Good afternoon, and welcome to Ladder Capital Corp’s Earnings Call for the Second Quarter of 2015. As a reminder, today’s call is being recorded. At this time, I would like to turn the conference call over to Ladder’s Associate General Counsel, Ms. Kelly Porcella. Please go ahead, Ms. Porcella.

Thank you, and good afternoon, everyone. I’d like to welcome you to Ladder Capital Corp’s earnings call for the second quarter of 2015. With me this afternoon 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 June 30, 2015. The earnings release is available on the Investor Relations section of the company’s website and our Quarterly Report will be filed with the SEC later this week. 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, 2014 for a more detailed discussion of the risk factors that could cause actual results to differ materially differ 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.

Thank you, Kelly. I’d like to take you through some of the highlights of the second quarter, and then I’ll turn you over to Marc for a more detailed discussion of our results. I am pleased to report that our core earnings for the quarter were $52.1 million or $0.51 per share. This is an increase in core earnings per share of approximately 34% from last year's second quarter. Our annualized after-tax return on average equity was 13.2%, up from 12.6% in the first quarter for an average in the first half of 2015 of 12.9%. Our return on equity is one of the statistics that we pay close attention to at Ladder. We also paid a cash dividend of $0.25 per share of holders of record on June 15. While we're on the topic of dividends, I'm also happy to report that we are increasing our regular quarterly cash dividend by 10% to $0.275 per share commencing in the third quarter. This change reflects the solid operating results we've been posting and our positive outlook for the future. I also have some good news to report regarding the Federal Home Loan Bank borrowing capacity. In the second quarter, our maximum borrowing limit was raised to $2.25 billion from our previous limit of $1.9 billion. This borrowing increase of $350 million is a clear signal of our continued and growing relationship with the FHLB. The Federal Home Loan Bank's mission is to provide reliable liquidity to member institutions to support housing finance and community investments, and we are pleased to be a part of their mission. This facility allows our members subsidiary to match-fund many of our assets, borrowing at relatively low fixed and floating rates for both short and long-term maturities. Now let's turn to some of our business…

Thank you, Brian, and good afternoon. I will now review Ladder Capital's financial results for the quarter ended June 30, 2015. For the second quarter, core earnings were $52.1 million, compared to $61.8 million in the second quarter of 2014. Core earnings for the six months ended June 30, 2015 were $100.1 million. These results reflect a 13.9% pre-tax return on average equity for the quarter ended June 30, 2015 based on an average shareholders’ equity balance of approximately $1.5 billion. Core EPS for the quarter was $0.51 per share, compared to $0.38 per share in the second quarter of 2014. For the six months of 2015, core EPS was $0.99 per share versus $0.73 per share in the same period last year. GAAP net income for the three and six months ended June 30, 2015 was $68.7 million and $86.7 million, respectively. This compares to $30.2 million and $48.6 million for the comparable periods in 2014. The largest GAAP to core earnings adjustments related to 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 depreciation. Brian covered many data points related to our investment activities, so I'm going to focus on a few key elements and themes found in our results that are worthy of note. Core earnings is a pre-tax measure and was $52.1 million for the quarter, $9.7 million less than earned in Q2 2014. In both quarters, we executed two multi-borrower securitizations, but in Q2 of last year, we also executed a $350 million single-borrower securitization, on which we earned a net securitization profit of over $11 million. Although, we have not completed a large single asset securitization yet this year, they are still part of our plan, but they…

Thank you. We'll now be conducting a question-and-answer session. [Operator Instructions] And with that our first question comes from the line of Steve DeLaney with JMP Securities. Please proceed with your question.

Good evening, everyone, and congratulations on another strong quarter. We noticed that your real estate held for sale increased to about $49 million at June from $22 million at end of the third quarter. I was just curious if you could comment on with that property - what you're looking to do there in terms of what type of property you’re looking to sell and reposition that capital? Thanks.

Hi Steve, this is Brian. When we purchase - I think we purchased one of the net lease properties with a short lease and we were anticipating that the lease might be longer. So when you see that on held for sale, it's really moved over into the TRS, whereas markets look again be funny - so go ahead, Marc.

Yes. I think that was the case and one of the cases by, I think in this particular - this is the property that we have for sale that we have under agreement.

That’s already for sale.

And it's a joint-venture property. And so we have it under agreement and we’re expecting to sell it.

All right. Steve, my fault there. That's a property that is for sale with a hard deposit that should close in the third quarter.

Great. And we noticed that you continue to acquire and rotate in and out of that. I was just curious about the - you’ve been doing more acquisitions, I guess, in sales, at least with that asset class. That was really a lead into my big question, Brian. And reading a lot out there - and I think anytime people start talking about interest rates going higher. They start talking about where the bubbles, and are some assets prices toppy we always come back to commercial real estate. You're old enough to been through a few cycles, and I was just curious if you would give us your thoughts on maybe what inning you think you’re in, in terms of commercial real estate property cycle in terms of both prices and investment activity?

Sure. I think we are going through a secular change in some real estate products. So for instance, I know one of my concerns is the very high-end residential condominium market in places like New York City and San Francisco. I think that those - I'm not sure they are really residential properties that people plan to live in or rent. I think sometimes they function as safe deposit boxes for foreigners. So I’ve seen in New York City they’ve slowed down quite a bit and I think that probably runs concurrent with the troubles that have taken place in some of the commodity economies, Russia, Brazil and I know China has certainly backed off a little bit. So we have some concerns there. I've got some deep concerns about certain regional malls, mainly because of the effects of Amazon, but grocery-anchored drugstores and shopping centers not terribly concerned about. I think apartments are doing great. Many of the formerly unemployed college graduates are now moving out of their parents’ homes and finding apartments. So I think the apartments are doing quite well. So I don't think you can really broad-brush and pick an inning here. You have to pick what product the high-end market in New York City on hotels. I think there are some interruption going on with Airbnb and lot of units are available for rental, that perhaps not even legally. So I think we’re kind of after if you call 2007, 2008, the teeth of the crises. We’re probably coming up towards the second half of the game for sure, but I think that pricing power in certain sectors is just going to be different this time. You know that office space people are using much less with more employees. And I think that for instance in New York - I'll focus on New York because I'm here all the time. They are building the World Trade Center, the Hudson rail yards. Park Avenue has left a lot of space open as the financial services have shrunk. So I think pricing power is kind of difficult in some of these markets, but that doesn't mean they are about to go and take header either. I think that there is limitations on how much higher they can go though.

Appreciate that color. Thanks.

Sure.

Thank you. And our next question comes from the line of Jade Rahmani with KBW. Please proceed with your question.

Hi. Thanks for taking my question. Your team, yourself as well, are considered amongst the best in the CMBS business, so I was wondering if you could provide your sense of what's driving volatility in the CMBS market. Obviously there is a range of factors, but maybe if you could touch on spread widening trends in conduit margins, as well as push back from AAA buyers and also BPs [ph] buyers on things like pull shaping and increased loan kick-ups. Just think it would be helpful to get your perspectives?

Sure, happy to try. I think one of the biggest problems that occurs is - and these mortgage lenders historically do this every once in a while. They will originate quite a bit of loans and they get very aggressive especially when interest rates are low in the beginning of the year, because they are quite attractive from a carry perspective and they have a long time to get out of the transaction going into December. So they put the carry trades on big inventories in the first quarter and then they figure they've got nine months to work out of them, except when something like this year happens. And what I think you're experiencing right now as we sit here, there is simply too much supply for the middle of August in this type of a market. So while I don't see anything in particular wrong with the AAAs that we're seeing anyway, we are seeing some extraordinarily wide spreads associated with clearing some of these. So we are purchasing some of them. We've become buyer of some of these transactions. We think that they've gotten very, very cheap. I will say going into this, the second quarter that we're talking about, we were a little concerned about that supply that we saw, and we sold quite a bit of our 10-year longer duration products. And there were two reasons for that. One is we felt that spreads would widen on the longer duration product. We were concerned about having interest rate hedges on those products if China was going to meltdown or Greece was going to be exiting the euro. So we got out, out of a lot of them. And I think I had mentioned in my call that our portfolio is 3.6 years. It's a very…

Thanks. That's helpful. Just based on current spreads and your view of the market, do you - are you anticipating a pick-up in the pace of securitization?

No, I think it would slowdown if rates go higher. You’ve now got AAA spreads over in the low 100s for conduit businesses and sometimes into the, not so low 100s for a single asset securitization. So that can cause some difficulty. Those are historically pretty wide spreads. And so I would imagine that that - if there is any rate rise here from the Fed, I think that should slow things down a little bit. I think there was a bit of a rush to the door thinking that the Fed was going to move in September, and that's another reason for the outside supply that we are experiencing in the market.

And just in terms of Ladder’s own volumes, it came in a little lighter than where they’ve recently been running. Do you anticipate a pick-up?

Well, we originated over $1 billion in conduit loans in four months. And again, we will do that when we think spreads are wide, as we've indicated, that we think spreads are wide, when we are buying securities. So we were a little hesitant. And it comes down to –if you’ve got spreads on AAA, let's say - again, I don’t want to get into bond math with too many people, but if you are selling AAAs at 85 over and they go to 100, you’ll lose a point, and if go to 70, you'll make a point. I would tell you the probability of it going down to set them down 15 is a lot higher now than it was three months ago. So that's one of the reasons we will bulk up on our inventory because we feel like there is a higher probability that spreads will tighten going into year-end, because I think you've got supply destruction as rates widen and rates rise. Was that just too bondy [ph]? Sorry if it was.

No, that’s really helpful. And then just lastly, a smaller commercial mortgage REIT took a large write-down on Puerto Rico mezzanine loan. Just wanted to see if you could touch on whether you guys have any exposure in Puerto Rico?

Sure. I actually saw that. And I believe it was on a hospitality property, right?

Yes.

Okay. Yes, Puerto Rico. We do have some exposure in Puerto Rico. It’s very limited. We have a $15 million mezzanine loan on four shopping centers in four different cities that were likely occupied four years ago when we made that loan. They are 100% occupied now, and the NOI has gone up so we are very comfortable with it, also not just on a leased standpoint because there is a lot of lease terms. We actually thought that one of properties would be leased by a major retailer in the United States and that's exactly what did happen. So we've enjoyed four years of very attractive rates. We have an 11% rate on that for five years and then it goes to 12% rate in the next five years. So no, we're not expecting any problems there. The dollars per foot is very reasonable, especially for Puerto Rico. It's very difficult to build in Puerto Rico because it's a volcanic island. So there is very few flat spots. So retail is very expensive. So this is performing just fine and we have seen no problems, even though we've seen some population decrease in Puerto Rico, but we are not concerned about that. The other Puerto Rico asset we had which was one of our net lease deals. We actually just purchased that this quarter, and I think we closed it two or three days ago. And it's a net lease drugstore and the lease is guaranteed by Walgreens for 22 years, the U.S. entity in Illinois. So we're assuming they will solve their problems in Puerto Rico in the next 22 years.

Great.

That's our only exposure there.

Thanks so much.

Sure.

Thank you. And our next question comes from the line of Dan Altscher with FBR Capital Markets. Please proceed with your question.

Good afternoon, everybody. Just want to clarify a question on the dividends since your dividend mix, I guess, a little bit different than others in terms of having a cash and a stock component. Increasing the cash dividend is pretty clear, but is that coming at a reduction of an expected stock standpoint, or is it the way to think about it as an all-in increase to the dividend, meaning the stock portion is what it is and now the cash portion is higher in its incremental?

No, I think it's a swap of stock for cash. It seems like our investors wanted to - we've been looking at our coverage of our dividend than we think that most of our investors would rather see cash than stock. So it will be a swap. It’s not an actual increase. It’s an increase in the cash component.

Okay, got it. The other piece in news I thought was maybe underemphasized was the authorization of a buyback. $50 million is not necessarily insignificant amount. But I guess, how are you thinking about the actual ability or practicality of using that? What are you weighing out the risk and reward for that versus reinvesting the capital back into parts of the balance sheet business?

Well, I think one of the things we've learned as a fairly new public company is we've got relatively thin float, even though it's a reasonably large market cap, It will really don't have a lot of shares outstanding. So we've got some exaggerated movements when there are determined sellers or determined buyers in the marketplace. So I think as we - if we stand by and we watch our stock price drop by 25%, where a million shares trade, that's - when you feel like you're having a pretty good quarter, that's a little bit frustrating while you're on the sidelines. So I think this was simply an opportunity for us rather than trying to figure this out later on, really just to prepare us at any point to step into the market and start acquiring our own stock keeping in mind that it has to be attractive from our standpoint because we can't leverage that stock anymore, because a $1 million worth of cash we can usually buy $4 million worth of assets with. And if we buy $1 million worth of stock, that $1 million is gone and retired. So it will have a slight impact on our earnings per share as we - but keep in mind, one of our problems here is the float. And so to go in and buy a whole lot of shares isn't necessarily something we necessarily want to do, but at some point if we feel like the value is there and it's better than alternative investments, we will step in.

Okay. All right. So I'll standby on that I guess. Just one other point also, the gain on sale margin was really strong this quarter and probably defied all of our expectations generally. But I guess you referenced obviously spread widening and that's been ensuing and continues to ensue. The same logic would suggest that for the securitization just completed, that would have a little bit of a negative impact or little bit more of a challenging impact on the gain on sale. But can you comment around that or provide us a little bit of help there, because again you did probably a lot better than we all thought even with spread widening this quarter as well?

Yes. Well, you're on the right track for sure. I think that our - we only say our best defense is a good basis. So from our perspective, I think the last transaction that we priced was in that context of the low 100s on the AAA 10-years, whereas the transaction that we did before that, we priced AAA 10-years at 90 to over swaps instead of low 100s. So by the same math I gave you before, you can anticipate that that - it had been gone on as well as we have hoped, but I'm very comfortable telling you it was in the black. I think another note I might want to make to you there just to help you understand it better is when we look back over the - let's go back to last August of 2014. We've participated in, I think nine securitizations since then. And in last August, we were selling AAA 10-years at plus 90. This August, we sold them at a little over 100. So these are historically reasonably wide spreads and there was a little dip-down in the middle of March or so, when rates were falling if you remember in the first quarter. But this business has not really had a tailwind anywhere inside and I think you're probably seeing that from the other companies you cover. So what we - we have elected to increase our production and we've certainly got acceptable margins built-in and we are hopeful that after the supply glut clears, that going into year-end when people seasonally go on the diet and they don't carry their real estate portfolios over year-end, they sell everything. So we are anticipating that and hopeful that spreads will catch a tailwind and tighten a bit.

Okay, thanks. And then one - yes, that was good. Then just one other quicky, but I think you guys have the ability to getting measured what the gain on sale is on each individual loan that goes [indiscernible]. So just of the ones that were sold in the quarter, if there is anything that was like individually outside that carried a very large weighted average that was kind of chunky, or was it generally all around pretty good turnout on an individual loan basis?

It was overall pretty - where we tend to originate in a rather granular fashion, most of our - you don't usually see us in the top 10 loans in securitizations. But I would say that occasionally we see some unique value, some uncommon value that we feel that will be appreciated more by the rating agencies than what the model spits out. For instance, I'll give you a quick example. Years ago, we did a loan on Third Avenue - on 909 Third Avenue which had the post office in the retail. It’s a full city block where the post office I think pays $3 a foot. We thought that was worth more than $9 cap on $3 a foot. So we went and just ignored that cap rate analysis and just said, here is what I think it’s worth and we explained that to investors and rating agencies. And by and large they went along with us. So we are not just model-driven. If you put the numbers into a machine, it comes out and it would tell you that full city block on Third Avenue was probably worth about $280,000 which - I mean that's an absurd comment I realize, but on some version, we do see that sometimes that people will sometimes just become a little too model-driven, and we’ll step in and see something that's pretty comfortable for us. Keep in mind too if we believe that where we understand it and it just doesn't work out that way, we’re also quite happy to hold these things where we are credit-driven. So if rating agencies don't agree with us, that's okay too.

Great. Thanks so much, Brian. Appreciate it.

Sure.

Thank you. [Operator Instructions] Our next question comes from the line of Joel Houck with Wells Fargo. Please proceed with your question.

Thanks. Wondering there is two countervailing theme here. One is what's going to happen at year-end and perhaps tightening spreads, but then on the other hand, potential Fed increase could widen spread. I guess one way have before the other, but the question I guess is, given the recent spread widening we've seen in CMBS and potential that who knows what happens with the Fed, but if that were to continue, what’s the appetite for increasing your own balance sheet portfolio as well as buying seasoned CMBS with wider spreads. And then on the flip side of that, the longer term outlook for the conduit pipeline as well as gain on sale into next year?

Sure. Let me take that in pieces. But I think that you have to believe that as - if there were certain amount of buyers led by these securities from these lenders and that's usually in the world of money managers and insurance companies. Insurance companies don't hedge. They are just asset liability matters, maybe some of them do. I don't mean it to paint them all with a brush, but insurance companies, when they think rates are going to go higher, they will sit on cash and hope to invest their money later at the higher rates, whereas the money manager hedges interest rate, so it doesn't really matter to him where interest rates are. What he is generally interested in is where he can leverage his position and what is the differential between his cost of funds and his coupon that he is earning. So if there is a belief that rates are rising, are going higher and which we are experiencing right now, I think that that's a common sentiment. You are seeing some of the insurance companies sit down and that’s why some of these single asset securitizations that are on very high quality buildings are not doing well, because they don't want to hedge those positions. So ultimately when they take these high quality assets and they put them out there at certain prices, they’re really doing with many managers rather than insurance companies and that causes widening. There is also in the longer term picture, we've got a large amount of maturities that are, I think everyone on this call is probably pretty familiar with on some level, that are simply going to mature whether interest rates are higher or not. So there is a natural demand for lending products, but I think that…

All right. Thanks Brian. It’s very helpful.

Thank you. We have no other questions in the queue at this time. I would now like to turn the call back over to management for any closing comments.

All right. Thanks everybody. I appreciate you being on the call with us today, and look forward to the next one. Bye-bye.

Thank you. This concludes today's teleconference. Let me disconnect your lines at this time, and we thank all of you for your participation.