Sentiment Analysis of the earnings transcript to help figure out if there are any bullish or bearish sentiments that could be gathered from it. We're doing ML and AI based analysis on the earnings call to get some more insights.
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| Statement |
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| If a higher for longer interest rate scenario plays out in the year ahead, we anticipate that our low coupon fixed rate corporate borrowings will enable us to maintain high net interest margins that are supportive of our dividend |
| So, we think double-digit ROE is very attainable |
| And future looks bright |
| So, I kind of feel like we're getting near the end of this credit cycle and that should bode well for us and the liquidity that we carry |
| Our dividend also remains well-supported by net interest margin and net rental income |
| The third quarter saw interest rates generally surge higher to levels not seen in a very long time, but Ladder's performance was impressive, now having delivered double-digit ROEs over each of the last four quarters |
| We believe our liquidity position and large pool of high quality, unencumbered assets continue to provide Ladder with strong financial flexibility |
| Until that happens, we are well-positioned to manage through a higher rate credit cycle and to take advantage of the opportunities markets like this invariably produce |
| Ladder has successfully managed through all of these market conditions, keeping leverage low and liquidity high |
| But the reality is just the earnings power of the company with no leverage and tons of liquidity and access to low corporate debt, it is an attractive outlook, at least from where we sit right now |
| Our $888 million real estate segment continues perform well and provide stable net operating income to our earnings |
| We feel good about it |
| So, we're getting a pretty good report card and since as to okay, how did we do? Are we as good at credit as we say we are? And we feel pretty good |
| And if you look at just the way we run the company today, we're a slightly smaller meaner company today with a $300 million to $400 million less of assets, but all of our other all of our debt levels, our cash, liquidity is higher, lower leverage, higher percentage of non-mark-to-market debt, larger amount of unencumbered assets, we're well-positioned to do it when the market allows at a price that's accretive to Ladder |
| We think this situation will change in the quarters ahead, but we can afford to be patient as we are well-positioned to sustain earnings that comfortably cover our quarterly cash dividend for the foreseeable future |
| However, we are well-prepared to seize new investment opportunities that offer attractive risk adjusted returns once that transaction activity rebounds |
| We have begun capitalizing on opportunities to expand this portfolio by acquiring additional $58 million of AAA CLO securities, which are presently offering highly attractive returns and a compelling unlevered yield of approximately 7.68% |
| In the third quarter, Ladder generated attributable earnings of $39 million or $0.31 per share, driven by contributions from strong net interest margin and not at net operating income, both of which benefit from our primarily fixed rate liability structure |
| This composition significantly enhances the flexibility and liquidity of our balance sheet in comparison to traditional secured funding sources |
| This readiness is supported by robust liquidity, prudent leverage, and the expertise of our seasoned originations team |
| And so far, we're doing well |
| Our distributable earnings over the first three quarters of this year were $128 million, a 17% increase from the $110 million over the same period in 2022 |
| Our real estate portfolio remains substantial, contributed to distributable earnings generating $16 million in net rental income this quarter |
| So those fixed rate loans are coming due at Ladder, and they appear to be doing pretty well, and that we were very comfortable that Fannie or Freddie could take most of the loan out, if not all of it, but with a little bit of seasoning, those rents are still going higher in most cases |
| So, we would love to be buying, more CLO AAA, the A classes on these new deals are really very, very attractive |
| And so we're constructive on it, and I think we made the first move in that direction to show consistency here |
| Our corporate bonds because of the surge in interest rates in September look very attractive to us |
| The AI complex out in Hayes Valley is doing pretty well |
| And in fact, I think our fixed, cost coverage is exceedingly high relative to what what's called for in the space |
| We've consistently maintained robust liquidity with approximately $800 million in cash and cash equivalents |
| Statement |
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| Multifamily is showing some softness in areas, a little bit of dip in occupancy and some markets like Phoenix with negative rent growth |
| Could things get much worse? And there's a couple of headlines going on right now in outside of Russia and in the Middle East that could make you think this could get worse |
| But this is a pretty -- this is the third year of a difficult fixed income investment environment |
| I think that a lot of the names, that we typically deal with in the world of CLO and transitional bond and transitional lending, some of them are having some difficulties now with their inventories and so there are some new names popping up |
| And so, when we saw that, we got a little concerned about the, the rehab story of a 1970s garden style apartment we're going to paint it, change the windows and rents double |
| There's plenty of cheap things out there and -- but a lot of it is has got some problems to it |
| And even if you thought rents might double, it still has turned into a bad idea because rates have outpaced the rent growth |
| And so when we opened Ladder, the financial collapse was taking place in the residential side, and nothing was getting hit harder than Detroit and the auto companies |
| We've always suffered from being too small though |
| Credit is holding up nicely for the most part, but we are seeing some delays on loan payoff as lenders have become quite cautious before loan refinancings close |
| Okay, the worst is over |
| Right now, I think primarily what we're dealing with is a Fed-induced commercial real estate recession |
| Although, as I said on the call, dropping at a lower rate at this point, the pace of deterioration is slowing down, which kind of has to happen |
| We expect the turbulence to continue for a bit longer until the Fed is convinced that the further rate hike they're thinking about are no longer necessary |
| As previously mentioned, we foreclosed on a $30.5 million loan collateralized by four mixed use properties reducing our non-accrual loan balance |
| So, if nothing else, I mean, I think the bond investor has been whipsawed around |
| So we're a little cautious there too |
| As rates have risen, property values naturally fell and while we don’t think the price deterioration is over, we do think the pace of depreciation is slow |
| So, that's that part is just endemic to us |
| It's in our DNA to keep leverage down and keep liquidity up, but I will admit this is pretty excessive right now |
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