Ladder Capital Corp.
07/28/2025 | Press release | Distributed by Public on 07/28/2025 07:38
Quarterly Report for Quarter Ending June 30, 2025 (Form 10-Q)
Management's Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis of financial condition and results of operations should be read in conjunction with the consolidated financial statements and the related notes of Ladder Capital Corp included within this Quarterly Report and the Annual Report. This Management's Discussion and Analysis of Financial Condition and Results of Operations contains forward-looking statements. See "Cautionary Statement Regarding Forward-Looking Statements" within this Quarterly Report and "Risk Factors" within the Annual Report for a discussion of the uncertainties, risks and assumptions associated with these statements. Actual results may differ materially from those contained in any forward-looking statements as a result of various factors, including but not limited to, those in "Risk Factors" set forth within the Annual Report.
References to "Ladder," the "Company," and "we," "our" and "us" refer to Ladder Capital Corp, a Delaware corporation incorporated in 2013, and its consolidated subsidiaries.
Overview
Ladder Capital is an investment grade-rated, internally-managed real estate investment trust ("REIT") that is a leader in commercial real estate finance. We originate and invest in a diverse portfolio of commercial real estate and real estate-related assets, focusing on senior secured assets. Our investment activities include: (i) our primary business of originating senior first mortgage fixed and floating rate loans collateralized by commercial real estate with flexible loan structures; (ii) owning and operating commercial real estate, including net leased commercial properties; and (iii) investing in investment grade securities secured by first mortgage loans on commercial real estate. We believe that our in-house origination platform, ability to flexibly allocate capital among complementary product lines, credit-centric underwriting approach, access to diversified financing sources, and experienced management team position us well to deliver attractive returns on equity to our shareholders through economic and credit cycles.
Our businesses, including balance sheet lending, conduit lending, securities investments, and real estate investments, provide for a stable base of net interest and rental income. We have originated $30.4 billion of commercial real estate loans from our inception in October 2008 through June 30, 2025. During this timeframe, we also acquired $15.2 billion of predominantly investment grade-rated securities secured by first mortgage loans on commercial real estate and $2.1 billion of selected net leased and other real estate assets.
As part of our commercial mortgage lending operations, we originate conduit loans, which are first mortgage loans on stabilized, income producing commercial real estate properties that we intend to make available for sale in commercial mortgage-backed securities ("CMBS") securitizations. From our inception in October 2008 through June 30, 2025, we originated $17.0 billion of conduit loans, of which $16.9 billion were sold into 75 CMBS securitizations, making us, by volume, one of the largest non-bank contributors of loans to CMBS securitizations in the United States in such period. Our sales of loans into securitizations are generally accounted for as true sales, not financings, and we generally retain no ongoing interest in loans which we securitize unless we are required to do so as issuer pursuant to the risk retention requirements of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, as amended, (the "Dodd-Frank Act"). The securitization of conduit loans enables us to reinvest our equity capital into new loan originations or allocate it to other investments.
We maintain a diversified and flexible financing strategy supporting our investment strategy and overall business operations, including the use of senior unsecured notes, non-recourse, non-mark-to-market Collateralized Loan Obligations ("CLO") debt issuances and committed term financing from leading financial institutions. Refer to "Our Financing Strategies" and "Liquidity and Capital Resources" for further information.
Ladder was founded in October 2008 and we completed our initial public offering in February 2014. We are led by a disciplined and highly aligned management team. As of June 30, 2025, our management team and directors held interests in our Company comprising over 11% of our total equity. On average, our management team members have 29 years of experience in the industry. Our management team includes Brian Harris, Chief Executive Officer; Pamela McCormack, President; Paul J. Miceli, Chief Financial Officer; Robert Perelman, Head of Asset Management; and Kelly Porcella, Chief Administrative Officer & General Counsel. Anthony V. Esposito, Chief Accounting Officer, and Stephanie Lin, Assistant Secretary, are additional officers of Ladder.
Our Businesses
We invest primarily in loans, securities and other interests in U.S. commercial real estate, with a focus on senior secured assets. Our complementary business segments are designed to provide us with the flexibility to opportunistically allocate capital in order to generate attractive risk-adjusted returns under varying market conditions. The following chart summarizes our investment portfolio as of June 30, 2025 ($ in thousands):
(1)CRE equity asset amounts represent undepreciated asset values.
There are a number of factors that influence our operating results. Some of these factors include: (1) our competition; (2) market and economic conditions, including inflation; (3) loan origination and repayment volume; (4) profitability of securitizations; (5) avoidance of credit losses; (6) availability of debt and equity funding and the costs of that funding; (7) the net interest margin on our investments; (8) effectiveness of our hedging and other risk management practices; (9) real estate transaction volumes; (10) occupancy rates; and (11) expense management. Refer to the heading "Results of Operations."
Loans
Balance Sheet First Mortgage Loans.We originate and invest in balance sheet first mortgage loans secured by commercial real estate properties that are typically undergoing transition, including lease-up, sell-out, and renovation or repositioning. These mortgage loans are structured to fit the needs and business plans of the property owners, and generally have Term SOFR-based floating rates and terms (including extension options) ranging from one to five years. Our loans are directly originated by an internal team that has longstanding and strong relationships with borrowers and mortgage brokers throughout the United States. We follow a rigorous investment process, which begins with an initial due diligence review; continues through a comprehensive legal and underwriting process incorporating multiple internal and external checks and balances; and culminates in approval or disapproval of each prospective investment by our Investment Committee. Balance sheet first mortgage loans in excess of $50.0 million also require the approval of our board of directors' Risk and Underwriting Committee.
We generally seek to hold our balance sheet first mortgage loans for investment although we also maintain the flexibility to contribute such loans into a CLO or similar structure, sell participation interests or "b-notes" in our mortgage loans or sell such mortgage loans as whole loans. Our balance sheet first mortgage loans may be refinanced by us into a new conduit first mortgage loan upon property stabilization. As of June 30, 2025, we held a portfolio of 52 balance sheet first mortgage loans with an aggregate book value of $1.6 billion. Based on the loan balances and the "as-is" third-party Financial Institutions
Reform, Recovery and Enforcement Act of 1989 ("FIRREA") appraised values at origination, the weighted average loan-to-value ratio of this portfolio was 67.1% at June 30, 2025.
Other Commercial Real Estate-Related Loans.We selectively invest in note purchase financings, subordinated debt, mezzanine debt and other structured finance products related to commercial real estate that are generally held for investment. As of June 30, 2025, we held a portfolio of 2 mezzanine loans with an aggregate book value of $7.3 million. Based on the loan balance and the "as-is" third-party FIRREA appraised values at origination, the weighted average loan-to-value ratio of the portfolio was 69.2% at June 30, 2025.
Conduit First Mortgage Loans.We also originate conduit loans, which are first mortgage loans that are secured by cash-flowing commercial real estate and are available for sale to securitizations. These first mortgage loans are typically structured with fixed interest rates and generally have five- to ten-year terms. Conduit first mortgage loans are originated, underwritten, approved and funded using the same comprehensive legal and underwriting approach, process and personnel used to originate our balance sheet first mortgage loans. Conduit first mortgage loans in excess of $50.0 million also require approval of our board of directors' Risk and Underwriting Committee. We held one conduit loan with an aggregate carrying value of $28.3 million at June 30, 2025.
Although our primary intent is to sell our conduit first mortgage loans to CMBS trusts, we generally seek to maintain the flexibility to keep them on our balance sheet, sell participation interests or "B-notes" in such loans or sell the loans as whole loans. The Company holds these conduit loans in its taxable REIT subsidiary ("TRS") upon origination. As of June 30, 2025, we held one conduit first mortgage loan that was available for contribution into securitizations. Based on the loan balance and the "as-is" third-party FIRREA appraised values at origination, loan-to-value ratio of the loan was 58.9% at June 30, 2025.
The following charts set forth our total outstanding balance sheet first mortgage loans, other commercial real estate-related loans, and conduit first mortgage loans as of June 30, 2025, and a breakdown of our loan portfolio by loan size and geographic location and asset type of the underlying real estate by loan balance.
Real Estate
Net Leased Commercial Real Estate Properties.As of June 30, 2025, we owned 149 single tenant net leased properties with an undepreciated book value of $592.0 million. These properties are fully leased on a net basis where the tenant is generally responsible for payment of real estate taxes, property, building and general liability insurance and property and building maintenance expenses. As of June 30, 2025, our net leased properties comprised a total of 3.4 million square feet, 100% leased with an average age since construction of 21.1 years and a weighted average remaining lease term of 7.2 years. Commercial real estate investments in excess of $20.0 million require the approval of our board of directors' Risk and Underwriting Committee. The majority of the tenants in our net leased properties are necessity-based businesses. During the three months ended June 30, 2025, we collected 100% of rent on these properties.
Diversified Commercial Real Estate Properties. As of June 30, 2025, we owned 55 diversified commercial real estate properties throughout the U.S with an undepreciated book value of $344.0 million. During the three months ended June 30, 2025, we collected 98% of rent on these properties.
The following charts summarize the composition of our real estate investments as of June 30, 2025 ($ in millions):
Securities
We invest in primarily AAA-rated real estate securities, typically front pay securities, with relatively short duration and significant subordination. We invest primarily in CMBS, including CRE CLOs, secured by first mortgage loans on commercial real estate. These investments provide a stable and attractive base of net interest income and help us manage our liquidity and hyper-amortization features included in many of these securities positions help mitigate potential credit losses in the event of adverse market conditions. We have significant in-house expertise in the evaluation and trading of these securities, due in part to our experience in originating and underwriting mortgage loans that comprise assets within CMBS trusts, as well as our experience in structuring CMBS transactions. In the future, we may invest in CMBS securities or other securities that are unrated.
As of June 30, 2025, the estimated fair value of our portfolio of CMBS investments totaled $2.0 billion in 114 CUSIPs ($17.2 million average investment per CUSIP). Included in the $2.0 billion of CMBS securities are $8.9 million of CMBS securities designated as risk retention securities under the Dodd-Frank Act, which are subject to transfer restrictions over the term of the securitization trust. The following chart summarizes our securities investments by market value, 99.3% of which were rated investment grade by Standard & Poor's Ratings Group, Moody's Investors Service, Inc. or Fitch Ratings Inc. as of June 30, 2025:
As of June 30, 2025, our CMBS investments had a weighted average duration of 2.4 years. The commercial real estate collateral underlying our CMBS investment portfolio is located throughout the United States. As of June 30, 2025, by property count and market value, respectively, 60.5% and 65.2% of the collateral underlying our CMBS investment portfolio was distributed throughout the top 25 metropolitan statistical areas ("MSAs") in the United States, with 5.0% and 12.9%, by property count and market value, respectively, of the collateral located in the New York-Newark-Jersey City MSA, and the concentrations in each of the remaining top 24 MSAs ranging from 0.4% to 5.8% by property count and 0.2% to 7.0% by market value.
AAA-rated CMBS or U.S. Agency securities investments in excess of $106.0 million and all other investment grade CMBS or U.S. Agency securities investments in excess of $51.0 million, each in any single class of any single issuance, require the approval of our board of directors' Risk and Underwriting Committee. The Risk and Underwriting Committee also must approve any investments in non-rated or sub-investment grade CMBS or U.S. Agency securities in any single class of any single issuance in excess of the lesser of (x) $21.0 million and (y) 10% of the total net asset value of the respective Ladder subsidiary or other entity for which Ladder has authority to make investment decisions.
Other Investments
Unconsolidated Ventures.From time to time we invest in real estate related ventures. As of June 30, 2025, the carrying value of our unconsolidated ventures was $18.9 million.
United States Treasury Securities. We invest in short-term and long-term U.S. Treasury securities. Short-term U.S. Treasury securities are classified as cash and cash equivalents on our consolidated balance sheet. As of June 30, 2025, we held $18.9 million of U.S. Treasury securities classified as cash and cash equivalents on our consolidated balance sheet.
Our Financing Strategies
Our financing strategies are critical to the success and growth of our business. We manage our financing to complement our asset composition and to diversify our exposure across multiple capital markets and counterparties. In addition to cash flow from operations, we fund our operations and investment strategy through a diverse array of funding sources, including:
•Senior unsecured notes
•Revolving credit facility
•CLO transactions
•Secured loan and securities repurchase financing
•Non-recourse mortgage debt
•Loan sales and securitizations
•Unencumbered assets available for financing
•Equity
From time to time, we may add financing counterparties that we believe will complement our business, although the agreements governing our indebtedness may limit our ability and the ability of our present and future subsidiaries to incur additional indebtedness. Our amended and restated charter and by-laws do not impose any threshold limits on our ability to use leverage. Refer to our discussion below and "Management's Discussion and Analysis of Financial Condition and Results of Operations." under the heading "Liquidity and Capital Resources" and Note 6, Debt Obligations, Net, to our consolidated financial statements included elsewhere in this Quarterly Report, for additional information about our financing arrangements.
Senior Unsecured Notes
As of June 30, 2025, we had $2.0 billion of senior unsecured notes outstanding. These unsecured financings were comprised of $285.0 million in aggregate principal amount of 5.25% senior notes due 2025 (the "2025 Notes"), $599.5 million in aggregate principal amount of 4.25% senior notes due 2027 (the "2027 Notes"), $633.9 million in aggregate principal amount of 4.75% senior notes due 2029 (the "2029 Notes") and $500.0 million in aggregate principal amount of 7.00% senior notes due 2031 (the "2031 Notes", collectively with the 2025 Notes, the 2027 Notes and the 2029 Notes, the "Notes"). The Company currently guarantees the obligations under the Notes and the indenture. Subsequent to quarter end, we issued $500.0 million of 5.50% senior notes due 2030 and redeemed in full our 2025 Notes, which had an outstanding principal amount of $285.0 million as of June 30, 2025.
Due in large part to devoting such a large portion of our capital structure to equity and unsecured corporate bond debt, we maintain a $3.6 billion pool of unencumbered assets, comprised primarily of first mortgage loans and unrestricted cash as of June 30, 2025.
Revolving Credit Facility
Our Revolving Credit Facility is available on a revolving basis to finance our working capital needs and for general corporate purposes. On January 2, 2025, we increased the aggregate maximum borrowing amount of the Revolving Credit Facility to $850.0 million, following the upsize to $725 million on December 20, 2024. The Revolving Credit Facility also allows us to enter into additional incremental revolving commitments up to an aggregate facility size of $1.3 billion subject to certain customary conditions. Borrowings under the Revolving Credit Facility bear interest at a rate equal to adjusted term SOFR plus a margin of 125 basis points as of June 30, 2025. The margin for borrowings is subject to adjustment based on the Company's credit rating and may range between 77.5 and 170 basis points. As of June 30, 2025, we had no outstanding borrowings on the Revolving Credit Facility.
Effective May 27, 2025, the date on which we received investment grade ratings from Moody's and Fitch, the Revolving Credit Facility was automatically amended, the pledge of the shares of (or other ownership or equity interest in) certain subsidiaries was terminated, and each guarantor (other than Ladder Capital Corp and any subsidiary that is a trigger guarantor) was released and discharged from all obligations as a guarantor and/or pledgor.
Collateralized Loan Obligations ("CLO") Debt
In July 2021, we financed a pool of $607.5 million of loans in a managed CLO transaction ("LCCM 2021-FL2"), which generated $498.2 million of gross proceeds to Ladder. On February 18, 2025, the Company redeemed all outstanding obligations of LCCM 2021-FL2. In December 2021, the Company financed a pool of $729.4 million of loans in a managed
CLO transaction ("LCCM 2021-FL3"), which generated $566.2 million of gross proceeds to Ladder. On June 16, 2025, the Company redeemed all outstanding obligations of LCCM 2021-FL3. Refer to Note 6, Debt Obligations, Net for further detail.
As of June 30, 2025, we did not have any matched term, non-mark-to-market and non-recourse CLO debt included in debt obligations on our consolidated balance sheets.
Committed Loan Financing Facilities
We are a party to multiple committed loan repurchase agreement facilities, totaling $1.1 billion of credit capacity. As of June 30, 2025, we had $62.7 million of borrowings outstanding, with an additional $1.0 billion of committed financing available. Assets pledged as collateral under these facilities are generally limited to first lien whole mortgage loans, mezzanine loans and certain interests in such first mortgage and mezzanine loans.
We have the option to extend some of our existing facilities subject to a number of customary conditions. The lenders have sole discretion to include collateral in these facilities and to determine the market value of the collateral. In certain cases the lenders may require additional collateral, a full or partial repayment of the facilities (margin call), or a reduction in undrawn availability under the facilities. Typically, the lender establishes a maximum percentage of the collateral asset's market value that can be borrowed. We often borrow at a lower percentage of the collateral asset's value than the maximum, leaving us with excess borrowing capacity that can be drawn upon at a later date and/or applied against future margin calls so that they can be satisfied on a cashless basis.
Securities Repurchase Financing
We are a party to master repurchase agreements with several counterparties to finance our investments in securities. As of June 30, 2025, the Company had $294.4 million of securities repurchase debt outstanding. The securities that serve as collateral for these borrowings are typically highly liquid AAA-rated CMBS with relatively short duration and significant subordination. The lenders have sole discretion to determine the market value of the collateral on a daily basis, and, if the estimated market value of the collateral declines, the lenders have the right to require additional collateral. If the estimated market value of the collateral subsequently increases, we have the right to call back excess collateral.
Mortgage Loan Financing
We typically finance our real estate investments with long-term, non-recourse mortgage financing. These mortgage loans have carrying amounts of $421.9 million, net of unamortized premiums of $3.4 million as of June 30, 2025, representing proceeds received upon financing greater than the contractual amounts due under these agreements. The premiums are being amortized over the remaining life of the respective debt instruments using the effective interest method. We recorded $0.3 million of premium amortization, which decreased interest expense for the six months ended June 30, 2025. During the six months ended June 30, 2025, we executed no new term debt agreements.
Hedging Strategies
We may enter into interest rate and credit spread derivative contracts to mitigate our exposure to changes in interest rates and credit spreads. We generally seek to hedge the interest rate risk on the financing of assets that have a duration longer than five years, including newly-originated conduit first mortgage loans and securities if long enough in duration. We monitor our asset profile and our hedge positions to manage our interest rate and credit spread exposures, and we seek to match fund our assets according to the liquidity characteristics and expected holding periods of our assets.
Financial Covenants
We generally seek to maintain a debt-to-equity ratio of approximately 3.0:1.0 or below. We expect this ratio to fluctuate during the course of a fiscal year due to the normal course of business. This ratio may also fluctuate as a result of our conduit lending operations, in which we generally securitize our inventory of conduit loans at intervals, and also because of changes in our asset mix, due in part to such securitizations. We generally seek to match fund our assets according to their liquidity characteristics and expected hold period. We believe that the defensive positioning of our predominantly senior secured assets and our financing strategy has allowed us to maintain financial flexibility to capitalize on an attractive range of market opportunities as they have arisen.
We and our subsidiaries may incur substantial additional debt in the future. However, we are subject to certain restrictions on our ability to incur additional debt in the indentures governing the Notes and our other debt agreements. Subsequent to June 30,
2025, we issued $500 million in aggregate principal amount of 5.50% senior notes due 2030, and are subject to additional restrictions on our ability to incur additional debt in the indenture governing such notes (the "2030 Indenture"). Under the 2030 Indenture, we may not incur certain types of indebtedness unless our leverage ratio (as defined in the 2030 Indenture) is less than or equal to 3.50:1.00 and our fixed charge coverage ratio is more than or equal to 1.25:1.00. We are also required to maintain unencumbered assets in excess of 120% of our aggregate unsecured indebtedness.
Our borrowings under certain financing agreements are subject to financial covenants as defined in such agreements, including minimum net worth requirements, minimum liquidity levels, maximum leverage ratios, minimum fixed charge coverage or interest coverage ratios. These restrictions, which would permit us to incur substantial additional debt, are subject to significant qualifications and exceptions.
Further, certain of our financing arrangements and loans on our real property are secured by our assets, including the assets of certain subsidiaries. From time to time, certain of these financing arrangements and loans may prohibit certain of our subsidiaries from paying dividends to us, from making distributions on such subsidiary's capital stock, from repaying to us any loans or advances to such subsidiary from us or from transferring any of such subsidiary's property or other assets to us or other of our subsidiaries. In addition, one of our subsidiaries was previously a captive insurance company subject to state regulations, which required regulatory approval for dividend distributions, limiting the Company's ability to utilize cash held by our subsidiary. Effective January 31, 2025, the subsidiary is no longer licensed as a captive insurer and is no longer subject to state regulation.
We are in compliance with all covenants as described in this Quarterly Report as of June 30, 2025.
Results of Operations
A discussion regarding our results of operations for the three months ended June 30, 2025 compared to the three months ended March 31, 2025 is presented below.
Three months ended June 30, 2025 compared to the three months ended March 31, 2025
The following table sets forth information regarding our consolidated results of operations ($ in thousands):
| Three Months Ended | |||||||||||||||||
| June 30, 2025 | March 31, 2025 | Difference | |||||||||||||||
| Net interest income | |||||||||||||||||
| Interest income | $ | 62,735 | $ | 64,326 | $ | (1,591) | |||||||||||
| Interest expense | 41,205 | 43,997 | (2,792) | ||||||||||||||
| Net interest income (expense) | 21,530 | 20,329 | 1,201 | ||||||||||||||
| Provision for (release of) loan loss reserves, net | (42) | (81) | 39 | ||||||||||||||
| Net interest income (expense) after provision for (release of) loan loss reserves | 21,572 | 20,410 | 1,162 | ||||||||||||||
| Other income (loss) | |||||||||||||||||
| Real estate operating income | 25,775 | 21,773 | 4,002 | ||||||||||||||
| Net result from mortgage loan receivables held for sale | 4,914 | 162 | 4,752 | ||||||||||||||
| Gain (loss) on real estate, net | - | 3,807 | (3,807) | ||||||||||||||
| Fee and other income | 2,803 | 5,285 | (2,482) | ||||||||||||||
| Net result from derivative transactions | 1,526 | 323 | 1,203 | ||||||||||||||
| Earnings (loss) from investment in unconsolidated ventures | (288) | (732) | 444 | ||||||||||||||
| Gain on extinguishment of debt | 1 | 256 | (255) | ||||||||||||||
| Total other income (loss) | 34,731 | 30,874 | 3,857 | ||||||||||||||
| Costs and expenses | |||||||||||||||||
| Compensation and employee benefits | 11,561 | 18,761 | (7,200) | ||||||||||||||
| Operating expenses | 4,767 | 4,516 | 251 | ||||||||||||||
| Real estate operating expenses | 10,266 | 8,766 | 1,500 | ||||||||||||||
| Investment related expenses | 844 | 1,188 | (344) | ||||||||||||||
| Depreciation and amortization | 8,043 | 7,336 | 707 | ||||||||||||||
| Total costs and expenses | 35,481 | 40,567 | (5,086) | ||||||||||||||
| Income (loss) before taxes | 20,822 | 10,717 | 10,105 | ||||||||||||||
| Income tax expense (benefit) | 3,714 | (838) | 4,552 | ||||||||||||||
| Net income (loss) | $ | 17,108 | $ | 11,555 | $ | 5,553 | |||||||||||
Investment Overview
Activity for the three months ended June 30, 2025 included fundings of $159.6 million and paydowns of $191.4 million, which contributed to a $133.6 million decrease of commercial mortgage loans. Activity for the three months ended June 30, 2025 included securities purchases of $623.5 million, amortization and paydowns of $116.0 million and sales of $19.5 million, which contributed to a net increase in our securities portfolio of $490.1 million. In addition, we purchased $267.8 million of short-term U.S. Treasury securities during the three months ended June 30, 2025. Nearly the entire short-term U.S. Treasury securities portfolio, or $733.9 million, matured or was sold during the three months ended June 30, 2025.
Activity for the three months ended March 31, 2025 included fundings of $316.4 million and paydowns of $181.9 million, which contributed to a $137.6 million increase of commercial mortgage loans. Activity for the three months ended March 31, 2025 included securities purchases of $521.8 million, $85.2 million of amortization and paydowns and sales of $39.9 million, which contributed to a net increase in our securities portfolio of $395.5 million. In addition, we purchased $1.4 billion of short-term U.S. Treasury securities during the three months ended March 31, 2025, and $1.8 billion matured or was sold during the three months ended March 31, 2025.
Net Interest Income
The $1.6 million decrease in net interest income was primarily attributable to net payoffs within our loan portfolio, partially offset by an increase in interest earned from CMBS securities due to purchases. There was a $0.5 billion increase in average securities investments from $1.3 billion for the three months ended March 31, 2025 to $1.8 billion for the three months ended June 30, 2025. There was a $0.1 billion increase in average loan investments from $1.6 billion for the three months ended March 31, 2025 to $1.7 billion for the three months ended June 30, 2025.
The $2.8 million decrease in interest expense was primarily attributable to the redemption of all outstanding obligations of LCCM 2021-FL2 and LCCM 2021-FL3.
The increase in net interest income before provision for loan losses of $1.2 million is primarily driven by increased income securities and lower interest expense as a result of the payoffs of LCCM 2021-FL2 and LCCM 2021-FL3.
As of June 30, 2025 and March 31, 2025, the weighted average yield on our mortgage loan receivables was 8.9% and 8.6%, respectively. As of June 30, 2025 and March 31, 2025, the weighted average interest rate on borrowings against our mortgage loan receivables was 6.5% and 6.3%, respectively. The increase in the rate on borrowings against our mortgage loan receivables from June 30, 2025 to March 31, 2025 was primarily due to changes in composition of our borrowings against our mortgage loans. As of June 30, 2025, we had outstanding borrowings secured by our mortgage loan receivables equal to 4.0% of the carrying value of our mortgage loan receivables, compared to 19.9% as of March 31, 2025.
As of June 30, 2025 and March 31, 2025, the weighted average yield on our securities was 5.9% and 5.7%, respectively. As of June 30, 2025, the weighted average interest rate on borrowings against our securities was 4.9%. As of June 30, 2025, we had outstanding borrowings secured by our securities equal to 15.0% of the carrying value of our securities. As of March 31, 2025, we did not have any borrowings against our securities.
Our real estate portfolio is comprised of non-interest bearing assets; however, interest incurred on mortgage financing collateralized by such real estate is included in interest expense. As of June 30, 2025 and March 31, 2025, the weighted average interest rate on mortgage borrowings against our real estate was 6.1%. As of June 30, 2025, we had outstanding borrowings secured by our real estate equal to 61.1% of the carrying value of our real estate, compared to 65.0% as of March 31, 2025.
Real Estate Operating Income
The increase of $4.0 million in real estate operating income during the three months ended June 30, 2025 compared to the three months ended March 31, 2025 was primarily attributable to an increase in operations at our properties and the acquisition of real estate that occurred during the three months ended June 30, 2025, for which there was no operating income during the three months ended March 31, 2025. Refer to Note 5, Real Estate and Related Lease Intangibles, Net, for further details.
Net Result from Mortgage Loan Receivables Held for Sale
Net result from mortgage loan receivables held for sale includes unrealized losses on loans held for sale related to lower of cost or market adjustments and realized gains and losses from the sale of loans. During the three months ended June 30, 2025, we sold one conduit loan for a gain of $3.6 million and we recorded $1.3 million of unrealized gains on loans related to lower of cost or market adjustments on our conduit loans. During the three months ended March 31, 2025, we recorded $0.2 million of unrealized gains on loans related to lower of cost or market adjustments on our conduit loans. Income from sales of loans, net is subject to market conditions impacting timing, size and pricing and as such may vary significantly quarter to quarter.
Gain (Loss) on Real Estate, net
The decrease of $3.8 million of gain on real estate, net during the three months ended June 30, 2025 compared to the three months ended March 31, 2025 was the result of no property sales during the three months ended June 30, 2025 compared to property sales during the three months ended March 31, 2025. Refer to Note 5, Real Estate and Related Lease Intangibles, Net, for further detail.
Fee and Other Income
We generate fee income on the loans we originate and in which we invest and include unrealized and realized gains and losses on securities within fee and other income. The $2.5 million decrease in fee and other income was primarily due to a decrease in unrealized and realized gains on securities, and the timing of loan payoffs and late fees received for the three months ended June 30, 2025 as compared to the three months ended March 31, 2025.
Net Result from Derivative Transactions
The total net result from derivative transactions is comprised of hedging interest expense, realized gains/losses related to hedge terminations and unrealized gains/losses related to changes in the fair value of asset hedges. Net result from derivative transactions of $1.5 million was comprised of a realized gain of $1.7 million and an unrealized loss of $(0.2) million for the three months ended June 30, 2025. Net result from derivative transactions of $0.3 million was comprised of a realized gain of $0.3 million and an unrealized gain of $35 thousand for the three months ended March 31, 2025. The hedge positions primarily relate to fixed rate conduit loans and securities investments. The derivative positions that generated these results were a combination of five and ten year U.S. treasury rate futures that we employed in an effort to hedge the interest rate risk primarily on the financing of our fixed rate assets and the net interest income we earn against the impact of changes in interest rates. The gain during the three months ended June 30, 2025 was primarily related to movement in interest rates during the three months ended June 30, 2025.
Compensation and Employee Benefits
Compensation and employee benefits are comprised primarily of salaries, bonuses, stock-based compensation and other employee benefits. The decrease of $7.2 million in compensation expense was primarily attributable to the immediate vesting of shares that were granted during the three months ended March 31, 2025, partially offset by an increase in bonus accrual for the three months ended June 30, 2025 as compared to the three months ended March 31, 2025.
Operating Expenses
Operating expenses are primarily comprised of professional fees, and lease, technology and administrative expenses. The increase of $0.3 million during the three months ended June 30, 2025 compared to the three months ended March 31, 2025 was primarily related to an increase in professional fees, information technology and administrative expenses.
Real Estate Operating Expenses
The increase of $1.5 million in real estate operating expenses during the three months ended June 30, 2025 compared to the three months ended March 31, 2025 was primarily attributable to an increase in operations at our properties and the acquisition of real estate that occurred during the three months ended June 30, 2025, for which there was no operating expenses during the three months ended March 31, 2025. Refer to Note 5, Real Estate and Related Lease Intangibles, Net, for further details.
Investment Related Expenses
Investment related expenses are comprised primarily of custodian fees, financing costs, servicing fees related to loans, and other deal related expenses. The decrease of $0.3 million during the three months ended June 30, 2025 compared to the three months ended March 31, 2025 was primarily attributable to a decrease in deal related expenses.
Depreciation and Amortization
The increase of $0.7 million in depreciation and amortization during the three months ended June 30, 2025 compared to the three months ended March 31, 2025 was primarily attributable to the acquisition of real estate that occurred during the three months ended June 30, 2025, for which there was no depreciation and amortization during the three months ended March 31, 2025. Refer to Note 5, Real Estate and Related Lease Intangibles, Net, for further details.
Income Tax (Benefit) Expense
Most of our consolidated income tax provision relates to business units held in our TRSs. The increase in expense during the three months ended June 30, 2025 compared to the three months ended March 31, 2025 is primarily a result of changes in our income in our TRSs.
Results of Operations
A discussion regarding our results of operations for the six months ended June 30, 2025 compared to the six months ended June 30, 2024 is presented below.
Six months ended June 30, 2025 compared to the six months ended June 30, 2024
The following table sets forth information regarding our consolidated results of operations ($ in thousands):
| Six Months Ended June 30, | |||||||||||||||||
| 2025 | 2024 | Difference | |||||||||||||||
| Net interest income | |||||||||||||||||
| Interest income | $ | 127,061 | $ | 184,428 | $ | (57,367) | |||||||||||
| Interest expense | 85,202 | 112,971 | (27,769) | ||||||||||||||
| Net interest income (expense) | 41,859 | 71,457 | (29,598) | ||||||||||||||
| Provision for (release of) loan loss reserves, net | (123) | 10,823 | (10,946) | ||||||||||||||
| Net interest income (expense) after provision for (release of) loan loss reserves | 41,982 | 60,634 | (18,652) | ||||||||||||||
| Other income (loss) | |||||||||||||||||
| Real estate operating income | 47,548 | 50,019 | (2,471) | ||||||||||||||
| Net result from mortgage loan receivables held for sale | 5,076 | (454) | 5,530 | ||||||||||||||
| Gain (loss) on real estate, net | 3,807 | 12,543 | (8,736) | ||||||||||||||
| Fee and other income | 8,088 | 7,338 | 750 | ||||||||||||||
| Net result from derivative transactions | 1,849 | 4,637 | (2,788) | ||||||||||||||
| Earnings (loss) from investment in unconsolidated ventures | (1,020) | 3 | (1,023) | ||||||||||||||
| Gain on extinguishment of debt | 257 | 177 | 80 | ||||||||||||||
| Total other income (loss) | 65,605 | 74,263 | (8,658) | ||||||||||||||
| Costs and expenses | |||||||||||||||||
| Compensation and employee benefits | 30,322 | 34,510 | (4,188) | ||||||||||||||
| Operating expenses | 9,283 | 9,822 | (539) | ||||||||||||||
| Real estate operating expenses | 19,032 | 20,180 | (1,148) | ||||||||||||||
| Investment related expenses | 2,031 | 4,281 | (2,250) | ||||||||||||||
| Depreciation and amortization | 15,379 | 16,715 | (1,336) | ||||||||||||||
| Total costs and expenses | 76,047 | 85,508 | (9,461) | ||||||||||||||
| Income (loss) before taxes | 31,540 | 49,389 | (17,849) | ||||||||||||||
| Income tax expense (benefit) | 2,876 | 836 | 2,040 | ||||||||||||||
| Net income (loss) | $ | 28,664 | $ | 48,553 | $ | (19,889) | |||||||||||
Investment Overview
Activity for the six months ended June 30, 2025 included fundings of $476.0 million and paydowns of $373.3 million, which contributed to a $3.8 million increase in commercial mortgage loans. Activity for the six months ended June 30, 2025 included securities purchases of $1.1 billion, $201.3 million of amortization and paydowns, and sales of $59.4 million, which contributed to a net increase in our securities portfolio of $885.6 million. In addition, we purchased $1.6 billion of short-term U.S. Treasury securities during the six months ended June 30, 2025. Nearly the entire short-term U.S. Treasury securities portfolio, or $2.7 billion, matured or was sold during the six months ended June 30, 2025.
Activity for the six months ended June 30, 2024 included fundings of $69.6 million and paydowns of $650.6 million, which contributed to a $615.8 million decrease in commercial mortgage loans. Activity for the six months ended June 30, 2024 included securities purchases of $152.3 million, sales of $10.6 million and $148.3 million of amortization and paydowns, which contributed to a net decrease in our securities portfolio of $4.6 million. We acquired $40.9 million in real estate via foreclosure. In addition, we purchased $3.8 billion of short-term U.S. Treasury securities during the six months ended June 30, 2024, of which $3.7 billion matured during the six months ended June 30, 2024.
Net Interest Income
The $57.4 million decrease in interest income was primarily attributable to net payoffs within our loan portfolio, partially offset by an increase in interest earned on CMBS securities due to purchases. There was a $1.2 billion decrease in average loan investments from $2.9 billion for the six months ended June 30, 2024 to $1.7 billion for the six months ended June 30, 2025. There was a $1.0 billion increase in average securities investments from $0.5 billion for the six months ended June 30, 2024 to $1.5 billion for the six months ended June 30, 2025.
The $27.8 million decrease in interest expense is primarily related to lower outstanding balances on our securities and loan repurchase facilities, the payoff of our FHLB borrowings, redemption of all outstanding obligations of LCCM 2021-FL2 and LCCM 2021-FL3, as well as a reduction in expense as a result of redemptions of our Notes, partially offset by the issuance of our 2031 Notes.
As of June 30, 2025, the weighted average yield on our mortgage loan receivables was 8.9%, compared to 9.4% as of June 30, 2024. As of June 30, 2025, the weighted average interest rate on borrowings against our mortgage loan receivables was 6.5%, compared to 7.2% as of June 30, 2024 primarily due to decreases in prevailing interest rates. As of June 30, 2025, we had outstanding borrowings secured by our mortgage loan receivables equal to 4.0% of the carrying value of our mortgage loan receivables, compared to 51.9% as of June 30, 2024.
As of June 30, 2025 the weighted average yield on our securities was 5.9%, compared to 6.9% as of June 30, 2024. As of June 30, 2025, the weighted average interest rate on borrowings against our securities was 4.9%, compared to 6.7% as of June 30, 2024. As of June 30, 2025, we had outstanding borrowings secured by our securities equal to 15.0% of the carrying value of our real estate securities, compared to 0.3% as of June 30, 2024.
Our real estate is comprised of non-interest bearing assets; however, interest incurred on mortgage financing collateralized by such real estate is included in interest expense. As of June 30, 2025, the weighted average interest rate on mortgage borrowings against our real estate assets was 6.1%, compared to 6.0% as of June 30, 2024. As of June 30, 2025, we had outstanding borrowings secured by our real estate equal to 61.1% of the carrying value of our real estate, compared to 70.9% as of June 30, 2024.
Provision for (release of) Loan Loss Reserves
The release of loan loss reserves for the six months ended June 30, 2025 of $(0.1) million was primarily due to a decrease in the size of our balance sheet first mortgage loan portfolio as a result of repayments, offset by continued uncertainty in macroeconomic market conditions affecting commercial real estate. For additional information, refer to Note 3, Mortgage Loan Receivables, in the consolidated financial statements.
The provision for loan loss reserves for the six months ended June 30, 2024 was $10.8 million. The increase in provision associated with the general reserve during the six months ended June 30, 2024 was primarily due to adverse changes in macroeconomic market conditions affecting commercial real estate, partially offset by a decrease in the size of our balance sheet first mortgage loan portfolio as a result of repayments.
For additional information, refer to "Allowance for Credit Losses and Non-Accrual Status" in Note 3, Mortgage Loan Receivables, to the consolidated financial statements.
Real Estate Operating Income
The decrease of $2.5 million in real estate operating income was primarily attributable to real estate sales that occurred between June 30, 2024 and June 30, 2025, partially offset by foreclosures that occurred during the same period. Refer to Note 5, Real Estate and Related Lease Intangibles, Net, for further details.
Net Result from Mortgage Loan Receivables Held for Sale
Net result from mortgage loan receivables held for sale includes unrealized losses on loans held for sale related to lower of cost or market adjustments and realized gains and losses from the sale of loans. During the six months ended June 30, 2025, we sold one conduit loan for a gain of $3.6 million and we recorded $1.4 million of unrealized gains on loans related to lower of cost or market adjustments on our conduit loans. During the six months ended June 30, 2024, we recorded $0.5 million of unrealized losses on loans related to lower of cost or market adjustments on our conduit loans. Income from sales of loans, net is subject to market conditions impacting timing, size and pricing and as such may vary significantly quarter to quarter.
Gain (Loss) on Real Estate, net
The decrease of $8.7 million of gain on real estate, net during the six months ended June 30, 2025 compared to the six months ended June 30, 2024 was the result of one property sale during the six months ended June 30, 2025 compared to four property sales during the six months ended June 30, 2024. Refer to Note 5, Real Estate and Related Lease Intangibles, Net, for further detail.
Fee and Other Income
We generate fee income on the loans we originate and in which we invest and include unrealized and realized gains and losses on securities within fee and other income. The $0.7 million increase in fee and other income was primarily due to an increase in unrealized and realized gains on securities, and the timing of loan payoffs and late fees received for the six months ended June 30, 2025 as compared to the six months ended June 30, 2024.
Net Result from Derivative Transactions
Net result from derivative transactions of $1.8 million was comprised of a realized gain of $2.0 million and an unrealized loss of $(0.2) million for the six months ended June 30, 2025. Net result from derivative transactions of $4.6 million was comprised of a realized gain of $5.3 million and an unrealized loss of $0.7 million for the six months ended June 30, 2024. The hedge positions primarily relate to fixed rate conduit loans and securities investments. The derivative positions that generated these results were a combination of five and ten year U.S. treasury rate futures that we employed in an effort to hedge the interest rate risk primarily on the financing of our fixed rate assets and the net interest income we earn against the impact of changes in interest rates. The net gain in 2025 was primarily related to changes in interest rates during the six months ended June 30, 2025.
Gain on Extinguishment of Debt
Gain on extinguishment of debt totaled $0.3 million for the six months ended June 30, 2025. During the six months ended June 30, 2025, the Company retired: (1) $10.7 million of principal of the 2025 Notes for a repurchase price of $10.6 million, recognizing a $7 thousand net gain on extinguishment of debt after recognizing $9 thousand of unamortized debt issuance costs associated with the retired debt; and (2) $12.4 million of principal of the 2027 Notes for a repurchase price of $12.2 million, recognizing a $0.2 million net gain on extinguishment of debt after recognizing $48 thousand of unamortized debt issuance costs associated with the retired debt.
Gain on extinguishment of debt totaled $0.2 million for the six months ended June 30, 2024. During the six months ended June 30, 2024, the Company retired $2.0 million of principal of the 2029 Notes for a repurchase price of $1.8 million, recognizing a $0.2 million net gain on extinguishment of debt after recognizing $21 thousand of unamortized debt issuance costs associated with the retired debt.
Compensation and Employee Benefits
Compensation and employee benefits are comprised primarily of salaries, bonuses, stock-based compensation and other employee benefits. The decrease of $4.2 million in compensation expense is primarily due to a decrease in bonus compensation expense for the six months ended June 30, 2025 as compared to the six months ended June 30, 2024.
Operating Expenses
Operating expenses are primarily comprised of professional fees, lease expense and technology expenses. The decrease during the six months ended June 30, 2025 as compared to June 30, 2024 of $0.5 million was primarily related to a decrease in professional fees.
Real Estate Operating Expenses
The decrease of $1.1 million in real estate operating expenses was primarily attributable to real estate sales that occurred between June 30, 2024 and June 30, 2025, partially offset by foreclosures that occurred during the same period. Refer to Note 5, Real Estate and Related Lease Intangibles, Net, for further details.
Investment Related Expenses
Investment related expenses are comprised primarily of custodian fees, financing costs, servicing fees related to loans and other loan related expenses. The decrease during the six months ended June 30, 2025 as compared to June 30, 2024 of $2.2 million was primarily attributable to a decrease in loan related expenses as a result of a smaller loan portfolio.
Depreciation and Amortization
The decrease of $1.3 million in depreciation and amortization was primarily attributable to real estate sales that occurred between June 30, 2024 and June 30, 2025, partially offset by foreclosures that occurred during the same period. Refer to Note 5, Real Estate and Related Lease Intangibles, Net, for further details.
Income Tax (Benefit) Expense
Most of our consolidated income tax provision related to the business units held in our TRSs. The increase in expense of $2.0 million during the six months ended June 30, 2025 as compared to June 30, 2024 is primarily a result of changes in income generated by our TRSs.
Liquidity and Capital Resources
The management of our liquidity and capital diversity and allocation strategies is critical to the success and growth of our business. We manage our sources of liquidity to complement our asset composition and to diversify our exposure across multiple capital markets and counterparties.
We require substantial amounts of capital to support our business. The management team, in consultation with our board of directors, establishes our overall liquidity and capital allocation strategies. A key objective of those strategies is to support the execution of our business strategy while maintaining sufficient ongoing liquidity throughout the business cycle to service our financial obligations as they become due. When making funding and capital allocation decisions, members of our senior management consider: business performance; the availability of, and costs and benefits associated with, different funding sources; current and expected capital markets and general economic conditions; our asset composition and capital structure; and our targeted liquidity profile and risks relating to our funding needs.
To ensure that Ladder can effectively address the funding needs of the Company on a timely basis, we maintain a diverse array of liquidity sources including: (1) cash and cash equivalents; (2) cash generated from operations; (3) proceeds from debt financing; (4) principal repayments on investments including mortgage loans and securities; (5) proceeds from securitizations and sales of loans; (6) proceeds from the sale of securities; (7) proceeds from the sale of real estate; and (8) proceeds from the issuance of equity capital. We use these funding sources to meet our obligations on a timely basis and have the ability to use our significant unencumbered asset base to further finance our business.
Our primary uses of liquidity are for: (1) the funding of loan, real estate-related and securities investments; (2) the repayment of short-term and long-term borrowings and related interest; (3) the funding of our operating expenses; and (4) distributions to our equity investors to comply with the REIT distribution requirements. We require short-term liquidity to fund loans that we originate and hold on our consolidated balance sheet pending sale, including through whole loan sale, participation, or securitization. We generally require longer-term funding to finance the loans and real estate-related investments that we hold for investment. We have historically used the aforementioned funding sources to meet the operating and investment needs as they have arisen and have been able to do so by applying a rigorous approach to long and short-term cash and debt forecasting.
In addition, as a REIT, we are also required to make sufficient dividend payments to our shareholders in amounts at least sufficient to maintain our REIT status. Under IRS guidance, we may elect to pay a portion of our dividends in stock, subject to a cash/stock election by our shareholders, to optimize our level of capital retention. Accordingly, our cash requirement to pay dividends to maintain REIT status could be substantially reduced at the discretion of the board of directors.
Our principal debt financing sources include: (1) long-term senior unsecured notes in the form of corporate bonds; (2) an unsecured Revolving Credit Facility; (3) CLO issuances; (4) committed and uncommitted secured funding provided by banks and other lenders; and (5) long term non-recourse mortgage financing.
In the future, we may also use other sources of financing to fund the acquisition of our assets, including credit facilities, warehouse facilities, repurchase facilities and other secured and unsecured forms of borrowing. These financings may be collateralized or non-collateralized, may involve one or more lenders and may accrue interest at either fixed or floating rates. We may also seek to raise further equity capital or issue debt securities in order to fund our future investments.
Refer to "Financial Covenants" and "Our Financing Strategies" for further disclosure of our diverse financing sources and, for a summary of our financial obligations, refer to the Contractual Obligations table below. All of our existing financial obligations due within the following year can be extended for one or more additional years at our discretion, refinanced or repaid at maturity or are incurred in the normal course of business (i.e., interest payments/loan funding obligations).
Cash Flows
We held cash and cash equivalents of $134.9 million and restricted cash of $13.4 million as of June 30, 2025. We held cash and cash equivalents of $1.3 billion and restricted cash of $12.6 million as of December 31, 2024.
The following table provides a breakdown of the net change in our cash, cash equivalents, and restricted cash ($ in thousands):
| Six Months Ended June 30, | |||||||||||
| 2025 | 2024 | ||||||||||
| Net cash provided by (used in) operating activities | $ | 15,318 | $ | 25,031 | |||||||
| Net cash provided by (used in) investing activities | (779,357) | 586,720 | |||||||||
| Net cash provided by (used in) financing activities | (433,673) | (480,213) | |||||||||
| Net increase (decrease) in cash, cash equivalents and restricted cash | $ | (1,197,712) | $ | 131,538 | |||||||
Six months ended June 30, 2025
We experienced a net decrease in cash, cash equivalents and restricted cash of $(1.2) billion for the six months ended June 30, 2025, reflecting cash provided by operating activities of $15.3 million, cash used in investing activities of $(779.4) million and cash used in financing activities of $(433.7) million.
Net cash provided by operating activities of $15.3 million was primarily driven by net interest income and net operating income on our real estate portfolio.
Net cash used in investing activities of $(779.4) million was driven by $(1.1) billion in purchases of securities and $(412.6) million of origination of mortgage loans held for investment, partially offset by $474.2 million of repayment from mortgage loan receivables, $200.6 million in repayments on securities, $59.4 million of proceeds from sale of securities and $13.1 million in proceeds from sale of real estate.
Net cash used in financing activities of $(433.7) million was primarily as a result of net repayments of borrowings of $(354.4) million, $(59.7) million of dividend payments, $(8.7) million payment to satisfy minimum federal and state tax withholdings on restricted stock, $(8.9) million purchase of treasury stock, and $(1.8) million in deferred financing cost.
Six months ended June 30, 2024
We experienced a net increase in cash, cash equivalents and restricted cash of $131.5 million for the six months ended June 30, 2024, reflecting cash provided by operating activities of $25.0 million, cash provided by investing activities of $586.7 million and cash used in financing activities of $(480.2) million.
Net cash provided by operating activities of $25.0 million was primarily driven by net interest income and net increases in operating income on our real estate portfolio.
Net cash provided by investing activities of $586.7 million was driven by $611.3 million of repayment from mortgage loan receivables, $147.9 million in repayments on securities, and $10.6 million of proceeds from sale of securities, partially offset by $(152.3) million in purchases of securities and $(69.6) million of origination of mortgage loans held for investment.
Net cash used in financing activities of $(480.2) million was primarily as a result of net repayments of borrowings of $(408.6) million, $(59.9) million of dividend payments, $(8.9) million of shares acquired to satisfy minimum federal and state tax withholdings on restricted stock, $(0.9) million purchase of treasury stock, and $(1.8) million in deferred financing cost.
Unencumbered Assets
As of June 30, 2025, we held unencumbered cash and cash equivalents of $134.9 million, unencumbered loans of $1.5 billion, unencumbered securities of $1.6 billion, unencumbered real estate of $266.8 million and $82.5 million of other assets not encumbered by any portion of secured indebtedness. As of December 31, 2024, we held unencumbered cash and cash equivalents of $1.3 billion, unencumbered loans of $689.7 million, unencumbered securities of $1.1 billion, unencumbered real estate of $213.4 million and $409.1 million of other assets not encumbered by any portion of secured indebtedness.
Borrowings under various financing arrangements
Our financing strategies are critical to the success and growth of our business. We manage our leverage policies to complement our asset composition and to diversify our exposure across multiple counterparties. Our borrowings under various financing arrangements as of June 30, 2025 are set forth in the table below ($ in thousands):
| June 30, 2025 | |||||
| Loan repurchase facilities | $ | 62,738 | |||
| Uncommitted securities repurchase facilities | 294,428 | ||||
| Securities repurchase financing | - | ||||
| Total repurchase facilities | 357,166 | ||||
| Revolving credit facility | - | ||||
| Mortgage debt(1) | 421,900 | ||||
| Senior unsecured notes(2) | 2,004,100 | ||||
| Total debt obligations, net | $ | 2,783,166 | |||
(1)Presented net of unamortized debt issuance costs of $0.7 million and net of premiums of $3.4 million as of June 30, 2025.
(2)Presented net of unamortized debt issuance costs of $14.4 million as of June 30, 2025.
The Company's repurchase agreements include financial covenants, including minimum net worth requirements, minimum liquidity levels, maximum leverage ratios and minimum fixed charge or interest coverage ratios. We were in compliance with all covenants as of June 30, 2025 and December 31, 2024. Further, certain of our financing arrangements and loans on our real property are secured by the assets of the Company, including the assets of certain subsidiaries. From time to time, certain of these financing arrangements and loans may prohibit certain of our subsidiaries from paying dividends to the Company, from making distributions on such subsidiary's capital stock, from repaying to the Company any loans or advances to such subsidiary from the Company or from transferring any of such subsidiary's property or other assets to the Company or other subsidiaries of the Company.
Senior Unsecured Notes
As of June 30, 2025, the Company had $2.0 billion of senior unsecured notes outstanding. These unsecured financings were comprised of $285.0 million in aggregate principal amount of 5.25% senior notes due 2025 (the "2025 Notes"), $599.5 million in aggregate principal amount of 4.25% senior notes due 2027 (the "2027 Notes"), $633.9 million in aggregate principal amount of 4.75% senior notes due 2029 (the "2029 Notes"), and $500.0 million in aggregate principal amount of 7.00% senior notes due 2031 (the "2031 Notes"). Subsequent to quarter end the Company issued $500.0 million of 5.50% senior notes due 2030 (the "2030 Notes," collectively with the 2025 Notes, the 2027 Notes, the 2029 Notes and the 2031 Notes, the "Notes") and redeemed in full the 2025 Notes which had an outstanding principal amount of $285.0 million as of June 30, 2025.
As of December 31, 2024, the Company had $2.0 billion of senior unsecured notes outstanding. These unsecured financings were comprised of $295.7 million in aggregate principal amount of the 2025 Notes, $611.9 million in aggregate principal amount of the 2027 Notes, $633.9 million in aggregate principal amount of the 2029 Notes and $500.0 million in aggregate principal amount of the 2031 Notes.
LCFH issued the Notes with Ladder Capital Finance Corporation ("LCFC"), as co-issuers on a joint and several basis. LCFC is a 100% owned finance subsidiary of LCFH with no assets, operations, revenues or cash flows other than those related to the issuance, administration and repayment of the Notes. The Company guarantees the obligations under the Notes and the indenture. The Company believes it was in compliance with all covenants of the Notes as of June 30, 2025 and 2024. The Notes are presented net of unamortized debt issuance costs of $14.4 million and $16.5 million as of June 30, 2025 and December 31, 2024, respectively.
The Notes require interest payments semi-annually in cash in arrears, are unsecured, and in some cases, are subject to an unencumbered assets to unsecured debt covenant. The Company may redeem the Notes prior to their stated maturity, in whole or in part, at any time or from time to time, with required notice and at a redemption price as specified in each respective indenture governing the Notes, plus accrued and unpaid interest, if any, to the redemption date. The board of directors has authorized the Company to repurchase any or all of the Notes from time to time without further approval.
During the six months ended June 30, 2025, the Company repurchased $10.7 million of the 2025 Notes and $12.4 million of the 2027 Notes recognizing a net gain on extinguishment of debt of $7 thousand and $250 thousand, respectively.
Revolving Credit Facility
The Company's Revolving Credit Facility is available on a revolving basis to finance the Company's working capital needs and for general corporate purposes. On January 2, 2025, the Company increased the aggregate maximum borrowing amount of the Revolving Credit Facility to $850.0 million, following the upsize to $725 million on December 20, 2024. The Revolving Credit Facility also allows the Company to enter into additional incremental revolving commitments up to an aggregate facility size of $1.3 billion subject to certain customary conditions. Borrowings under the Revolving Credit Facility bear interest at a rate equal to adjusted term SOFR plus a margin of 125 basis points as of June 30, 2025. The margin for borrowings is subject to adjustment based on the Company's credit rating and may range between 77.5 and 170 basis points. As of June 30, 2025, the Company had no outstanding borrowings on the Revolving Credit Facility.
Effective May 27, 2025, the date on which the Company received investment grade ratings from Moody's and Fitch, the Revolving Credit Facility was automatically amended, the pledge of the shares of (or other ownership or equity interest in) certain subsidiaries was terminated, and each guarantor (other than Ladder Capital Corp and any subsidiary that is a trigger guarantor) was released and discharged from all obligations as a guarantor and/or pledgor.
Collateralized Loan Obligations ("CLO") Debt
On July 13, 2021, the Company financed a pool of $607.5 million of loans at an 82% advance rate on a matched term, non-mark-to-market and non-recourse basis in a managed CLO transaction ("LCCM 2021-FL2"), which generated $498.2 million of gross proceeds to Ladder. The Company retained an 18% subordinate and controlling interest in LCCM 2021-FL2. The Company retained control over major decisions made with respect to the administration of the loans in LCCM 2021-FL2, including broad discretion in managing these loans, and had the ability to appoint the special servicer. LCCM 2021-FL2 was a VIE and the Company was the primary beneficiary and, therefore, consolidated the VIE. On February 18, 2025, the Company redeemed all outstanding obligations of LCCM 2021-FL2.
On December 2, 2021, the Company financed a pool of $729.4 million of loans at a 77.6% advance rate on a matched term, non-mark-to-market and non-recourse basis in a managed CLO transaction ("LCCM 2021-FL3"), which generated $566.2 million of gross proceeds to Ladder. The Company retained a 15.6% subordinate and controlling interest in the LCCM 2021-FL3 and held two additional tranches totaling 6.8% as investments. The Company retained control over major decisions made with respect to the administration of the loans in LCCM 2021-FL3, including broad discretion in managing these loans, and had the ability to appoint the special servicer. LCCM 2021-FL3 was a VIE and the Company was the primary beneficiary and, therefore, consolidated the VIE. On June 16, 2025, the Company redeemed all outstanding obligations of LCCM 2021-FL3. Refer to Note 6, Debt Obligations, Net for further detail.
As of June 30, 2025, the Company did not have any matched term, non-mark-to-market and non-recourse CLO debt included in debt obligations on its consolidated balance sheets.
As of December 31, 2024, the Company had $601.4 million of matched term, non-mark-to-market and non-recourse CLO debt included in debt obligations on its consolidated balance sheets. Unamortized debt issuance costs of $0.1 million were included in CLO debt as of December 31, 2024.
Committed Loan Financing Facilities
The Company is a party to multiple committed loan repurchase agreement facilities, totaling $1.1 billion of credit capacity as of June 30, 2025. As of June 30, 2025, the Company had $62.7 million of borrowings outstanding, with an additional $1.0 billion of committed financing available. As of December 31, 2024, the Company had $62.7 million of borrowings outstanding, with
an additional $1.1 billion of committed financing available. Assets pledged as collateral under these facilities are generally limited to first lien whole mortgage loans, mezzanine loans and certain interests in such first mortgage and mezzanine loans.
The Company has the option to extend some of its existing facilities subject to a number of customary conditions. The lenders have sole discretion to include collateral in these facilities and to determine the market value of the collateral. In certain cases the lenders may require additional collateral, a full or partial repayment of the facilities (margin call) or a reduction in undrawn availability under the facilities. Typically, the facilities are established with stated guidelines regarding the maximum percentage of the collateral asset's market value that can be borrowed. The Company often borrows at a lower percentage of the collateral asset's value than the maximum leaving the Company with excess borrowing capacity that can be drawn upon at a later date and/or applied against future margin calls so that they can be satisfied on a cashless basis.
Securities Repurchase Financing
The Company is a party to master repurchase agreements with several counterparties to finance its investments in securities. The securities that serve as collateral for these borrowings are typically highly liquid AAA-rated CMBS with relatively short duration and significant subordination. The lenders have sole discretion to determine the market value of the collateral on a daily basis, and, if the estimated market value of the collateral declines, the lenders have the right to require additional collateral. If the estimated market value of the collateral subsequently increases, the Company has the right to call back excess collateral. As of June 30, 2025, the Company had $294.4 million of securities repurchase debt outstanding.
Mortgage Loan Financing
The Company typically finances its real estate investments with long-term, non-recourse mortgage financing. These mortgage loans have carrying amounts of $421.9 million and $446.4 million, net of unamortized premiums of $3.4 million and $3.7 million as of June 30, 2025 and December 31, 2024, respectively, representing proceeds received upon financing greater than the contractual amounts due under these agreements. The premiums are being amortized over the remaining life of the respective debt instruments using the effective interest method. The Company recorded $0.3 million of premium amortization, which decreased interest expense for each of the six months ended June 30, 2025 and 2024. During the six months ended June 30, 2025, the Company executed no new term debt agreements. During the six months ended June 30, 2024, the Company executed ten new term debt agreements to finance properties in its real estate portfolio with a carrying amount of $68.9 million.
Stock Repurchases
On April 23, 2025, the board of directors authorized the repurchase of $100.0 million of the Company's Class A common stock from time to time without further approval. This authorization increased the remaining outstanding authorization per the April 24, 2024 authorization from $66.8 million to $100.0 million. Stock repurchases by the Company are generally made for cash in open market transactions at prevailing market prices but may also be made in privately negotiated transactions or otherwise. The timing and amount of purchases are determined based upon prevailing market conditions, our liquidity requirements, contractual restrictions and other factors. As of June 30, 2025, the Company has a remaining amount available for repurchase of $93.4 million, which represents 6.8% in the aggregate of its outstanding Class A common stock, based on the closing price of $10.75 per share on such date. Refer to Note 9, Equity, to our consolidated financial statements included elsewhere in this Quarterly Report, for disclosure of the Company's repurchase activity.
The following table is a summary of the Company's repurchase activity of its Class A common stock during the six months ended June 30, 2025 ($ in thousands):
| Shares | Amount(1) | |||||||||||||
| Authorizations remaining as of December 31, 2024 | $ | 67,604 | ||||||||||||
| Additional authorizations (2) | 33,201 | |||||||||||||
| Repurchases paid: | ||||||||||||||
| January 1, 2025 - January 31, 2025 | - | - | ||||||||||||
| February 1, 2025 - February 28, 2025 | - | - | ||||||||||||
| March 1, 2025 - March 31, 2025 | 70,506 | (805) | ||||||||||||
| April 1, 2025 - April 30, 2025 | - | - | ||||||||||||
| May 1, 2025 - May 31, 2025 | 401,396 | (4,151) | ||||||||||||
| June 1, 2025 - June 30, 2025 | 234,094 | (2,456) | ||||||||||||
| Authorizations remaining as of June 30, 2025 | $ | 93,393 | ||||||||||||
(1)Amount excludes commissions paid associated with share repurchases.
(2)On April 23, 2025, the Board authorized repurchases up to $100.0 million in aggregate.
Dividends
In order for the Company to maintain its qualification as a REIT under Sections 856 through 860 of the Internal Revenue Code (the "Code"), it must annually distribute at least 90% of its taxable income. The Company has paid and in the future intends to declare regular quarterly distributions to its shareholders in aggregating to an amount approximating at least 90% of the REIT's annual net taxable income.
All distributions are made at the discretion of our board of directors and depend on our earnings, our financial condition, any debt covenants, maintenance of our REIT qualification, restrictions on making distributions under Delaware law and other factors as our board of directors may deem relevant from time to time.
Refer to Note 9, Equity, to our consolidated financial statements included elsewhere in this Quarterly Report, for disclosure of dividends declared.
Principal Repayments on Investments
We receive principal amortization on our loans and securities as part of the normal course of our business. Repayment of mortgage loan receivables provided net cash of $474.3 million for the six months ended June 30, 2025 and $611.3 million for the six months ended June 30, 2024. Repayment of real estate securities provided net cash of $200.6 million for the six months ended June 30, 2025, and $147.9 million for the six months ended June 30, 2024.
Proceeds from Securitizations and Sales of Loans
We sell our conduit mortgage loans to securitization trusts and to other third parties as part of our normal course of business and from time to time will sell balance sheet mortgage loans. There were $66.8 million of proceeds from sales of mortgage loans for the six months ended June 30, 2025. There were $69.4 million of proceeds from sales of mortgage loans for the six months ended June 30, 2024.
Proceeds from the Sale of Securities
We sell our investments in CMBS, including CRE CLOs, U.S. Agency securities, corporate bonds, U.S. Treasury securities, and equity securities as a part of our normal course of business. Proceeds from sales of securities provided net cash of $59.4 million for the six months ended June 30, 2025, and $10.6 million for the six months ended June 30, 2024.
Proceeds from the Sale of Real Estate
There were $13.1 million of proceeds from sales of real estate, net of closing costs for the six months ended June 30, 2025. There were $45.9 million of proceeds from sales of real estate, net of closing costs for the six months ended June 30, 2024.
Other Potential Sources of Financing
In the future, we may also use other sources of financing to fund the acquisition of our assets, including credit facilities, warehouse facilities, repurchase facilities and other secured and unsecured forms of borrowing. These financings may be collateralized or non-collateralized, may involve one or more lenders and may accrue interest at either fixed or floating rates. We may also seek to raise further equity capital or issue debt securities in order to fund our future investments.
Contractual Obligations
Contractual obligations as of June 30, 2025 were as follows ($ in thousands):
| Contractual Obligations (1) | |||||||||||||||||||||||||||||
| Less than 1 Year | 1-3 Years | 3-5 Years | More than 5 Years | Total | |||||||||||||||||||||||||
| Secured financings | $ | 402,479 | $ | 227,047 | $ | 59,068 | $ | 87,744 | $ | 776,338 | |||||||||||||||||||
| Senior unsecured notes (2) | 285,049 | 599,490 | 633,919 | 500,000 | 2,018,458 | ||||||||||||||||||||||||
| Interest payable (3) | 112,489 | 167,870 | 92,681 | 58,805 | 431,845 | ||||||||||||||||||||||||
| Other funding obligations (4) | 349 | 12,180 | - | - | 12,529 | ||||||||||||||||||||||||
| Operating lease obligations | 3,469 | 4,590 | 4,789 | 7,646 | 20,494 | ||||||||||||||||||||||||
| Total | $ | 803,835 | $ | 1,011,177 | $ | 790,457 | $ | 654,195 | $ | 3,259,664 | |||||||||||||||||||
(1)As more fully disclosed in Note 6, Debt Obligations, Net, to our consolidated financial statements included elsewhere in this Quarterly Report, the allocation of repayments under our committed loan repurchase facilities is based on the earlier of: (i) the maturity date of each agreement; or (ii) the maximum maturity date of the collateral loans, assuming all extension options are exercised by the borrower.
(2)Subsequent to quarter end, we redeemed in full the 2025 Notes which had an outstanding principal amount of $285.0 million as of June 30, 2025.
(3)Comprised of interest on secured financings and on senior unsecured notes. For borrowings with variable interest rates, we used the rates in effect as of June 30, 2025 to determine the future interest payment obligations.
(4)Comprised primarily of our off-balance sheet unfunded commitment to provide additional first mortgage loan financing as of June 30, 2025. The allocation of our unfunded loan commitments is based on the earlier of the commitment expiration date or the final maturity date, however, we may be obligated to fund these commitments earlier than such date. This amount excludes $35.7 million of future funding commitments that require the occurrence of certain "good news" events, such as the owner concluding a lease agreement with a major tenant in the building or reaching a pre-determined net operating income which may or may not be achieved.
The table above does not include amounts due under our derivative agreements as those contracts do not have fixed and determinable payments. Our contractual obligations will be refinanced and/or repaid from earnings as well as amortization and sales of our liquid collateral. We have made investments in various unconsolidated ventures of which our maximum exposure to loss from these investments is limited to the carrying value of our investments.
Future Liquidity Needs
In addition to the future contractual obligations above, the Company, in the coming year and beyond, as a part of its normal course of business will require cash to fund unfunded loan commitments and new investments in a combination of balance sheet mortgage loans, conduit loans, real estate investments and securities as it deems appropriate as well as necessary expenses as a part of general corporate purposes. These new investments and general corporate expenses may be funded with existing cash, proceeds from loan and securities payoffs, through financing using our Revolving Credit Facility or loan and security financing facilities, or through additional debt or equity raises. The Company has no known material cash requirements other than its contractual obligations in the above table, unfunded commitments and future general corporate expenses.
Unfunded Loan Commitments
We may be a party to financial instruments with off-balance sheet risk in the normal course of business to meet the financial needs of our borrowers. These commitments are not reflected on the consolidated balance sheets. As of June 30, 2025, our off-balance sheet arrangements consisted of $47.9 million of unfunded commitments of mortgage loan receivables held for investment. 74% of these unfunded commitments require the occurrence of certain "good news" events, such as the owner
concluding a lease agreement with a major tenant in the building or reaching some pre-determined net operating income. As of December 31, 2024, our off-balance sheet arrangements consisted of $34.6 million of unfunded commitments of mortgage loan receivables held for investment to provide additional first mortgage loan financing. Such commitments are subject to our borrowers' satisfaction of certain financial and nonfinancial covenants and involve, to varying degrees, elements of credit risk in excess of the amount recognized in the consolidated balance sheets. Commitments are subject to our loan borrowers' satisfaction of certain financial and nonfinancial covenants and may or may not be funded depending on a variety of circumstances including timing, credit metric hurdles, and other nonfinancial events occurring.
Interest Rate Environment
The nature of the Company's business exposes it to market risk arising from changes in interest rates. Changes, both increases and decreases, in the rates the Company is able to charge its borrowers, the yields the Company is able to achieve in its securities investments, and the Company's cost of borrowing directly impacts its net income. The Company's net interest income includes interest from both fixed and floating rate debt. The percentage of the Company's assets and liabilities bearing interest at fixed and floating rates may change over time, and asset composition may differ materially from debt composition. Refer to Item 3 "Quantitative and Qualitative Disclosures about Market Risk" for further disclosures surrounding the impact of rising or falling interest rate on our earnings.
Critical Accounting Estimates
The preparation of financial statements in accordance with GAAP requires management to make estimates and judgments in certain circumstances that affect amounts reported as assets, liabilities, revenues and expenses. We have established detailed policies and control procedures intended to ensure that valuation methods, including any judgments made as part of such methods, are well controlled, reviewed and applied consistently from period to period. We base our estimates on historical corporate and industry experience and various other assumptions that we believe to be appropriate under the circumstances. The Company's critical accounting estimates are those which require assumptions to be made about matters that are highly uncertain. Different estimates could have a material effect on the Company's financial results. For all of these estimates, we caution that future events rarely develop exactly as forecasted and, therefore, routinely require adjustment.
During 2025, management reviewed and evaluated these critical accounting estimates and policies and believes they are appropriate. The following discussion describes critical accounting estimates that require more significant judgment by management. This summary should be read in conjunction with a more complete discussion of our significant accounting policies which are described in Note 2, Significant Accounting Policies, to our consolidated financial statements included elsewhere in this Quarterly Report.
Allowance for Loan Losses
The Company uses a current expected credit loss model ("CECL") for estimating the provision for loan losses on its loan portfolio. The CECL model requires the consideration of possible credit losses over the life of an instrument and includes a portfolio-based component and an asset-specific component. The Company engages a third-party service provider to provide market data and a credit loss model. The credit loss model is a forward-looking, econometric, commercial real estate ("CRE") loss forecasting tool. It is comprised of a probability of default ("PD") model and a loss given default ("LGD") model that, layered together with the Company's loan-level data, fair value of collateral, net operating income of collateral, selected forward-looking macroeconomic variables, and pool-level mean loss rates, produces life of loan expected losses ("EL") at the loan and portfolio level. Where management has determined that the credit loss model does not fully capture certain external factors, including portfolio trends or loan-specific factors, a qualitative adjustment to the reserve is recorded. In addition, interest receivable on loans is not included in the Company's CECL calculations as the Company performs timely write offs of aged interest receivable. The Company has made a policy election to write off aged receivables through interest income as opposed to through the CECL provision on its statements of income.
Loans for which the borrower or sponsor is experiencing financial difficulty, and where repayment of the loan is expected substantially through the operation or sale of the underlying collateral, are considered collateral dependent loans. For collateral dependent loans, the Company may elect a practical expedient that allows the Company to measure expected losses based on the difference between the collateral's fair value and the amortized cost basis of the loan. When the repayment or satisfaction of the loan is dependent on a sale, rather than operations of the collateral, the fair value is adjusted for the estimated costs to sell the collateral. If foreclosure is probable, the Company is required to measure for expected losses using this methodology.
The Company generally will use the direct capitalization rate valuation methodology or the sales comparison approach to estimate the fair value of the collateral for loans and in certain cases will obtain external appraisals. Determining fair value of the collateral may take into account a number of assumptions including, but not limited to, cash flow projections, market capitalization rates, discount rates and data regarding recent comparable sales of similar properties. Such assumptions are generally based on current market conditions and are subject to economic and market uncertainties.
The Company's loans are typically collateralized by real estate directly or indirectly. As a result, the Company regularly evaluates the extent and impact of any credit deterioration associated with the performance and/or value of the underlying collateral property as well as the financial and operating capability of the borrower/sponsor on a loan-by-loan basis. Specifically, a property's operating results and any cash reserves are analyzed and used to assess: (i) whether cash flow from operations is sufficient to cover the debt service requirements currently and into the future; (ii) the ability of the borrower to refinance the loan at maturity; and/or (iii) the property's liquidation value. The Company also evaluates the financial wherewithal of any loan guarantors as well as the borrower's competency in managing and operating the properties. In addition, the Company considers the overall economic environment, real estate sector, and geographic submarket in which the collateral property is located. Such impairment analyses are completed and reviewed by asset management and underwriting personnel, who utilize various data sources, including: (i) periodic financial data such as property occupancy, tenant profile, rental rates, operating expenses, the borrowers' business plan, and capitalization and discount rates; (ii) site inspections; and (iii) current credit spreads and other market data and ultimately presented to management for approval.
When a debtor is experiencing financial difficulties and a loan is modified, the effect of the modification will be included in the Company's assessment of the CECL allowance for loan losses. If the Company provides principal forgiveness, the amortized cost basis of the loan is written off against the allowance for loan losses. Generally, when modifying loans, the Company will seek to protect its position by requiring incremental pay downs, additional collateral or guarantees and, in some cases, lookback features or equity interests to offset concessions granted should conditions impacting the loan improve.
The Company designates a loan as a non-accrual loan generally when: (i) the principal or coupon interest components of loan payments become 90-days past due; or (ii) in the opinion of the Company, recovery of principal and coupon interest is doubtful. Interest income on non-accrual loans in which the Company reasonably expects a recovery of the loan's outstanding principal balance is recognized when received in cash. Otherwise, income recognition will be suspended and any cash received will be applied as a reduction to the amortized cost basis. A non-accrual loan is returned to accrual status at such time as the loan becomes contractually current and future principal and coupon interest are reasonably assured to be received. A loan will be charged-off when management has determined principal and coupon interest is no longer realizable and deemed non-recoverable.
The CECL accounting estimate is subject to uncertainty as a result of changing macro-economic market conditions, as well as the vintage and location of the underlying assets as disclosed in Note 3, Mortgage Loan Receivables, to our consolidated financial statements included elsewhere in this Quarterly Report. The provision for (release of) loan loss reserves for the three months ended June 30, 2025 and June 30, 2024 was $(42.0) thousand and $5.1 million, respectively, and $(0.1) million and $10.8 million for the six months ended June 30, 2025 and June 30, 2024, respectively.
The allowance for loan losses at June 30, 2025 and December 31, 2024 was $52.7 million and $52.8 million, respectively. The allowance includes $0.5 million of reserves for unfunded commitments at both June 30, 2025 and December 31, 2024. The estimate is sensitive to the assumptions used to represent future expected economic conditions.
Acquisition of Real Estate
We generally acquire real estate assets or land and development assets through purchases and may also acquire such assets through foreclosure or deed-in-lieu of foreclosure (collectively, "foreclosure") in full or partial satisfaction of defaulted loans. Purchased properties are classified as real estate, net or land and development, net on our consolidated balance sheets. When we intend to hold, operate or develop the property for a period of at least 12 months, the asset is classified as real estate, net, and if the asset meets the held-for-sale criteria, the asset is classified as real estate held for sale. Upon purchase, the properties are recorded at cost. Foreclosed assets classified as real estate and land and development are initially recorded at their estimated fair value and assets classified as held for sale are recorded at their estimated fair value less costs to sell. The excess of the carrying value of the loan over these amounts is charged-off against the reserve for loan losses. In both cases, upon acquisition, tangible and intangible assets and liabilities acquired are recorded at their relative fair values.
Identified Intangible Assets and Liabilities
We record intangible assets and liabilities acquired at their relative fair values, and determine whether such intangible assets and liabilities have finite or indefinite lives. As of June 30, 2025 and December 31, 2024, all such acquired intangible assets and liabilities have finite lives. We review finite lived intangible assets for impairment whenever events or changes in circumstances indicate that their carrying amount may not be recoverable. If we determine the carrying value of an intangible asset is not recoverable, we will record an impairment charge to the extent its carrying value exceeds its estimated fair value. Impairments of intangibles are recorded in impairment of assets in our consolidated statements of income.
Impairment or Disposal of Long-lived Assets
Real estate assets to be disposed of are reported at the lower of their carrying amount or estimated fair value less costs to sell and are included in real estate held for sale on our consolidated balance sheets. The difference between the estimated fair value less costs to sell and the carrying value will be recorded as an impairment charge. Impairment for real estate assets are included in impairment of assets in our consolidated statements of operations. Once the asset is classified as held for sale, depreciation expense is no longer recorded.
We periodically review real estate to be held and used, and land and development assets for impairment in value, whenever events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable. The asset's value is impaired only if management's estimate of the aggregate future cash flows (undiscounted and without interest charges) to be generated by the asset (taking into account the anticipated holding period of the asset) is less than the carrying value. Such estimate of cash flows considers factors such as expected future operating income, trends and prospects, as well as the effects of demand, competition and other economic factors. To the extent impairment has occurred, the loss will be measured as the excess of the carrying amount of the property over the fair value of the asset and reflected as an adjustment to the basis of the asset. Impairments of real estate and land and development assets are recorded in impairment of assets in our consolidated statements of operations.
There were no properties classified as held for sale as of June 30, 2025 or December 31, 2024. We did not record any impairments of real estate for the six months ended June 30, 2025 or June 30, 2024.
Fair Value of Assets and Liabilities
The degree of management judgment involved in determining the fair value of assets and liabilities is dependent upon the availability of quoted market prices or observable market parameters. For financial and nonfinancial assets and liabilities that trade actively and have quoted market prices or observable market parameters, there is minimal subjectivity involved in measuring fair value. When observable market prices and parameters are not fully available, management judgment is necessary to estimate fair value. In addition, changes in market conditions may reduce the availability of quoted prices or observable data. For example, reduced liquidity in the capital markets or changes in secondary market activities could result in observable market inputs becoming unavailable. Therefore, when market data is not available, we would use valuation techniques requiring more management judgment to estimate the appropriate fair value measurement.
Recently Adopted Accounting Pronouncements and Recent Accounting Pronouncements Pending Adoption
Our recently adopted accounting pronouncements and recent accounting pronouncements pending adoption are described in Note 2, Significant Accounting Policies, to our consolidated financial statements included elsewhere in this Quarterly Report.
Reconciliation of Non-GAAP Financial Measures
Distributable Earnings
The Company utilizes distributable earnings, a non-GAAP financial measure, as a supplemental measure of our operating performance. We believe distributable earnings assists investors in comparing our operating performance and our ability to pay dividends across reporting periods on a more relevant and consistent basis by excluding from GAAP measures certain non-cash expenses and unrealized results as well as eliminating timing differences related to conduit securitization gains or losses and changes in the values of assets and derivatives. In addition, we use distributable earnings: (i) to evaluate our earnings from operations because management believes that it may be a useful performance measure; and (ii) because our board of directors considers distributable earnings in determining the amount of quarterly dividends. In addition, we believe it is useful to present distributable earnings prior to charge-offs of allowance for credit losses to reflect our direct operating results and help existing and potential future holders of our Class A common stock assess the performance of our business excluding such charge-offs. Distributable earnings prior to charge-offs of allowance for credit losses is used as an additional performance metric to consider when declaring our dividends.
We define distributable earnings as income before taxes adjusted for: (i) net (income) loss attributable to noncontrolling interests in consolidated ventures; (ii) our share of real estate depreciation, amortization and gain adjustments and (earnings) loss from investments in unconsolidated ventures in excess of distributions received; (iii) the impact of derivative gains and losses related to hedging fair value variability of fixed rate assets caused by interest rate fluctuations and overall portfolio market risk as of the end of the specified accounting period; (iv) economic gains or losses on loan sales, certain of which may not be recognized under GAAP accounting in consolidation for which risk has substantially transferred during the period, as well as the exclusion of the related GAAP economics in subsequent periods; (v) unrealized gains or losses related to our investments in securities recorded at fair value in current period earnings; (vi) unrealized and realized provision for loan losses and real estate impairment; (vii) non-cash stock-based compensation; and (viii) certain non-recurring transactional items.
We exclude the effects of our share of real estate depreciation and amortization. Given GAAP gains and losses on sales of real estate include the effects of previously-recognized real estate depreciation and amortization, our adjustment eliminates the portion of the GAAP gain or loss that is derived from depreciation and amortization.
As discussed in Note 2, Significant Accounting Policies, to our consolidated financial statements included elsewhere in this Quarterly Report, our derivative instruments do not qualify for hedge accounting under GAAP and, therefore, any net payments under, or fluctuations in the fair value of derivatives are recognized currently in our income statement. The Company utilizes derivative instruments to hedge exposure to interest rate risk associated with fixed rate mortgage loans, fixed rate securities, and/or overall portfolio market risks. Distributable earnings excludes the GAAP results from derivative activity until the associated mortgage loan or security for which the derivative position is hedging is sold or paid off, or the hedge position for overall portfolio market risk is closed, at which point any gain or loss is recognized in distributable earnings in that period. For derivative activity associated with securities or mortgage loans held for investment, any hedging gain or loss is amortized over the expected life of the underlying asset for distributable earnings. We believe that adjusting for these specifically identified gains and losses associated with hedging positions adjusts for timing differences between when we recognize the gains or losses associated with our assets and the gains and losses associated with derivatives used to hedge such assets.
We originate conduit loans, which are first mortgage loans on stabilized, income producing commercial real estate properties that we intend to sell into third-party CMBS securitizations. Mortgage loans receivable held for sale are recorded at the lower of cost or market under GAAP. For purposes of distributable earnings, we exclude the impact of unrealized lower of cost or market adjustments on conduit loans held for sale and include the realized gains or losses in distributable earnings in the period when the loan is sold. Our conduit business includes mortgage loans made to third parties and may also include mortgage loans secured by real estate owned in our real estate segment. Such mortgage loans receivable secured by real estate owned in our real estate segment are eliminated in consolidation within our GAAP financial statements until the loans are sold in a third-party securitization. Upon the sale of a loan to a third-party securitization trust (for cash), the related mortgage note payable is recognized on our GAAP financial statements. For purposes of distributable earnings, we include adjustments for economic gains and losses related to the sale of these inter-segment loans for which risk has substantially transferred during the period and exclude the resultant GAAP recognition of amortization of any related premium/discount on such mortgage loans payable recognized in interest expense during the subsequent periods. This adjustment is reflected in distributable earnings when there is a true risk transfer on the mortgage loan sale and settlement. Conversely, if the economic risk was not substantially transferred, no adjustments to net income would be made relating to those transactions for distributable earnings purposes. Management believes recognizing these amounts for distributable earnings purposes in the period of transfer of economic risk is a useful supplemental measure of our performance.
As more fully discussed in Note 2, Significant Accounting Policies, to our consolidated financial statements included elsewhere in this Quarterly Report, we invest in certain securities that are recorded at fair value with changes in fair value recorded in current period earnings. For purposes of distributable earnings, we exclude the impact of unrealized gains and losses associated with these securities and include realized gains and losses in connection with any disposition of securities. Distributable earnings includes declines in fair value deemed to be an impairment for GAAP purposes if the decline is determined to be non-recoverable and the loss to be nearly certain to be eventually realized. In those cases, an impairment is included in distributable earnings for the period in which such determination was made.
We include adjustments for unrealized and realized provision for loan losses and real estate impairment. For purposes of distributable earnings, management recognizes loan and real estate losses as being realized generally in the period in which the asset is sold or the Company determines a decline in value to be non-recoverable and the loss to be nearly certain.
Set forth below is an unaudited reconciliation of income (loss) before taxes to distributable earnings (in thousands):
| Three Months Ended | |||||||||||
| June 30, | March 31, | ||||||||||
| 2025 | 2025 | ||||||||||
| Income (loss) before taxes | $ | 20,822 | $ | 10,717 | |||||||
| Net (income) loss attributable to noncontrolling interests in consolidated ventures | 220 | 220 | |||||||||
| Our share of real estate depreciation, amortization and real estate sale adjustments (1) | 7,755 | 4,503 | |||||||||
| Adjustments for derivative results and loan sale activity (2) | (724) | (435) | |||||||||
| Unrealized (gain) loss on securities | (102) | (687) | |||||||||
| Adjustment for impairment | (42) | (81) | |||||||||
| Non-cash stock-based compensation | 2,996 | 11,215 | |||||||||
| Distributable earnings | $ | 30,925 | $ | 25,452 | |||||||
| (1) |
The following is an unaudited reconciliation of GAAP depreciation and amortization to our share of real estate depreciation, amortization and gain adjustments and (earnings) loss from investment in unconsolidated ventures in excess of distributions received ($ in thousands):
|
|||||||||||||
| Three Months Ended | ||||||||||||||
| June 30, | March 31, | |||||||||||||
| 2025 | 2025 | |||||||||||||
| Total GAAP depreciation and amortization | $ | 8,043 | $ | 7,336 | ||||||||||
| Depreciation and amortization related to non-rental property fixed assets | (109) | (108) | ||||||||||||
| Non-controlling interests in consolidated ventures' share of depreciation and amortization | (121) | (119) | ||||||||||||
| Our share of operating lease income from above/below market lease intangible amortization | (346) | (402) | ||||||||||||
| Our share of real estate depreciation and amortization | 7,467 | 6,707 | ||||||||||||
| Adjustments for accumulated depreciation and amortization on real estate sold (a) | - | (2,936) | ||||||||||||
| Adjustment for (earnings) loss from investments in unconsolidated ventures in excess of distributions received | 288 | 732 | ||||||||||||
| Our share of real estate depreciation, amortization and real estate sale adjustments | $ | 7,755 | $ | 4,503 | ||||||||||
| (a) GAAP gains/losses on sales of real estate include the effects of previously-recognized real estate depreciation and amortization. For purposes of distributable earnings, our share of real estate depreciation and amortization is eliminated and, accordingly, the resultant gains/losses also must be adjusted. The following is an unaudited reconciliation of the related consolidated GAAP amounts to the amounts reflected in distributable earnings ($ in thousands): | ||||||||||||||
| Three Months Ended | ||||||||||||||
| June 30, | March 31, | |||||||||||||
| 2025 | 2025 | |||||||||||||
| GAAP realized gain/loss on sale of real estate, net | $ | - | $ | 3,807 | ||||||||||
| Adjusted (gain)/loss on sale of real estate for purposes of distributable earnings | - | (871) | ||||||||||||
| Accumulated depreciation and amortization on real estate sold | $ | - | $ | 2,936 | ||||||||||
| (2) |
The following is an unaudited reconciliation of GAAP net results from derivative transactions to our adjustments for derivative results and loan sale activity within distributable earnings ($ in thousands):
|
|||||||||||||
| Three Months Ended | ||||||||||||||
| June 30, | March 31, | |||||||||||||
| 2025 | 2025 | |||||||||||||
| GAAP net results from derivative transactions | $ | (1,526) | $ | (323) | ||||||||||
| Realized results of loan sales, net (a) | 1,504 | - | ||||||||||||
| Unrealized lower of cost or market adjustments related to loans held for sale | (1,287) | (162) | ||||||||||||
| Amortization of (premium)/discount on mortgage loan financing included in interest expense | (152) | (178) | ||||||||||||
| Recognized derivative results | 737 | 228 | ||||||||||||
| Adjustments for derivative results and loan sale activity | $ | (724) | $ | (435) | ||||||||||
(a) Represents the net hedge related gain on conduit sales for the three months ended June 30, 2025.
Distributable earnings has limitations as an analytical tool. Some of these limitations are:
•Distributable earnings does not reflect the impact of certain cash charges resulting from matters we consider not to be indicative of our ongoing operations and is not necessarily indicative of cash necessary to fund cash needs; and
•Other companies in our industry may calculate distributable earnings differently than we do, limiting its usefulness as a comparative measure.
Because of these limitations, distributable earnings should not be considered in isolation or as a substitute for net income (loss) attributable to shareholders or any other performance measures calculated in accordance with GAAP. Our non-GAAP financial measures should not be considered an alternative to cash flows from operations as a measure of our liquidity.
In addition, distributable earnings should not be considered to be the equivalent to REIT taxable income calculated to determine the minimum amount of dividends the Company is required to distribute to shareholders to maintain REIT status. In order for the Company to maintain its qualification as a REIT under the Internal Revenue Code of 1986, as amended, we must annually distribute at least 90% of our REIT taxable income. The Company has declared, and intends to continue declaring, regular quarterly distributions to its shareholders in an amount approximating the REIT's net taxable income.
In the future, we may incur gains and losses that are the same as or similar to some of the adjustments in this presentation. Our presentation of distributable earnings should not be construed as an inference that our future results will be unaffected by unusual or non-recurring items.
Ladder Capital Corp. published this content on July 28, 2025, and is solely responsible for the information contained herein. Distributed via Edgar on July 28, 2025 at 13:38 UTC. If you believe the information included in the content is inaccurate or outdated and requires editing or removal, please contact us at [email protected]