Ladder Capital Reports Q3 Distributable Earnings of $44.7 Million

Ladder Cap (NYSE: LADR ) reported third-quarter financial results on Friday. The transcript from the company's third-quarter earnings call has been provided below. This transcript is brought to you APIs. For real-time access to our entire catalog, please visit for a consultation.

View the webcast at Summary Ladder Capital Corp reported strong third-quarter results with distributable earnings of $44.7 million, or $0.35 per share, and a book value increase driven by a $31 million gain from selling a Jacksonville office campus. The company's loan portfolio is predominantly new, with 90% of loans originated since late 2024, positioning it well for the current high-rate environment. Over 50% of its debt is fixed-rate, providing income stability. Investment activity totaled $703 million with a focus on AAA-rated securities and new balance sheet loans.

The securities portfolio is largely AAA-rated and short-duration, contributing to liquidity. Ladder Cap repurchased $8 million of its stock at a discount, enhancing book value, and declared a $0.23 per share dividend, reflecting confidence in its financial position. Management emphasized the strategic flexibility to pivot between securities and loans based on market conditions and expressed interest in potential M&A opportunities while maintaining a conservative leverage approach. The company highlighted the stability of its real estate portfolio, with significant gains from asset sales and ongoing focus on high-quality acquisitions in select markets like New York.

Ladder Cap maintains strong liquidity, with $784 million available and a robust balance sheet, supporting its ability to navigate a volatile interest rate environment and pursue growth opportunities. Full Transcript OPERATOR Good morning and welcome to Ladder Cap's earnings call for the third quarter of 2026. As a reminder, today's call is being recorded. This morning Ladder Cap released its financial results for the quarter ended September 30, 2026.

Before the call begins, I'd like to call your attention to the customary safe harbor disclosure in our earnings release regarding forward-looking statements. Today's call may include forward-looking statements and projections, and we refer you to our most recent Form 10-K for important factors that could cause actual results to differ materially from these statements and projections. We do not undertake any obligation to update our forward-looking statements or projections unless required by law. In addition, Ladder Cap will discuss certain non-GAAP financial measures on this call which management believes are relevant to assessing the company's financial performance.

The company's presentation of this information is not intended to be considered in isolation or as a substitute for the financial information presented in accordance with GAAP. These measures are reconciled to GAAP figures in our Earnings Supplement presentation which is available in the Investor Relations section of our website. We also refer you to our Form 10-K and Earnings Supplement presentation for definitions of certain metrics which we may cite on today's call. At this time, I'd like to turn the call over to Ladder Cap's president, Pamela McCormack.

Pamela McCormack, Director Good morning and thank you for joining us today. Ladder Cap had a strong third quarter. We generated distributable earnings of $44.7 million, or $0.35 per share, with modest adjusted leverage of 2.5 times. Results included a $31 million gain on the sale of our largest net lease asset, an office campus in Jacksonville, Florida.

The sale provides another clear example of unlocking value above our cost basis in the real estate portfolio. We are executing the plan we laid out at the start of the year and the quarter reflects it. Three things stand out: book value increased, our loan portfolio is predominantly new vintage with limited legacy loans, and we're well positioned for rising rates. Each one supports our earnings going forward.

First, book value. Our undepreciated book value per share did not just hold steady this quarter, it went up, rising to $13.50 from $13.44, driven primarily by the gain on sale of the Jacksonville office campus. That increase builds on book value that has held firm since the end of 2022, reflecting the strong credit performance of our portfolio. The Jacksonville sale, along with the full payoff of our largest legacy office loan in Miami during the second quarter, is the latest proof.

Second, our loan portfolio is new vintage. Approximately 90% of our loans have been originated since late 2024. They were underwritten in a higher-rate environment at conservative loan-to-values on a reset basis. We believe that positions the portfolio well for today's rates and gives us room to keep growing it.

Third, we are well positioned for rising rates. Over 50% of our debt is fixed rate, so as our floating-rate assets reset higher, our income rises while the cost of that debt stays the same. As the only investment-grade rated commercial mortgage REIT with senior secured assets and modest leverage, our model is cycle tested. Ladder Cap has been in business for 18 years, public for 13, and a bond issuer for 14.

We are middle market by design. Our average loan size is about $30 million and our average investment size is about $15 million. That granularity and diversification limit our exposure to any single asset, sponsor, or market, and we believe it is one of the reasons our book value has remained stable, in addition to our clear alignment of interest with high insider ownership. Investment activity: During the third quarter we stayed selective as rates rose.

We made $703 million of new investments, including $481 million of predominantly AAA-rated securities at attractive yields and seven new balance sheet loans totaling $222 million. Net of payoffs, sales, and amortizations, our combined loan and securities portfolios grew by approximately $570 million year to date. We've originated $1.4 billion in new loans, already matching our 2025 volume, and our loan portfolio has grown over 50% in the trailing 12 months. Balance sheet loans now make up approximately half of our total assets.

Our goal is to keep growing that share over time, but we will stay flexible. When higher rates slow lending activity, as they began to in September, we will put capital to work where we see the best risk-adjusted returns. Brian will talk more about that. That said, with ample liquidity and payoffs expected to remain light in coming quarters, we are well positioned to keep growing our loan portfolio without compromising on credit.

Securities portfolio. During the third quarter, we acquired $481 million of primarily AAA-rated securities at attractive yields, and we continued buying into October. As of September 30, our securities portfolio totaled $2.3 billion, representing 37% of total assets, with a weighted average yield of 5.5%. The portfolio is 99% investment grade and 97% AAA rated, with a weighted average duration of approximately three years.

Because it is short duration, liquid, and largely floating rate, our securities portfolio earns attractive yields in today's market and gives us a ready source of capital to move into loans when they offer the best risk-adjusted returns. Real estate portfolio. Ladder Cap has consistently produced real estate and other gains on top of our carry income, and Brian will discuss that track record in more detail. As mentioned, this quarter we completed the sale of our net lease office campus in Jacksonville, Florida.

The sale contributed $31 million to distributable earnings and generated an 18% IRR over the life of the investment. We sold the property well above our carrying value, which highlights the value embedded in our real estate portfolio. Share repurchases. We believe our stock is undervalued.

During the third quarter, we repurchased $8 million of stock at an average price of $9.38 per share, a 31% discount to our undepreciated book value of $13.50 per share. Repurchases at these levels are accretive to book value and, alongside loan growth and real estate gains, they remain one of the ways we create value for shareholders. In closing, this quarter showed our plan at work. Our loan and securities portfolios grew, we realized a meaningful gain in our real estate portfolio, and our floating-rate assets earned more while the cost of our fixed-rate debt stayed the same.

Our plan for the coming quarters is unchanged: grow our loan portfolio, deploy capital where we see the best risk-adjusted returns, and realize gains across our businesses, all with the credit discipline that has always defined Ladder Cap. We believe these levers will drive higher earnings, support our dividend, and create long-term value. Finally, as promised, we've begun taking our story directly to shareholders and will continue those conversations in the coming months.

Our message is simple: management and the board own 13% of Ladder Cap and are collectively our largest shareholder group, so we're focused on the same things you are—protecting principal, growing earnings, and building long-term value. With that, I'll turn the call over to Paul. Paul Thank you, Pamela. Good morning.

During the third quarter, Ladder Cap generated distributable earnings of $44.7 million, or $0.35 per share. Excluding a realized loan loss previously reserved for, our third quarter earnings were $0.38 per share. Our balance sheet remains strong. We maintain modest leverage and a resilient investment-grade capital structure, with unsecured debt representing 69% of our total debt at an attractive cost of capital.

As of quarter end, our adjusted leverage ratio was 2.5 times and we maintained robust liquidity of $784 million, including same-day capacity on our unsecured revolver. In addition, we held $1.2 billion of unencumbered, primarily AAA securities. Our $1.25 billion unsecured corporate revolver continues to be a valuable asset, allowing for funding flexibility with same-day liquidity, driving our ability to execute our capital deployment strategy. Alongside our revolver, our access to the investment-grade unsecured corporate bond market allows us to fund our growth with long-term, fixed-rate unsecured debt.

We have been monitoring the markets closely and expect the unsecured debt market to continue to be a meaningful source of capital for Ladder Cap. As Pamela mentioned, rising rates this quarter highlighted the benefit of how we finance our balance sheet. As of September 30, 57% of our debt was fixed rate, primarily unsecured corporate bonds with a weighted average coupon of 5.3%. This is complemented by 92%, or $4.8 billion, of our interest-earning assets being floating rate.

Based on our balance sheet as of quarter end, we estimate that each 25 basis point increase in SOFR adds approximately 1 penny per share per quarter to our distributable earnings. Our unencumbered asset pool represented 73% of total assets as of quarter end. As of September 30, 88% of this pool is comprised of first mortgage loans, investment-grade securities, and unrestricted cash. As of September 30, Ladder Cap's undepreciated book value per share was $13.50, which is net of 30.35 cents per share of CECL reserve established.

In the third quarter, we repurchased $8.2 million of common stock, or 871,000 shares, at a weighted average share price of $9.38. Year to date in 2026, we've repurchased $29.6 million of common stock, or 3 million shares, at a weighted average price of $9.89 per share. As of September 30, $83.8 million remains outstanding on Ladder Cap's stock repurchase program. Overall, we continue to believe in our book value and will seek to continue to opportunistically utilize our buyback program while our stock is trading at a meaningful discount.

In the third quarter, Ladder Cap declared a $0.23 per share dividend, which was paid on October 15, 2026. Going forward, we believe our largely floating-rate asset base, fixed-rate debt, and continued loan growth will support a durable dividend. Turning to credit quality, as of September 30 we had two loans on nonaccrual with a combined carrying value of $61 million. The first, with a carrying value of $51 million, is collateralized by a hotel in Los Angeles, California.

The second is collateralized by an office property in Minneapolis, Minnesota. We expect to take ownership of that property in the fourth quarter. In anticipation, we charged off $3.5 million of an existing CECL allowance associated with that loan, bringing our carrying value to $9.9 million, or $67 per square foot. As of September 30, our CECL reserve was $44 million, or $0.35 per share, which represents 1.48% of our loan portfolio and takes into consideration current market conditions, including the rise in interest rates, as well as the fact that 87% of our loan portfolio was originated since late 2024 at reset values.

We continue to believe this reserve level is adequate. As of September 30, our securities portfolio totaled $2.3 billion with a weighted average yield of 5.5%. Notably, 99% of the portfolio was investment grade, 97% was AAA rated, with 96% being floating rate and a weighted average duration of approximately three years. Underscoring its high credit quality and overall liquidity, during the quarter we recognized a $4.5 million loss in distributable earnings on a legacy fixed-rate CMBS, with no impact to book value as the loss was previously recognized through our other comprehensive income.

As previously stated, as of quarter end, over 50%, or $1.2 billion, of our securities portfolio remained unencumbered, complementing our $784 million of same-day liquidity. We believe this combined broad access to liquidity reinforces the strength of our balance sheet and positions Ladder Cap well to continue to selectively originate and grow our loan portfolio to drive future earnings growth. Our $900 million real estate segment continued to generate stable net operating income during the quarter.

The portfolio includes 148 net lease properties, comprised primarily of investment-grade credits committed to long-term leases, with an average remaining lease term of 6.4 years. As noted, we sold our largest net lease property in the third quarter, the office campus in Jacksonville, Florida. The sale contributed a $31 million gain to distributable earnings and produced a GAAP gain of $66 million. The difference between the two reflects the recapture of depreciation and amortization previously recorded on the property and is why we measure our real estate and our book value on an undepreciated basis.

For further details on our third quarter 2026 operating results, please refer to our earnings supplement presentation available on our website, as well as our quarterly report on Form 10-Q, which we expect to file in the coming days. With that, I'll let Brian take it from here. Brian Harris, CEO Thanks, Paul. In the third quarter, interest rates moved quite a bit higher, especially in September.

This abrupt increase in global interest rates will undoubtedly put the brakes on a lot of refinancing activity. In addition, we are seeing many buyers of assets going back to sellers, requesting lower purchase prices due to the recent spike in borrowing rates. Knowing that both of these items would slow origination pipelines, we pivoted to acquiring more securities—$481 million in the quarter—as general market volatility created a higher-yield environment for these high-quality investments. After this week's inflation statistics were released, market sentiment now expects that we're in for another 25 basis point hike from the Fed before year end.

And as Paul said, our balance sheet is constructed to benefit from this kind of market change, with incrementally higher earnings per share as the Fed hikes the Fed Funds interest rate. Also, as mentioned earlier, we sold our largest office asset after owning it for about nine years because we identified our five largest office exposures back in 2022 when that sector was causing some consternation among investors. I wanted to point out that this is the fourth of the five assets we highlighted at that time, with no losses to date from these five larger exposures.

We expect the final office loan from that 2022 group to pay off in full before year end, and I will update you when and if that happens. We hear a lot that investors don't really value one-time gains, preferring steady carry each quarter, but I'd like to mention that we don't view these occasional sales of real estate as one-time gains. While these gains are hard to model, when we look at the last 13 years since we went public, we've made $250 million in profits on the sale of 69 assets, with $76 million of gains reported in just the last five years after the pandemic.

Owning real estate is a high ROE business line at Ladder Cap, not a hobby, and we don't think it's accurate to characterize these 69 transactions as one-time gains. I'll end today by noting that the capital markets are very volatile lately, given many geopolitical events, price shocks in the energy sector, AI capital consumption, and ballooning deficits. Given our careful construct of our liability complex, with primarily unsecured corporate debt funding our business, we are prepared to take advantage of the market opportunities that invariably come up as markets churn and investors raise liquidity.

We hope to continue migrating our capital out of securities and into higher-yielding loans. But sometimes markets lead us to consider other options. While we only leverage half of our securities, those levered returns are now reaching into the 14% to 15% range for AAA CLO securities. The other half of our securities, totaling over $1 billion of mostly AAA mortgage-backed securities, are held unlevered and yield about 5.5%.