Ladder Capital (LADR) Q3 FY26 earnings call: guidance and Q&A

Could management provide details on the retail property in Carmel, New York, mentioned in the press release?

Brian Harris confirmed it's an asset foreclosed on a few years ago, currently under contract for sale, and expected to result in a slight loss of about $600,000, which was taken in the current quarter.

“The -- it's an asset that we foreclosed on a few years ago. It is under contract for sale presently. And there is likely going to be a slight loss associated with it of about $600,000, which I think we took this quarter, didn't we, Paul?”

asked by Timothy D'Agostino · answered by Brian Harris

How is Ladder Capital balancing share repurchases, loan originations, and securities investments given the current rate environment, and what might limit or expand buyback appetite?

Brian Harris explained that the company pivoted to securities due to slowing acquisition pipelines and attractive yields on AAA CLO securities (14-15% levered). He stated that while they prefer loan originations, market demand for quality loans is low. Regarding buybacks, they will continue opportunistically as long as the stock is cheap, but are mindful of bondholders and not borrowing solely for buybacks.

“The origination side, we'd love to sell all of our securities and put that money into own originations. But the demand just isn't there and at least the quality demand because the acquisition pipeline has effectively evaporated because prices -- borrowing rates have gone up so much.”

asked by Timothy D'Agostino · answered by Brian Harris

Given that 87% of the loan portfolio was originated since late 2024, what is the dollar amount or percentage of 2021 and 2022 vintage multifamily loans, and does management expect stress in this sector?

Pamela McCormack clarified that 99% of their multifamily loans were originated after late 2024, with only one legacy multifamily loan of $10.2 million from before that period, which they expect to take title to without impairment. Brian Harris added that Ladder avoided the 2021-2022 vintage multifamily market due to concerns about underwriting practices at the time, thus expecting minimal stress in their book.

“We only have -- so Jade, 99% of our multifamily loans were originated after late 2024. We have one legacy multifamily loan. It's a $10 million -- $10.2 million loan. I do expect that it's likely we'll end up taking title to that. But that -- and we do not expect an impairment on it, but that is the only multifamily loan that is pre late 2024.”

asked by Jade Rahmani · answered by Pamela McCormack

Does Ladder Capital expect to participate in special situations or M&A, potentially acquiring assets from distressed players, given its investment-grade rating?

Brian Harris stated they are very interested in M&A and have received calls this quarter. He believes they offer synergies to companies that have cleaned up most problems but are struggling in the stock market. They are open to acquiring high-quality assets, especially newer properties, but will not be hostile acquirers. They also participate by making loans on buildings purchased at lower prices.

“I would tell you that all of the above, we would very much like to participate in merger and acquisition activity. I think I mentioned on our last call, you would think after all of the stress that took place after interest rates spiked from the Fed, that our phone would have ranged. And it never did. This quarter, we did get a couple of calls, a couple of bankers checking in with us on a couple of names that we know a lot of the personnel over there. So we'd like to.”

asked by Jade Rahmani · answered by Brian Harris

How competitive is the current lending environment, and how attractive are returns on new loans, distinguishing between higher SOFR and wider spreads?

Brian Harris noted that credit spreads have widened, but not to the point of distress, and the market remains competitive with some entities tightening spreads for market share. He explained that Ladder prefers to buy AAA CLO securities at attractive yields (14-15% levered) rather than compete in the loan origination market at sub-250 over spreads, viewing it as a safer and more liquid proposition.

“The market at large is very competitive still despite the fact that credit spreads are widening. There are entities out there that are tightening their spreads, I guess, for market share, always dangerous 2 words. And why not? We're happy to let them go to work at tight spreads. And when they come to market with CLOs, we'll buy the AAAs.”

asked by Christopher Muller · answered by Brian Harris

How does the volatility and shift in interest rates impact the CECL model, and should higher reserves be expected?

Brian Harris stated that credit quality seems stable, and they are not seeing credit getting worse. He mentioned that while doubling the loan book might warrant adding to CECL, they are adequately covered for current reserves. He believes the market might calm after year-end Fed actions and midterm elections, and that their known problems are not getting worse.

“I don't pay attention to rates. I don't know if anyone else on our staff does. But I think that we'll address that intuitively, if you double the size of your loan book, you should probably add something to CECL and we probably will. But I don't -- it's not like credit is getting worse. We're not seeing -- credit seems pretty stable.”

asked by Christopher Muller · answered by Brian Harris

Has the success of the office equity monetization in Q3 changed the team's appetite for further monetizations or additions to the CRE portfolio?

Brian Harris confirmed they have an appetite to acquire more real estate equity, particularly in micro-markets within San Francisco, Miami, and New York, where opportunities exist. He noted that they have made several successful investments in Manhattan office buildings. He emphasized that real estate is a core vertical for Ladder, providing stable, durable income, and they are always open to selling assets at the right price.

“We have quite a bit of real estate equity and we have been adding -- I think I said it earlier in the call that we would rather -- there was a time where we would rather just buy the office building, then finance it. Because if you're right, you get paid off. And if you're right on the equity side, you can double and triple your money.”

asked by Unknown Analyst · answered by Brian Harris

With the pre-2024 loan balance dropping to 14-15% and lighter repayments this quarter, what are the expectations for this figure to trend in the next few quarters?

Brian Harris mentioned over $100 million of earlier vintage loans are coming due before year-end, which he expects to pay off. Pamela McCormack added that their legacy book is small, around $250 million with an average loan size of $25 million, and is well-contained with a healthy CECL reserve.

“Our legacy book is pretty small. It's like $250 million with an average loan size of $25 million. and included in that is a loan upcoming that we -- one of the larger loans that we expect to pay off that Brian referenced earlier. So really well contained. And as we said, our CECL reserve is pretty healthy relative to that book.”

asked by Unknown Analyst · answered by Pamela McCormack