolio size right now.

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Jade Joseph Rahmani, Keefe, Bruyette, & Woods, Inc., Research Division – Director [13]

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Okay. And is there approximately 5x leverage against that? And can you just convey your sense of confidence in ability to manage that leverage?

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Brian Richard Harris, Ladder Capital Corp – Founder, CEO & Director [14]

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I’ll let Marc answer the question on the leverage, but pretty — we’re comfortable that we can manage that leverage. I think if you — I think the mistake that got made is — we’ve always said we use more leverage on AAA securities, and we use very little leverage everywhere else in the company. That seemed to be overlooked for a little while there. So we did receive some margin calls that were, frankly, a little bit larger than I would have expected. However, we had no problem with them.

And I think another item that seemed to be overlooked completely is that we have just received $750 million from a bond offering that we did on an unsecured basis that settled at the last day of January, like 6 weeks before this problem began. So when I was asked a few times by people as to, «Are you having trouble meeting margin calls?» My question, «What do you think we did with the money in 6 weeks?» So I think that we were rather pressured in getting ahead of a potential problem as, Jade, you know that I’ve been somewhat concerned for several quarters now about complacency. Never saw this coming, but the volatility involved in a 2-year AAA bond is just not the same thing as a 30-year mortgage. And so we were being linked to a discussion with organizations that use only repo financing that were longer and dated or non-investment-grade or non-AAA securities and unable to meet margin calls. And I, frankly, have been dying to get on this call because I could not believe that anybody thought we were having a problem.

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Jade Joseph Rahmani, Keefe, Bruyette, & Woods, Inc., Research Division – Director [15]

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Okay. So if — just going over lessons learned, let’s say cities start to open up, states start to open up and there is a resurgence in coronavirus, we could hypothetically go through a repeat of what happened in March and early April. Do you stress-test for that to make sure the same thing doesn’t repeat itself?

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Brian Richard Harris, Ladder Capital Corp – Founder, CEO & Director [16]

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Absolutely right. Yes, we do. And do I — were we comfortable with what was going on in March at the end of the quarter? No. But I used to use as a third standard deviation 2008, 2009. I now use March of 2020 because it was far more volatile than I had ever seen in my career. On the other hand, I would like to point out that if we were to return to that period of time, we’re now 5x more cash in our hands than we were when it happened, and we didn’t have a problem when it happened.

So I think the lesson is, yes, more cash if you’re going to carry such a big portfolio of securities. Even though we believe they’re safe, short and not terribly price-volatile, that doesn’t mean the rest of the world believes it. And in addition to that, because we were — had just done an offering of $750 million, we felt pretty ready for any kind of a downturn that was taking place. And if it were to happen again, first of all, we have a smaller portfolio. It is marked differently. It’s just down, again, about 4 points at this point. But — and these bonds, as Marc said, they’re only 28 months in average maturity. So in 3 months from now or 4 months from now, they’ll be even shorter than that. These assets also should perform better if there are more defaults. And a lot of people don’t fully understand that.

And in addition to that, we have real first mortgages, unencumbered loans. We have $1.25 billion of them and $830 million in cash. And while we did sell some apartment loans — and by the way, there was some reference that we had sold some nonperforming loans. We did not sell any nonperforming loans. We sold some apartment loans, and people were not able to visit the property, get on an airplane or go to a lawyer’s office. And we have loans maturing in early March — I’m sorry, in early April, and they were very low-coupon. Some of our largest loans were maturing, and we got a little concerned that perhaps this problem and volatility was going to prevent them from paying off. So we sold some loans to get cash ready in case they didn’t pay off, and they all paid off. So we brought — we sold some securities, we sold some loans, and we got payoffs on assets. And ultimately, we were in an incredibly heavy cash position throughout most of the month.

So — but yes, we will — lesson learned, we will absolutely carry more cash with the securities portfolio of that size. Rather than have — wanting to go out and get it, we will have it on hand.

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Jade Joseph Rahmani, Keefe, Bruyette, & Woods, Inc., Research Division – Director [17]

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Okay. Two more just quick ones, and I apologize for asking this many questions, but I think investors really need information. Do you have an estimate of the current undepreciated book value per share? Should we just take the $14.01 that you provided and subtract the — I believe you said that there was a loss of $16 million or so, which is $16.7 million, which is $0.14 a share, be about $13.87 for, I guess, what current book value is.

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Marc Alan Fox, Ladder Capital Corp – CFO and Head of Merchant Banking & Capital Markets [18]

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Yes, that’s a fair estimate. I would say this, that we have seen the securities market improve somewhat. So some of that mark that we took at the end of the quarter could come back. But I think that if you want to start at that point, you’re not going to be that far off.

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Jade Joseph Rahmani, Keefe, Bruyette, & Woods, Inc., Research Division – Director [19]

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Okay. And then just finally, can you comment on the FHLB? You noted further reduction in the amount outstanding. Are you comfortable with the current balance and the likelihood of sunset and amortization of that balance down? Or will you be looking to further reduce that?

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Pamela Lynn McCormack, Ladder Capital Corp – Co-Founder, President & Director [20]

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Jade, this is Pamela. I think as you know, our membership was subject to a February 2021 sunset date. So over the past few years, we gradually reduced our borrowings to a peak of $1 billion at 3/31. Since then, in anticipation of the pending sunset, we further reduced our borrowings to $487 million in connection with our efforts to replace recourse mark-to-market debt with nonrecourse debt that doesn’t contain any mark-to-market provision.

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Jade Joseph Rahmani, Keefe, Bruyette, & Woods, Inc., Research Division – Director [21]

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Okay. And was the FHLB a significant source of margin calls during the quarter?

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Pamela Lynn McCormack, Ladder Capital Corp – Co-Founder, President & Director [22]

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No, not really. I mean they have more of an overcollateralization concept that sort of protected us from that.

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Operator [23]

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We’ll take our next question from Rick Shane with JPMorgan.

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Richard Barry Shane, JP Morgan Chase & Co, Research Division – Senior Equity Analyst [24]

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Can you hear me?

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Brian Richard Harris, Ladder Capital Corp – Founder, CEO & Director [25]

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Ja.

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Marc Alan Fox, Ladder Capital Corp – CFO and Head of Merchant Banking & Capital Markets [26]

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Ja.

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Pamela Lynn McCormack, Ladder Capital Corp – Co-Founder, President & Director [27]

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Yes, we can.

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Richard Barry Shane, JP Morgan Chase & Co, Research Division – Senior Equity Analyst [28]

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Look, when we think about this, I think we see it in 3 stages. There’s the liquidity stage that we’re just emerging from. There’s going to be a transition phase where I think in all likelihood, outcomes are going to be determined by sponsor behavior. And then ultimately, there’s the underlying performance of the properties. Given the breadth of your portfolio, the attractiveness is that it’s highly granular. But that also means that you’re in discussions with an enormous number of sponsors. What sort of feedback are you getting? And where are your concerns?

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Brian Richard Harris, Ladder Capital Corp – Founder, CEO & Director [29]

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Well, it’s a little early because it is early in May still. The April collections were phenomenal, shockingly good. And I think we had one loan that missed the payment, and then the rest of them were fine. We — I would expect naturally to be in conversations more than others with hotel operators as well as malls. We don’t own any mall loans, but mall will have problems completely here, you’re going to see some big names probably filing, and also just general retail because they don’t have the reserves. So the neighborhood retail store, nail salon, pizza place, they may have to get into a forbearance conversation. And we have had some, frankly, not as many as I would have thought. And I don’t know if that’s because they’re trying to avoid the conversation or if they’re just going to meet the payments, and interest rates are reasonably low.

Our bridge loan portfolio, which is really where I look when I think about the question you just asked me, we have a floor in that book of 6.2%. So that’s close to 600 over LIBOR right now. And I do believe there are scenarios, especially where a lot of our cash flows, a lot of our loans are a little more seasoned because we began to get a little concerned maybe about 18 months ago. So we keep things short, we keep things with high floors, and a lot of our transitional assets are already transitioned at this point.

So the question will be really, the tenants that they put in, how are those performing? And are they able to refinance us out? But — so I would tell you, look, my fear is the conversations should mostly take place in hotels and retail, but I think you could get into several conversations. We also have had some crazy conversations with very, very wealthy people and well-heeled organizations that have plenty of capital that have indicated they might not want to make a payment. However, they did. So we’re dealing with a little bit of that, too.

But I look at the 3 stages the way you do also. Liquidity was first of all, that was March. I think that was a first quarter event. I don’t think you’re going to see that again. I know Jade just asked what if we’re back here because infection rates spiked. I think everybody got a chance to deal with what March looked like, and they’re a lot more ready for that possibility right now. And I think that a lot of forced selling took place. And I don’t think too many people will become forced sellers at this point.

And then yes, you get into the, who knows what’s going to happen next? And I don’t think anybody knows that. I don’t think any — we’ve never dealt with this before. I’m a little more optimistic. I see energy prices down. I see interest rates LIBOR at 25 basis points. I don’t see a lot of real estate changing hands at that point. And there’s plenty of ways to restructure and add reserves. They’re — you can carry real estate with interest rates so low. But — so that’s the second phase.

And then I think the third phase will be the opportunity phase. I don’t think you want to charge out there and start buying real estate right now because you don’t really know what’s coming. But to the extent that the relationships between owners and lenders breaks down, there might be some great opportunities. And I would say the short-term opportunities are on the screen in the bond world because things just get sold, and they don’t always make some sense. However, I think that in time, you will actually have an opportunity really to seize on some real estate purchases. And I think I like that better than being a lender right now because lending, I think, is going to be a little broken for a little while. It’s very hard to finance things. And as we said, the government has decided AAA CMBS, and that’s it so far. So I think that will cause a lot of debt to be restructured and also a lot of opportunities to come out of it. And we’ve seen downturns and recoveries. This could be a quick recovery. I think if the word vaccine shows up in anybody’s vocabulary here in the next year, we might be — I don’t think we’ll go back to where we were. But I do think that we could do a little bit better than most think.

Pamela is — because we’re dealing with TV screens here, I’ve never done this before. Pamela wanted to add something. So I’m going to stay there. Go ahead.

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Pamela Lynn McCormack, Ladder Capital Corp – Co-Founder, President & Director [30]

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All I was really going to add is just when you look at Ladder, I think that was one of the points we tried to make in the script, 46% of our assets are in balance sheet loans. So as opposed to some of our peers who have 100%, we have this diversified business model. And we believe the securities are overlooked in terms of the credit enhancement there relative to loan book at the AAA level.

And the last thing I would just say is, like everyone else, we are doing hand-to-hand combat on loans, but we are limiting the conversations. You’re talking about deferrals of interest, and there’s a lot of reserves in place to accommodate that. So nothing today. I think it’s just — the question for everybody is how long does this go on.

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Richard Barry Shane, JP Morgan Chase & Co, Research Division – Senior Equity Analyst [31]

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Got it. And curious, the comment was made that some well-heeled borrowers sort of agitated a little bit. Do you think that that’s brinksmanship? Or do you think that’s an indication that they’re seeing rationale for strategic default?

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Pamela Lynn McCormack, Ladder Capital Corp – Co-Founder, President & Director [32]

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I think the fact that it’s a 99%…

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Brian Richard Harris, Ladder Capital Corp – Founder, CEO & Director [33]

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I think it’s brinksmanship.

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Pamela Lynn McCormack, Ladder Capital Corp – Co-Founder, President & Director [34]

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And it’s the — with — some result of that was 99% of our book but for one loan paid last quarter. So that’s all talk.

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Operator [35]

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We will take our next question from Tim Hayes with B. Riley FBR.

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Timothy Paul Hayes, B. Riley FBR, Inc., Research Division – Analyst [36]

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My first one, and Brian, I know you mentioned that 99% of borrowers were current in April. But just curious how many borrowers in the loan portfolio or tenants in the real estate portfolio have initiated conversations or outright requested forbearance at this point. And what actions, if any, have you taken to grant some relief?

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Brian Richard Harris, Ladder Capital Corp – Founder, CEO & Director [37]

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I’ll defer that. Rob Perelman, he’s on the phone and he runs asset management. Do you have that information, Rob? I don’t have it.

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Robert M. Perelman, Ladder Capital Corp – Co-Founder & Head of Asset Management [38]

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Yes, I would say about 20% have made requests across the loan book, but we’re dealing with that, as Pamela said, on a one-off situation.

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Timothy Paul Hayes, B. Riley FBR, Inc., Research Division – Analyst [39]

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Okay. Got it. And maybe if you could touch from a high level of kind of the types of things that you’re considering doing in order to work with some of these borrowers or tenants and provide some relief, whether it’s reducing kind of structure on the loans or periods of interest or principal deferment — deferral, rather, anything like that.

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Pamela Lynn McCormack, Ladder Capital Corp – Co-Founder, President & Director [40]

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So we’re talking about doing what everyone else is doing. Right now, we are only in a discussion about a potential deferral of interest and the use of reserves. Nothing further at this point.

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Brian Richard Harris, Ladder Capital Corp – Founder, CEO & Director [41]

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I would point out, Tim, also that we have a couple of loans scheduled for maturity this month. And so far, they look like they’re paying off. We’ve been asked for payoff statements. We’ll see. But so far, so good on that count.

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Timothy Paul Hayes, B. Riley FBR, Inc., Research Division – Analyst [42]

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That’s a good update. And then how many tenants in the real estate portfolio are eligible for either PPP or some other government program? And how significant of an impact would you say that stimulus has on the credit outlook for those companies or for those tenants rather, excuse me?

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Pamela Lynn McCormack, Ladder Capital Corp – Co-Founder, President & Director [43]

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Ja. We don’t have a great sense today. We know a number of borrowers were trying to apply for it. I think we’ll have a little more color into that after our next mature — payment date in May, May 6 that is.

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Timothy Paul Hayes, B. Riley FBR, Inc., Research Division – Analyst [44]

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Okay, okay. Got it. And then, Brian, I know you touched on kind of what is top of mind in terms of capital deployment if you had an extra dollar to spend. But from a high level, can you — and I know there’s a lot of uncertainty in the market ahead. But can you just touch on your different segments and comment on which ones you expect will be net users and net providers of capital over the course of the year?

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Brian Richard Harris, Ladder Capital Corp – Founder, CEO & Director [45]

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It’s a tricky question. It’s not because I don’t know the answer. I don’t know that I want to divulge everything that we’re thinking here. I cannot stop seeing opportunities. It’s one of the reasons that I’m very happy to be somewhat aligned with the Koch Industries people. And I think that some of these opportunities will be very big. I think there’s a lot of money being raised. So I don’t know if it’s going to be as big as I might think if all that money does get raised.

But I think it’s time to get a little untraditional in how you go about doing things. Like I think the conduit business might come back and you might be okay. But if you’re going to lend — if you’re going to sell AAA 10-year securities at a 2%, 2.25% yield, it’s kind of hard to make a lot of money in that business. I suspect you might be a better borrower in that business if you wanted to make a lot of money. So I would lean us towards real estate, especially any kind of real estate that’s having a debt problem. And that might show up in the form of somewhat just providing a mezzanine on a paydown and taking an equity interest in things like a kicker. So a lot of structured finance, I think, is a good possibility.

On the screen of securities — and I would be out of my mind to not tell you that I think some of our bonds are ridiculously cheap. So I don’t think I’m letting the cat out of the bag there. But Ladder has taken great steps to make sure that we have a lot of unencumbered assets if a situation like this were to occur. We’ve got bonds maturing over the next 7 years. And I can’t figure out how to make a loan that makes more money than if we were to retire some of that debt at some of the prices I’ve seen them at.

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Timothy Paul Hayes, B. Riley FBR, Inc., Research Division – Analyst [46]

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Got it. Yes, that’s helpful. And then one last question from me. If you could just provide maybe a little bit more detail on the terms of the Koch facility, advance rates or spread assuming it’s a floating-rate facility. And then I’m sorry if I missed this, but is there a negotiated price that Koch’s entitled to when acquiring a 3% stake? Or is that at market?

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Brian Richard Harris, Ladder Capital Corp – Founder, CEO & Director [47]

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Pamela, I’m going to — if you don’t mind.

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Pamela Lynn McCormack, Ladder Capital Corp – Co-Founder, President & Director [48]

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Ja. I can give you — so the Koch facility, and Marc can give you sort of — we have a weighted average blend cost of funds across our initiatives over the last few months. But I can just tell you, for the Koch facility in particular, it’s match funding, nonrecourse and has a lot of flexibility to modify loans. And we really took the line, as Brian said, in many ways as insurance. And I think we negotiated it early on in the crisis as a way of getting flexibility to deal with the loans in the best manner we think we can to protect shareholder value. So there’s a lot of flexibility in terms of making modifications in the best interest of the loan. And that was the intent of the line.

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Timothy Paul Hayes, B. Riley FBR, Inc., Research Division – Analyst [49]

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Okay.

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Marc Alan Fox, Ladder Capital Corp – CFO and Head of Merchant Banking & Capital Markets [50]

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I think that…

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Timothy Paul Hayes, B. Riley FBR, Inc., Research Division – Analyst [51]

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Go ahead, I’m sorry.

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Marc Alan Fox, Ladder Capital Corp – CFO and Head of Merchant Banking & Capital Markets [52]

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I was just going to say — elaborate and say that really, when you look at us and the financing we’ve done over the course of the past 3 months between the bonds, the CLO and the Koch deal, you’re talking about $1.27 billion of financing that we arranged. The weighted average cost of that is about 5 — a little bit on the 5.5%. And that — we’re talking about long-term funding. $750 million of it is unsecured. The secured parts that are the CLO and the Koch deal, as Pamela said, non-mark-to-market, nonrecourse, flexibility to deal with borrowers. So I think we’ve really strengthened ourselves in a lot of ways there.

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Timothy Paul Hayes, B. Riley FBR, Inc., Research Division – Analyst [53]

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I would agree with that. And thanks for the — just the tidbit on cost there, Marc.

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Operator [54]

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We’ll now take our next question from Stephen Laws with Raymond James.

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Stephen Albert Laws, Raymond James & Associates, Inc., Research Division – Research Analyst [55]

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Brian, I guess I wanted to follow up on a couple of your previous comments. And clearly, balance sheet strength and leverage is down. Securities have continued to decline a little bit, I think, $1.7 billion, Marc mentioned, I think, to Jade’s question earlier. Where do you — on the loan portfolio too, you’ve executed some sales, do you view the portfolio today with the information we have in the deck as kind of where you want to see it? Should we expect it to continue shrinking in the coming weeks before it stabilizes? Or do you really see that going the other way where some things are starting to look attractive, whether it’s repurchasing your debt, as you mentioned, or some other options? Kind of how do we think about — I know everything can change tomorrow morning, I realize that. But as you sit tonight, how do you think about the portfolio size and where we move from here?

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Brian Richard Harris, Ladder Capital Corp – Founder, CEO & Director [56]

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Ja. I think it’s — it was always designed to be a source of liquidity, to tell you the truth. It may not have worked out that way completely especially in March. However, we did keep it short. It’s not hedged. And yes, it doesn’t require a lot of attention. I think on the money side of it, it is money good. I can’t fathom a scenario where we don’t get return of principal. It’s probably the one thing that we do own or that I can say that about, that I have no doubts about the return of principal.

I think over the next couple of months — and I could be wrong here, this is kind of speculating on my part. But I don’t think people fully understand these overcollateralization tests that take place. And I think these portfolios are put together, and CLOs, they’re kind of used as financing even though they’re sales, they are true sales. So if you take a look at the issuers of some of these transactions, a lot of them are our peers, by the way. So we own the AAA portion of a lot of the loans that they’ve originated. So — but when a loan goes bad in those portfolios, typically it gets pulled out and another one gets put in if it’s a managed CLO. But if 30% of the loans go bad at one time, I think you’re going to have a lot of conviction to start writing hundreds of millions of dollars of new loans and removing nonperforming loans at par from the portfolio.

So I think that these triggers, if you will, which forces — the cash flow that goes to the sponsor presently — which is actually quite a bit of money because a lot of these loans have floors, but the bonds, they have a floor of 0 on LIBOR. So there’s another test called the coverage test, and those are designed to have 120% of coverage of the investment-grade bonds’ rates. Most of these CLOs have 300% coverage, and that’s because LIBOR has fallen so rapidly and so low. So if you do have — the overcollateralization test is a very thin margin in most transactions. And we look at one where there’s a $41 million loan in default. And if that loan goes 60 days delinquent, the trigger kicks in, just one loan.

And so I think it won’t happen right away. I think May, you may start to see 30-day delinquencies with some of these pools. And in June, you’ll start seeing some 60s, and maybe you’ll see some repair work done to try to stay in the game. But if we do open the doors of the economy and it doesn’t go well, I think that the default will be overwhelming to the point where they won’t be able to replace them or restructure them. And that will send a hell of a lot of cash flow right to the AAA, and that will hyperamortize the balances.

So we’re kind of in a wait-and-see mode here. We do sell periodically. They’re — it’s not a functioning market. It’s not working great. But with 28 months on average life, if we had to, we would hang and just hang on to it. On the other hand, I would love to get my hands on capital and do something else with it right now. But we — I still think it is a bit of a wait-and-see model where we have to take a look and see what happens when everyone goes outside. And so it sure looks like things are cheap, but that doesn’t mean they are. And if — there’s been a lot of payroll protection plans. But if the people in the restaurant are getting a paycheck and the restaurant gets evicted, I think that there’s another shoe there.

So we like the way our portfolio is composed. I don’t particularly like having that much of a position, not earning a lot of carry in this target-rich environment. So I’m not overly happy with my own performance in putting those on the balance sheet, but I am certainly not worried about them from the standpoint of this becoming problematic to us.

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Stephen Albert Laws, Raymond James & Associates, Inc., Research Division – Research Analyst [57]

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Great. And that leads me onto the next question, Marc, which I wanted to touch base. Page S-8 provides the book value roll forward. Given the unrealized nature of a lot of the securities portfolio markdown, how much of that, I guess, here it’s lumped into — inclusive of other comprehensive income, but how much of the book value, Marc, should we view as unrealized that can — is potentially reversible or recoverable as we move forward?

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Marc Alan Fox, Ladder Capital Corp – CFO and Head of Merchant Banking & Capital Markets [58]

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Ja. So we ended up at the end of the quarter taking a $78.2 million reduction in the value of that securities portfolio. We have realized, I think, $6 million or $7 million of those losses in the security sales that took place in that $16.7 million. So we’re not going to recover that portion. The rest of it, if we see a return to the types of valuations we saw precrisis, which were like clockwork around par, then the rest of it could be recovered. And of course, these are short-duration securities, so they will amortize rather rapidly. And as they amortize, we’re going to be recovering that at par as well. So we’re pretty optimistic. We got to wait and see what the market does.

And to the rest of the book value, obviously part of it is CECL, and baked into it was the initial CECL reserve that we added on Jan 1, which is the $5.8 million. You’ll see that on the chart. That’s just that small piece. But then don’t forget, we also had to portion another $18.5 million or so that ran through the P&L that also had that impact.

So there’s a lot of noncash impacts on our equity in the first quarter.

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Stephen Albert Laws, Raymond James & Associates, Inc., Research Division – Research Analyst [59]

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Ja. Appreciate the clarity on that. And lastly, Pamela, just one quick question. I wanted to follow up on the FHLB, but I think there’s $60 million of assets related to your membership there. When that facility matures, do you intend to remain a member of the FHLB network? Do you sell that membership position? How does it work around your FHLB stock on the balance sheet?

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Pamela Lynn McCormack, Ladder Capital Corp – Co-Founder, President & Director [60]

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The answer is we don’t have the option to do either. The membership funds that so, like every 5-year captive REIT member, it will terminate.

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Marc Alan Fox, Ladder Capital Corp – CFO and Head of Merchant Banking & Capital Markets [61]

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But we get it — you’re talking about the stock. And so we will get that.

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Pamela Lynn McCormack, Ladder Capital Corp – Co-Founder, President & Director [62]

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Oh, I’m sorry, the stock? Yes, you get — we get the full return of the stock.

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Stephen Albert Laws, Raymond James & Associates, Inc., Research Division – Research Analyst [63]

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Yes, I think the $62 million.

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Pamela Lynn McCormack, Ladder Capital Corp – Co-Founder, President & Director [64]

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Ja. That, and the…

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Stephen Albert Laws, Raymond James & Associates, Inc., Research Division – Research Analyst [65]

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And you’ll get that back paid in cash?

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Pamela Lynn McCormack, Ladder Capital Corp – Co-Founder, President & Director [66]

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We get that back in stages as it pays down. But by the end of the facility, when we pay it off, we will get back all of it in cash.

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Operator [67]

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And we’ll take our final question from Mark Streeter with JPMorgan.

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Mark Stephen Streeter, JP Morgan Chase & Co, Research Division – MD [68]

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Okay. The bond guy gets to go last, but I agree with you, Brian, that the bonds are cheap here. You mentioned the orphaning of the commercial mortgage market. So maybe the Fed or the Treasury are listening. What would you like to see, Brian? Is it an expansion of TALF, a PPIP, some sort of public-private investment partnership? What should the government do to help?

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Brian Richard Harris, Ladder Capital Corp – Founder, CEO & Director [69]

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Well, I think the government has actually done a pretty good job overall. I’m not at all sure why there’s been such a radical departure from commercial real estate from the last go-around of TALF, but because it almost feels willful and on purpose that they would leave it out. What they should do, I think, is what they have done to really stabilize areas elsewhere, like corporate bonds. And it is — I think that they should take investment-grade CMBS and CLOs, whether they’re managed or not, because there is a financing problem in these sectors, and you will not get lending started in the United States unless that financing situation corrects itself. I think you would have to be out of your mind to write a bridge loan right now unless you had a rate of 12% and didn’t plan on leveraging it at all.

And what we’ve tried to get market — the market to understand is this is the business that, due to regulation, banks don’t really support because if you want to take a Class C multifamily project in Houston with 400 units and you want to upgrade all of the housing with new air conditioning and new floors and new appliances, this is done through the bridge loan market. And in 2008, there was a big cry for more private investment. And at this point, if the commercial real estate sector is left on its own, there is going to be a downturn of significant proportion that will ultimately wash into some of the banks and because the refinance market for a lot of these assets is simply not there. Now with LIBOR at a low rate, that’s fine, you can carry these things for a little while. But as I said, they keep trying to figure out how to keep employees paid. But if the employer doesn’t open, I don’t think it’s very helpful that you’ve gotten checks for the bartenders, waitresses and counter people.

So I think — I don’t understand why they’re taking junk bonds, ETFs and BBBs of unsecured bonds in corporate world and not taking AAs and As in the secured world of real estate. I also think that there is a tremendous lack of understanding that they don’t believe or don’t understand that CLOs are mortgages. If you think about commercial real estate, CLOs and mortgages, they think that they’re levered loans that don’t have anything backing them. And I think the other misunderstanding is that if they were to make eligible single-asset securities, that they’re somehow helping wealthy people. And the only help that the wealthy people get is one that’s BBBs trade at $0.30 on the dollar and the billionaire that owns the building buys those bonds, and the pension fund and the 401(k) gets drilled and the REIT. So I think that is a misunderstood — and I don’t know if it’s deliberate or not, but it has been an orphaned class.

There are efforts to help — the first attempt they made was to make CLO AAAs and CMBS AAAs eligible in the primary dealer credit facility, which was not helpful at all because the only one that could borrow under it was a New York Fed bank, and they weren’t interested in upsizing their positions at all. And so then they moved the top expansion to take AAA CMBS, but that was it. So I think that they should expand it. If they don’t, we’re going to have very high-cost mortgage debt in the commercial real estate space.

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Mark Stephen Streeter, JP Morgan Chase & Co, Research Division – MD [70]

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Okay. Great. And just want to shift gears and talk about — so the, call it, $2.7 billion of unencumbered assets, a little less than half are the first mortgage loans. And when we drill down into that, just looking at Page S-7 of the slide deck, it is a little bit more skewed towards hotel, retail and mixed-use. You add all those up, it’s about 61%. So how can the bondholders get comfortable with the quality of those loans and sort of the risk in that unencumbered pool being skewed towards those property types? Anything you can give us about loan-to-value or loan performance specifically there?

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Pamela Lynn McCormack, Ladder Capital Corp – Co-Founder, President & Director [71]

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Ja. It…

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Brian Richard Harris, Ladder Capital Corp – Founder, CEO & Director [72]

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Ja. I think well, first of all, they’re first mortgages. So I’ve learned over the years in my new role as a corporate fund borrower that a lot of times, the unencumbered asset test is called a rock pile, and ours is not a rock pile. These are first mortgages, and they are skewed a little bit more towards things that we didn’t want to get in a lot of conversations with finance people about, and we always want our finance lenders to be comfortable. But I would say that our — by virtue of the fact that we have so much cash and in addition to so many first mortgages as opposed to the tail end of something pledged to somebody else or a mezzanine loan or a land loan, I think that we are an upgrade to what many people carry in that area.

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Pamela Lynn McCormack, Ladder Capital Corp – Co-Founder, President & Director [73]

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I would just add to that — the only thing I would add to that is I think there’s — I’ll say this, why not, everyone else is. There’s a lot of a look at unencumbered assets. And when you look at Ladder’s unencumbered assets, we are unequivocally and unapologetically superior to all other unencumbered asset spaces in the space. We are primarily first mortgages. We have over $500 million, $600 million of office and mixed-use mixed into that, $146 million of multifamily. It is — there is — of $1.25 billion, there is only like $400 million of retail and hotel. So I would say we feel really well positioned. And when people talk about liquidity there, I want to pull my hair out because retained equity interest in CMBS and CLO transactions is not liquidity. These are first mortgages and cash primarily.

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Marc Alan Fox, Ladder Capital Corp – CFO and Head of Merchant Banking & Capital Markets [74]

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Mark, I…

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Brian Richard Harris, Ladder Capital Corp – Founder, CEO & Director [75]

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And I would also point out, Mark, that we — when a loan pays off at Ladder, and we’ve seen several in the teeth of this problem, 50-50 chance is in that group of loans that is performing quite well. So I know that we have a — the loans, the 2 loans I was talking about earlier that looked like they’re going to pay off this month, neither one of them are encumbered assets. And so while I certainly understand the suspicion to — you might be hiding your problems over here, I will put that portfolio up against anyone else’s unencumbered asset portfolio.

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Pamela Lynn McCormack, Ladder Capital Corp – Co-Founder, President & Director [76]

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Right. Just keep in mind one last thing, if I may just add one point. The LTV on these are between 67% and 70%. We have a big equity cushion and a lot of room. So the way I would think about them is to think about a modest advance rate against them alone would produce a nice sizable portion of proceeds.

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Marc Alan Fox, Ladder Capital Corp – CFO and Head of Merchant Banking & Capital Markets [77]

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Mark, we’ve always had a very, very high-quality unencumbered asset portfolio. And actually, if you look at that same page that you’re looking at, which is, I think, S-7 of the supplement, you’ll see another statistic that’s cited there, 1.72x. And what that statistic is, is it basically goes and figures out what that ratio would be if you deducted the cash from the unencumbered asset pool and you deducted the cash from the requirements for unencumbered — or that you have to meet. And when you do that, you come up with that 1.72 ratio, meaning that the remainder that you have to meet is met by 1.72x. So we looked at that ratio for this quarter, and we looked and calculated it back since the first time we were using this calculation. That ratio was within 0.11 of the best ratio we’ve ever had, and we’ve always had a very, very strong unencumbered asset pool. So it’s a very high-quality pool when you look at it and say, «I’ve got first mortgage loan, and I’ve got a big amount of cash.»

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Brian Richard Harris, Ladder Capital Corp – Founder, CEO & Director [78]

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And you’re not requiring — because it’s not loaded with mezzanine and B pieces and tail interest on term loan Bs, then as a result of that, if something goes wrong, we don’t have to go take out that first mortgage to go protect our interest. It’s just a straight discussion, and it might be a restructuring or a foreclosure, but it isn’t us writing big checks to take collateral.

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Mark Stephen Streeter, JP Morgan Chase & Co, Research Division – MD [79]

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Okay. Great. Let me just sneak in one last one. I know everyone wants to go home. But just back when cash was lower, the unencumbered asset coverage was getting close to that 1.2x covenant threshold. Then you obviously improved some cash, moved things around and so forth. So when we just look at sort of the excess cash that you have right now and this excess coverage of the unencumbered pool here, how do we think about, Brian, going back to trying to play offense versus maintaining some of this cash for defense in case something happens? And obviously, you don’t want to be running the company at 1.2x coverage on this unencumbered pool. So how do we think about the capital you have today, how much offense can you play? And how much do you need to reserve, if you will, as cushion?

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Brian Richard Harris, Ladder Capital Corp – Founder, CEO & Director [80]

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I think we want to — again, rule of thumb that I generally walk around with is we want to carry about 25% of our — anything that’s callable in cash because anything can happen. So we have way more than that. However, I would also tell you that I think there are scenarios here that exist in the current market, not necessarily having to do with a lot of capital but just having to do with BB space right now given what’s going on in the petroleum sector with oil, who knows what it’s doing today. But there are scenarios where you could buy back some of the corporate debt and create a very large gain on sale and, at the same time, lower your debt. So that’s certainly something we’d have to look at.

In addition to that, we can easily, if we want to, convert some of these securities. I would say if we have to sell these securities today, we would take a small loss associated with it. But given that we don’t think that’s necessary, we haven’t done it. But I’m hard-pressed to figure out that we should be writing a lot of loans right now because of the complete lack of financeability other than AAA CMBS. And I wouldn’t say complete lack, but it’s not very comfortable, right? You can’t get a lot of banks in that business at this point. They may return to it, but some of them have gotten a little bit squishy around it.

So I think the better thing to do is to borrow money with interest rates really low, and banks probably pretty conservatively lending into the space. And I think that’s the way we borrow anyway. So that’s not uncomfortable for us. So I think that we will try to get into the offensive game in — through the real estate door, possibly in helping people that have debt problems, and we can take kickers or mezzanine. But that would be the offensive nature that I would see.

And in addition to that, because we have such a short book of bridge loans and we hardly have any conduit loans, I’ve got about $100 million of those, but so what’s going to happen over the next couple of years, we think, let’s not go to an Armageddon scenario, but let’s say, things improve somewhat, we do come out of this with interest rates very low and our bridge portfolio is mostly through its transition. We have not been aggressively writing bridge loans. We don’t have construction loans, so we don’t have a whole lot of future advances going out the door. So cash sense — tends to stay pretty stable here. And what will happen because half of our — so many unencumbered assets, as loans pay off and as securities pay off or get sold, this creates more liquidity. And that is where we’ll find the offensive power.

So with $830 million, that’s probably excessive, and we can certainly start wading in to do some things. But I think that we’ll always carry a little more — a little bit more cash than we were carrying in March. And — but that — given the short nature and the high floors in our bridge portfolio and the liquid nature and short term of our securities portfolio, we should be taking in a lot of cash over the next couple of years. And I think that will provide us plenty of octane for new investments.

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Operator [81]

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Vielen Dank. That concludes our Q&A session. I will now return the call to Mr. Brian Harris, the company’s Chief Executive Officer.

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Brian Richard Harris, Ladder Capital Corp – Founder, CEO & Director [82]

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With that, I know this was a longer call, but this was — I think that was the longest quarter I’ve ever lived through, too. So thank you for being on with us today. And I will apologize that we could not convey a lot of information to you at a time when I really wanted to. But I would like you to understand that we didn’t lose our minds. We are conservative by nature. And the one fact that I think was left out was everybody forgot we raised $750 million on January 30. So keep that in mind. And when you see some of the press parcels that come out that sometimes we just can’t figure out where they come from, maybe just go back to the basics and how we go about running this company. All right. So thank you. I look forward to talking to you all again. Stay safe, and hopefully, we’ll be all out outside soon.

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Operator [83]

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Vielen Dank. And that does conclude today’s conference. Thank you all for your participation. You may now disconnect.

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