Ladder Capital Corp. Class A Stock

Good morning, and welcome to Ladder Capital Corp.'s Earnings Call for the Second Quarter of 2026. As a reminder, today's call is being recorded. This morning, Ladder released its financial results for the quarter ended June 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 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's President, Pamela McCormack.

Good morning, and thank you for joining us today. Ladder had a strong second quarter with robust origination activity and continued earnings growth. We generated distributable earnings of $30.8 million or $0.24 per share with modest adjusted leverage of 2.3x. Ladder's business model is performing well, yet our stock still trades at a meaningful discount to book value, a value we feel confident in and one that has remained stable throughout the cycle.

We have 3 levers that should help narrow that discount over time. Combined with a dividend yield of over 9%, closing that gap would put a total return potential above 30% from here. First, continued rotation to higher-yielding loans build earnings power. Our investment-grade balance sheet gives us the liquidity and financial flexibility to continue rotating capital into loans without compromising on credit and our stable book value reflects that discipline.

Second, generating gains from sales across our multi-cylinder strategy from securities, real estate and conduit loans continues to be part of our playbook, and a source of earnings we don't think is fully reflected in our valuation today. And third, with our stock price currently trading below book value, every share we repurchase adds to book value per share, a lever we'll use opportunistically alongside loan growth. I'll explain how you're already seeing progress in each of these areas.

Rotating into loans. Year-to-date, we have originated $1.2 billion in new loans with our loan portfolio growing 75% over the trailing 12 months. Balance sheet loans now make up approximately 50% of total assets, and we expect that share to continue to climb. 85% of our loan portfolio has been originated in the past 2 years at conservative loan to values on reset bases, resulting in recently underwritten loans, not a legacy book carried at peak cycle values.

That rotation is showing up in the results. Our net interest margin has trended higher year-over-year as we rotated out of lower-yielding securities and replaced legacy loans with these new recently originated ones even as all-in rates on new originations have come down. In the second quarter, we made over $800 million of new investments, over $550 million in new loans at a weighted average yield of 7.2% and $333 million in AAA investment-grade rated securities at a weighted average yield of 5.15%. These investments are predominantly floating rate, while our liability structure is largely fixed rate. So higher rates from here should benefit earnings.

Every dollar we rotate from securities yielding approximately 5% into floating rate first mortgages yielding over 7% picks up about 200 basis points of income on that capital, which would flow directly through to earnings. Notably, our second quarter loan originations included a $268 million loan for the acquisition of a Class A office and retail building in Midtown Manhattan, along with a $10 million or 6% equity co-investment in the property. The loan was made at a 62% loan to cost on a reset basis to a repeat borrower.

Origination momentum has continued into the third quarter with an active pipeline of approximately $500 million of new loans under application and in closing. With payoffs expected to stay light through year-end, we expect net portfolio growth to build each quarter for the remainder of 2026. Overall, transaction volume across the market has picked up, broadening our opportunity set as a lender, and we continue to canvas for the best risk-adjusted returns. Our primary focus remains middle market income-producing collateral, mainly multifamily and industrial.

On office, to be clear, we're not making a directional bet on the sector. But in select markets, we're finding compelling opportunities where leasing momentum has returned and basis has reset sharply. We favor cities with low prime rates and a return to in-person work, and we underwrite each of these loans on its own reset basis, not on a view of office broadly. Supplementing carry with gains. Gains from our multicylinder business strategy, security sales, real estate, and conduit can be lumpy from quarter-to-quarter, but they've been a consistent contributor to earnings by design since our founding.

Because of that consistency, Ladder is better evaluated year-over-year rather than quarter-to-quarter, a distinction we believe gets lost in how our stock is valued today. Our $1.9 billion securities portfolio, representing 33% of total assets is predominantly AAA rated and has served as a primary source of capital as our loan origination activity accelerates. During the quarter, we reduced our securities portfolio with net sales producing $1.8 million in gains. As we continue to fund new loans, we expect the securities portfolio share of total assets to contract further with the pace driven by loan origination activity, not a retreat from securities as an asset class.

Our $1 billion real estate portfolio generated $18 million of net operating income in the second quarter. We also realized a $1.7 million gain to distributable earnings tied to a $13 million distribution from a cash out refinancing of a joint venture equity investment we made in a Manhattan office property in 2024. Over the course of our ownership, property occupancy increased 52% to 94%, with NOI increasing over 200% from acquisition, another example of unlocking value above our cost basis in select assets.

This is not unique to one property. Across our real estate portfolio, we carry several assets below the value we would expect to realize, and we anticipate capturing that value as we selectively monetize positions over time, though the timing of any given sale is never guaranteed. Overall, we realized approximately $4.1 million of gains this quarter across all 3 of our cylinders, $1.8 million from security sales, $1.7 million from our real estate equity and $600,000 from our conduit business. These gains are not always sizable individually, but this is our multicylinder business model working the way it's supposed to, earnings support that builds over the year rather than in any single quarter.

Share repurchases. As Paul will discuss, we continue to repurchase stock at a discount to book value this quarter. Stock repurchases remain one of the more accretive uses of capital available to us today, increasing book value with every share repurchase at today's market price. In closing, we can't control our stock price, but we can control many of the inputs that help drive it. An investment-grade capital structure and rising higher quality earnings should attract a broader base of investors, including equity REIT holders, supporting the kind of stock performance that would move us towards that 30-plus percent total return, where shareholders have paid a yield of over 9% in the meantime.

We've built a strong track record earning the confidence of a new core base of investment-grade bondholders. When we issued our inaugural investment-grade bond, we effectively refreshed our fixed income investor base, attracting high-quality institutional buyers who bought the latter story and drove our bond spreads materially tighter. Now we're turning that same attention and effort to the equity side. Over the second half of the year, we plan on taking our story directly to current and prospective shareholders, widening the audience and candidly, going to work on our stock.

Looking ahead, our priorities remain unchanged: originate high-quality investments across loan securities, and real estate with a particular focus on our loan segment while maintaining the credit discipline that has always defined Ladder.

Management and the Board remain Ladder's largest shareholder group, which keeps our incentive squarely aligned with yours, protecting principal, delivering an attractive return on equity and building long-term value for every shareholder alongside us. With that, I'll turn the call over to Paul.

Thank you, Pamela. Good morning. During the second quarter, Ladder generated distributable earnings of $30.8 million or $0.24 per share. Our investment-grade balance sheet continues to be in a position of strength, powering our multicylinder strategy. We maintain modest leverage and a highly resilient unsecured capital structure with unsecured debt representing 67% of our total debt at an attractive cost of capital. As of quarter end, our adjusted leverage ratio was 2.3x, and we maintained robust liquidity of $1.1 billion, including same-day capacity on our unsecured revolver and cash.

During the second quarter, we fully drew down the $275 million unsecured term loan we closed in the first quarter, which is priced at 140 basis points over SOFR. Alongside this facility, our $1.25 billion unsecured corporate revolver continues to be a valuable asset, allowing for funding flexibility with same-day liquidity at SOFR plus 125 basis points, driving our ability to execute our capital deployment strategy.

Our unencumbered asset pool represented 73% of total assets as of June 30. 85% of this pool is comprised of first mortgage loans, investment-grade securities and unrestricted cash. These highly liquid senior secured unencumbered assets do more than expand our liquidity. They provide a high-caliber asset base that directly supports our unsecured liability structure. Subsequent to quarter end, S&P revised their outlook on Ladder to positive, one step closer to investment grade and the second positive rating action S&P has taken on Ladder this year following their upgrade to BB+ in January.

The action is reflective of Ladder's strengthening balance sheet and track record of disciplined leverage, sound credit management and durable predominantly unsecured funding profile. An upgrade to investment grade from S&P would bring Ladder's credit rating in line with Moody's and Fitch, where we are already investment grade. We'd like to thank the team at S&P for their diligence and partnership throughout this process, and we look forward to continuing to build on that relationship.

As of June 30, Ladder's undepreciated book value per share was $13.44, which is net of $0.37 per share of CECL reserve established. In the second quarter, we repurchased $8 million of common stock or 800,000 shares at a weighted average share price of $10.03 per share or a 25% discount to book value. Year-to-date in 2026, we have repurchased $21 million of our common stock or 2.1 million shares at a weighted average share price of $10.10 per share. As of June 30, $92 million remains outstanding on our stock repurchase program.

Overall, we continue to believe in our book value, and we will seek to continue to opportunistically utilize our buyback program while our stock is trading at a meaningful discount. In the second quarter, we declared a $0.23 per share dividend, which was paid on July 15, 2026. Over time, continued rotation of capital into our loan segment, along with the earnings power of our multi-cylinder strategy could be a tailwind to dividend coverage.

Turning to credit quality. In the second quarter, we added 1 loan to nonaccrual status collateralized by an office asset in Minneapolis, Minnesota with a carrying value of $13.4 million. We anticipate resolution of this loan by the fourth quarter. As of June 30, our CECL reserve remained steady at $47 million or $0.37 per share. We continue to believe this reserve level is sufficient to cover potential losses across our loan portfolio.

During the quarter, we resolved one loan through foreclosure, an $8 billion (sic) [ $8 million ] loan collateralized by an office property in Birmingham, Alabama that we now own at $30 per square foot. Our plan is to stabilize this asset and maximize value for a potential sale in the future. As of June 30, our securities portfolio totaled $1.9 billion with a weighted average yield of 5.19%. Notably, 99% of the portfolio was investment grade and 96% was AAA rated with a weighted average duration of approximately 3 years, underscoring its high credit quality and overall liquidity.

As of quarter end, approximately 50% or $925 million of our securities portfolio remain unencumbered, complementing our $1.1 billion of same-day liquidity. We believe this combined firepower reinforces the strength of our balance sheet and positions Ladder to organically fund loan origination to drive future earnings growth. Our $1 billion Real Estate segment continued to generate stable net operating income in the second quarter. The portfolio includes 149 net lease properties comprised primarily of investment-grade credits committed to long-term leases with an average remaining lease term of 6.2 years.

For further details of our second quarter 2026 operating results, please refer to our earnings supplement and our investor presentation, both 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.

Thanks, Paul. Given the quarter was more or less as expected, I won't focus too much on the numbers Paul and Pamela gave you other than to reinforce how our business plan is unfolding right on schedule. Our loan portfolio is continuing to show steady growth funded by our numerous options of unsecured liabilities and the sale and paydowns of unencumbered securities as we allocate more capital each quarter to higher-yielding products. We expect this rotational pattern into higher-yielding first mortgage loans to continue through year-end, and we expect to issue additional unsecured corporate debt to refinance our 4.25% bonds maturing in early 2027.

I'd note that we don't have to issue more debt given our $1.25 billion undrawn corporate revolver, but we do expect to issue new debt over the next 6 months when an attractive window opens for issuance. We were pleased to hear that S&P had moved Ladder to positive outlook recently and hope that our next bond issuance will be rated investment grade by 3 rating agencies. We spent a lot of time and effort on our liability complex over the years and it's very rewarding to see benefits that come from our consistent and conservative approach towards liquidity, leverage and most importantly, credit.

When the office sector began to alarm investors after the pandemic, we highlighted our top 5 exposures in an earnings call in the fourth quarter of 2022. At the time, our largest equity exposure to office were 2 similarly sized portfolios, one in Florida, one in Virginia, totaling $242 million. The Virginia portfolio has since been sold at our basis, and we anticipate selling the Florida portfolio above our current basis before year-end.

We also had 3 mortgage loans secured by office properties, one in Alabama for $66 million, which has since paid off in full and 2 in Florida, totaling approximately $326 million. Of that, a $215 million mortgage on a Miami office building paid off in full in the second quarter of this year, and the remaining loan was paid down by approximately $30 million a while ago from $110 million to $80 million today, where we still carry it. We expect this loan to pay off by year-end also.

In a sector that delivered huge losses in many companies we competed with, we now look reasonably likely to benefit from a full return of capital on our 5 largest office exposures as depicted 4 years ago. There are no guarantees this will go as planned, but is the base case scenario we are operating under. We seem to have fared better than most over this difficult time period, and this is why we have had lower charge-offs and have maintained a fairly steady book value for our share price.

Our debt complex is now in place to safely support our growing asset base, and we are very pleased with the reception bond investors welcomed us with as we issued our first investment-grade corporate bond last summer. In short, they understood our conservative approach towards investing in commercial real estate, but now we have to turn our full attention to our stock price that seemingly reflects none of the differentiated features of our company.

These features include, but are not limited to: 1. An internally managed structure; 2. Our middle market lending preferences; 3. Our conservative use of leverage; 4. Our access to many low-cost options to finance our businesses; 5. Our balanced approach to risk/reward relationships when allocating capital; 6. Our stable book value and attractive quarterly cash dividend; and 7. An ownership structure where management and the Board are among the largest shareholders of the company.

We believe the equity markets incorrectly compare us to other commercial mortgage REITs based solely on what we own on the asset side of our balance sheet. It seems that common ownership of various commercial real estate-related products is where that analysis ends. We think there is much more to comparative analysis than similar asset types, and we will now work tirelessly to broaden our investor base to include investors who generally invest in lower-yielding investment-grade property REITs, regional banks and T-bills.

We think our correct comp set should be chosen by how we finance our assets rather than by what assets we own. This is difficult, but let's remember that Ladder is the only investment-grade commercial mortgage REIT in the United States. So naturally, we will need to market our company to investors that have not seen anything quite like us in a very long time. We needed to get the liability side of Ladder squared away first, given how integral our differentiated financing methodology is to understanding the value of our shares over time.

We are not looking to convert holders of non-investment-grade commercial mortgage REITs with tenuously high dividends into owning our stock instead. Rather, we are trying to convert holders of lower-yielding investment-grade property REITs into our 9-plus percent dividend yielding investment-grade company. We are also aiming to convert a small portion of record levels of cash and T-bills and money market funds into owning our nearly 3x higher yielding but still conservative commercial mortgage REIT that also happens to be the only investment-grade mortgage REIT in the country.

We kick off this effort starting today, and I direct your attention to just one slide in our online investor presentation, Slide 5. This slide condenses my words into an easy-to-understand illustration, and I welcome comments regarding our approach to accessing investors who seek higher yields in a cash-heavy market with our one-of-a-kind vehicle. We can now take some questions.

[Operator Instructions] Our first question comes from Timothy D'Agostino with B. Riley.

Congrats on the quarter. It seems like the rotation from securities into loan portfolio picked up this quarter. And if I'm reading Slide 9 correctly, it seems like most of the securities sold came from 3- to 5-year duration. And so I guess thinking about as that rotation continues through year-end, like how do you go about selecting what securities to sell? Just trying to get a better understanding of why it might be longer duration.

[Technical Difficulty]

[Operator Instructions]

Apologies for the disconnect, but we're back.

Yes, we can hear you.

Awesome. Yes. So it seems like the shift from securities to the loan portfolio picked up this quarter. And it seems, if I'm reading Slide 9 correctly, that most of that rotation came from longer duration securities in the 3 to 5 years. So I was just wondering, how do you think about the selection of what securities to sell as you rotate that capital?

Sure. We -- this is Brian, by the way. We generally just group them into what is the objective of the day. And if the objective is simply to fund a new loan that we're originating and we need the cash for it, we'll generally sell something that is paid down quite a bit with a low factor because we've owned it for several years. So the -- while it's quite safe, the instrument, it might be a 20% LTV across a pool of assets, it's going to pay off near term. So anything that looks like it's about to pay off is what we select first when we're just trying to generate cash to close loans.

Sometimes when markets get -- especially when rates rise a little bit, spreads can tighten. And so we did see some attractive pricing, too. And everything we sold was a floater. So when you say longer duration, it's still kind of it's very hard to make a lot of money on a floating rate AAA because it just doesn't swing around a lot in price. But we were able to sell quite a few at a gain of about 0.5 point.

And that added, I think, $1.8 million to the quarter. So the selection criteria is usually what's about to be cash first. Secondly, what are we up and maybe feel mispriced about that we might be selling at a high price. And then last, we've never gotten to that. But if we ever got to it, we would then start taking larger positions to generate capital quickly. But the beauty of that AAA sale complex is that you get your cash 24 hours later.

Okay. Great. And then I guess with that rotation, obviously, the 2 percentage points you pick up from 5% securities to 7% loans, I guess, could you help us quantify maybe the costs associated with that rotation just to get a better understanding of the process?

I may be misunderstanding the question, but there is no cost to it, to my knowledge. We simply sell the securities, get cash and then fund the loan. For instance, in April, I believe we got paid off on $215 million in the Miami office loan. And I think 2 days later, we made another loan for $268 million. So I don't know what kind of cost you're talking about. You mean breakage costs or hedge costs?

No, I was thinking more of like cost to originate that next loan. Obviously, you're picking up the 2%. But in the meantime, as you originate the loan and put that money to work, I was thinking how much does that cost you kind of maybe corporate overhead origination costs that might eat into it in that quarter?

Yes. Given we have that large revolver that has a same-day delivery on cash, we don't travel with a lot of cash overnight anymore. We also have such low leverage that the idea of a margin call would be pretty surprising, too, because half of the assets are unencumbered completely.

But -- so the cost -- the opportunity cost, if you will, would be -- we take -- we come out of securities at 5%. We might stick it overnight into a money market fund at 3.75% and then whenever the loan closes. But we usually sell those securities in tandem with loans closing. We don't -- they're not random events. They take place together.

Our next question will hear from John Nicodemias with BTIG.

In the past, your team has cited concentration risk with respect to your origination decisions, including the origination year. Now that about -- if I have my numbers right, 37% of your loan book has been originated this year and 85% across 2025 and 2026. How is that average vintage setup affecting your deployment plans for the back half of the year?

In very rough numbers, we try to set the company up to originate $400 million to $500 million a quarter. We're not particularly concerned if we don't originate that much nor are we concerned if we originate twice as much. But -- so the we're not going to experience a lot of paydowns after now. Most of our legacy loan portfolio has paid off. So I think we were experiencing some large payoff quarters, which I'm sure you saw. And we were redeploying that capital and sometimes that took a little while, but we're past that point now.

So I would say if we're going to fund additional loans, and we will and that 85% -- that 50% of the inventory will climb over time into the loan book. But when we do that, we'll probably either access the corporate revolver that is undrawn or else we'll just sell AAA securities. I think we have about $900 million of those with no leverage on them. So it's a 24-hour turnaround for cash.

I don't know if I'm answering you right there, but I think the message is that paydowns are slowing down dramatically, but not because of the credit reason just because they got older, and they're hitting maturities.

Got it. No, that's very helpful, Brian. And then other one for me. During the last quarter's call, you discussed how much borrower appetite can quickly shift due to either a change in rates or macro volatility. With rates markedly up since then, volatility is still present, obviously, we've seen what's gone on the past couple of days. How have you been seeing borrowers react both late in the second quarter and now that we're into the third quarter here?

Yes. Well, higher rates will deter all but the most ardent borrowers that need to get something done. So I think the first thing you'll see with the higher rates is there's actually an initial push to close loans because those that are under application want to get them closed because they're afraid rates might move even higher. But after that, there's usually a gap and things slow down, and you'll see this in mortgage servicers and how the residential market works. But borrower appetite is very picky right now.

So it is a rather competitive environment. And they are -- at least in our floating rate book, our spreads have been rising. So that sounds like I contradicted myself. But what we're doing now that we're getting more deployed and we have less headroom to go on our maximum asset base that will optimize over time. And so as of now, we've kind of stiffened on price and also on credit conditions.

So whereas we might have been a little aggressively competing on any given multifamily loan a year ago, we're a lot less so now. We pretty much set our prices. And if borrowers want to close, they will. What we are seeing more of, though, and I don't think it has anything to do with interest rates is there's a lot of price discovery popping up as office buildings are being sold by lenders either who had foreclosed or else who are selling the notes at a deep discount in cooperation with the next buyer and the old borrower.

So that's happening. But there seems to be this sense in the United States that the office market is recovering, and it is to some degree. But I would point out that it's really just 2 cities that are really doing well, and that's San Francisco and New York. There is -- I don't see any recovery whatsoever in Chicago or Los Angeles or Washington, D.C., where the government drives a lot of that business.

So -- but you do see a lot of activity in those cities. And what's happening is lenders on legacy assets are throwing in the towel and they're finally they're just taking their medicine and taking the loss. So you'll see a lot of prints, but I don't want you to think there's a lot of borrowing going on there. There's -- it's usually very challenged assets that are going to take quite a while to stabilize.

We're happy to do some of those with the right party who can execute their business plan. But when it's a refinance of somebody who is already having a problem and he's had a loan for 5 years, I would not expect much to change in the next couple of years with the same owner. So I think the long story there is the market is -- Ladder is getting fuller on its inventory. So Ladder is charging more for a smaller amount of liquidity remaining to redeploy.

And next, I'll move to Chris Muller with Citizens Capital.

Congrats on a solid quarter here. So I guess picking up on a prior line of questioning here. You guys have talked about pretty extensively being able to flip capital from the securities portfolio to the bridge portfolio. But bridge portfolio is up about $1 billion year-over-year and securities portfolio is pretty flat.

So that gives you plenty of capacity to grow the bridge portfolio going forward. I guess how do you think that dynamic plays out in the back half of the year? Could we see the securities portfolio get down to like $1 billion-ish type number? Or is that too aggressive of a pace?

No, I think that's very possible. I've been asked a couple of times on these calls, how many securities do you intend to own forever. That's almost like asking me how much cash do you want to hold on a regular basis because I kind of view them the same way, especially short AAA floaters. But I think we will be cutting into that inventory of securities between now and year-end. And I think that number will go down, and it could go down quite a bit depending on how active the origination arm is.

Got it. It's good to hear. And then I ask you guys this one all the time. But on the conduit business, nice to see a little bit of that in the quarter. I think that's the second quarter in a row, but still well below what you guys used to do pre-COVID. So is that business going to start ramping up, do you think in the back half of the year? Or is -- are interest rates really too choppy for that to really ramp?

Yes, I probably would have answered that question differently a month ago, but I think it is too choppy right now. And if you actually take a look, never mind the latter, but if you just take a look at the CMBS business and the issuance over the years, there has been a steady decline in issuance, and it's only recently started to pick up. But the amount of eligible assets that can get into a 5-year or a 10-year fixed rate loan right now after the downturn over the -- since 2021 on.

There's just not a lot. So that's why you're actually seeing a lot of CMBS deals with sometimes 8, 9 originators because everyone is trying to amass a critical mass to go with their deal. But I don't really see the volume picking up. And a cautionary note there that most of the loans in the conduit business in the CMBS origination arm are cash out refinances. And a cash out refinance in this market after what we went through in 0 interest rates and expenses through inflation is, in my opinion, a rare animal.

So I get a little bit concerned when almost everything is a refinance and nothing is an acquisition. To me, that's a flag. And I think all it really is, it's not a danger flag. It's just a flag that says we're happy to go slow on this product because we're going to be very picky. And also that it's going to be slow.

And these rates -- just today's rate movements will -- you'll see a lot of CMBS deals in the pipeline that are going to move a month or 2 and might even just go further than that. But we're at the point -- I would say once we cross the 450 on the 10-year, and I think that slows things down, and I think that will come through. You'll see that on the residential side, too, in those REITs that have a lot of interest-sensitive home loans.

And next, we'll move to Jade Rahmani with KBW.

This is Jason Sabshon on for Jade. So in your corporate presentation, you outlay a distributable EPS target of $0.26 to $0.27. Just curious, what's the target time frame for achieving that? And do you see ways to grow beyond that?

Yes. This is Paul. That's just reflective of what we've historically stated, which is we think our business can achieve a high single-digit, low double-digit ROE. And if you just simply apply that to our book value per share, that's where -- that's what generates that number. So the time frame of which is always subject to timing of when our loan portfolio closes and the generation of gains in our multicylinder business, but it's something we've historically stated. We just put some numbers to it in our presentation.

Got it. And hit on multifamily, it'd be great to hear about what you're seeing. Has the supply headwinds started to abate some? And is rent growth still muted?

Rent growth definitely still muted, although settling, the concessions offered by the landlord to achieve certain term leases in multifamily. Yes, the whole story about the Sunbelt being a little overbuilt and in particular, maybe Austin, Texas, that's true. And I think the ICE situation for a C -- Class low B, high C type properties is probably more impacted. You'll see some quick vacancy drops that I personally in my career, have never seen in a 2-week period in time.

But I think that, that will largely correct itself. And I would say rents are nearly done falling, but the expense side is still a little tricky with a lot of municipalities raising taxes. So I still think it's a bit of a dangerous business to tell you the truth because you're selling something shelter to a party that is pinched for cash generally and getting more pinched as other expenses go up. So that can become a little bit problematic. We try to avoid that not by trying to be better than anybody else.

We just try to avoid anything other than newer properties with lower leverage and sponsors who have hung in for a while. And you can really get a chance to see that now because a lot of these borrowers have just been through a very difficult period of time. So you get a forensic look at what they did during 2023 and '24 when they had some problems. We also are seeing some loans where people are going under application with us, say, for $80 million, and they're coming to the closing with $20 million cash in.

That's a refinance, cash in refi, but it feels like a purchase to me. And we really do like those things. And we also still favor new properties, especially ones coming off construction because the -- you're just watching a lease-up take place, and you've got to borrow with plenty of equity in those deals.

[Operator Instructions] Next, we'll move to Gabe Poggi with Raymond James.

So Ladder is a few quarters into kind of rotating the portfolio, right? Much higher loan origination from the securities book. And Pamela, you talked about picking up 200 basis points in that rotation. How should we think about net interest income, right, from just the loan book inflecting higher at some point on your borrowing base, right?

Because NII has been flat for the last 3 quarters as you've kind of gone through this. Is that a timing issue? Is there a point in time where that inflects higher? Just help us think about that.

I don't think there's a straight-line answer on that. I think the answer is it depends on the portfolio. So we have a couple -- as Brian said earlier, we're being very selective and picky about our assets. We're trying to originate about $400 million to $500 million a quarter. And the weighted average spread can range from 275 to 350 depending on the asset. and the lumpiness in how we've done 1 or 2 larger loans. So it really is a blend and the timing will depend on the closing.

Right now, as I said, we have about $500 million in pipeline for this coming quarter. And candidly, the spread is on the higher side of that. But if one of the loans don't pan out in diligence, it could quickly drop back into line with the average of 315 that we've been doing. So a long way of saying that I think if you want to project that, you should take about $400 million to $500 million a quarter at somewhere roughly, call it, $300 million spread.

Yes. And so I think the bottom line that you asked about on the net interest income, it should continue to rise. I don't think it will take off dramatically. But I do think we'll see our distributable earnings going up because of other things that we don't -- our dividend is not fully covered by its net interest income. We have the other barrels that we use in where we allocate capital. And I do believe those will be performing pretty nicely over the -- between now and year-end.

And you talk about a combination of both net rental income on our real estate assets, but also, as we alluded to on the call, we expect to monetize a few equity positions and then if we do a one-off conduit. So what we're really trying to remind the market is that we have these -- what people will call a one-time gain on sale and any individual gain is a one-time gain. But collectively, it adds up over the year. And Brian has long held we should be looking at Ladder as an annual year-over-year analysis rather than quarter-over-quarter because of that lumpiness.

Gabe, I want to revisit something too, that actually Ladder was out in front of when the Fed went on their hiking campaign when they raised rates 550 basis points. On one of our earnings calls, we said if rates go up by 50 or 100 basis points, here's what happens to our earnings. Today, Paul, I think, correct me if I have this wrong, but I don't know what will happen at the Fed. He's going to play it a lot closer to the vest.

But generally, I think he leans towards higher rates, but he might have jaw bone this market into higher rates without actually moving. But I do think if -- let's say, they raise rates 25 or 50 basis points, this is an advantage for Ladder because we have a large fixed rate component on our liability side that doesn't go up. So -- and Paul, how many dollars per -- what's the cents per share if we had to raise it by $0.25 and $0.50.

$0.02 per share quarterly.

And I bring that up because the SOFR was at 3.65% for a long time. I think it's at 3.70% something this morning. And it does look to be pointing higher. I don't think there's any general direction that the Fed is going to take and continue raising rates. But I do think -- I think Warsh would like to pull back one of those recent cuts, and I suspect he will. But I don't think he's going to do it in July. He doesn't have to.

It was more just -- and that was all very helpful. The real estate, the hard assets at Ladder are adding to the bottom line. I fully appreciate that as well as to Pamela's point, the other kind of gain on sales that add up over time. It was just kind of an idea from the loan book, parsing out the loan book perspective. But that commentary is helpful.

I think that unique -- not unique, but there are times when all of our products are green light. And it's unusual because they're meant to be stressed in certain environments. But right now, with the -- other than the fact that there's a volume challenge going on to finding high-quality real estate to lend on, I think all of our silos are going to be kicking in. And certainly, I think your initial question, net interest income, that should be rising.

And at this time, there are no further questions. That will conclude the question-and-answer session. I would like to turn it back over to Brian Harris for any additional or closing remarks.

Sure. Thanks, operator, and thank you for joining us today. Those of you who call in later, thanks too. But just we'll see you again soon. Things are going pretty well here. I think we've got some positive surprises that should benefit everybody, all the shareholders near term.

And we're somehow sailing along here and feel pretty comfortable where we are. The question I get asked a lot of times on interest rates, would I rather have rates up or down as a lender? I'd rather have them up because there's simply more dollars of interest being paid through the system. So I'll leave it at that and look forward to the next one.

Thank you.

And that will conclude today's call. We thank you for your participation. You may now disconnect.

Good morning, and welcome to Ladder Capital Corp.'s Earnings Call for the First Quarter of 2026. As a reminder, today's call is being recorded. This morning, Ladder released its financial results for the quarter ended March 31, 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 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 financial information presented in accordance with GAAP. These measures are reconciled to GAAP figures in our earnings supplement presentation, which is available on 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's President, Pamela McCormack.

Good morning, and thank you for joining us today. Ladder had a strong first quarter with robust origination activity and earnings growth. We generated distributable earnings of $28 million or $0.22 per share. Our near-term strategy is straightforward: grow distributable earnings and deliver attractive risk-adjusted returns to shareholders across cycles.

Since March 31, 2025, we've grown the loan portfolio by nearly 60%. Balance sheet loans now account for 46% of total assets and leverage is moving back towards 3x. The rotation is underway, and the earnings power of the company grows with every dollar deployed into the loan portfolio. That growth has come against the backdrop of elevated payoffs over the past 2 years, which were a net positive. They replaced legacy exposures with newly originated loans at attractive loan-to-value ratios on reset basis and are a key reason our book value has remained stable. With payoffs now normalizing, net portfolio growth is accelerating, and we expect that trajectory to continue. As the portfolio grows, we anticipate returns will strengthen and dividend coverage will expand with credit discipline unchanged.

First quarter deployment and early second quarter development. In the first quarter, we deployed approximately $900 million in new investments, over $620 million in new loans with a weighted average spread of 300 basis points and $264 million in securities with a weighted average yield of 5.22%. We remain focused on middle market income-producing collateral, primarily multifamily and industrial properties where we see the best risk-adjusted returns. At the same time, the recent increase in macro market volatility is creating selective opportunities in other asset classes, including office, where dislocation is allowing us to lend against high-quality credit at wider spreads without compromising our underwriting standards.

Origination momentum carried into the second quarter. Through mid-April, we've closed over $370 million in new loans. Aside from one large payoff Brian will discuss, we expect loan payoffs for the remainder of the year to be limited, supporting continued portfolio growth and revenue expansion.

Securities portfolio. Our $2.1 billion securities portfolio, representing 36% of total assets is predominantly AAA rated and will serve as the primary source of capital as our loan origination activity continues to ramp. Each dollar redeployed from securities into loans generates meaningful incremental yield, and we expect the securities portfolio to shrink as loan originations accelerate.

Book value and credit quality. Our book value has remained stable, reflecting underwriting quality and credit discipline. Our loans are originated at conservative loan-to-value ratios against income-producing collateral, and we actively manage positions to protect principal across cycles. We don't stretch on credit and our balance sheet is positioned for growth, not repair.

Real estate portfolio. Our $1 billion real estate portfolio generated $15.9 million of net operating income in the first quarter, and we continue to see opportunities to unlock value above our cost basis in select assets.

Capital structure and liquidity. We ended the quarter with adjusted leverage at a modest 2.3x. In the first quarter, we secured $675 million in new unsecured capital commitments. And with over $1 billion in undrawn capacity, we have significant liquidity to fund our growing pipeline. Paul will walk through the details.

In closing, we are executing our plan, deploying capital into newly originated loans and growing distributable earnings from a position of strength, modest leverage, full access to the investment-grade capital markets and the credit discipline that has always defined Ladder. Management and the Board remain Ladder's largest shareholder group. We are fully aligned on growing earnings, supporting the dividend and creating long-term value, and we are well positioned to capitalize on opportunities amid ongoing geopolitical uncertainty.

With that, I'll turn the call over to Paul.

Good morning, and thank you, Pamela. During the first quarter, Ladder generated distributable earnings of $28 million or $0.22 per share. As Pamela discussed, in the first quarter, Ladder raised $675 million in new unsecured capital commitments. First, securing a $400 million full accordion expansion of our unsecured revolving credit facility to $1.25 billion, adding 3 new banks to our syndicate. And second, securing a new unsecured delayed draw term loan facility of $275 million with an accordion feature for a total capacity of up to $500 million. Our expanded use of unsecured capital provides Ladder further financial flexibility with access to same-day capital at attractive cost.

The $275 million term loan is priced at 140 basis points over SOFR, which steps down upon credit rating upgrades and maintains a February 2030 fully extended maturity. We anticipate fully drawing on the term loan in the second quarter to fund loan origination. In the first quarter, we were pleased to receive an upgrade to our credit rating by S&P to BB+ just one notch below the investment-grade ratings we benefit from with Moody's and Fitch. We are hopeful that the ratings momentum with S&P continues as we deploy our capital prudently and further demonstrate our access to the broader investment-grade capital markets.

As of quarter end, our adjusted leverage ratio was 2.3x as we continue to expand our balance sheet. We maintained robust liquidity of $1.1 billion, including same-day capacity on our unsecured revolver and undrawn term loan. Our unencumbered asset pool represented 73% of total assets as of March 31, of which 85% was comprised of first mortgage loans, investment-grade securities and unrestricted cash and cash equivalents, providing significant balance sheet flexibility. As of March 31, Ladder's undepreciated book value per share was $13.42, which is net of $0.37 per share of CECL reserve we established.

In the first quarter, we repurchased $13.4 million of common stock or 1.3 million shares at a weighted average share price of $10.15. As of March 31, $77 million remained outstanding on Ladder's stock repurchase program. Subsequent to quarter end in April, Ladder's Board of Directors approved an increase to Ladder share buyback authorization back to $100 million. In the first quarter, Ladder declared a $0.23 per share dividend, which was paid on April 15, 2026. As our loan portfolio continues to scale and net interest income grows, we endeavor to expand dividend coverage, positioning us for potential dividend growth as we approach full deployment.

Turning to credit quality. In the first quarter, we added no new nonaccrual loans, had just one $51 million loan on nonaccrual status. During the quarter, we resolved 3 nonaccrual loans through foreclosure. The first, a loan with a $62 million carrying value collateralized by a 3-property 158-unit multifamily portfolio in the East Harlem neighborhood of New York City, built between 2017 and 2020 that is currently 88% occupied. The second, a loan with a $12 million carrying value collateralized by a 150-room Marriott Courtyard Hotel in Canton, Ohio, where we successfully extended an existing Marriott franchise agreement by 15 years to a new 17-year term contemporaneous with foreclosure. And third, a loan with a $6 million carrying value collateralized by an office property in Portland, Oregon with a basis of $85 per square foot. Our plan is to continue to stabilize these assets and maximize value for potential sale in the future.

As of March 31, our CECL reserve remained steady at $47 million or $0.37 per share. Taking into consideration the current state of our loan portfolio and the macroeconomic backdrop in the U.S., including the impact of ongoing geopolitical uncertainty, we believe this reserve level is sufficient to cover potential loan losses.

As of March 31, our securities portfolio totaled $2.1 billion with a weighted average yield of 5.3%. Notably, 99% of the portfolio was investment grade and 96% was AAA rated, underscoring its high credit quality. As of quarter end, approximately 50% or $1 billion of our securities portfolio remained unencumbered, complementing our $1.1 billion of same-day liquidity. This combined firepower reinforces the strength of our balance sheet and positions Ladder to organically fund loan origination that will drive future earnings growth.

Our $1 billion Real Estate segment continues to generate stable net operating income. The portfolio includes 149 net lease properties comprised of primarily investment-grade credits committed to long-term leases with an average remaining lease term of 6.5 years. For further details on our first quarter 2026 operating results, please refer to our earnings supplement presentation available on our website and our quarterly report on Form 10-Q, which we expect to file in the coming days.

With that, I will turn the call over to Brian.

Thanks, Paul. After a concerted effort to establish a safe and durable liability complex on which to build our growing asset base, our efforts are now paying off. While the first quarter seemed a lot longer than most, given daily volatility caused by numerous global geopolitical headlines, Ladder fared nicely with our conservative investing strategy and was able to add to our high-quality asset base at lower prices than we've seen in a while. Our asset base has increased by a net 25% or over $1 billion year-over-year, and we expect this upward trajectory to continue as we execute our differentiated business plan, funding our investments using primarily unsecured debt and lower leverage.

Loan origination volume has been good, totaling $1.9 billion over the last 10 months, if we include just the first few weeks of April. We consider this pace of production to be just what we're looking for. I would caution against too much straight-line extrapolation because these production numbers tend to swing up or down from one quarter to the next. In the fourth quarter of 2025 earnings call, we mentioned that a $200-plus million loan fell out of our pipeline during due diligence. And in this quarter, we received a full payoff of our largest office loan just last week for $215 million. On the day after that payoff, we closed on a new first mortgage loan for approximately $275 million related to the acquisition of an office and retail complex on Fifth Avenue in Manhattan at 66% loan to cost. None of those events were coordinated to happen anywhere close to each other on the calendar. In short, it's best to look at our loan origination year-over-year rather than quarter-over-quarter.

With our growing asset base, our net interest income is also rising and is positive versus last quarter with no credit deterioration observed, maintaining our stable book value. Our first quarter originations were our highest quarterly volume in years. We recently indicated that we would fund loan growth by drawing on our unsecured revolver and the sale and payoff of securities. When 2026 began, markets were calm, accompanied by the usual credit spread tightening we've witnessed to start the year in years past. We sold $152 million of securities at a weighted average spread of 131 basis points. We also received payoffs of $125 million of those securities during the quarter. However, as we moved into March, volatility roiled markets and spreads widened. So we then acquired $264 million of securities at an average spread of 149 basis points so that if levered, the ROE would exceed 14%.

This pivot into higher quality assets and higher liquidity is part of the Ladder playbook when fear's in the markets as our flexible product mix allows us to pivot our capital allocation to the best risk-adjusted returns we can find at the time. We also found value in repurchasing our stock at an accretive discount to book value when the price fell in tandem with overall market indices as investor concerns around a war in the Middle East, energy supply disruption and some apparent cracks in private capital gripped markets. We believe the only item on that list that might impact our U.S.-based operation is the spike in the cost of energy. So we acted to buy back our shares at an accretive discount to undepreciated book value.

In the months ahead, assuming market volatility subsides, we expect to fully draw our $275 million term loan in the second quarter and coupled with proceeds from additional payoffs and further sales of securities and the use of our unsecured revolving line of credit, we will continue to grow our asset base and earnings using only modest leverage. As we said last quarter, we are now firmly on offense, and we plan to stay that way as conditions permit for the remainder of the year. Our business plan is evolving nicely with our pace of investment across several product types all increasing. We believe our asset base, along with our earnings, should stay on a positive trajectory in the quarters ahead. We can take some questions now.

[Operator Instructions] And the first question comes from the line of Jade Rahmani with KBW.

When do you expect the distributable earnings of the company to exceed the dividend?

Next quarter.

Okay. Do you have a target in mind for the loan portfolio size?

Not particularly, although we do expect things to roll out of securities and into loans. We won't force the issue depending on what's going on with spreads in the markets and what we're seeing. But ideally, we'll ultimately wind up with no securities and all of this -- the $1 billion of unencumbered securities will turn into a loan portfolio and it will take a 5.3% average yield up to something in the near 7% area.

Lastly, on the net lease portfolio, could you give an update as to what your plans are there? Do you aim to grow it? And what's the weighted average lease duration?

I think the weighted average lease duration was given at 6.3 years in this call, but I'll verify that if anybody else has it. But the game plan is we'll sell those occasionally into the 1031 market. The 1031 market does better when stock markets are high because people are protecting gains. But the -- we will grow that portfolio as conditions warrant it, but we believe that business is primarily driven by financing costs. And while we'll be able to find plenty of things to buy, but we've never been overly aggressive. We tend to buy -- even when we want to buy a credit like Dollar General, for instance, we still only buy 1 out of every 3 or 4 that we look at. So there's no act to grow it. I know a lot of our competitors are looking to grow that business. It's a very nice passive income stream generally, but I think it has to be handled accordingly. And right now, cap rates are quite wide, and that's attractive. But if financing rates are high enough that they -- it becomes a less than acceptable return at this point. But if the curve steepens and the Fed starts cutting rates, that all becomes very much more interesting. But it's hard to build a business around it completely, but I do believe it should be one of the verticals that we're involved with.

And the next question comes from the line of Timothy D'Agostino with B. Riley Securities.

I guess we're only about 4 months into 2026, but could you maybe provide some more color kind of on the 2026 vintage you're seeing right now compared to years past? Is it more attractive? Just getting a better sense of the loans you're writing today and how they compare to loans that were written in '25, '24 and '23.

Sure. I think it's an interesting bifurcation taking place. We're starting to see some real pricing visibility. So you are seeing, I'll call it, capitulation and that some lenders are just saying, get me out and you're seeing a refinance take place at discounted levels. But if you separate the world into acquisitions and refinances, I would tell you that the refinance world is pretty messy. There is a lot of overleveraged inventory in the markets, and you have to be very careful. It doesn't mean it's all bad, but there are clearly -- if you took out a lot of loans through acquisitions in 2021 and '22, those are coming due now. And so as a result of that, that is a bit of a red flag when you're refinancing in 2021 or '22, obviously, not in all cases, but sometimes.

On the other hand, the acquisition side of the business, the entire market has been reset primarily. Certainly, the office market has been drastically reset. We're starting to see apartments that people are disposing of assets at lower prices than they purchased them at in 2021 and '22. So those are -- the acquisition world, we like very much. It's very attractive. The refinance world, I think it is a flea market, and there's a lot of junk on those tables, but there's also a few antiques that we look to get ourselves involved with.

If you take a look at the conduit market, the 5- and 10-year business of commercial real estate, it's a rather small market still. You see a lot of deals where there's 5, 6, 7 originators indicating that there's not a lot of business getting done there. But also that is largely a refinance market. And you have to be a little cautious around refinance markets because you basically -- nothing is changing hands. You're pretty much paying an appraiser to come up with a level. And I'm not really sure how they can do that right now. However, when somebody is acquiring a property, you know exactly what the price is at that point, and there's no guessing involved. So we try to keep -- stick to the acquisition side of the world, not exclusively, but generally. And -- we also try to stick to newer properties that have been built recently because we think a lot of the dangerous inventory that's coming up for refinance really has a lot to do with Class B and C properties that were being posted for higher rents and rehabilitation and CapEx dollars. We do think that there's a good amount of brand-new apartment complex assets out there that we tend to try to focus on through the acquisition world.

Okay. Great. That's really helpful color. And then I guess just to clarify, it seems like you're being more opportunistic or selective in the refinance space. Is that correct?

Yes, I would say so. I mean some of them are straight down the middle. The guy bought an empty building and signed a lease and now it's full, but that is few and far between. So I think the refinance market, as I said, has a few danger points to it. However, like we are seeing some really good opportunities there. I know -- I think it was the second quarter, maybe it was the first quarter, but we had a bank approach one of our sponsors and ask them to refinance the loan that the bank was carrying. The loan was current. And the bank was taking a $20 million loss to get refinanced, and it still didn't underwrite at the $20 million discount to the bank loan. And then the sponsor wrote a rather large check also, and then we wrote a new senior that is way below where the bank's loan amount was. And interestingly enough, the loan was not in default. So those are situations that you have to look at these structures and really see where money is coming from. And in much of the refinance world that we're seeing, especially in the office side, there is capital tension somewhere. And it may be the seller, it may be the lender, it may be the buyer. You never know where it is, but you have to go find it and try to exploit that opportunity. And we're seeing more of that, I think, in banks that are disposing of inventory of loans that have been under some level of distress for years and also, in particular, in the office market.

And the next question comes from the line of Chris Muller with Citizens.

So nice to see the $80 million of loan resolutions through foreclosure, but I don't see any realized losses or write-offs in the quarter. Does that mean that your attachment point on these assets was equal to the fair value marks?

We're comfortable with it, yes. And we have taken some initial write-downs here and there when we foreclose on a property. But because as Pamela has echoed numerous times in prior quarters, we concern ourselves with basis all the time. And oftentimes, we can see some loans that where the borrower owns the property, it's going to be pretty difficult for him to come out of that with an equity return. But oftentimes, when we get the property at the basis we've got and the equity is wiped out, we're pretty comfortable with real estate, not just lending. So we go to work leasing it. And so far, we're having a lot of success there. And so some of the assets that we're foreclosing on, I would anticipate we'll probably hang on to for a very long time inside this REIT because they're doing quite well.

Got it. And I think that would be favorable to you guys. Sorry...

Chris, I was just going to say in the fourth quarter, one of the loans we foreclosed on this quarter, we did have a write-off that we took in the fourth quarter, the office loan in Portland.

Got it. So that was the $5 million in the fourth quarter. And I think that does speak highly to your guys' underwriting there. You guys do a really good job with that. I guess my other question is, I see the small conduit deal on Slide 7, but I hear Brian's comments about the conduit market. Are you guys seeing any signs of that business starting to pick back up? Or is it just still too volatile rate environment for that business to really work as we sit today?

The business is picking up, but it still has a lot of headwinds. The curve, every time we think it's going to steepen, it doesn't. We'll see what's going to win here, higher rates or lower rates after Warsh gets in the seat, I'm assuming he will. But -- so that business works best in a steep yield curve. We don't have one right now. It's not inverted, but it's not terribly steep either. And in addition to that, I think the refinance -- if you look at the actual number of loans in the conduit business, most of them are refinanced, I believe. That's a bit of a guess. I haven't done homework there, but I'm pretty sure. But -- and if you're dealing with the refinance vertical in the mortgage space, you're definitionally dealing with loans from 2021 and '22 that are trying to get refinanced. So the short story is to put it plainly, there's a lot of c*** out there. So we'll continue sifting through it, and it will get better as '21 and '22 passes and we get into loans that were made in '23 and '24, I think that business will -- the inventory will upgrade, and we'll see where interest rates are. But we are getting ready and are ready to be involved in that business in a big way if we get the right conditions, and we're hopeful, but it's not right away. It's going to -- it will come.

Do you think that flushes through by the back half of the year? Or is that more a 2027 type event?

Probably '27 event.

And the next question comes from the line of [ John Nicodemus ] with BTIG.

I wanted to ask about office exposure. I know that this dropped at least in your loan book by the end of the quarter and then obviously, you had the Miami repayment. But I know you also did selectively invest in the space in 2025. And then, Brian, you mentioned that office and retail complex that you invested in after the Miami repayment as well. So just curious about your thoughts on that sector sort of as we look into the rest of '26.

Sure. We have been peppered with questions rightfully so over the last few years about office exposure. And we have oftentimes said we don't really manage against a certain number or concentration or percentage. We manage against risk. And while we wrote a loan for over $200 million in Miami in 2021, I believe, that is in the vintage where you probably didn't want to have a lot of exposure, but we were always pretty comfortable with it because Miami did quite well during the pandemic and after that. And so we weren't overly worried about it, and that loan paid off. So the office sector, we think, creates great danger and great opportunity. So you mentioned that we made an investment in an office building a couple of years ago. Interestingly enough that you time that question because last night, the last thing I did was check my e-mail, and I got an e-mail from our finance department telling me that our entire equity check that we wrote on a building in Manhattan on Third Avenue, we were in the partnership on the equity. We did not write the loan. The loan refinanced less than 2 years after being acquired for about $185 million. I haven't got the details on it, but I think the property must have appraised between $350 million and $400 million just 2 years later. That is not a fluke. The occupancy in that building went from 50% to 95%. Our partner did a great job leasing it up. So that was an equity investment that we now have the equivalent of an infinite return because all of our equity has been returned, and we still own a small percentage. It's not a -- we don't own most of the building, but it's a very healthy asset, and we expect to hang on to it for a long time.

So those things, they occur. And then the last thing you mentioned there was a building, it's in the press now, 575 Fifth Avenue. We wrote over $250 million loan on that. It's an acquisition. The property was purchased at a price where the seller had purchased it in 2005. And in addition to that, there were some refinances that took place at pretty astronomical numbers, too. So we like the basis there. We really like the quality and the asset location on Fifth Avenue and 46th and 47th Street. It is part retail and part office. And it's pretty leased. It's not one of the empty buildings out there. This is -- there's not a lot of rollover going on. There are a lot of below-market rents in the building. So we like the loan in that case, maybe better than the equity, although we did make a small investment in the equity partnership also.

[Operator Instructions] The next question comes from the line of Gabe Poggi with Raymond James.

First question is, can you guys talk about kind of the timing of loan closings during the quarter? It looked like based on the significant volume in 1Q that some of the loan closings may have been back-end weighted. I apologize if you already mentioned this, but curious as to kind of the timing of loan closings for 1Q. And then, Brian, I think I ask you this every quarter, so sorry for being a broken record. But any commentary on bank activity, right, with less regulation, et cetera, are you seeing any regional banks, smaller community banks, et cetera, in and around the hoop as from a competitive perspective, you had mentioned that they're actually selling some assets. Just curious as to your commentary in that regard.

Sure. If anybody on this call at Ladder knows the back-ended nature of origination this quarter, please put your hand up and I'll name you. But I don't think it was as particularly back-ended as it had been in the prior quarter. I think as we went into -- that happens all the time at the end of the year because people for tax reasons, start getting very serious about closings. So in the first quarter, we had -- I think we had $250 million in the first 3 weeks of the first quarter. And we came out, I think, at $630 million all in. And then we supplemented that further with another $350 million in the first 3 weeks of this quarter. So it's been a very strong 7 months, I would say, and we really like what we're seeing. Some of the loans are a little bit bigger than usual, but we're very comfortable with them. And so I don't want to draw any conclusions about when things closed. But it's a very high-quality portfolio. Most of the assets are really, really nice. And it isn't a whole lot of turnaround stuff going on. So these results are usually either quick or quite apparent as to when they're going to happen.

So -- and then I think to address your other question, the banks are returning without a doubt. We are definitely losing some smaller loans where I'll get an e-mail from an originator that says this is going bank. That's a bit of a broken record we're beginning to see. But that tends to be on loans that are under $20 million. We happen to like that part of the market, but we've never chased it, and we encourage our originators that if a broker tells them we're competing with a bank and an insurance company, just go to the next loan. We -- if they want to have it, they can. They've got a different cost of funds and a different business model. And there is no shortage of inventory out there. So we don't really need to start chasing price. We still view capital as very in charge in these markets. A lot of previously aggressive lenders are, as Pamela said, we're built for growth, not repair. And I think our credit acumen is really coming through here. And the last thing we want to do is s**** that up.

But -- so we have to pass on a lot, especially in the refinance channels. As I said in the last call, we've learned our lesson a bit on refinancing one of our competitors bridge to bridge because they know more about it than we do. And very happy with the way things are going right now. I think that the banks, while they're going to take their fair share, there just aren't enough of them. And the banking lending apparatus in the United States is drastically smaller than it was before 2008. So we're comfortable with the competitive set. We like that they're out there. Oddly enough, where we are seeing a lot of business is from the banks where banks that have construction loans, they finish a brand-new apartment complex and it's in lease-up, and they don't hang on to those. They want the construction loan to be paid off. So we're pretty comfortable putting loans like that under application where we get to see the leasing for the next couple of months before we close. And it's a very high-quality asset that cannot give you a lot of operational surprises because it's brand new. So you don't have a big CapEx budget. And that's why I say the inventory in times like this, you really want to stick to the high end of quality. And almost everything we're doing now is new-ish like -- but certainly not unless they're just in parts of the city or somewhere that are very old. But most of these apartment loans that we're writing are very new vintage with new -- the apartment complexes have gotten better with a lot of the WiFi and the technology that goes into these smart apartments. So very comfortable there.

And so the banks are competing, but they're not competing at the higher loan sizes. That doesn't mean we're targeting higher loan sizes. We just think there's a theme because if you have a $450 million loan, you can go to JPMorgan or Wells Fargo and they will explain to you where AAAs trade and they'll take your loan to market, and you can accept it or not, but they don't usually take the risk of that. At $100 million, it's too small for a single asset securitization with those names, and it's too big for a typical loan. So we really do like this $60 million, $125 million area, but we're not targeting it, but we're paying attention to it, and we do see a lot of value there.

That's super helpful. I appreciate all that commentary. I got a quick follow-up. Because Ladder has got a multi-strat and opportunistic tilt, right, is there anything to do in -- potentially in multifamily equity as you just -- particularly in the Sunbelt as you just kind of have those relations as a big multifamily lender. Is that something you look at? I know there's a ton of capital out there chasing multifamily, but just curious what Ladder's view on a potential opportunity maybe in that construct as just another kind of business sliver or business silo, so to speak.

Yes. We like that idea. As you said, there is a lot of capital chasing those things. And sometimes when we'll explore something like a loan will come in, a guy is buying a complex and he wants a 70% loan to cost. If we really like it, we might show them at 85% and take away part of his concern about going out and raising equity, where we'll take an equity kicker in the deal. That's probably a bit of a new term, but we've done it a few times, but not recently. I would love to do more of that, but the equity capital that's out there is still nudging us. We're not pricing it where they are. So where we would put a stretch-senior, the mezz component of that loan is we're pricing it wider than equity is pricing on multifamily right now.

However, we do see some things that are sort of interesting. As we mentioned, we foreclosed on a 3 building complex in East Harlem, these are practically brand-new buildings, new construction, luxury, garage in one of them, grocery store on the first floor. And the equity got a little soft because it got a little over its skis on cost. And so as you know, the bane of equity investing in construction is time. If you don't get it done on time, don't care how good you are, you're probably not going to pull it off. So the equity got flushed and there was a mezzanine in that portfolio also that for the life of me, I don't know why that mezzanine did not protect itself, but it didn't. And so we foreclosed on it, and we love our basis there. I think the address of the big one is 2211 Third Avenue, if you want to go look at it. We plan on owning that for a long time. In fact, I believe we're in discussions talking to Fannie Mae and Freddie Mac about possibly financing some of that.

So we'd like to buy some things. We do see some things in Austin. Austin is a market we like that is overbuilt, and there are some losses being taken from equity investors from 2021 and '22. We have not hit it yet, though. So -- but that is the market we're looking at. The Sunbelt rents are falling in a lot of these markets. They're not falling drastically, and I don't expect them to continue. But -- and I also believe that a lot of these apartments will benefit from No Tax on Tips as well as Social Security. Those are meaningful upticks in income to the people that live in these kind of units. So short story, send us some if you have some, we'd love to buy them, but we're not really seeing too many. We have not dipped down into the Class C stuff, and B, we believe that those markets and especially in the Sunbelt are plagued by ICE raids and general pressure on lower income demographics. So a little bit too dicey still for us, but the higher-end stuff, we're very interested in acquiring.

And the next question comes from the line of Logan Epstein with Wolfe Research.

Just wanted to hit one you touched on in the prepared remarks. Just curious if you could expand on whether or not you're seeing the macro uncertainty and volatility causing any borrower appetite to change at all?

Tough question. I mean borrower appetite is -- it always changes. They live in a world where they think rates are going down. And rates have not been going down, especially since the oil shock has sent through an inflation shock, which has sent through a question about the deficit, which is now forcing rates higher. I think the 10-year is around 4.30% right now. So the appetite is driven by the rates available in the market. And if you take a look at what the actual interest rate was on a loan in 2021 versus today, even though today's rates are by historic standards, not terribly high, they are way higher than they were in 2021 and '22.

And so yes, they react pretty quickly. It's a very -- it's a price-sensitive business unless you have a maturity date staring you down. So we have seen -- and I also think, too, when you have something like U.S. and Israel attacks Iran one night and you wake up, and I call it the TV moment because it's funny because all the traders go to work really early. They start sending out e-mails about what's going on. Volatility is up, the VIX is here, stock market is down. But the reality is you don't do anything on those days. You just kind of watch TV. And so I do believe that we will see an air pocket here, probably about 60 or 90 days out from when that all started because I think people just generally stopped doing business in a lot of places. And -- but I think it had more to do with just general levels of anxiety as a result of those events taking place. And so the long answer is it's interrupted here and there when you -- if you really want to know when it gets interrupted, just follow the VIX. When you see the VIX around '24, '25, that's pretty volatile manic markets and not a lot is getting when that's going on because you got lenders putting things on hold, telling them we're subject, we have to wait to close. Credit committees don't meet because they're dealing with other things. So high volatility as measured by the VIX is usually the best indicator I have. And I think if you look at the securitization world, you'll see less securitization. But then it should pick right up once the volatility goes away.

Maybe as a follow-up to that, have you seen spreads? You touched on in the opening remarks that you're seeing some opportunity potentially in office given the volatility. Are you seeing spreads, whether in office or multi-industrial really changing on what you guys are underwriting over the last, say, 60 days?

Yes, I would say so. The office is a little bit more accepted in securitizations now. So I sometimes say the defroster went on. I always thought the office sector had more of a capital markets problem than a real estate problem because there was a time where like I couldn't write a loan, right? No one wants an office loan ever again for the rest of our lives. And that just wouldn't pan out that way. So are we seeing -- I think if you see a refinance of an office loan that's rather large and the dollars per foot are pretty high, yes, those are pretty much great opportunities because a loss is being taken and the basis is being reset. However, you still have to go lease an office building and it costs money to acquire tenants. But we do believe that there is a slice of the office sector, especially in the high-quality portion where if you've got a building in the hands of an owner that has capital and is not going to lose it and is going to pay for things that need to be done as opposed to having a lender dictate payments that are going out to repair things. That's a great opportunity, and we hope to continue to exploit that. But I don't want to open the floodgates on the office market. It does have some challenges without a doubt, especially older properties. But when you see a lender and the sponsor both taking a $10 million or $20 million loss to hang on to a property, that's usually a pretty good place to invest. So we see it there.

We don't see it really in apartments. That's not nearly as stressed out. And I think a lot of the -- as I say, the pig going through the python in the office sector, it's getting there. It's not quite done. But I think all of the headlines that you saw when Signature Bank got in trouble and Silicon Valley Bank, you heard about how every bank in the world was going to be dead. That never happened, nor did I ever think that was going to happen. And I think with -- there was a bit of hoarding that went on in the labor markets, and that kept some buildings full. And now you're seeing AI replace some jobs. So you do have to deal with the vectors that push down on value, but there is plenty of just reset value out there where you can't possibly build a building for less. And a long one [indiscernible] of which we invest in is on Third Avenue, many of the office buildings on Third Avenue are converting to residential. So these are going to become like Battery Park City over there.

And then just off Third Avenue over near Park, JPMorgan and Citadel are seemingly buying every square foot of space available. So tenants are hunting for space. So these all add up to good micro dynamics where you've got 50% occupied buildings turning into residential complexes and those tenants that are in those buildings need a place to go. And so we're picking them up from other buildings that are having difficulties and also Park Avenue because the Plaza District is just shut. And whereas Class A buildings were leasing up briskly, you're seeing rates in Manhattan, the rental rates are astronomical in the Plaza District. You're now beginning to see the B products filling up because there's just no room left on A.

Ladies and gentlemen, thank you. That now concludes our question-and-answer session. I would like to turn the floor back over to Brian Harris for any closing comments.

Only closing comments I have for you is thank you for your patience as investors with our deployment strategy. We still think it's the right one, and you're really beginning to see it pick up. As I said plainly, we are on offense. We are not dealing with a lot of problems. And we expect this to continue, and you'll see our earnings power become apparent for -- we suspect over the remainder of the year. Obviously, geopolitical events exist, and we have to be a little careful there. But what I particularly am gratified by right now is we're seeing contributions from all of our products into our distributable earnings, and we hope to continue that. So thank you for listening to us today, and we'll catch you on the next one.

Ladies and gentlemen, thank you for your participation. That does conclude today's teleconference. Please disconnect your lines, and have a wonderful day.

Good morning, and welcome to Ladder Capital Corp.'s Earnings Call for the Fourth Quarter of 2025. As a reminder, today's call is being recorded. This morning, Ladder released its financial results for the quarter and year ended December 31, 2025. 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 will discuss certain non-GAAP financial measures on this call, which management believes are relevant to the assessing of 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's President, Pamela McCormack.

Good morning, and thank you for joining us today. I'm pleased to report Ladder Capital's fourth quarter and year-end results for 2025. This past year marked a significant milestone for our company. We became the only investment-grade rated commercial mortgage REIT, underscoring our strong balance sheet management and conservative approach to leverage. Our robust positioning enables us to enter 2026 with a dedicated focus on driving earnings growth. Earnings and financial strength. During the fourth quarter, Ladder generated distributable earnings of $21.4 million or $0.17 per share. Adjusting for a $5 million realized loan loss that had previously been reserved for, the fourth quarter earnings were $26.4 million or $0.21 per share.

For the full year, Ladder generated distributable earnings of $109.9 million, delivering a 7.1% return on equity. With adjusted leverage at a modest 2.0x, stable book value and robust liquidity, these results reflect a solid -- year of solid performance and financial strength. positioning for long-term growth. Achieving investment-grade status in 2025 with ratings from Moody's and Fitch significantly enhanced Ladder's access to deeper and more stable capital markets. This achievement lowered our cost of funds and strengthened our liquidity profile. Building on this momentum, we are pleased to see S&P upgrade Ladder to BB+ just [indiscernible] grade. Our $850 million unsecured revolving credit facility remains a cornerstone of our funding strategy, complementing our unsecured bond issuances by providing same-day liquidity at a highly competitive rate.

This facility includes an accordion feature that allows for expansion up to $1.25 billion. We are pleased to share that we recently secured $400 million of additional commitments to exercise the accordion with closing anticipated later in the quarter. Together, these funding sources enable Ladder to maintain a predominantly unsecured capital structure, operating independently of repo or CLO markets and position us to capitalize on future opportunities with confidence. Investment and loan portfolio activity. In 2025, we originated $1.4 billion in new loans, our highest annual volume since 2021. The second half of the year was particularly strong with nearly $950 million in new loan originations, representing our best 2-quarter performance in over 3 years. During the fourth quarter alone, we made over $870 million in new investments, including over $400 million in securities, a $25.8 million equity investment and more than $430 million in new loans at a weighted average spread of 340 basis points.

At year-end, our loan portfolio totaled $2.2 billion, representing 42% of total assets. Our investment strategy remains focused on stable income-producing collateral, primarily multifamily and industrial properties with no drift on credit quality. Notably, office loan exposure declined from 14% to 11% of total assets by year-end. While we have reduced overall office exposure, we've selectively pursued new investments as capital returns to the sector. In 2025, we made 3 new loans totaling $68 million collateralized by recently acquired office properties. Additionally, and as previously mentioned, we made a $25.8 million investment for a 20% noncontrolling interest alongside a strong operating partner to acquire a 667,000 square foot Manhattan office property located just less than 1 block away from Grand Central Terminal.

Momentum has carried into 2026 as acquisition activity improved in the commercial real estate market. We've already closed over $250 million in new loans with more than $450 million under application and in closing. Securities portfolio. During the fourth quarter, we acquired $413 million of primarily AAA-rated commercial real estate securities. As of year-end, the securities portfolio totaled $2.1 billion, representing 39% of total assets. Real estate portfolio. Our $966 million real estate portfolio delivered consistent performance in 2025, generating $14.8 million of net operating income in the fourth quarter and $57.3 million for the full year. This steady income was supported by active leasing and proactive asset management, which improved both occupancy and overall portfolio stability throughout the year.

Capital structure and liquidity. In 2025, we issued our inaugural $500 million investment-grade unsecured bond at a fixed rate of 5.5% with pricing tightening from 200 basis points over treasuries to 167 basis points at issuance. Since then, our bonds have tightened by over 60 basis points to approximately 100 basis points over treasuries, outpacing comparably rated equity REIT bonds by nearly 2x and distinguishing us from higher leverage mortgage REITs and property REITs with first loss exposure. Historically, commercial mortgage REITs face skepticism from bondholders and shareholders of traditional equity REITs due to concerns over leverage composition, external management and limited insider ownership. Ladder stands apart.

We offer a differentiated investment proposition, an investment-grade internally managed company with management and the Board owning over 11% of the public company, a portfolio comprised of senior secured assets and a capital structure anchored by unsecured debt with conservative leverage of 2 to 3x. As of year-end, 71% of our debt was unsecured and 81% of our assets were unencumbered. We maintained $608 million in liquidity, including $570 million of undrawn capacity on our unsecured revolver. Having now converted traditional equity REIT bondholders, we believe we offer a meaningful alternative to traditional equity REIT shareholders as well by providing a clear and compelling value proposition for investors seeking stability, alignment and attractive risk-adjusted returns. Building on our momentum, our focus now shifts to loan origination and earnings growth as the primary catalyst driving our story forward.

With this stronger narrative, we aim to attract high-quality equity REIT shareholders, aligning our valuation with equity REIT peers to further reduce our cost of capital. In closing, 2025 was a landmark year for Ladder. We achieved investment-grade ratings, enhanced our capital structure and delivered consistent performance across our portfolio. In 2026, we plan to drive growth by increasing loan originations to enhance returns, support dividend growth and create shareholder value, all while maintaining the balance sheet discipline that defines Ladder. Thank you to our investors for your continued support and to our team for their dedication throughout this transformative year. With that, I'll turn the call over to Paul.

Good morning, and thank you, Pamela. Expanding on the topics Pamela highlighted, I'll be providing additional detail on our operating performance and strategic positioning as 2026 begins. During the fourth quarter, Ladder generated distributable earnings of $21.4 million or $0.17 per share. Excluding a realized loan loss previously reserved for, our fourth quarter earnings were $0.21 per share. In 2025, we achieved our long-standing goal of attaining investment-grade credit ratings as Moody's upgraded ladder to Baa3 and Fitch to BBB- with S&P upgrading ladder to BB+ in January, subsequent to year-end. Ladder is now the only investment-grade rated mortgage REIT, a distinction that underscores our disciplined approach to balance sheet and credit management, prudent leverage and the durability of our diversified commercial real estate platform.

These ratings enhance our access to investment-grade capital at tighter spreads, validate our commitment to the use of unsecured debt to finance our balance sheet and overall further solidify Ladder's industry leadership. In July of 2025, we issued $500 million of senior unsecured notes maturing in 2030 at a 5.5% coupon, representing a 167 basis point spread over the benchmark treasury. This transaction was oversubscribed by more than 5.5x with orders exceeding $3.5 billion, executing at the tightest spread in Ladder's history. This transaction firmly established Ladder in the investment-grade bond market, expanding our access to a deeper, more stable pool of capital. As Pamela mentioned, but it's worth repeating, the bond has continued to perform well in the secondary market, trading as tight as 100 basis points over treasury since closing.

As of year-end, our adjusted leverage ratio was 2.0x, and we maintained a robust liquidity of $608 million, including $570 million of revolver capacity. Our unencumbered asset pool represented 81% of total assets as of December 31, 2025, of which 87% was comprised of first mortgage loans, investment-grade securities and unrestricted cash and cash equivalents, providing a significant balance sheet flexibility. As of December 31, 2025, Ladder's undepreciated book value per share was $13.69, which is net of $0.37 per share of CECL reserve established. In the fourth quarter of 2025, we repurchased $928,000 of common stock or 88,000 shares at a weighted average share price of $10.57. And in total in 2025, we repurchased $10.2 million of common stock or 965,000 shares at a weighted average share price of $10.60.

As of December 31, 2025, $90.6 million remains outstanding on Ladder's stock repurchase program. In the fourth quarter, Ladder declared a $0.23 per share dividend, which was paid on January 15, 2026. For the full year, we achieved 96% dividend coverage, excluding the loan write-off, while simultaneously allowing our loan portfolio to grow following a record year of paydowns in 2024. Our dividend remains stable, reflecting the strength of our balance sheet and our ability to grow earnings as our asset base transitions into newly originated loans and reaches full capacity.

Furthermore, as our investment-grade story continues to gain traction, we see potential for our dividend yield to tighten relative to other investment-grade REITs with comparable credit ratings, further underscoring the value of our differentiated model. Building on Pamela's overview of our performance, I will highlight a few additional insights into how each of our segments fared for the fourth quarter. As of December 31, 2025, our loan portfolio totaled $2.2 billion with a weighted average yield of 7.8%. As of year-end, 4 loans totaling $129.7 million or 2.5% of total assets were on nonaccrual, including one loan added in the fourth quarter, collateralized by an office property in Portland, Oregon, the Weatherly building.

The loan has a carrying value of $5.8 million or $88 per square foot, which is net of a $5 million loan loss reserve realized in the fourth quarter. Subsequent to year-end, we resolved one nonaccrual loan with a $61 million carrying value through foreclosure. The loan is collateralized by a 3-property 158-unit multifamily portfolio in the Harlem neighborhood of New York City with 60 parking spaces and built between 2017 and 2020. The properties are currently 87% occupied and generate healthy net operating income. Our CECL reserve otherwise remained steady at $47 million or $0.37 per share. Taking into consideration the continued ongoing macroeconomic shifts in the U.S. and global economy, we believe this reserve level is sufficient to cover any potential losses in our loan portfolio. Ladder CECL reserve level has been and we believe will continue to be the result of a disciplined approach to credit risk management, allowing us to remain well positioned to navigate market challenges while protecting shareholder value.

As of December 31, 2025, our securities portfolio totaled $2.1 billion with a weighted average yield of 5.3% Notably, 99% of the portfolio was investment-grade rated and 97% was AAA rated, underscoring its high credit quality. As of year-end, approximately 66% or $1.4 billion of our securities portfolio remained unencumbered, providing an additional source of liquidity for ladder, complementing our same-day liquidity of $608 million and reinforcing our strong balance sheet and ability to focus on offense. In 2025, our $966 million Real Estate segment continued to generate stable net operating income. The portfolio includes 149 net lease properties comprised of primarily investment-grade credits committed to long-term leases with an average lease term of 6.7 years.

For further details of our fourth quarter and full year 2025 operating results, please refer to our earnings supplement presentation available on our website and our annual report on Form 10-K, which we expect to file in the coming days. With that, I will turn the call over to Brian.

Thanks, Paul. 2025 was a pivotal year for us, and we reaffirmed our commitment to an unsecured liability structure after upsizing our revolver and issuing our first investment-grade bond. With predominantly unsecured debt now at attractive borrowing costs, we expect 2026 to be a year where we complete our business plan to grow our loan portfolio along with our earnings. We've already begun to grow our asset base, increasing it by 16% in the second half of 2025 and 10% in the fourth quarter. Our growth in assets has been partially offset by large payoffs in our loan portfolio over the last 2 years, with $1.7 billion in payoffs in 2024 and $608 million in 2025. But I would note that in the fourth quarter of 2025, we received only $107 million in payoffs, our lowest quarterly total in the last 2 years.

With payoffs slowing, our accelerating loan originations become more visible as growth in our loan book takes center stage. We originated $511 million in new loans in the third quarter and $433 million in the fourth quarter, with an additional $251 million originated in January of 2026. This totals $1.2 billion of new loan originations over the last 7 months. Turning to our securities portfolio. In 2025, we successfully reallocated capital from T-bills into AAA securities, increasing our holdings by over 90% to $2.1 billion despite taking in $535 million in paydowns. We expect our securities portfolio to continue to experience robust paydowns as capital markets have become more constructive around refinancing commercial mortgage loans and issuers exercise cleanup calls due to deleveraging of AAA classes.

This is the class we have a preference for as seen in our holdings. We expect to use the proceeds from these paydowns in our securities book, combined with the sales of securities and our access to unsecured capital to provide much of the liquidity needed to fund our growing loan origination pipeline. This plan is not new. It is simply an illustration of the business plan we outlined last year. We believe it was critical to prepare the company's liability complex for the loan growth we've been expecting, and we're now seeing this play out in real time. While we will always be on the lookout for opportunities to improve our cost of funds, we believe most of our efforts in the year ahead will be focused on growth in our loan portfolio and by extension, earnings.

We think we are well positioned to take advantage of the lending opportunities we see emerging. Rising stock prices and a more balanced liquidity picture in commercial real estate markets should provide Ladder with many opportunities in the year ahead. Our diversified mix of investments has weathered the storm felt in the CRE markets as rates rose quickly after being near 0 for years. We believe our stable book value over the last several years has validated our credit acumen along with our multicylinder approach towards allocation of capital. Now fully on offense, we plan to grow our earnings over time and our book value. We can take some questions now.

[Operator Instructions] Our first question comes from Jade Rahmani with KBW.

2026 seems to be off to a pretty volatile start, and there are jitters in sectors of the economy around the impact of AI on key areas, all the CapEx spend big tech is targeting and volatilities in interest rates. At the same time, CRE loan spreads have continued to tighten. So I just wanted to start off by asking if Ladder is planning to do anything different in light of the potential volatility.

This is Brian, Jade. Thanks for the question. I don't think we're planning to do anything differently given the volatility. It's been pretty volatile, although in the beginning of almost every year, spreads tend to tighten after the stock market has hit some records at the end of the year before. because I think there's rebalancing, and I think the insurance companies have fresh allocations of capital that are usually larger than the one before because of the stock market rebalancing. But we're not overly impacted by that. We are not a fan of data centers as far as calling them real estate assets. So we weren't doing that before. So I don't think we're going to do it now.

I do think that a lot of the private credit lenders in the CLO market and corporates below investment grade, they may be impacted more by that. And I think naturally, you get dragged when you're in some ETFs with them. But overall, no, I don't anticipate -- if anything, I think if the market is getting concerned about the spend on AI and data centers, there's probably a place in the world for a safe dividend that is based on bricks and mortar and utility for normal everyday people as opposed to the next great wave of technology. So I don't think this volatility does anything to us other than present opportunities because I think that a lot of the big operations, the big asset manager will sit down and decide how they want to allocate capital here. And of course, they'll pull the real estate guys into that conversation, too. But at Ladder, we're independent. We're not having any trouble with this.

And in terms of the plan to drive earnings growth and that being the main focus, what ROE do you think is achievable within the current capital structure? And where do you see maybe the loan portfolio going in size by year-end? And do you plan to grow the real estate equity portfolio?

I'll try to take those in order and maybe in backwards order. We do plan to grow the real estate equity portfolio. We've been doing that a little bit more lately than in quarters past. We're selective. We're not just making an overall call on real estate coming back, but there are some opportunities. Typically, when we make an investment, there's a little bit of capital tension involved in the capital allocation of the -- it might be the prior lender, it might be the owner, it might be a mezz owner, but we're pretty comfortable making investments, especially when they've been reset on the valuations. A lot of the buildings we've invested in New York on the office side, we're investing at levels that these buildings were purchased at 30, 35 years ago.

And just a quick report card. The first one we did in New York, the first office building we invested in went from 55% to over 90% occupancy in under 1.5 years. So we'll probably refinance that pretty soon, and that might create some capital to a capital event. So yes, we do plan to grow that. As far as the loan portfolio, given our pension for lower leverage models, I suspect we can probably get the assets as opposed to loans. I'm rather agnostic as to how we go about getting to the levels. But I suspect we'll take the portfolio up a little over $6 billion by year-end. And what was the first part of the question, Jade, if you don't mind?

ROE.

ROE, I would say 9% and that will largely depend on how much of a resurgence of the conduit comes back. You could easily go above that. Some of our real estate may be ready to harvest some gains, too. So we may have some one-timers that will drive the ROE higher. Not really anticipating anything getting worse. I think the visibility we have into our portfolio is good enough that I don't see any negative surprises coming our way. We're aware of any problems that may exist, and they don't look too bad to us.

Our next question comes from Timothy D'Agostino with B. Riley Securities.

Quarter-over-quarter, obviously, net interest income ticked down. Looking at top line interest income, it was about $3.5 million lower. Obviously, SOFR has come in over the past couple of months. But I was wondering as well, like is the pressure at the top line also attributable to maybe loans being funded that were written in 4Q being funded 1Q? Just kind of understanding that dynamic a little bit better.

Okay. I think that we had a reasonably good quarter as far as loan originations go in the low 400s. followed by the third quarter in the low 500s. I've always said these can be a little bit lumpy. And if you just look at a 90-day period, you might get confused. But if you actually stretch it out over a quarter in front and a quarter in back, it actually is a pretty smooth process. We did fund a lot of our loans at the end of December. That was not by design. I don't know why that happened. Maybe people get a little more serious about getting closed before year-end. So we didn't really enjoy the net interest income from a lot of our new originations, but we will pick it up in the first quarter.

And I think the second thing that happens with net interest income is the payoffs, anything that comes in and pays off, there was only $107 million in the fourth quarter. But payoffs tend to have relatively high rates compared to the newer loans that we're writing. And that's oftentimes because a lot of them have been modified and there's cash flow sweeps and these things are being refinanced. So -- but the good part is while we do see a slight dip from those loans and spread, we're happy to see them go because we've been in triage with a few of them, and we're very happy with the results generally on how our asset management team is doing a great job of getting capital back into the building. And we think that will continue. And we are not having too much trouble anymore finding suitable investments on the outside for new loan originations.

So again, I think we'll pick that up as we go on. I think we already had $250 million in the month of January 2026. So again, I don't take too much offense to looking at 1 quarter at a possible dip. I suspect the heavy REIT refinances are over. And so we're now going to be converting a lot of cash out of the unsecured lines as well as our cash positions and sell some securities, we will be funding more loans that have higher yields than the fuel that we get them from being the unsecured line as well as the securities book. The securities book is paying off rather quickly, and that kind of makes sense because as the defroster went on in the commercial real estate refinance market, a lot of loans paid off. And as those loans pay off in those CLOs, the AAA portion dips and you have large subordination, that happens to be what we own mostly.

And they're being called. So they're being refinanced into new CLOs and with old and new loans. So again, a very healthy part. So while payments are slowing -- payoffs are slowing down in the loan book, they're picking up in the securities book. And that's right on schedule. There's nothing unusual about that. That's what we were anticipating, and we expect that to continue.

Our next question is from Steve Delaney with JMP Securities.

The shift towards a more lending-focused business model moving out into 2026, remaining diversified, but a reemphasis on lending. When I look at the commercial mortgage REIT group, 22 companies, I mean, the losses on bridge loans over the last 3 to 5 years just have been huge. And I guess, Brian, when you look back over the last, say, 5 or 6 years, what were the biggest mistakes in underwriting? I mean, just on a very high-level simplistic term, I guess, what are you going to do in your underwriting of your bridge loans moving forward to ensure that we don't have the kind of harnage that we saw with all those post-COVID generation of bridge loans within the industry. Just appreciate your thoughts on lending discipline and what those bridge loans look like going forward.

Okay. I'll try to bear what's in the cupboard here as to the warts and all conversations that we get into sometimes. But I think that many of the losses that occurred across the financial sector really were as a result of a deadly combination of low cap rates driven by 0 interest rates delivered by the Fed and people were -- lots of liquidity as the Fed was making alternative investments. You had to get out of the banks, right? You couldn't keep your money there because there was no return. So it got a little bit undisciplined and low -- as we know, apartment buildings, in particular, were being purchased at 3 caps. And then the other part of that deadly combination I mentioned is rapidly rising interest rates. So whereas a lot of the rents in those apartment buildings did go up, the operating expenses and the refinance, what's required for a debt yield went up more.

So that was a bit of a rather easy look back and see what happened there. The work-from-home phenomenon caused some problems, too. And I think that there had been maybe a little bit of overinvestment in a lot of cities. As you know, we tended to avoid those -- they used to be called gateway cities where you had large airports, big population centers, large downtown corporates and you throw a crime wave into that and those get into trouble pretty quickly, especially with people that are working from home. I think the largest part of that is over. There's a few cities that are probably still going through it. And listen, if I have to be honest, our losses have been de minimis compared to others. However, not compared to our models. We think we made some mistakes, and we want to make sure we don't make them again.

If I had to look back on one theme that I wish we had not done, I think you have to be very careful when you're writing a bridge loan and you're refinancing one of your competitors' bridge loans because it's -- the competitor knows more about it than you do. And if it was that good of a loan, you keep it. He's just going to take the payoff and make another loan. So if you really like the loan that you're writing there, you might get into trouble. We got into a couple of loss situations in the office sector, really minor, though. I mean, I'm pretty happy with the way we underwrote them. But our losses over the years, while quite small relative to the portfolio, we had Wilmington, Delaware, Portland, Oregon this quarter.

I suspect we will have a small loss on a building in Minneapolis. And San Francisco has certainly caused its set of problems in these portfolios. But the good part is Ladder focuses oftentimes on what is called flyover cities where there are population centers that are quite stable, but most people have never been to those cities. So we do like the Midwest. We've always liked the Southeast, Texas, where we're comfortable with in certain places. But you have to always be careful. And when you're the industry leader in volume, which unfortunately, a lot of operations try to be, all you're really telling me is you paid more for things than anyone else would. And when it whiplashes back at you and goes the other way, you suffer the biggest losses.

So you might remember when we started this company, we were sometimes asked why we don't have a big parent company to support us during difficult times. And we call these things kickstand REITs. So you've got giant asset managers with these small REITs. And you saw Apollo recently roll up -- sell a loan portfolio to an insurance company internally. We don't have that at Ladder. And so the other side of that is we don't have a parent company suggesting the loans we should be making. And so we're very independent in how we operate and with the insider ownership of the company. It really is people with first and last names making loans. And if you just look at how our book value has held up relative to what I'll consider our former peer set, we've just done much better. And that doesn't surprise me after 40 years in the business, I'm proud of it.

And -- but on the other hand, we're still quite wary about things that could go wrong. So I think to sum up quickly on your question, I think I'll be much more cautious. We were always cautious, but more cautious on large cities with unionized workforces and a fair amount of prime. I think we'll also be very cautious around refinancing competitor bridge loans that have been on their balance sheet for 3 years. And the obvious question is, well, why aren't they refinancing it? So lessons learned. Thankfully, they weren't learned with anyone dying, but they were learned with small losses relative to competitors. However, we still feel like our losses were unacceptably high.

Got it. So bridge loans doesn't have to be a 4-letter word, right, to do it?

No, not at all.

[Operator Instructions] Our next question comes from Gabe Poggi with Raymond James.

Brian, I wanted to ask a question kind of piggybacking what Steve just asked about. Can you talk about the competitive landscape as it pertains to banks, in particular, regional banks getting back in the fray. You guys made 12 loans in the fourth quarter, 340 over, so that's super attractive. But just kind of how you think about the go forward in '26 with a return of some bank competition, that would be helpful.

Sure. First of all, the banks are becoming more competitive, yes. However, what we're seeing is they're making more construction loans, and we're very comfortable refinancing properties that are in lease-up and that are brand new. So when I look at the landscape of our loan portfolio and the buildings that secure those loans, they're clearly newer and recently built and much, much better than the inventory that went into the downturn when interest rates were at 0, where everybody thought they could buy a garden apartment complex from the 1970s and spend a few dollars and raise the rent, and that was going to be no problem. So we do move to higher ground during periods of volatility, which is why we own AAA securities as opposed to BBB securities. And in addition to that, we make loans on newer properties.

And the good part now is almost everything we do has a level that's been reset and the expectation of the borrower is more sober than it was when everybody was competing for low cap. If you take a look at the names of the borrowers that show up in a lot of the syndicated loans that got into trouble, and I won't name them here, but I will tell you, they're largely absent at Ladder. And the reason why is because they were shopping around asking for 80% to 85% financing, and they had several willing participants in that. We did not. I asked Adam Siper, our Head of Originations, how did we avoid these guys? And those packages submissions wound up in the garbage because it started with 80% leverage, and said we didn't feel like we had to do that.

So that was a nice bit of underwriting there that avoided problems. But I would also tell you the banks are not really competing on the bridge loan side. Some insurance companies are. But I think with the amount of regulators in the bank's offices that are looking to criticize loans, if anything looks amiss, anything but a stabilized cash flow is not really landing in the banks at all. So -- and a lot of our -- the competitive set that we used to deal with they are -- I would call them permanently smaller unless they go out and raise capital. I mean they don't have a valuation problem. They've lost money, and that shows up in the discount to book value. So we believe, and I don't want to get too many secrets out of the kitchen here, but we think that the single asset world, $250 million and over is being handled by the large banks that are on Park Avenue and San Francisco.

But the loans that we do, we historically have had an average loan balance of about $25 million. I think you'll see that tick up a little bit. And the orphan in the world right now for getting a loan from a large bank or from a conduit or from a bridge lender is at around $80 million to $100 million. A little too big for single -- it's too big for conduit. It's too soft for a single asset. And it's too big for a regional, but it fits us just fine. So we're pretty comfortable. In fact, when we said in this earnings call that we had $430 million in loan originations, we did have a $200 million loan fall out of application during the quarter.

And if it had come in, then we'd be talking about $630 million instead. But I still wouldn't think that would change our opinion of anything other than on a certain date, we had a certain amount of loans closed. So yes, look, they're back. They're competing again. And I think that their cost of funds is still rather high, but the Fed -- when the Fed got rid of T-bills at 5.5%, that is probably the single biggest event that helped the regional banks because they became more competitive on deposits, whereas when they had to raise their deposit rate, and as you know, banks have a 5-year conveyor belt where the rate -- higher rate loans pay off as rates are falling, that really did help them a lot. And if you remember, we had $2 billion worth of T-bills at 5.5%.

We moved that into securities. And now we're going to move out of those securities into bridge loans and conduit. The conduit business is the wildcard as to -- because that's a stabilized cash flow, and that does compete with regional banks. So -- and that business is still, I would call it soft. There's just not a lot of volume there. If you look at conduit deals, there's 7, 8, 9 originators in those pools. So -- but we're having the beginnings of those discussions. And it feels a little bit like 2008 and 2009 to me because it will come back. I mean, as these properties come out of that recession that we went through and the low cap rate environment, these cash flows will start to stabilize at higher rates. And that should be a tailwind for the conduit business at large and also Ladder's participation in it.

We have reached the end of the question-and-answer session. I'd now like to turn the call over to Brian Harris for closing comments.

Thank you for all the support in 2025 and understanding our thematic way of piecing one act into another as we make our investment decisions. But we laid the groundwork that will be here for years by becoming an investment-grade company and largely financing ourselves with unsecured debt. We're going to keep doing that. We are the only investment-grade company in the space. We will not be the last, I don't think. But we are very happy with the way we performed and also how our -- how ready we are now to move forward into a reset level of prices for real estate and a liquidity set that you don't want no liquidity. You don't want no competitors, but you also don't want too many at one time. The private credit world is largely controlled by large asset managers, and most of them are not writing loans that compete with us.

So we think we've got a very, very positive runway ahead of us, and we look forward to 2026, and we are completely on offense now. No more T-bills, no more AAAs, we're going to start moving into lending ownership of real estate as well as capital markets activity and securitization. So long-winded answer there, but a big thank you to all of our investors. And we do -- we have an organic plan in place to get the market cap of this company higher through earnings.

Okay. This concludes today's conference. You may disconnect your lines at this time, and we thank you for your participation.

Good morning, and welcome to Ladder Capital Corp.'s Earnings Call for the Third Quarter of 2025. As a reminder, today's call is being recorded. This morning, Ladder released its financial results for the quarter ended September 30, 2025.

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 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's President, Pamela McCormack.

Good morning. During the third quarter, Ladder generated distributable earnings of $32.1 million or $0.25 per share, delivering a return on equity of 8.3% with modest adjusted leverage of 1.7x. Credit performance remained stable and the quarter was marked by 3 notable developments, a significant acceleration in new loan originations, continued progress in reducing office loan exposure and the successful closing of our inaugural investment-grade bond offering. These results reflect our disciplined business model and conservative balance sheet philosophy, positioning Ladder for continued earnings growth and greater capacity to capitalize on investment opportunities across market cycles.

Loan portfolio activity. Origination activity accelerated in the third quarter with $511 million of new loans across 17 transactions at a weighted average spread of 279 basis points, our highest quarterly origination volume in over 3 years. The spread reflects the mix of assets originated, which were predominantly multifamily and industrial, consistent with our focus on stable income-producing collateral.

Net of $129 million in paydowns, the loan portfolio grew by approximately $354 million to $1.9 billion, now representing 40% of total assets. Year-to-date, we originated over $1 billion in new loans with an additional $500 million under application and in closing. Notably, the full payoff of our third largest office loan, a $63 million loan secured by an office property in Birmingham, Alabama, reduced office loan exposure to $652 million or 14% of total assets. Approximately 50% of the remaining office loan portfolio consists of 2 well-performing loans secured by the Citigroup Tower in Downtown Miami and the Aventura Corporate Center in Aventura, Florida.

Securities portfolio. As of September 30, our securities portfolio totaled $1.9 billion, representing 40% of total assets. During the quarter, we acquired $365 million in AAA-rated securities, received $164 million in paydowns through amortization and sold $257 million of securities, generating a $2 million net gain. Paydowns and sales exceeded purchases, resulting in a modest net reduction in securities holdings this quarter. This reflects our disciplined approach to capital allocation as we did not replace certain securities that ran off, consistent with our view that spreads may widen in the mortgage market given recent volatility and the Federal Reserve's ongoing runoff of mortgage-backed securities.

Consistent carry income from our real estate portfolio. Our $960 million real estate portfolio generated $15.1 million in net operating income during the third quarter. The portfolio primarily consists of net lease properties with long-term leases to investment-grade rated tenants and continues to deliver stable, predictable income.

Capital structure and liquidity. During the third quarter, we closed our inaugural $500 million 5-year investment-grade unsecured bond offering at a rate of 5.5%, representing 167 basis point spread over the benchmark treasury, the tightest new issuance spread in Ladder's history. The offering was met with strong demand and the bonds have since traded tighter in the secondary market, reaching spreads as low as 120 basis points. This transaction validates the strength of our conservative balance sheet philosophy and disciplined business model. As one of our premier debt capital markets bankers noted, it also firmly planted Ladder's flag in the investment-grade market.

The continued tightening of our bonds positions us for lower borrowing costs, stronger execution and improved shareholder returns. As of quarter end, 75% of Ladder's debt consisted of unsecured corporate bonds and 84% of our balance sheet assets remain unencumbered. We maintained $879 million in liquidity, including $49 million in cash and $830 million of undrawn capacity on our unsecured revolver, which provides same-day liquidity at highly competitive rates.

Outlook. Ladder's unique investment-grade balance sheet, disciplined use of unsecured debt and robust origination platform positions us to capitalize on investment opportunities, while maintaining prudent credit risk management. We expect fourth quarter loan originations to exceed third quarter production.

Recent credit rating upgrades and our successful inaugural investment-grade bond issuance have lowered our cost of debt and expanded our access to a deeper, more stable capital base that remains consistently available across market cycles. Over time, we expect our strong balance sheet, modest leverage and reliable funding profile to position Ladder alongside a broader set of high-quality peers, including equity REITs rather than solely within the commercial mortgage REIT space.

As investors increasingly recognize the strength of our senior secured investment strategy and conservative capital structure, we believe our equity valuation will reflect this alignment. Combined with our disciplined credit risk management and ability to deploy capital with speed and certainty, these attributes reinforce our capacity to deliver strong, stable returns for shareholders across market cycles.

With that, I'll turn the call over to Paul.

Thank you, Pamela. In the third quarter of 2025, Ladder generated $32.1 million of distributable earnings or $0.25 per share, achieving a return on average equity of 8.3%. In the third quarter, we closed our inaugural investment-grade bond offering of $500 million 5-year bond at 5.5%. The proceeds were partially used to call the remaining $285 million of bonds that were maturing in October and fund loan originations.

As of quarter end, $2.2 billion or 75% of our debt is comprised of unsecured corporate bonds across 4 issuances with a weighted average remaining term of 4 years and a weighted average coupon of 5.3%. Our next corporate bond maturity is now in 2027.

The offering strengthened our balance sheet and affirmed our commitment to the investment-grade bond market as our primary source of capital. We're encouraged by the bond's strong trading performance in the secondary market and believe our bonds offer attractive relative value to fixed income investors with [ meat on the bone ] to tighten further as the market continues to recognize Ladder's distinct long-standing investment strategy, anchored by conservative lending attachment points, AAA-rated securities and high-quality real estate equity investments.

As of September 30, 2025, Ladder's liquidity was $879 million, comprised of cash and cash equivalents and our undrawn capacity of $850 million unsecured revolver. Total gross leverage was 2.0x as of quarter end, below our target leverage range. Overall, our balance sheet remains strong and primed for continued growth as our investment pipeline continues to build.

As of September 30, 2025, our unencumbered asset pool stood at $3.9 billion or 84% of total assets. 88% of this unencumbered asset pool is comprised of first mortgage loans, investment-grade securities and unrestricted cash and cash equivalents.

As of September 30, 2025, Ladder's undepreciated book value per share was $13.71, which is net of a $0.41 per share CECL reserve established. In the third quarter of 2025, we repurchased $1.9 million of common stock or 171,000 shares at a weighted average price of $11.04 per share. Year-to-date in 2025, we've repurchased $9.3 million of common stock or 877,000 shares at a weighted average price of $10.60 per share.

As of September 30, 2025, $91.5 million remains outstanding on Ladder's stock repurchase program. In the third quarter, Ladder declared a $0.23 per share dividend, which was paid on October 15, 2025. As of today, our dividend yield is approximately 8.5% with a stock price that we believe has been pulled down by the broader market concerns around private credit.

We'll note that our dividend remains stable and our asset base continues to turn over into freshly originated loans, AAA securities, high-quality real estate equity investments. With a stable earnings base complemented by our investment-grade capital structure, we believe there's ample room for our dividend yield to tighten, specifically when compared to other investment-grade REITs with similar credit ratings to Ladder. We continue to expand our investor outreach efforts now as an investment-grade company, and we look forward to further educating the market on our story.

Building on Pamela's overview of our performance, I'll highlight a few additional insights to how each of our segments fared in the third quarter. As of September 30, 2025, our loan portfolio totaled $1.9 billion with a weighted average yield of approximately 8.2%. As of quarter end, we had 3 loans on non-accrual totaling $123 million or 2.6% of total assets.

In the third quarter, we resolved 2 non-accrual loans, first through the payoff at part of a $16 million loan through the sale by a sponsor of 2 mixed-use properties in New York City; and the second be a foreclosure of a loan collateralized by an office property in Maryland with a carrying value of $22.7 million. No new loans were added to non-accrual in the third quarter.

Our CECL reserve remained steady at $52 million or $0.41 per share. We believe this reserve is adequate to cover any potential losses in our loan portfolio, including consideration of the ongoing macroeconomic shifts in the U.S. and global economy.

As of September 30, 2025, our securities portfolio totaled $1.9 billion with a weighted average yield of 5.7%, of which 99% was investment-grade and 96% was AAA-rated, underscoring the portfolio's high credit quality. As of quarter end, approximately 80% of the portfolio of almost entirely AAA securities were unencumbered and readily financeable, providing an additional source of liquidity, complementing our same-day liquidity of $879 million.

In the third quarter, our $960 million real estate segment continued to generate stable net operating income. The portfolio includes 149 net lease properties, primarily investment-grade credits committed to long-term leases with an average lease term of 7 years remaining. For further information on Ladder's third quarter 2025 operating results, refer to our earnings supplement presentation, which is available on our website and our quarterly report on Form 10-Q, which we expect to file in the coming days.

With that, I will turn the call over to Brian.

Thanks, Paul. The third quarter was a particularly gratifying one, highlighted by the successful completion of our first corporate unsecured issuance as an investment-grade issuer. We now have access to a much larger investor base in the investment-grade market than the high-yield market where we had issued our prior 7 offerings over the last 13 years.

Having access to this larger pool of capital should allow us to further optimize our liability management in the years to come. We believe that by being a regular issuer in the investment-grade corporate bond market, we will be able to lower our overall interest expense to a greater extent than what we could expect in the secured repo and high-yield markets. We prioritized getting to investment-grade ratings several years ago. So having that distinction today from 2 of the 3 major rating agencies is very satisfying, and we plan to maintain or improve our ratings over time.

While Ladder has historically been grouped into a peer group of other commercial mortgage REITs, we believe we are more properly comped against other investment-grade rated property REITs who finance their operations like we do, primarily with the use of corporate unsecured debt and large unsecured revolvers. If we succeed in curating an equity investor base that views us more in line with investment-grade property REITs, we think our stock price will start to reflect a lower required dividend yield more in line with how these investment-grade property REITs with lower leverage are valued.

In the fourth quarter and beyond, we expect to continue adding to our inventory of higher-yielding balance sheet loans, while staying nimble enough to pivot into securities acquisitions during periods of high volatility when these investments provide extraordinary opportunities to add safer, more liquid investments as market turbulence flares up.

We are hopeful that the yield curve will steepen much more next year as the Fed makes good on market predictions of several cuts to the Fed funds rate. This in turn should pave the way for more regular contributions to securitizations. We are always on the lookout for opportunities to own more real estate, but we expect most of the lift to earnings next year to come from organic growth of our loan portfolio. We're expecting to finish this transformational year on a positive note as market conditions do appear to favor our business model as we head into 2026.

We can take some questions now.

[Operator Instructions] Our first question comes from the line of Jade Rahmani with KBW.

I'm interested to know if you're doing anything differently on the origination side from prior to the IG rating. Perhaps that has opened you up to deals that are closer to stabilization or perhaps larger in size. Clearly, the IG rating might give you a competitive advantage over non-bank lenders. So if you could provide any color on that, it would be helpful.

Sure. Thanks, Jade. Yes, I would say, we're looking at some slightly larger transactions and it's just a lot more stability around it financing it this way. You don't have to go about trying to figure out if an individual lender will see the assets the same way you do. But I wouldn't call it anything wholesale indifference.

Slightly larger, yes, everything is a little bit more profitable when your cost of funds go down. But for the most part, the one real change that I see in this part of the cycle versus the last time is the assets on which we're lending are of much, much better quality than the garden apartment buildings and older warehouse properties. So we seem to -- when I take a look at the assets that we're lending on, they're really newly built Class A apartment complexes, resort style almost. And a lot of the industrial portfolios are also quite new as a result of all the onshoring that took place.

And on the origination side, I noticed a difference between fundings and commitments upfront that seemed, at least from the outside, a little larger than historically. Were there any construction loans in there or any large CapEx projects in those deals, if you could provide any color?

I wouldn't say as a rule, but we generally don't write construction loans. So there are no construction loans in that portfolio that you're looking at. And as far as heavy CapEx work, I think if you're gravitating towards a slightly wider spread than maybe you're expecting, I don't think it's as a result of a higher construction component or a lot of TI hammer swinging. It really is just -- we're just getting a little bit better.

I think the portfolio doesn't look like it's changing meaningfully. Right now, it's most of the assets are industrial and multifamily. I'm not sure it will stay that way. And we haven't been avoiding hotels. We put one under app recently, but we just haven't run across too many of them.

And as I said, a lot of the -- we try to focus more importantly rather than property types is on acquisitions where the borrower is buying something usually at a reset basis. Some of these resets are quite remarkable. But as opposed to cash out refinances. The only real cash out refinances that we're doing is if a guy is coming off a construction loan on an apartment building, and he's only 50% leased now. So those oftentimes have 30% or 40% equity in them. And sometimes there's a cash out refi because the property is now complete and half leased. So other than that, it's pretty straight down the middle lending on apartments and industrial properties.

Our next question comes from the line of Steve Delaney with Citizens JMP.

Congrats on the strong quarter. Curious, let's start with lending. You seem to like the market. You have plenty of capacity. But let's talk about just the $1.9 billion rather than the $5 billion overall portfolio, focusing on the loan portfolio because you appear to be increasingly active there. Do you see -- looking at that portfolio, if we were to look out over the next year, do you see further growth and meaningful growth in that $1.9 billion loan portfolio? And can you give us some idea of a range with your current capital base, how large the loan portfolio might be able to grow?

Sure. Thanks, Steve. let's start with capital first because if you remember, in the second half of 2024, we took in over $1 billion in loan payoffs. And while we began originating loans more frequently, we were not originating at that pace. So what was happening is each quarter, the loan book would get a little bit smaller. This is really the first quarter in a while where we've originated more than has paid off, and we expect that to continue.

So the fourth quarter is off to a very good start. I would expect or as I said originally, the organic side of growth will come from just building up the bridge book. I think that's the place where we're focused right now. And we're pretty happy with where spreads are. They're a little bit less competitive than they were really, I would say, just a couple of months ago, which tends to happen after you hit the midpoint of the year. But -- so I would expect that $1.9 billion portfolio to go up by $1 billion in all likelihood.

Maybe I would -- if I had to take the over-under on that $1 billion, I would take the over. We're quite active right now and business begets business. So I think that when we had a pretty strong origination quarter, that gets noticed by borrowers as well as brokers and the phone rings a little bit more.

As Pamela mentioned, we have over $500 million in loans under application right now. You never really know how many of these are going to close depending on what happens with the volatility sometimes coming out of the political picture as well as the geopolitical side of things. But generally, I would expect that we -- I think we had that loan book up to around $3.4 billion a couple of years ago, and I would like to get back there. And I think that will come from a few places. One, we have a larger revolver that's mostly undrawn. We have a lot of securities. Securities are paying off at a much more rapid clip than loans right now. And I think that's a testimony to the payoffs that have been coming in and the capital markets becoming more welcoming to single asset transactions.

So as you pay down those AAAs in a CLO, the financing becomes quite unpopular. So they've been calling a lot of those bonds, and we'll expect that to continue. I think that our securities portfolio will, through attrition pay off, but also we will sell them. As we said in the quarter, we sold a little over $250 million. We own over -- I think we own over $2 billion today. I would expect that number to go down, but I would expect the loan inventory book to go up.

That's really helpful color, Brian. In terms of [ specialty ] comparison, you mentioned the property REITs and their valuation is something that you would be envious of on a -- whether it's on a PE or a dividend yield. Looking at the ROE at 8.3%, I would say, it kind of strikes me as being solid, but in terms of valuation and where the stock is trading relative to book that some improvement to that, maybe something in the 9% to 10% range might be very beneficial to the stock price, and therefore, your valuation relative to book. Is that improving the ROE in a prudent manner? Is that part of your vision for the next 1 to 2 years? And do you think the strategy you have in place will necessarily take your ROE some higher?

I would say yes to all of those parts of that question. The game plan is to write more loans and we'll get through the cash component of our liquidity. As you remember, we had a lot of T-bills when T-bills were yielding 5.5%, and that kept us away from very tight mortgage loans because if it wasn't at the margin worth sacrificing the liquidity and safety of the securities, we really didn't do it. But now with the Fed cutting rates and promising to cut further, we have a nice mix of floating rate and fixed rate liabilities. So we would expect our cost of funds to be going down.

That revolver, I'll remind you, is now priced at SOFR plus 1.25%. So if I am of the opinion the Fed is going to cut rates 100 basis points, usually probably bridging over Powell's last few stance as well as the next Fed official that comes in. And if that happens, you get SOFR down around 3% we can borrow unsecured at 4.25% at that point. So that should all bode well. We've got floors in our bridge loan portfolio up around 6%, 6.25%. And so the loan -- the rates we're able to write loans at these days have actually gone up not down in the last quarter anyway. So we're going to continue doing that. And after we get through the cash component of our liquidity, we'll then begin to sell down or pay down the securities.

And the way it comes out on paper, we're hoping to add $1 billion to $2 billion of assets net on the balance sheet and we're hoping to pick up 3% to 4% of profit margin. So if we can take a security that we're earning 5.5% on and get it and pay that loan -- pay the security off and then redistribute, reinvest that money into a loan portfolio that's earning 8.5%, we think that bodes very well for dividend, ROE as well as earnings. So it's not a hard ping-pong ball to follow. That is going to be what we're going to do. It's what we've been saying we're going to do.

The one thing that has really masked all the work that we've done has been the very rapid pace of payoffs. And those are high-yielding instruments and we hate to see them go. But when they've been around a little bit past their expiration date, you do want them to pay off, and we've been pretty successful at that.

So credit, very stable. We like what we're seeing. The quality is good. The borrowers are good. They've been patient. They're not in difficult financial binds as a result of owning too many over-levered properties. So it looks strong. And you got the stock market at an all-time highs, you got spreads low, rates low, Fed cutting. These are all good conditions on the weather map for a successful lending business at Ladder.

[Operator Instructions] Our next question comes from the line of Tom Catherwood with BTIG.

Brian, I just wanted to go back to something that you said in response to Steve's question, and I want to make sure I heard it right. Did you mention that -- I thought you said rates we can get on loans have gone up, not down. Did I hear that right?

The ones we're looking at, yes. I think -- well, you're seeing -- I mean, I'm not immune to looking at corporate spreads, credit spreads, mortgage spreads. But there's a couple of things going on more recently in the -- literally the last 60 days, I would say. The Fed is letting the mortgage-backed securities portfolio run off. So the agency securities market is actually not as tight as you would think on spread. And the reason why is the Fed is effectively letting $30 billion roll off. I think it's $30 billion. I'm not a Fed watcher. So if I have that wrong, please don't send me a bunch of e-mail.

But the other -- after April, when the tariff talk started and now the back and forths that go on, the commercial sector was -- as it always does, and I've said this to you probably several times. In January, every year, we go to a convention down in Miami called CREFC. Everyone is a bull. Everyone comes out, it's going to be its best year ever, and they put a carry trade on until the middle of June. Around the middle of June, they think maybe we paid too much for these things and they start to sell them and they're less aggressive.

At Ladder, we have found a nice little theme I think in loan sizes. We traditionally like loans at $25 million to $30 million on middle market lenders by choice. However, we dabbled occasionally in larger loans. The banks are not really writing loans in the $100 million range. That's a little too small for them to put on their balance sheet and then try to securitize. They'll write $1 billion loan with a consortium of banks, but $100 million loan is under their radar and $100 million is probably a little too big for a lot of the CLO issuers that are out there that we mainly compete with.

So we're actually very happy in our $50 million to $100 million range right now and we'll try to stay there. And so don't think that we've changed our stripes if we start picking up loans that are a little larger than average. We're still doing plenty of smaller loans, too. But the $100 million type loan is a better asset. It's newer. It's got better financial characteristics to it. And it is higher rate because the competitive landscape is just not as bad as it was. And keep in mind, I'm talking about the last 60 to 90 days. The first half of the year was very, very tight and we were not originating a lot for that reason. In fact, we were buying a lot of securities.

Another good proxy, Tom, if you want to take a look at it, is the CLO market. So there's a lot of CLOs coming to market. And they're in the 145, 155, 160 area for AAAs. That's wider than they were just a few months ago. It's not extraordinarily wider. But you're also seeing the VIX tick up. I think it was around 25 the other day after being at 15 for a month. So when you see the VIX ticking up like that and all the volatility around the rhetoric and the political circles, we're able to find things that are pretty attractive.

Again, I also think we have a reputation as being very reliable. So as we get to the year-end here, we tend to do -- we always do better in the second half of the year than the first year -- first half of the year when it comes to production. That has been something that has followed me around through my whole career. And I think it has more to do with seasonality and what happens.

As you know, insurance companies, they allocate money into fixed income. Usually, by June or July, they're fully invested. So even that competitive force kind of backs off a little bit, too. So we actually prefer to fatten up going into the end of the year.

Got it. Really appreciate that answer, Brian. And then if I think about then sources and uses -- and again, I know you laid it out before, how you think about funding things. But if the spreads and securities are somewhat widening and the revolver is priced at S plus 125, wouldn't it make sense to then just put everything on the revolver and then term it out with unsecured once you get to $400 million, $500 million and just keep wash rents repeat that? Or is -- do you think selling down securities along with using the revolver gives some other benefit?

Well, I think it's almost like we have several companies at Ladder with the products that we dabble in. But on the floating rate side -- I'm sorry, on the securities side, I mean, if you take a look at the rating agency REITs, the agency buyers like AGNC and Annaly and a couple of others, these guys are throwing off dividends of 14%, 15%. And they're levered, I don't know, 7x, 8x in many cases. That's way too hot for us on leverage, but with government-guaranteed paper, with a lot of duration, I think your risk is in the duration side of that. But at where we are, these securities, there -- if we levered them up and easily can, the financing cost is around SOFR plus 50 on a AAA. If we're buying things at 150, you can figure out that there is a pretty good spread in there.

So we can lever those up to about 15%, but it's a lot of leverage. And the road we're on is not to just have a low cost of funds so we can lever things up. The game plan is to focus more and more in the years ahead on unsecured debt that we extend. But the game -- the change at Ladder versus before we were IG, we would normally be thinking about issuing another bond here because we're growing rapidly, we're going to need more capital. We've got sources of ability to get capital, but we might think about that.

But if you really think the Fed is going to cut rates by 75 or 100 basis points, it would not go out and do a bond deal right now because that revolver is going to get down to a low-4% rate. And that's what we think will happen. It doesn't have to happen. But if it does, that's probably the first thing we'll do is draw that. We don't want to draw all of that because that's not what the agencies and investors want to see on the bond side.

So -- but my guess is we'll probably -- I don't think securities were ever meant to be a long-term hold for us. They're kind of a parking spot for us while we're waiting for better opportunities to come by on the loan side. And I think our patience has been rewarded because I think Paul mentioned that our spread on the loans we wrote in the $500 million or so was around $279 million. I think the spread on what's coming in the fourth quarter is going to be wider than that.

Our next question is a follow-up from Jade Rahmani with KBW.

Just curious if you would contemplate launching a securities fund, if you can deliver 15% type returns with leverage, you could put the leverage in the fund, not on Ladder's balance sheet and create value for investors looking for that type of return profile. And of course, comparing to residential mortgage securities, commercial has a lot more predictable duration. So you don't have the prepayment volatility that the agency REITs deal with.

Yes. I mean, we've done that before. When we first opened, we ran a few investment portfolios even some individuals that we knew because sometimes securities get cheap, but most people with the first and last name don't know how to go buy them. And so oftentimes, we'll get a call and say, why don't you buy these?

So we have an asset that's yielding, as I said, a levered yield of around 15% I think. So that's generally attractive, but it does come with a lot of leverage. We've historically looked -- we've looked at that. We've looked at stapling on a residential mortgage arm of things because we all understand that business also, but haven't done it. And the last thing we've looked at too is possibly spinning off our triple net portfolio because we don't get much for that in valuation.

So this is going to be -- 2026 is going to be a year about really fine-tuning the columns and what the right cap rate should be on those things. We have an internal manager that has no value apparently. So there's lots of things we can do now around the edges, but the first step is going to be becoming an investment-grade company. And we still like the -- given where we are in the cycle right now, we like the commercial mortgage business better than the residential side. The residential side could get very interesting though, not from a loan, but from a standpoint of if there's too much supply due to the absence of the Fed.

So those are very attractive, but as I said, they do have a lot of duration on them. So -- but we're probably -- we're agnostic as to holding on to things that yield 15% or selling things that make 1 to 2 points and then recycling the money. And I think that, that is an option open to us right now, as you saw in the small sales that we did in the third quarter.

And then the New York office equity investment you made, how are you feeling about that? Is that a long-term hold? It looks like it was pretty prescient in terms of timing. But could you also remind us the size of that?

Sure. Our investment -- we're a minority participant in the equity on that. But we may very well get involved in the debt side of that situation later on, but we have a loan from an insurance company for now. But that building, 780 Third Avenue, by the way, if anybody cares, is -- we put in a $13 million or $14 million investment. At the time, the building was about 50% occupied. I don't know where we are on free rent, but I do believe we've now -- the building is leased over 90% in just a short -- under 1.5 years.

So we do like that one. Again, that's a very high-quality building. Third Avenue is not known for high-quality buildings, but a lot of the lower quality is becoming residential. And a lot of those poorly occupied office buildings that are becoming residential, those tenants are looking for space. The real benefit we picked up was between JPMorgan and Citadel, Park Avenue is being just gobbled up on space and a lot of those tenants are also moving. So we didn't -- we thought we were going to get Third Avenue tenants looking for an address. We wound up getting Park Avenue tenants that were being displaced by JPMorgan's expansion.

So all going well. I wish we had done more of that. And do we like that? We are looking at another situation right now of larger size than the one we did at 780 Third Avenue, and we like it. These transportation hubs in New York City tend to do better. They come out a little bit quicker, especially when people have concerns around safety on mass transportation. I think that situation has largely corrected itself with the return of people. Our offices are full. We haven't ordered anybody to be in 5 days a week, but most of them are.

So we generally like pockets of the office market, but we do understand the obsolescence associated with some of the older ones. So yes, we like where we are. We're happy to do more of those investments. And that long-term hold is the last part of your question there. I would say, we're going to hold that for a while, yes.

We have no further questions at this time. Mr. Harris, I'd like to turn the floor back over to you for closing comments.

Thanks, everybody, for listening and those who dialed in afterwards. And good year 2025, we're in the fourth quarter. The reason I say that now is because we're not going to talk again until after the new year comes and we get through the audited financials. But a lot of this is just falling into place the way we largely expected it.

The only real surprises were the rapid paydowns that took place in the second half of last year, but we're catching up quickly. We've had an inflection point here in the last quarter where we originated more than paid off, and we think that, that is going to be a consistent theme over the next 4 or 5 quarters. So thank you for tuning in, and we'll catch up with you after the new year.

Ladies and gentlemen, this does conclude today's teleconference. You may disconnect your lines at this time. Thank you for your participation, and have a wonderful day.