Good evening. My name is Courtney and I'll be your conference operator today. At this time I'd like to welcome everyone to the Ladder Capital Corp. Third Quarter 2014 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there'll be a question and answer session. (Operator Instructions) Pamela McCormack, Chief Strategy Officer and General Counsel, you may begin your conference.

Thank you, and good evening everyone. I'd like to welcome you to Ladder Capital Corp. earnings call for the third quarter 2014. With me this evening are Brian Harris, the company's Chief Executive Officer; and Marc Fox, the company’s Chief Financial Officer. This afternoon we released our financial results for the quarter ended September 30, 2014. The earnings release is available in the Investor Relations section of the company’s website and our quarterly report will be filed with the SEC shortly. Before the call begins, I'd like to remind everyone that certain statements made in the course of this call are not based on historical information and may constitute forward-looking statements. These statements are based on management's current expectations and beliefs and are subject to a number of trends and uncertainties that could cause actual results to differ materially from those described in these forward-looking statements. I refer you to Ladder Capital Corp's Form-10-K for the year ended December 31, 2013 for a more detailed discussion of the risk factors that could cause actual results to differ materially from those expressed or implied in any forward-looking statements made today. Accordingly, you are cautioned not to place undue reliance on these forward-looking statements. The company undertakes no duty to update any forward-looking statements that may be made during the course of this call. Additionally, certain non-GAAP financial measures will be discussed on this conference call. The company's presentation of this information is not intended to be considered in isolation or as a substitute for the financial information presented in accordance with GAAP. Reconciliations of these non-GAAP financial measures to the most comparable measures prepared in accordance with GAAP, are contained in our earnings release. With that, I'll turn the call over to our Chief Executive Officer, Brian Harris.

Thanks, Pamela and thanks to all for listening to our earnings call today. During the third quarter, Ladder had core earnings of $49.2 million, core earnings per share of $0.31 per share and GAAP earnings per share of $0.30 per share. I'll start with an overview of the key financial highlights in the quarter. On the production side of Ladder, we originated $736 million conduit loans, $347 million of bridge loans which we expect to hold on our balance sheet and $29.4 million of mezzanine loans also to be held on our balance sheet. Total loan originations in the quarter were $1.1 billion. This is a pretty strong quarter for us in loan originations. During the quarter we participated in two CMBS securitizations contributing a total of $680 million of loans and earning a profit of $23.3 million. This brings our year-to-date securitizations to seven in the first nine months of 2014. Ladder has contributed loans with a face value of $2.34 billion in the year generating a profit of $99.9 million year-to-date. In our real estate segment, during the third quarter we acquired a total of $127 million of commercial real estate assets comprised of $32.5 million of industrial property, $12.3 million of retail properties, and $82.2 million of office properties. Of the $127 million in acquisitions, we invested a total of $29.7 million of our own equity and we borrowed a total of $97.3 million of 10 year fixed rate non recourse mortgages approximately 76.5% of our purchase price. During the quarter we also sold four net lease retail properties and had ongoing sales at our condominium properties in Las Vegas and Miami. We realized growth proceeds from these sales of $38.6 million and recognized a core gain of $7.2 million of these real estate sales in the…

Thank you, Brian. I will now review Ladder Capital's financial results for the quarter ended September 30, 2014. The $49.2 million of core earnings for the third quarter reflects the impact of strong origination volumes and asset growth offset by compressed securitization margins and higher interest charges related to the August issuance of $300 million of seven year unsecured corporate bonds and the extension of other debt maturities. For the first nine months of the year, core earnings were $166.4 million. Based on an average shareholders' equity balance of approximately $1.4 billion, this result reflects a 15.8% year-to-date return on average equity. GAAP net income was $37.2 million and $85.8 million for the three and nine months ended September 30, 2014 respectively. This compares to $21.2 million and $169 million for the comparable periods in 2013 respectively. The largest GAAP to core earnings adjustments related to the adjustment of the timing of the recognition of hedge results to coincide with the realization of gains and losses on the disposition of hedged assets and real estate appreciation. The competitions of historic core earnings were recently revisited and it was determined that core earnings should be adjusted downward by just under 1% for the 2013 calendar year and by approximately 1.7% downward for the first six months of 2014. Additional information regarding these adjustments can be found in the press release and Form 10-Q. During the third quarter, Ladder's investment activities focused on loan originations and securitization. In addition, Ladder completed its first real estate acquisitions of the year. During the three months ended September 30, we originated $1.1 billion dollars of loans, bringing year-to-date loan production to $2.98 billion or 65% more than we originated in all of 2013. The relatively low balance of commercial mortgage loans held for sale at…

(Operator Instructions) Your first question comes from the line of Steve DeLaney with JMP. Your line is open.

Thanks. Good evening everyone. Brian, you cited a loan closed last week -- I guess, the late October $450 million. Should we assume -- is this going to be a conduit loan, is the first part of the question; and if so, is it possible that you'll look to do a single borrower execution, similar to what you did with your New York office loan in the second quarter? Thanks.

Hi, Steve.

Hi, Brian.

It's not - I don’t think I would call it a conduit loan because we would have to break it up into probably seven pieces of -

Got it.

But in all likelihood there, a very likely scenario was a single asset securitization, but given that it's a five year loan, there is also a possibility we can hang on it for a while. So, we have an undetermined edges at this point. Steve DeLaney – JMP Securities: Okay. And the third quarter origination volume -- obviously fine. You commented on the margins. Seasonally, fourth quarter is usually a big quarter for commercial real estate lenders. Can you make any general comments as to your expectations for how total fourth quarter volume may compare to the third quarter?

Fourth quarter typically is a very active quarter, usually driven by tax deadlines. People are trying to get transactions completed before year-end for tax reasons. So, little early for that right now although it should - the fun should start pretty soon. I will tell you that interest rates have been low and lower than where they are right now. If you took a look at where the 10 year was maybe about six weeks or so ago, it was probably around 2.5% and then it went down to 1.90% for about five minutes on October 15, so now it's back up there again around 2.30% or so. So, I think that unless its tax motivated, I would not expect any extraordinary activity. I can also comment that the September activity in the CMBS world was extraordinary. I am not quite sure why that is but I will tell you that was an unusually heavy calendar of issuance. And I guess because people just didn’t want to do the transactions in August, with the thin staff on the financial desks. But I think that typically it's a pretty big quarter, but I am not seeing any unusual activity just yet, but nor would I expect to in the early part of November.

Are you concerned that September could have pulled forward something -- pulled some business forward, maybe, that normally would have just been - because September was so big, it may impact 4Q.

It's possible. I think that the bigger problem if there is one in the market right now is really this flat yield curve. And in that five year and 10 year rates are pretty similar. So, how all mortgage lenders work, I mean there is some component of short term financing against longer term assets, and right now that component of profitability is suffering. And in addition to that though I do generally feel, I don't have any evidence to support it, but I generally feel that because of what went on in the early part of - in the middle of October there with that little crash that took place when oil fell, I think that there is a lot of money in fixed income that has not been deployed yet, because I think a lot of money flood the stock markets and unfortunately as retail tends to do it, it’s led at the wrong time. But often times we will see a pickup after stock market downturn like that because a lot of money finds the fixed income markets. But we're not seeing any difficulty in selling bonds right now, although I don't see any extraordinary demand that’s causing spreads to tighten either.

Okay. Got it. Thanks. And just lastly, to close out, Brian, a lot of investors are focused on the Ladder structure and how that might change to make the company more tax-efficient, but -- considering the $10 million in taxes that Marc referenced. Should we assume at this point -- you haven't made any comments as to that, that if there is going to be any news, that you would possibly just schedule another conference call to handle that before the end of the year?

I think that would be a good assumption. There is clearly a large component of our asset base, and that could be handled in a more tax efficient manner, and that certainly is not lost on us. However it's not just that simple to make these decisions and the company is certainly looking into all of that right now. And we’ve always targeted a year end likelihood when we would make a decision to that effect. And I think that's probably the case now also.

Thanks for the comments, Brian.

Sure.

Your next question comes from the line of Jade Rahmani with KBW. Your line is open.

Thanks very much for taking the question. Brian, on that last point, I was wondering if you could comment on how you would view the limitations of the REIT structure on Ladder's opportunistic strategy. I mean, I think this quarter highlighted some of the opportunistic gains that were taken, whether it's on the securities side or the real estate side. So, is the REIT structure really viable for the Ladder strategy?

Sure. We think about this quite a bit. And as I said, the decision doesn't simply get made in a vacuum regarding tax efficiency, it's not the only component of it. You touch on something that I think about all the time, you have to remember the company was set up as a C corp and the hardwiring of the organization is really built for safety. And we actually like to go on offence during periods of rough weather in markets, and REITs don't intuitively set up comfortably for that, if you were to pursue that in a tax strategy. So, I think what I struggle with sometimes is, it certainly would limit some of our flexibility, but the real question is, do we have to go to a much more inflexible model? Or could we have instead of a black and white situation where one day we're C corp and the next day we have one more tax efficient 100%. Or is there not a transition period, - call it a gray period, where we're probably not – we’re more tax efficient than we are now, but not quite as tax efficient as we could be. And then as time goes by after we do some retained earnings and we're still living in a very volatile market. You can see this periodically it flares up and many of the problems of the same problems that flared up two years ago and six years ago. So, I think we’re still little cautious around volatility and we certainly like to be very well capitalized. I think we probably issued our second corporate debt issuance in the summer maybe a little bit earlier than we might have, although market conditions seem pretty favorable. And so as a result of that if we made a mistake there, we probably made the mistake of taking $300 million at a time where we weren't quite ready to deploy it but we felt that for seven year scenario, we were going to be well served over the long term there. So, I don't know if have answered your question there, but I think you have to keep in mind from our perspective it's not likely that we’ll try to convert to the lowest possible tax rate available. I think we're thinking more along the lines of an optimal tax rate and that would entail something probably that would allow us to continue to build book value as well as having plenty of cash on hand.

Okay. Great. That's helpful. Just turning to the volatility that you just cited, do you think there's -- have you seen an abatement, quarter to date? And also, has any of the volatility caused some of these smaller, newer entrants in the conduit market -- less liquid players than yourselves, or players with less access to capital than yourselves -- has it caused any of those players to retreat somewhat? And in addition, have you changed any of your indicated loan yields on some of the loans planned for securitization?

The comment regarding the other players in the market, the smaller ones, I really don’t know. We’re not generally an aggregator of names like that. We tend to be one of the contributors to a loan portfolio that gets securitized and we tend to be much larger than some of the smaller names. But I don't think that any bout of volatility makes anybody comfortable when you’re smaller sized. So, institutively it makes sense to me, I don’t think anybody welcomes those situations when you’re undersized. I don't even welcome them when we're at our size. But as far as our loan yields go, we - I think our major component of what we think about when we think a about loan yield, when we're lending to somebody, is it so much where the execution is presently. We try to look forward and try to figure out where we think spreads will be when we come to market. We were also looking at the mid-term elections last night. There is a scenario there where corporate taxes could be a little bit friendlier, I don't know that’ll happen but we will see, but these are all things that come into play but we’re really dealing in 90 to 120 day short term cycles. And we have a view that we are historically on the right side of spreads right now. And so we're originating accordingly. You’ll see scenarios with us where you’ll instead of making three points in change, you'll see us make 5.5 points, those are the times where we originated thinking spreads might tighten and they did. You might see us on the lower end of the spectrum when we think spreads are going to tightened and they don’t or they widen. And I would argue that's arguably what happened in this quarter.

Great. Thanks very much for taking the question.

You’re welcome.

Your next question comes from the line of Dan Altscher with FBR Capital Markets. Your line is open. Dan Altscher - FBR Capital Markets & Co: Thanks. Good afternoon. I appreciate you taking my questions. I was wondering if you can maybe help quantify a little bit of how much the volatility and spreads contributed to the gain on sale. In other words, is it possible to parse out, if spreads had not changed, what the gain on sale may have actually looked like?

Sure, Dan. We actually tried to detail some of that in the verbal part of the announcement today. In that - in general and I don’t want to get too deep in the weeds here with the callers but if you consider 15 basis points in spread equal to 1% of profit - I showed you that if spreads widen from 78% to 90% at one point and 86% in the second securitization, I would think shotgun math about a point on the quarter, and so call it $700 million probably we did a point less than we had hoping for. As you know, we target the number that's just north of four points, we try to anyway. And didn't work out exactly as we had planned but the fact that that's generally what we try to do, is to - is that one spreads widen we don’t go into the loss column, we go into the less profitable column. Dan Altscher - FBR Capital Markets & Co: That's perfect. That's exactly the -- kind of, the metric or the color I was looking for. So, that's really helpful. Maybe switching to a new -- a different topic, with risk retention, quite a still two years away, and there's a lot of preparations that probably need to be done, is there any expectations at this point that there could be maybe a rush or a flurry of new issuance activity ahead of that, where people are trying to get grandfathered in before that maybe happening?

Yes - I've been asked this - we asked this question today in the office. I don't think so, although I will tell you I am in the minority in the room, but I think that the biggest impact of risk retention is really going to show up and there's going to be a cost component because the so called B-piece, our first loss piece is going to become 40% to 50% larger. So, there’s going to be some double B's in that first loss piece now, and the first loss piece can trade at 15%, so, whereas double B’s are not newly that wide. So, I think the overall effect will be cost to borrowers will go up because of that component, and I also think that from a bank standpoint, it’s a difficult asset to hold. I think credit is going to become paramount, because - let’s take an example, I’ll talk about us, because it's the one I know about. If we were able to team up with a bank and contribute 50% of the assets to a pool and they contributed 50% of the assets, we could acquire that first loss piece that risk retention requirement and with our permanent equity base able - we’re able to hold it for five years. So, I think that we become a more strategic partner. Now, this also entails us rendering an opinion on our partner's collateral. Because those are loans that we didn’t originate and now we’re going to have to understand them basically from a first loss perspective if this is a business we choose to follow. I think this is an option for Ladder. I don’t think this is an option for a lot of people, because I don’t think a lot of the participants in this space are designed to hold first loss risk for five years because of their capital base and the way it's structured. Dan Altscher - FBR Capital Markets & Co: Okay. And maybe just one other one. It's regarding the FHLB line. A, I'm sorry if I missed before, about how much capacity is still available on the facility. And then secondly, while we're kind of in this gray period of unknown rule changes, are you kind of locked out from expanding that line any further, or can you still pledge new collateral to upsize that -- the advances there?

We're able to continue to borrow from FHLB as we have historically. We’ve got a limit that’s equal to the lesser of $1.9 billion or 33% of Ladder’s total assets. So we’ve got plenty of capacity considering we’re at $1.29 billion of borrowings at the end of the third quarter. In terms of future size expansion, this going to depend on variety of factors, right now for the foreseeable future, feel like we’ve got adequate capacity.

And let me just add one thing there, the lines at the Federal Home Loan Bank presently are operating quite normally. We currently have excess capacity, I think presently as of today anyway we have about $1.3 billion drawn, and as Marc said, we have up to about $.1.9 billion available to meet some tests. But what might be important to note is that we're - there is a discussion the current change that's been contemplated is a sunset provision, where captives would be phased out from borrowing over a five year period of time. And so we currently have and have recently extended our maturities well past five years. So, I don’t think that anything is contemplated where we would have to pay off any advances that have been made, that has eight or nine or 10 years in tenure. But I think that if that worked, if it really were to hold the way it is, then we probably from that day forward wouldn't be allowed to borrow past five years in maturity. However, we have many dollars borrowed longer than five years presently, and that’s actually one of the things that added to our fixed interest costs in the quarter, not only did we add $1.5 million per month in the corporate bond area on the $300 million we borrowed but we also extended our maturities of Federal Home Loan Bank, and that’s probably going to cost us another few $100,000 per month also. But we think long term well worth it. Short term, interest rates fell immediately. So, probably wasn't the happiest moment to do it, but over a long period of time, over an eight year period of time, I think we’ll be happy with it. Dan Altscher - FBR Capital Markets & Co: Okay. Great, thanks for all the color, Brian, and Marc. I really appreciate it.

(Operator Instructions) Your next question comes from the line of Charles Nabhan with Wells Fargo. Your line is open.

Hi, thanks for taking my question. I was wondering if you could comment on the competitive environment, specifically as it pertains to CMBS issuance. Would you attribute the pickup in activity during September to a pullback on the part of insurance companies and banks? And also, are you -- you had commented last quarter on some borderline irrational underwriting that you're seeing from maybe some of the non-bank financials. And I was wondering if you're still seeing those trends in the transitional space.

In the transitional space, we're not seeing it. That's a balance sheet item that’s usually held and vetted pretty closely. I also would say that I am seeing - we are experiencing what I would consider to be a bit of turn here in the credit cycle. And that some - whereas I think the initial phase of that was that people were putting a lot of capital at risk without any intention of making a lot of profit, it was making loans instead of making money, and I think as I said in the past, I think that’s really an unintended consequences of regulation and how banks pay people. However, I would point out, I would not limit the sloppy underwriting to non-banks. There are plenty of banks that are making loans that are clearly made for sale, as opposed to for balance sheet, but I am not really seeing too much in the transitional phase as a problem. And I do think that in the competitive space generally, it’s quite competitive right now, and I've been scratching my head as to why some of the larger players are doing some of the transactions they're doing, and I think it has to do with the fact that so many of the banks products that have traditionally made money during this part of the cycle are not really available to them any more. So, as a result of that, even though these transactions don’t make that much money, they do make some money, and from an ROE perspective I wouldn’t be surprised if there’s some of the best products in the bank. But I do think if this risk retention rule is going to be impactful because I think it’s going to turn into a very credit sensitive business, it’s no longer going to be big pools going at the rating agencies with eight originators in the deal. I think it’s going to be a lot tighter on the number of originators in the deal. And I think it’s going to be a deeply personal relationship between the partners and the transaction because the risk is going to be moving to probably one of them. I hope that helps.

Yeah. I appreciate the color. Thank you very much.

Sure.

(Operator Instructions) There are no further questions at this time. This concludes today's conference call. You may now disconnect.