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What changed in Ladder Capital Corp's 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of Ladder Capital Corp's 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+685 added−658 removedSource: 10-K (2023-12-31) vs 10-K (2022-12-31)

Top changes in Ladder Capital Corp's 2023 10-K

685 paragraphs added · 658 removed · 487 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

81 edited+8 added−20 removed88 unchanged
Biggest changeThe Company invests in primarily AAA-rated real estate securities, typically front pay securities, with relatively short duration and significant subordination. The hyperamortization features included in many of the securities positions we own help mitigate potential credit losses in the event of adverse market conditions.
Biggest changeDuring the year ended December 31, 2023, we collected 99% of rent on these properties. 5 Table of Contents The following charts summarize the composition of our real estate investments as of December 31, 2023 ($ in millions): Securities The Company invests in primarily AAA-rated real estate securities, typically front pay securities, with relatively short duration and significant subordination.
During this timeframe, we also acquired $13.0 billion of predominantly investment grade-rated securities secured by first mortgage loans on commercial real estate and $2.0 billion of selected net leased and other real estate assets.
During this timeframe, we also acquired $13.2 billion of predominantly investment grade-rated securities secured by first mortgage loans on commercial real estate and $2.0 billion of selected net leased and other real estate assets.
In addition to cash flow from operations, we fund our operations and investment strategy through a diverse array of funding sources, including: • Unsecured corporate bonds • CLO transactions • Secured loan and securities repurchase facilities • Non-recourse mortgage debt • Revolving credit facility • FHLB financing • 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.
In addition to cash flow from operations, we fund our operations and investment strategy through a diverse array of funding sources, including: • Unsecured corporate bonds • CLO transactions • Secured loan and securities repurchase facilities • Non-recourse mortgage debt • Revolving credit facility • 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.
We expect that certain of our subsidiaries (including any series thereof) may rely on the exclusion from the definition of an “investment company” under the Investment Company Act pursuant to Section 3(c)(5)(C) of the Investment Company Act, which is available for entities “primarily engaged” in the business of “purchasing or otherwise acquiring mortgages and other liens on and interests in real estate.” This exclusion, as interpreted by the staff of the SEC, requires that an entity invest at least 55% of its assets in “qualifying real estate assets” and at least 80% of its assets in qualifying real estate assets and “real estate-related assets.” Although we reserve the right to modify our business methods at any time, as of December 31, 2022, we expect each of our subsidiaries (including any series thereof) relying on Section 3(c)(5)(C) to primarily hold assets in one or more of the following categories, which are comprised primarily of “qualifying real estate assets”: commercial mortgage loans, investments in securities secured by first mortgage loans, and investments in selected net leased and other real estate assets.
We expect that certain of our subsidiaries (including any series thereof) may rely on the exclusion from the definition of an “investment company” under the Investment Company Act pursuant to Section 3(c)(5)(C) of the Investment Company Act, which is available for entities “primarily engaged” in the business of “purchasing or otherwise acquiring mortgages and other liens on and interests in real estate.” This exclusion, as interpreted by the staff of the SEC, requires that an entity invest at least 55% of its assets in “qualifying real estate assets” and at least 80% of its assets in qualifying real estate assets and “real estate-related assets.” Although we reserve the right to modify our business methods at any time, as of December 31, 2023, we expect each of our subsidiaries (including any series thereof) relying on Section 3(c)(5)(C) to primarily hold assets in one or more of the following categories, which are comprised primarily of “qualifying real estate assets”: commercial mortgage loans, investments in securities secured by first mortgage loans, and investments in selected net leased and other real estate assets.
If we or any of our subsidiaries (including any series thereof) fail to qualify for, and maintain an exemption from, registration under the Investment Company Act, or an exclusion from the definition of an investment company, we could, among other things, be required either to (a) substantially change the manner in which we conduct our operations to avoid being required to register as an investment company, (b) effect sales of our assets in a manner that, or at a time when, we would not otherwise 15 Table of Contents choose to do so, or (c) register as an investment company under the Investment Company Act, any of which could have an adverse effect on us, our financial results, the sustainability of our business model or the value of our securities.
If we or any of our subsidiaries (including any series thereof) fail to qualify for, and maintain an exemption from, registration under the Investment Company Act, or an exclusion from the definition of an investment company, we could, among other things, be required either to (a) substantially change the manner in which we conduct our operations to avoid being required to register as an investment company, (b) effect sales of our assets in a manner that, or at a time when, we would not otherwise choose to do so, or (c) register as an investment company under the Investment Company Act, any of which could have an adverse effect on us, our financial results, the sustainability of our business model or the value of our securities.
We also support our employees’ wellness and aim to create an environment that provides for work-life balance, including opportunities for a hybrid work schedule. 17 Table of Contents Our Corporate Information Our principal executive offices are located at 320 Park Avenue, 15th Floor, New York, New York 10022, and our telephone number is (212) 715-3170.
We also support our employees’ wellness and aim to create an environment that provides for work-life balance, including opportunities for a hybrid work schedule. 15 Table of Contents Our Corporate Information Our principal executive offices are located at 320 Park Avenue, 15th Floor, New York, New York 10022, and our telephone number is (212) 715-3170.
From our inception in October 2008 through December 31, 2022, we originated $16.9 billion of conduit loans, of which $16.8 billion were sold into 71 CMBS securitizations, making us, by volume, the second largest non-bank contributor of loans to CMBS securitizations in the United States in such period.
From our inception in October 2008 through December 31, 2023, we originated $16.9 billion of conduit loans, of which $16.8 billion were sold into 71 CMBS securitizations, making us, by volume, the second largest non-bank contributor of loans to CMBS securitizations in the United States in such period.
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 $29.7 billion of commercial real estate loans from our inception in October 2008 through December 31, 2022.
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 $29.7 billion of commercial real estate loans from our inception in October 2008 through December 31, 2023.
Under the Indentures, we may not incur certain types of indebtedness unless our consolidated non-funding debt to equity ratio (as defined in the Indentures) is less than or equal to 1.75:1.00 or if the unencumbered assets of the Company and its subsidiaries is less than 120% of their unsecured indebtedness, although our subsidiaries are permitted to incur indebtedness where recourse is limited to the assets and/or the general credit of such subsidiary.
Under the Indentures, we may not incur certain types of indebtedness unless our consolidated non-funding debt to equity ratio (as defined in the Indentures) is less than or equal to 1.75:1.00 or if the unencumbered assets of the Company and its 11 Table of Contents subsidiaries is less than 120% of their unsecured indebtedness, although our subsidiaries are permitted to incur indebtedness where recourse is limited to the assets and/or the general credit of such subsidiary.
Item 1. Business Overview Ladder Capital Corp is an 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.
Item 1. Business Overview Ladder is an 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.
These mortgage loans are structured to fit the needs and business plans of the property owners, and generally have SOFR-based or LIBOR-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.
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.
On average, our management team members have over 26 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, is an additional officer of Ladder.
On average, our management team members have 28 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, is an additional officer of Ladder.
Our underwriters conduct a thorough due diligence process for each prospective investment. The team coordinates in-house and third-party due diligence for each prospective loan as part of a checklist-based process that is designed to ensure that each loan receives a systematic evaluation. Elements of the underwriting process generally include: 8 Table of Contents Cash Flow Analysis.
Our underwriters conduct a thorough due diligence process for each prospective investment. The team coordinates in-house and third-party due diligence for each prospective loan as part of a checklist-based process that is designed to ensure that each loan receives a systematic evaluation. Elements of the underwriting process generally include: Cash Flow Analysis.
We expect this ratio to fluctuate during the course of a fiscal year due to the normal course of business in 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 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.
Our in-house transaction management team includes experienced attorneys that manage, negotiate, structure and close all transactions and complete legal due diligence on each property, borrower, and sponsor, including evaluating documents such as leases, title, title insurance, opinion letters, tenant estoppels, organizational documents, and other agreements and documents related to the property or the loan. Third-party Appraisal.
Our in-house transaction management team includes experienced attorneys that manage, negotiate, structure and close all transactions and complete legal due diligence on each property, borrower, and sponsor, including evaluating documents such as leases, title, title insurance, opinion letters, tenant estoppels, organizational documents, and other agreements and documents related to the property or the loan. 7 Table of Contents Third-party Appraisal.
We are in compliance with all covenants as described in this Annual Report as of December 31, 2022. Competition The commercial real estate finance markets are highly competitive.
We are in compliance with all covenants as described in this Annual Report as of December 31, 2023. Competition The commercial real estate finance markets are highly competitive.
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 December 31, 2022, and a breakdown of our loan portfolio by loan size and geographic location and asset type of the underlying real estate by loan balance. 5 Table of Contents Real Estate Net Leased Commercial Real Estate Properties.
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 December 31, 2023, and a breakdown of our loan portfolio by loan size and geographic location and asset type of the underlying real estate by loan balance. 4 Table of Contents Real Estate Net Leased Commercial Real Estate Properties.
Refer to “Risk factors—Risks related to our taxation as a REIT.” 14 Table of Contents Regulation Our operations are subject, in certain instances, to supervision and regulation by U.S. federal and state governmental authorities and may be subject to various laws and judicial and administrative decisions imposing various requirements and restrictions.
Refer to “Risk factors—Risks related to our taxation as a REIT.” Regulation Our operations are subject, in certain instances, to supervision and regulation by U.S. federal and state governmental authorities and may be subject to various laws and judicial and administrative decisions imposing various requirements and restrictions.
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 68.1% at December 31, 2022. 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.
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 82.0% at December 31, 2023. 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.
We expect each of our subsidiaries (including any series thereof) relying on Section 3(c)(5)(C) to rely on guidance published by the SEC or its staff or on our analyses of such guidance to determine which assets are qualifying real estate assets and real estate-related assets.
We expect each of our subsidiaries (including any series thereof) relying on Section 3(c)(5)(C) to rely on guidance published by the Securities and Exchange Commission (“SEC”) or its staff or on our analyses of such guidance to determine which assets are qualifying real estate assets and real estate-related assets.
The premiums are being amortized over the remaining life of the respective debt instruments using the effective interest method. We recorded $0.7 million of premium amortization, which decreased interest expense, for the year ended December 31, 2022. The loans are collateralized by real estate and related lease intangibles, net, of $559.9 million as of December 31, 2022.
The premiums are being amortized over the remaining life of the respective debt instruments using the effective interest method. We recorded $0.6 million of premium amortization, which decreased interest expense, for the year ended December 31, 2023. The loans are collateralized by real estate and related lease intangibles, net, of $474.7 million as of December 31, 2023.
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 December 31, 2022, we held a portfolio of 14 other commercial real estate-related loans with an aggregate book value of $65.9 million.
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 December 31, 2023, we held a portfolio of 9 mezzanine loans with an aggregate book value of $32.4 million.
As of December 31, 2022, our net leased properties comprised a total of 3.8 million square feet, 100% leased with an average age since construction of 17.7 years and a weighted average remaining lease term of 9.5 years. Commercial real estate investments in excess of $20.0 million require the approval of our board of directors’ Risk and Underwriting Committee.
As of December 31, 2023, our net leased properties comprised a total of 3.8 million square feet, 100% leased with an average age since construction of 18.6 years and a weighted average remaining lease term of 8.5 years. Commercial real estate investments in excess of $20.0 million require the approval of our board of directors’ Risk and Underwriting Committee.
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 68.0% at December 31, 2022. Other Commercial Real Estate-Related Loans.
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 65.5% at December 31, 2023. Other Commercial Real Estate-Related Loans.
As a firm with just 63 employees as of December 31, 2022, Ladder’s flat management structure and open-door policy provide all employees with daily access to our senior management.
As a firm with just 59 employees as of December 31, 2023, Ladder’s flat management structure and open-door policy provide all employees with daily access to our senior management.
Disposition and Distribution Our securitization team works with our transaction management and underwriting teams to realize our disposition strategy of selling certain first mortgage loans into CMBS securitization trusts. We typically partner with other leading financial institutions to contribute loans to multi-asset securitizations.
Disposition and Distribution Our securitization team works with our transaction management and underwriting teams to realize our disposition strategy of selling certain first mortgage loans into CMBS securitization trusts. We typically partner with other leading financial institutions to contribute loans to multi-asset securitizations. We have also led single asset securitizations on single loans we have originated.
The most significant factors include: (1) our competition; (2) market and economic conditions, including inflation and the continuing impact from COVID-19 on the economy; (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.
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.
However, we are subject to certain restrictions on our ability to incur additional debt in the indentures governing the Notes (the “Indentures”) and our other debt agreements.
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 (the “Indentures”) and our other debt agreements.
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 $27.4 million at December 31, 2022.
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 $26.9 million at December 31, 2023.
As of December 31, 2022, our CMBS investments had a weighted average duration of 1.1 years. The commercial real estate collateral underlying our CMBS investment portfolio is located throughout the United States.
As of December 31, 2023, our CMBS investments had a weighted average duration of 2.0 years. The commercial real estate collateral underlying our CMBS investment portfolio is located throughout the United States.
As of December 31, 2022, we owned 156 single tenant net leased properties with an aggregate book value of $497.8 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 December 31, 2023, we owned 156 single tenant net leased properties with an undepreciated book value of $653.5 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.
Our mortgage loan financings have primarily fixed rates ranging from 4.25% to 8.03%, mature between 2023-2031 and total $498.0 million as of December 31, 2022. These long-term non-recourse mortgages include net unamortized premiums of $2.4 million at December 31, 2022, representing proceeds received upon financing greater than the contractual amounts due under the agreements.
Our mortgage loan financings have primarily fixed rates ranging from 4.39% to 9.03%, mature between 2024 - 2031 and total $437.8 million as of December 31, 2023. These long-term non-recourse mortgages include net unamortized premiums of $1.8 million at December 31, 2023, representing proceeds received upon financing greater than the contractual amounts due under the agreements.
As of December 31, 2022, the Company had $616.9 million of borrowings outstanding, with an additional $0.7 billion of committed financing available. Assets pledged as collateral under these facilities are generally limited to first mortgage whole mortgage loans, mezzanine loans and certain interests in such first mortgage and mezzanine loans.
As of December 31, 2023, the Company had $605.0 million of borrowings outstanding, with an additional $637.0 million of committed financing available. Assets pledged as collateral under these facilities are generally limited to first mortgage whole mortgage loans, mezzanine loans and certain interests in such first mortgage and mezzanine loans.
The approaches we apply to financing our assets are a key component of our asset/liability risk management strategy with respect to managing liquidity risk. These approaches, supplemented by the use of hedging primarily via the use of standard derivative instruments, facilitate the prudent management of our interest rate and credit spread exposures. Refer to “Our Financing Strategies” for further information.
The approaches we apply to financing our assets are a key component of our asset/liability risk management strategy with respect to managing liquidity risk. These approaches, supplemented by the use of hedging 8 Table of Contents primarily via the use of standard derivative instruments, facilitate the prudent management of our interest rate and credit spread exposures.
As of December 31, 2022, we held one conduit first mortgage loan that was available for contribution into securitizations. Based on the loan balances and the “as-is” third-party FIRREA appraised values at origination, loan-to-value ratio of this loan was 58.9% at December 31, 2022.
As of December 31, 2023, 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 this loan was 59.4% at December 31, 2023.
Included in the $551.8 million of CMBS securities are $9.4 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.
Included in the $431.5 million of CMBS securities are $9.3 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, 99.5% of which were rated investment grade by Standard & Poor’s Ratings Group, Moody’s Investors Service, Inc. or Fitch Ratings Inc. as of December 31, 2022: 7 Table of Contents In the future, we may invest in CMBS securities or other securities that are unrated.
The following chart summarizes our securities investments by market value, 98.9% of which were rated investment grade by Standard & Poor’s Ratings Group, Moody’s Investors Service, Inc. or Fitch Ratings Inc. as of December 31, 2023: In the future, we may invest in CMBS securities or other securities that are unrated.
As of December 31, 2022, the Company had $8.6 million borrowings outstanding, with an additional $91.4 million of committed financing available. Additionally, we are a party to multiple uncommitted master repurchase agreements with several counterparties to finance our investments in CMBS and U.S. Agency securities.
As of December 31, 2023, the Company had no borrowings outstanding, with an additional $100.0 million of committed financing available. Additionally, we are a party to multiple uncommitted master repurchase agreements with several counterparties to finance our investments in CMBS and U.S. Agency securities.
As of December 31, 2022, by property count and market value, respectively, 63.3% and 68.4% of the collateral underlying our CMBS investment portfolio was distributed throughout the top 25 metropolitan statistical areas (“MSAs”) in the United States, with 5.9% and 20.2%, 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 0.1% to 7.8% by property count and 0.2% to 8.6% by market value.
As of December 31, 2023, by property count and market value, respectively, 65.2% and 66.3% of the collateral underlying our CMBS investment portfolio was distributed throughout the top 25 metropolitan statistical areas (“MSAs”) in the United States, with 7.9% and 20.2%, 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 0.1% to 7.6% by property count and 0.1% to 8.5% by market value. 6 Table of Contents AAA-rated CMBS or U.S.
These unsecured financings were comprised of $344.0 million in aggregate principal amount of 5.25% senior notes due 2025 (the “2025 Notes”), $650.8 million in aggregate principal amount of 4.25% senior notes due 2027 (the “2027 Notes”) and $649.0 million in aggregate principal amount of 4.75% senior notes due 2029 (the “2029 Notes,” and collectively with the 2025 Notes and the 2027 Notes, the “Notes”).
These unsecured financings were comprised of $327.8 million in aggregate principal amount of 5.25% senior notes due 2025 (the “2025 Notes”), $611.9 million in aggregate principal amount of 4.25% senior notes due 2027 (the “2027 Notes”) and $635.9 million in aggregate principal amount of 4.75% senior notes due 2029 (the “2029 Notes,” and collectively with the 2025 Notes and the 2027 Notes, the “Notes”).
As applicable, we evaluate loan modifications, debt and/or equity recapitalizations and other changes or variations to a borrower’s or venture partner’s business plan or budget and recommend a course of action to the Investment Committee.
As applicable, our asset management team evaluates loan modifications, debt and/or equity recapitalizations and other changes or variations to a borrower’s or venture partner’s business plan or budget and recommend a course of action to the Investment Committee.
The majority of the tenants in our net leased properties are necessity-based businesses. During the year ended December 31, 2022, we collected 100% of rent on these properties. Diversified Commercial Real Estate Properties. As of December 31, 2022, we owned 48 diversified commercial real estate properties throughout the U.S with an aggregate book value of $202.3 million.
The majority of the tenants in our net leased properties are necessity-based businesses. During the year ended December 31, 2023, we collected 100% of rent on these properties. Diversified Commercial Real Estate Properties. As of December 31, 2023, we owned 53 diversified commercial real estate properties throughout the U.S with an undepreciated book value of $293.7 million.
Refer to “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and capital resources.” Regulation as an Investment Adviser Effective as of July 16, 2021, Ladder Capital Asset Management LLC (“LCAM”) is a registered investment adviser under the Investment Advisers Act of 1940, as amended (the “Advisers Act”) and currently provides investment advisory services solely to Ladder-sponsored collateralized loan obligation trusts (“CLO Issuers”).
Regulation as an Investment Adviser Effective as of July 16, 2021, Ladder Capital Asset Management LLC (“LCAM”) is a registered investment adviser under the Investment Advisers Act of 1940, as amended (the “Advisers Act”) and currently provides investment advisory services solely to Ladder-sponsored collateralized loan obligation trusts (“CLO Issuers”).
We have also led single asset securitizations on single loans we have originated. 10 Table of Contents In addition to contributing first mortgage loans into CMBS securitization trusts, we also maintain the flexibility to keep such loans on our balance sheet, contribute loans into a CLO or similar structure, sell participation interests or “b-notes” in our first mortgage loans or sell first mortgage loans as whole loans.
In addition to contributing first mortgage loans into CMBS securitization trusts, we also maintain the flexibility to keep such loans on our balance sheet, contribute loans into a CLO or similar structure, sell participation interests or “b-notes” in our first mortgage loans or sell first mortgage loans as whole loans.
None of our employees are represented by a union or subject to a collective bargaining agreement and we have never experienced a work stoppage. We believe that our employee relations are good.
All employees are employed by our operating subsidiary, Ladder Capital Finance LLC. None of our employees are represented by a union or subject to a collective bargaining agreement and we have never experienced a work stoppage. We believe that our employee relations are good.
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 investments in excess of $76.0 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.
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.
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 Venture. From time to time we invest in real estate related ventures.
Asset Management Our in-house asset management team pro-actively manages the Company’s loan and real estate portfolios, demonstrating our Company-wide focus and emphasis on principal preservation and maximizing asset performance.
Refer to “Our Financing Strategies” for further information. Asset Management Our in-house asset management team pro-actively manages the Company’s loan and real estate portfolios, demonstrating our Company-wide focus and emphasis on principal preservation and maximizing asset performance.
As of December 31, 2022, the Company had $1.1 billion 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 $5.9 million were included in CLO debt as of December 31, 2022.
CLO Debt As of December 31, 2023, the Company had $1.1 billion of matched term, non-mark-to-market and non-recourse CLO debt included in debt obligations on its consolidated balance sheets.
Factors Impacting Operating Results There are a number of factors that influence our operating results in a meaningful way.
There are a number of factors that influence our operating results.
Refer to “Our Financing Strategies” and “Liquidity and Capital Resources” for further information. Ladder was founded in October 2008 and we completed our IPO in February 2014. We are led by a disciplined and highly aligned management team. As of December 31, 2022, our management team and directors held interests in our Company comprising over 10% of our total equity.
Ladder was founded in October 2008 and we completed our IPO in February 2014. We are led by a disciplined and highly aligned management team. As of December 31, 2023, our management team and directors held interests in our Company comprising over 11% of our total equity.
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. AAA-rated CMBS or U.S. Agency securities investments in excess of $76.0 million and all other investment grade CMBS or U.S.
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.
As of December 31, 2022, the Company had no outstanding borrowings on the Revolving Credit Facility. The obligations under the Revolving Credit Facility are guaranteed by the Company and certain of its subsidiaries.
As of December 31, 2023, the Company had no outstanding borrowings on the Revolving Credit Facility, but still maintains the ability to draw $323.9 million. The obligations under the Revolving Credit Facility are guaranteed by the Company and certain of its subsidiaries.
The SEC staff has issued little interpretive guidance with respect to Section 3(c)(6) and any guidance published by the staff could require us to adjust our strategies accordingly. 16 Table of Contents In 2011, the SEC solicited public comment on a wide range of issues relating to Section 3(c)(5)(C) of the Investment Company Act, including the nature of the assets that qualify for purposes of the exemption and whether companies that are engaged in the business of acquiring mortgages and mortgage-related instruments should be regulated in a manner similar to investment companies.
In 2011, the SEC solicited public comment on a wide range of issues relating to Section 3(c)(5)(C) of the Investment Company Act, including the nature of the assets that qualify for purposes of the exemption and whether companies that are engaged in the business of acquiring mortgages and mortgage-related instruments should be regulated in a manner similar to investment companies.
As of December 31, 2022, the estimated fair value of our portfolio of CMBS investments totaled $551.8 million in 81 CUSIPs ($6.8 million average investment per CUSIP).
As of December 31, 2023, the estimated fair value of our portfolio of CMBS investments totaled $431.5 million in 73 CUSIPs ($5.9 million average investment per CUSIP).
The Company retained control over major decisions made with respect to the administration of the Contributed December 2021 Loans, including broad discretion in managing these loans, and has the ability to appoint the special servicer under the CLO.
The Company retained control over major decisions made with respect to the administration of the Contributed December 2021 Loans, including broad discretion in managing these loans, and has the ability to appoint the special servicer under the CLO. Committed Loan Financing Facilities We are parties to multiple committed loan repurchase agreement facilities, totaling $1.2 billion of credit capacity.
In addition, certain of our subsidiaries’ businesses may rely on exemptions from various requirements of the Securities Act, the Exchange Act, the Investment Company Act, and the U.S. Employee Retirement Income Security Act of 1974, as amended (“ERISA”). These exemptions are sometimes highly complex and may in certain circumstances depend on compliance by third-parties who we do not control.
In addition, certain of our subsidiaries’ businesses may rely on exemptions from various requirements of the Securities Act, the Exchange Act, the Investment Company Act, and the U.S. Employee Retirement Income Security Act of 1974, as amended (“ERISA”).
Investment Process Origination Our team of originators is responsible for sourcing and directly originating new commercial first mortgage loans from the brokerage community and directly from real estate owners, operators, developers and investors.
Treasury securities classified as cash and cash equivalents and held $53.7 million of U.S. Treasury securities classified as securities on our consolidated balance sheet. Investment Process Origination Our team of originators is responsible for sourcing and directly originating new commercial first mortgage loans from the brokerage community and directly from real estate owners, operators, developers and investors.
Securities We invest primarily in CMBS, including CLOs, secured by first mortgage loans on commercial real estate and own predominantly AAA-rated securities. These investments provide a stable and attractive base of net interest income and help us manage our liquidity.
We invest primarily in CMBS, including 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.
Regulation of Commercial Real Estate Lending Activities Although most states do not regulate commercial finance, certain states impose limitations on interest rates and other charges and on certain collection practices and creditor remedies, and require licensing of lenders and financiers and adequate disclosure of certain contract terms.
These exemptions are sometimes highly complex and may in certain circumstances depend on compliance by third-parties who we do not control. 12 Table of Contents Regulation of Commercial Real Estate Lending Activities Although most states do not regulate commercial finance, certain states impose limitations on interest rates and other charges and on certain collection practices and creditor remedies, and require licensing of lenders and financiers and adequate disclosure of certain contract terms.
We thoroughly document the due diligence process up to, and including, the credit memorandum and maintain an organized digital archive of our work. 9 Table of Contents Transaction Management The transaction management team is generally responsible for coordinating and managing outside counsel, working directly with originators, underwriters and borrowers to manage, structure, negotiate and close all transactions, including the securitization of our loans.
Transaction Management The transaction management team is generally responsible for coordinating and managing outside counsel, working directly with originators, underwriters and borrowers to manage, structure, negotiate and close all transactions, including the securitization of our loans.
A credit memorandum is prepared to summarize the results of the underwriting and due diligence process for the consideration of the Investment Committee.
A credit memorandum is prepared to summarize the results of the underwriting and due diligence process for the consideration of the Investment Committee. We thoroughly document the due diligence process up to, and including, the credit memorandum and maintain an organized digital archive of our work.
Balance sheet first mortgage loans in excess of $50.0 million also require the approval of our board of directors’ Risk and Underwriting Committee. 4 Table of Contents 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 collateralized loan obligation (“CLO”) or similar structure, sell participation interests or “b-notes” in our mortgage loans or sell such mortgage loans as whole loans.
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.
Section 3(a)(1)(A) of the Investment Company Act defines an investment company as any issuer that is or holds itself out as being engaged primarily, or proposes to engage primarily, in the business of investing, reinvesting or trading in securities.
In addition, our contracts would be unenforceable unless a court required enforcement, and a court could appoint a receiver to take control of us and liquidate our business. 13 Table of Contents Section 3(a)(1)(A) of the Investment Company Act defines an investment company as any issuer that is or holds itself out as being engaged primarily, or proposes to engage primarily, in the business of investing, reinvesting or trading in securities.
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. 13 Table of Contents We and our subsidiaries may incur substantial additional debt in the future.
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.
Our balance sheet first mortgage loans have been typically repaid at or prior to maturity (including by being refinanced by us into a new conduit first mortgage loan upon property stabilization). As of December 31, 2022, we held a portfolio of 140 balance sheet first mortgage loans with an aggregate book value of $3.8 billion.
Our balance sheet first mortgage loans may be refinanced by us into a new conduit first 3 Table of Contents mortgage loan upon property stabilization. As of December 31, 2023, we held a portfolio of 107 balance sheet first mortgage loans with an aggregate book value of $3.1 billion.
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.
Refer to Part II, Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” under 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.
The securitization of conduit loans enables us to reinvest our equity capital into new loan originations or allocate it to other investments. As of December 31, 2022, we had $6.0 billion in total assets and $1.5 billion of total equity.
The securitization of conduit loans enables us to reinvest our equity capital into new loan originations or allocate it to other investments.
Our complementary business segments are designed to provide us with the flexibility to opportunistically allocate capital in order to generate attractive risk-adjusted returns under varying market conditions.
Our complementary business segments are designed to provide us with the flexibility to opportunistically allocate capital in order to generate attractive risk-adjusted returns under varying market conditions. The following chart summarizes our investment portfolio as of December 31, 2023 ($ in thousands): (1) CRE equity asset amounts represent undepreciated asset values.
We use anonymous employee experience surveys to solicit real-time feedback on topics such as job satisfaction and employee activities. We use the information from these surveys to guide management engagement, decision-making, and strategy.
We use anonymous employee experience surveys to solicit feedback on topics such as job satisfaction and employee activities. We use the information from these surveys to guide management engagement, decision-making, and strategy. Health, Safety and Wellness The Company offers comprehensive healthcare benefits, paid time off, and a business continuity plan that places our employees’ health and safety at its core.
Due in large part to devoting such a large portion of the Company’s capital structure to equity and unsecured corporate bond debt, Ladder maintains a $2.9 billion pool of unencumbered assets, comprised primarily of first mortgage loans and unrestricted cash as of December 31, 2022. 11 Table of Contents CLO Debt On July 13, 2021, a consolidated subsidiary of the Company completed a privately marketed CLO transaction, which generated $498.2 million of gross proceeds to Ladder, financing $607.5 million of loans (“Contributed July 2021 Loans”) at an 82% advance rate on a matched term, non-mark-to-market and non-recourse basis.
On July 13, 2021, a consolidated subsidiary of the Company completed a privately-marketed CLO transaction, which generated $498.2 million of gross proceeds to Ladder, financing $607.5 million of loans (“Contributed July 2021 Loans”) at an 82% advance rate on a matched term, non-mark-to-market and non-recourse basis.
Our assets primarily included $3.9 billion of loans, $0.6 billion of securities, $0.7 billion of real estate, and $0.6 billion of unrestricted cash. We maintain a diversified and flexible financing strategy supporting our investment strategy and overall business operations, including the use of unsecured corporate bonds, non-recourse, non-mark-to-market CLO debt issuances and committed term financing from leading financial institutions.
We maintain a diversified and flexible financing strategy supporting our investment strategy and overall business operations, including the use of unsecured corporate bonds, 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.
Refer to our discussion below and “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources” and Note 7 Debt Obligations, Net in our consolidated financial statements included elsewhere in this Annual Report for more information about our financing arrangements.
Refer to our discussion below and Part II, Item 7 “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 Annual Report, for additional information about our financing arrangements. 9 Table of Contents Unsecured Corporate Bonds As of December 31, 2023, we had $1.6 billion of unsecured corporate bonds outstanding.
Violations of these regulations can result in revocation of its authorization to do business as a captive insurer or result in censures or fines. The subsidiary is also subject to insurance laws of states other than Michigan (i.e., states where the insureds are located).
It is regulated by the state of Michigan and is subject to regulations that cover all aspects of its business. Violations of these regulations can result in revocation of its authorization to do business as a captive insurer or result in censures or fines.
In addition, under the Revolving Credit Facility, LCFH is required to comply with financial covenants relating to minimum net worth, maximum leverage, minimum liquidity, and minimum fixed charge coverage, consistent with our other credit facilities. FHLB Financing We became a member of the FHLB in 2012 through our subsidiary, Tuebor Captive Insurance Company LLC (“Tuebor”).
In addition, under the Revolving Credit Facility, LCFH is required to comply with financial covenants relating to minimum net worth, maximum leverage, minimum liquidity, and minimum fixed charge coverage, consistent with our other credit facilities. 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.
As REITs are excluded from the provisions, we do not expect the IRA to have a material impact on our financial statements. 3 Table of Contents Our Businesses We invest primarily in loans, securities and other interests in U.S. commercial real estate, with a focus on senior secured assets.
The Company has disclosed the impact of current market conditions on our business throughout this Annual Report. 2 Table of Contents Our Businesses We invest primarily in loans, securities and other interests in U.S. commercial real estate, with a focus on senior secured assets.
The securities that serve as collateral for these borrowings are typically 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 cash collateral.
The securities that serve as collateral for these borrowings are typically 10 Table of Contents AAA-rated CMBS with relatively short duration and significant subordination.
If the estimated market value of the collateral subsequently increases, we have the right to call back excess cash collateral. 12 Table of Contents Mortgage Loan Financing We generally finance our real estate using long-term non-recourse mortgage financing. During the year ended December 31, 2022, we executed one long term debt agreement to finance real estate.
Mortgage Loan Financing We generally finance our real estate using long-term non-recourse mortgage financing. During the year ended December 31, 2023, we did not execute any long term debt agreement to finance real estate.
As of December 31, 2022, we employed 63 full-time industry professionals. We continue to actively manage the liquidity and operations of the Company in light of market conditions, including rising interest rates and potential recessionary conditions, and the lingering impact of the COVID-19 pandemic in the United States.
We continue to actively manage the liquidity and operations of the Company in light of market conditions, including the current interest rate environment, and potential recessionary conditions.
Regulation as a Captive Insurance Company We maintain a captive insurance company, Tuebor, to provide coverage previously self insured by us, including nuclear, biological or chemical coverage, excess property coverage and excess errors and omissions coverage. It is regulated by the state of Michigan and is subject to regulations that cover all aspects of its business.
See “Risk factors—Risks related to our Investment Company Act exemption—Maintenance of our exemption from registration under the Investment Company Act imposes significant limits on our operations.” 14 Table of Contents Regulation as a Captive Insurance Company We maintain a captive insurance subsidiary to provide coverage previously self insured by us, including nuclear, biological or chemical coverage, excess property coverage and excess errors and omissions coverage.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeSome of the factors that could negatively affect the price of our Class A common stock or result in fluctuations in the price or trading volume of our Class A common stock include: variations in our quarterly operating results; failure to meet our earnings estimates; publication of research reports about us or the investment management industry or the failure of securities analysts to cover our Class A common stock after the offering; additions or departures of our executive officers and other key management personnel; adverse market reaction to any indebtedness we may incur or securities we may issue in the future; actions by shareholders; changes in market valuations of similar companies; speculation in the press or investment community; changes or proposed changes in laws or regulations or differing interpretations thereof affecting our business or enforcement of these laws and regulations, or announcements relating to these matters; adverse publicity; a credit rating downgrade; and general market, economic and world health conditions.
Biggest changeSome of the factors that could negatively affect the price of our Class A common stock or result in fluctuations in the price or trading volume of our Class A common stock include: • our actual or projected operating results, financial condition, cash flows and liquidity, or changes in business strategy or prospects; • variations in our quarterly operating results; • a compression of the yield on our investments and an increase in the cost of our liabilities; • changes in the value of our portfolio; • failure to meet our earnings estimates; • publication of research reports about us or the commercial real estate industry or the failure of securities analysts to cover our Class A common stock; • additions or departures of our executive officers and other key management personnel; • adverse market reaction to any indebtedness we may incur or loss of a major funding source or securities we may issue in the future; • dilutive equity issuances by us, including additional shares of Class A common stock and options, rights, warrants and appreciation rights relating to Class A common stock or securities convertible into Class A common stock, as authorized by our board of directors or pursuant to an equity incentive plan, or significant share resales by our shareholders, or the perception that such issuances or resales may occur; • issuance of securities at a price less than our then-current book value per share; • the timing, amount, pricing and any potential discontinuance of Class A common stock repurchases by the Company; • the issuance of any debt or equity securities that rank senior to our Class A common stock or which may have rights, preferences and privileges more favorable than those of our Class A common stock; • actions by shareholders; • changes in market valuations or operating performance of similar companies; • speculation in the press or investment community; 41 Table of Contents • changes or proposed changes in laws or regulations or differing interpretations thereof affecting our business or enforcement of these laws and regulations, or announcements relating to these matters; • adverse publicity; • actual or anticipated changes in our current or future dividend yield, including as a result of increases in market interest rates, which may lead investors to demand a higher dividend yield for our Class A common stock and would result in increased interest expenses on our debt that lowers our income available for distribution; • failure to maintain our REIT qualification or exemption from registration under the Investment Company Act; • a credit rating downgrade; • significant volatility in the market price and trading volume of securities of publicly traded REITs or other companies in our sector, including us, which is not necessarily related to the operating performance of these companies; • short-selling pressure with respect to shares of our Class A common stock or REITs generally; • price and volume fluctuations in the overall stock market from time to time; and • general market, economic, geopolitical and world health conditions or events, and trends including inflationary concerns.
In addition, we are not required to observe specific diversification criteria relating to property types, locations, tenants or borrowers. A limited degree of diversification increases risk because the aggregate return of our business may be adversely affected by the unfavorable performance of a single property type, single tenant, single market or even a single investment.
In addition, we are not required to observe specific diversification criteria relating to property types, locations, tenants or borrowers. A limited degree of diversification increases risk because the aggregate investment return of our business may be adversely affected by the unfavorable performance of a single property type, single tenant, single market or even a single investment.
Even if we are provided with full and accurate disclosure of all material information concerning a borrower, we may misinterpret or incorrectly analyze this information, which may cause us to purchase or originate loans that we otherwise would not have purchased or originated and, as a result, may negatively impact our business or the borrower could still defraud us after origination leading to a loss and negative publicity.
Even if we are provided with full and accurate disclosure of all material information concerning a borrower, we may misinterpret or incorrectly analyze this information, which may cause us to originate or purchase loans that we otherwise would not have originated or purchased and, as a result, may negatively impact our business or the borrower could still defraud us after origination leading to a loss and negative publicity.
Moreover, some of the mortgage-backed securities that we acquire may have been issued with original issue discount. We are required to report such original issue discount based on a constant yield method and will be taxed based on the assumption that all future projected payments due on such mortgage-backed securities will be made.
Moreover, some of the mortgage-backed securities that we acquire may have been issued with original issue discount. We are required to report such original issue discount based on a constant yield method and are taxed based on the assumption that all future projected payments due on such mortgage-backed securities will be made.
NOI of an income-producing property can be affected by many factors, including, but not limited to: • the ongoing need for capital improvements, particularly in older structures; • changes in operating expenses; • changes in general or local market conditions; • changes in tenant mix and performance, the occupancy or rental rates of the property or, for a property that requires new leasing activity, a failure to lease the property in accordance with the projected leasing schedule; • competition from comparable property types or properties; • unskilled or inexperienced property management; • limited availability of mortgage funds or fluctuations in interest rates which may render the sale and refinancing of a property difficult; • development projects that experience cost overruns or otherwise fail to perform as projected including, without limitation, failure to complete planned renovations, repairs, or construction; • unanticipated increases in real estate taxes and other operating expenses; • challenges to the borrower’s claim of title to the real property; • environmental considerations, including liability for testing, monitoring and remediation; • changes in zoning laws, rent control laws and other similar legal restrictions on property ownership and operation; • other governmental rules and policies including those associated with a transition to a low-carbon economy; • community health issues, including, without limitation, epidemics and pandemics; • unanticipated structural defects or costliness of maintaining the property; • uninsured losses, such as possible acts of theft, terrorism, social unrest or civil disturbances; • a decline in the operational performance of a facility on the real property (such facilities may include multifamily rental facilities, office properties, retail facilities, hospitality facilities, healthcare-related facilities, industrial facilities, warehouse facilities, restaurants, mobile home facilities, recreational or resort facilities, arenas or stadiums, religious facilities, parking lot facilities or other facilities); and • large-scale fire, earthquake or severe weather-related damage to, or the effect of climate change on, the property and/or its operations.
NOI of an income-producing property can be affected by many factors, including, but not limited to: • the ongoing need for capital improvements, particularly in older structures; • changes in operating expenses; • changes in general or local market conditions; • changes in tenant mix and performance, the occupancy or rental rates of the property or, for a property that requires new leasing activity, a failure to lease the property in accordance with the projected leasing schedule; • competition from comparable property types or properties; • unskilled or inexperienced property management; • limited availability of mortgage funds or fluctuations in interest rates which may render the sale and refinancing of a property difficult; • development projects that experience cost overruns or otherwise fail to perform as projected including, without limitation, failure to complete planned renovations, repairs, or construction; • unanticipated increases in real estate taxes and other operating expenses; • challenges to the borrower’s claim of title to the real property; • environmental considerations, including liability for testing, monitoring and remediation; • changes in zoning laws, rent control laws and other similar legal restrictions on property ownership and operation; • other governmental rules and policies including those associated with a transition to a low-carbon economy; • community health issues, including, without limitation, epidemics and pandemics; • unanticipated structural defects or costliness of maintaining the property; • uninsured or underinsured losses, such as possible acts of theft, terrorism, social unrest or civil disturbances; • a decline in the operational performance of a facility on the real property (such facilities may include multifamily rental facilities, office properties, retail facilities, hospitality facilities, healthcare-related facilities, industrial facilities, warehouse facilities, restaurants, mobile home facilities, recreational or resort facilities, arenas or stadiums, religious facilities, parking lot facilities or other facilities); and • large-scale fire, earthquake or severe weather-related damage to, or the effect of climate change on, the property and/or its operations.
In particular: • part of the income and gain recognized by certain qualified employee pension trusts with respect to our common stock may be treated as unrelated business taxable income if shares of our Class A common stock are predominantly held by qualified employee pension trusts, and we are required to rely on a special look-through rule for purposes of meeting one of the REIT ownership tests, and we are not operated in a manner to avoid treatment of such income or gain as unrelated business taxable income; • part of the income and gain recognized by a tax-exempt investor with respect to our Class A common stock would constitute unrelated business taxable income if the investor incurs debt in order to acquire the common stock; • part or all of the income or gain recognized with respect to our Class A common stock by social clubs, voluntary employee benefit associations, supplemental unemployment benefit trusts and qualified group legal services plans which are exempt from U.S. federal income taxation under the Code may be treated as unrelated business taxable income; and • to the extent that we have “excess inclusion income,” e.g., from: (i) us (or a part of us, or a disregarded subsidiary of ours) being treated as a “taxable mortgage pool”; (ii) us holding residual interests in a REMIC securitization; or (iii) us receiving income from another REIT that is treated as excess inclusion income, a portion of the distributions paid to a tax-exempt shareholder that is allocable to such excess inclusion income may be treated as unrelated business taxable income.
In particular: • part of the income and gain recognized by certain qualified employee pension trusts with respect to our Class A common stock may be treated as unrelated business taxable income if shares of our Class A common stock are predominantly held by qualified employee pension trusts, and we are required to rely on a special look-through rule for purposes of meeting one of the REIT ownership tests, and we are not operated in a manner to avoid treatment of such income or gain as unrelated business taxable income; • part of the income and gain recognized by a tax-exempt investor with respect to our Class A common stock would constitute unrelated business taxable income if the investor incurs debt in order to acquire the Class A common stock; • part or all of the income or gain recognized with respect to our Class A common stock by social clubs, voluntary employee benefit associations, supplemental unemployment benefit trusts and qualified group legal services plans which are exempt from U.S. federal income taxation under the Code may be treated as unrelated business taxable income; and • to the extent that we have “excess inclusion income,” e.g., from: (i) us (or a part of us, or a disregarded subsidiary of ours) being treated as a “taxable mortgage pool;” (ii) us holding residual interests in a REMIC securitization; or (iii) us receiving income from another REIT that is treated as excess inclusion income, a portion of the distributions paid to a tax-exempt shareholder that is allocable to such excess inclusion income may be treated as unrelated business taxable income.
In addition, our ability to satisfy the requirements to qualify as a REIT depends in part on the actions of third parties over which we have no control or only limited influence, including in cases where we own an equity interest in an entity that is classified as a partnership for U.S. federal income tax purposes.
Our ability to satisfy the requirements to qualify as a REIT depends in part on the actions of third parties over which we have no control or only limited influence, including in cases where we own an equity interest in an entity that is classified as a partnership for U.S. federal income tax purposes.
These alternatives could increase our costs or reduce our shareholders’ equity. Thus, compliance with the REIT requirements may hinder our ability to grow, which could adversely affect the value of our common stock. We have not established a minimum distribution payment level and we cannot assure you of our ability to pay distributions in the future.
These alternatives could increase our costs or reduce our shareholders’ equity. Thus, compliance with the REIT requirements may hinder our ability to grow, which could adversely affect the value of our Class A common stock. We have not established a minimum distribution payment level and we cannot assure you of our ability to pay distributions in the future.
We may be required to make distributions to shareholders at disadvantageous times or when we do not have funds readily available for distribution and may be unable to pursue investments that would be otherwise advantageous to us in order to satisfy the source-of-income or asset-diversification requirements for qualifying as a REIT.
We may be required to make distributions to shareholders at disadvantageous times or when we do not have funds readily available for distribution and may be unable to pursue or be required to liquidate investments that would be otherwise advantageous to us in order to satisfy the source-of-income or asset-diversification requirements for qualifying as a REIT.
We have not requested the SEC to approve our treatment of any company as a majority-owned subsidiary and the SEC has not done so. If the SEC were to disagree with our treatment of one or more companies as majority-owned subsidiaries, we would need to adjust our strategy and our assets in order to continue to pass the 40% test.
We have not requested that the SEC approve our treatment of any company as a majority-owned subsidiary and the SEC has not done so. If the SEC were to disagree with our treatment of one or more companies as majority-owned subsidiaries, we would need to adjust our strategy and our assets in order to continue to pass the 40% test.
Even if we qualify for taxation as a REIT, we may be subject to certain U.S. federal, state and local taxes on our income and assets, including taxes on any undistributed income, taxes on income from some activities conducted as a result of a foreclosure, excise taxes, state or local income, property and transfer taxes, such as mortgage recording taxes, and other taxes.
Even if we qualify for taxation as a REIT, we may be subject to certain U.S. federal, state and local taxes on our income and assets, including taxes on any undistributed income, taxes on income from some activities conducted as a result of a foreclosure, excise taxes, state or local income, property and transfer taxes, mortgage recording taxes, and other taxes.
CMBS are securities backed by obligations (including certificates of participation in obligations) that are principally secured by commercial mortgage loans or interests therein having a multi-family or commercial use, such as retail space, office buildings, industrial or warehouse properties, hotels, nursing homes and senior living centers.
CMBS, including CLOs, are securities backed by obligations (including certificates of participation in obligations) that are principally secured by commercial mortgage loans or interests therein having a multi-family or commercial use, such as retail space, office buildings, industrial or warehouse properties, hotels, nursing homes and senior living centers.
Appraisals and engineering and environmental reports, as well as a variety of other third-party reports, are generally obtained with respect to each of the properties we acquire and the mortgaged properties underlying our investments at or about the time of origination. Appraisals are not guarantees of present or future value.
Appraisals and engineering and environmental reports, as well as a variety of other third-party reports, are generally obtained with respect to each of the properties we acquire and the mortgaged properties underlying our investments at or about the time of origination. These reports are not guarantees of present or future value.
These potential payments will be contingent liabilities and, therefore, may not appear in our financial statements. The amount due would be equal to the unrealized loss of the open positions with the respective counterparty and could also include other fees and charges.
These potential payments would be contingent liabilities and, therefore, may not appear in our financial statements. The amount due would be equal to the unrealized loss of the open positions with the respective counterparty and could also include other fees and charges.
The commercial mortgage loans and other commercial real estate-related loans, the commercial mortgage loans underlying the securities in which we may invest, and the real estate that we own are subject to the ability of the commercial property to generate net income (and not the independent income or assets of the borrower in the case of mortgage loans).
The commercial real estate mortgage loans and other commercial real estate-related loans we provide, the commercial mortgage loans underlying the securities in which we may invest, and the real estate that we own are subject to the ability of the commercial property to generate net income (and not the independent income or assets of the borrower in the case of mortgage loans).
Furthermore, if any CLO that we sponsor or hold interests in fails to meet certain tests relevant to the most senior debt issued and outstanding by the CLO issuer, an event of default may occur under that CLO.
Furthermore, if any CLO that we sponsor or in which we hold interests fails to meet certain tests relevant to the most senior debt issued and outstanding by the CLO issuer, an event of default may occur under that CLO.
ESG rating agencies and our stakeholders may look to us to implement more or different ESG procedures, standards or goals in order to improve our ratings, continue engaging with us, remain invested in us, or before they make further investments in us.
ESG rating agencies and our stakeholders may look to us to implement more or different ESG policies, procedures, standards or goals in order to improve our ratings, continue engaging with us, remain invested in us, or before they make further investments in us.
Specifically, in connection with any particular securitization, we: (i) make certain representations and warranties regarding ourselves and the characteristics of, and origination process for, the mortgage loans that we contribute to the securitization; (ii) undertake to cure a defect of, repurchase or replace any mortgage loan that we contribute to the securitization that is affected by a material breach of any such representation or warranty or a material loan document deficiency; (iii) assume, either directly or through the indemnification of third-parties, potential securities law liabilities for disclosure to investors regarding ourselves and the mortgage loans that we contribute to the securitization; and (iv) may, depending upon our role in the securitization, (a) retain some or all of the risk retention interests in the securitization and/or (b) retain responsibility for ensuring compliance with risk retention rules (and may be required to indemnify other participants in 29 Table of Contents the securitization for any violation of such rules, including in circumstances where some or all of the risk retention interests are retained by and/or sold to other parties).
Specifically, in connection with any particular securitization, we: (i) make certain representations and warranties regarding ourselves and the characteristics of, and origination process for, the mortgage loans that we contribute to the securitization; (ii) undertake to cure a defect of, repurchase or replace any mortgage loan that we contribute to the securitization that is affected by a material breach of any such representation or warranty or a material loan document deficiency; (iii) assume, either directly or through the indemnification of third-parties, potential securities law liabilities for disclosure to investors regarding ourselves and the mortgage loans that we contribute to the securitization; and (iv) may, depending upon our role in the securitization, (a) retain some or all of the risk retention interests in the securitization and/or (b) retain responsibility for ensuring compliance with risk retention rules (and may be required to indemnify other participants in the securitization for any violation of such rules, including in circumstances where some or all of the risk retention interests are retained by and/or sold to other parties).
In addition, in order to meet the REIT qualification requirements, prevent the recognition of certain types of non-cash income, or to avert the imposition of a 100% tax that applies to certain gains derived by a REIT from dealer property or inventory, we intend to hold some of our assets through our TRSs or other subsidiary corporations that will be subject to corporate level income tax at regular corporate rates.
In addition, in order to meet the REIT qualification requirements, prevent the recognition of certain types of non-cash income, or to avert the imposition of a 100% prohibited transaction tax that applies to certain gains derived by a REIT from dealer property or inventory, we intend to hold some of our assets through our TRSs or other subsidiary corporations that will be subject to corporate level income tax at regular corporate rates.
In general, losses on a mortgaged property securing a mortgage loan included in a securitization will be borne first by the equity holder of the property, then by a cash reserve fund or letter of credit, if any, then by the holder of a mezzanine loan or B-Note, if any, then by the “first loss” subordinated security holder (generally, the “B-Piece” buyer and in some cases by the holder of a risk retention interest) and then by the holder of a higher-rated security.
In general, losses on a mortgaged property securing a mortgage loan included in a securitization would be borne first by the equity holder of the property, then by a cash reserve fund or letter of credit, if any, then by the holder of a mezzanine loan or B-Note, if any, then by the “first loss” subordinated security holder (generally, the “B-Piece” buyer and in some cases by the holder of a risk retention interest) and then by the holder of a higher-rated security.
The Company’s qualification as a REIT and exemption from U.S. federal income tax with respect to certain assets may be dependent on the accuracy of legal opinions or advice rendered or given or statements by the issuers of assets that the Company acquires, and the inaccuracy of any such opinions, advice or statements may adversely affect the Company’s REIT qualification and result in significant corporate-level tax.
The Company’s exemption from U.S. federal income tax with respect to certain assets may be dependent on the accuracy of legal opinions or advice rendered or given or statements by the issuers of assets that the Company acquires, and the inaccuracy of any such opinions, advice or statements may adversely affect the Company’s REIT qualification and result in significant corporate-level tax.
Third-party diligence reports on mortgaged properties and the properties we own are made as of a point in time and are therefore limited in scope.
Further, third-party diligence reports on mortgaged properties and the properties we own are made as of a point in time and are therefore limited in scope.
Any one or more of the preceding factors could materially impair our ability to recover principal in a foreclosure on the related loan as lender and repay the principal as borrower. A substantial portion of our portfolio may be committed to the origination or purchasing of commercial loans to small and medium-sized, privately owned businesses.
Any one or more of the preceding factors could materially impair our ability to recover principal in a foreclosure on the related loan as lender and repay the principal as borrower. A substantial portion of our portfolio may be committed to the origination or purchasing of commercial real estate loans to small and medium-sized, privately owned businesses.
In addition, we will be subject to a non-deductible 4% excise tax if the actual amount distributed to our shareholders in a calendar year is less than a minimum amount specified under U.S. federal tax laws. We intend to make distributions to our shareholders to comply with the REIT qualification requirements of the Code.
In addition, we would be subject to a non-deductible 4% excise tax if the actual amount distributed to our shareholders in a calendar year is less than a minimum amount specified under U.S. federal tax laws. We intend to make distributions to our shareholders to comply with the REIT qualification requirements of the Code.
In addition, if we or any of our subsidiaries were required to register as an investment company under the Investment Company Act, the registered entity would become subject to substantial regulation with respect to capital structure (including the ability to use leverage), management, operations, transactions with affiliated persons (as defined in the Investment Company Act), portfolio composition, including restrictions with respect to diversification and industry concentration, compliance with reporting, record keeping, voting, proxy disclosure and other rules and regulations that would significantly change our operations.
In addition, if we or any of our subsidiaries were required to register as an investment company under the Investment Company Act, the registered entity would become subject to substantial regulation with respect to capital structure (including the ability to use leverage), management, operations, transactions with affiliated persons (as defined in the Investment Company 38 Table of Contents Act), portfolio composition, including restrictions with respect to diversification and industry concentration, compliance with reporting, record keeping, voting, proxy disclosure and other rules and regulations that would significantly change our operations.
Our securitization activities will be affected by a number of factors, including our loan origination volumes, changes in loan values, quality and performance during the period such loans are on our books and conditions in the securitization and credit markets generally and at the time we seek to launch and complete our securitizations.
Our securitization activities are affected by a number of factors, including our loan origination volumes, changes in loan values, quality and performance during the period such loans are on our books and conditions in the securitization and credit markets generally and at the time we seek to launch and complete our securitizations.
Normally any real property improvements made by the lessee during the term of the lease will revert to the owner at the end of the lease term.
Normally any real property improvements made by the lessee during the term of the lease revert to the owner at the end of the lease term.
If we fail to maintain effective internal controls in the future, it could result in a material misstatement of our financial statements that may not be prevented or detected on a timely basis, which could cause stakeholders to lose confidence in our reported financial information.
If we fail to maintain effective internal controls, it could result in a material misstatement of our financial statements that may not be prevented or detected on a timely basis, which could cause stakeholders to lose confidence in our reported financial information.
Risks Related to Our Investment Company Act Exemption Maintenance of our exemption from registration under the Investment Company Act imposes significant limits on our operations. The value of our securities, including our Class A common stock, may be adversely affected if we are required to register as an investment company under the Investment Company Act.
Maintenance of our exemption from registration under the Investment Company Act imposes significant limits on our operations. The value of our securities, including our Class A common stock, may be adversely affected if we are required to register as an investment company under the Investment Company Act.
Income from, and the value of, our investments may be adversely affected by many factors that are beyond our control, including: • volatility and adverse changes in international, national and local economic and market conditions, including contractions in market liquidity for mortgage loans and mortgage-related assets and tenant bankruptcies; • changes in interest rates, inflation, credit spreads, prepayment rates and in the availability, costs and terms of financing; • changes in rates of default or recovery rates; • changes in generally accepted accounting principles; • changes in governmental laws and regulations, fiscal policies and zoning and other ordinances and costs of compliance with laws and regulations; • downturns in the markets for mortgage-backed securities and other asset-backed and structured products, and commercial real estate; • civil unrest, terrorism, acts of war, outbreaks of communicable diseases, nuclear or radiological disasters and natural disasters, including earthquakes, hurricanes, tornadoes, tsunamis, floods, and other extreme weather and permanent climate changes, which may result in uninsured and underinsured losses; and • in addition to the physical risks of climate change, transition risks such as changes in consumer preferences or additional legislative or regulatory requirements, including those associated with the transition to a low-carbon economy.
Income from, and the value of, our investments may be adversely affected by many factors that are beyond our control, including: • volatility and adverse changes in international, national and local economic and market conditions, including contractions in market liquidity for mortgage loans and mortgage-related assets and tenant bankruptcies; • changes in interest rates, inflation, credit spreads, prepayment rates and in the availability, costs and terms of financing; • changes in rates of default or recovery rates; • changes in generally accepted accounting principles; • changes in governmental laws and regulations, fiscal policies and zoning and other ordinances and costs of compliance with laws and regulations; • downturns in the markets for mortgage-backed securities and other asset-backed and structured products, and commercial real estate; • the broader impacts of the Ukraine-Russia and Hamas-Israel conflicts; • civil unrest, terrorism, acts of war, outbreaks of communicable diseases, nuclear or radiological disasters and natural disasters, including earthquakes, hurricanes, tornadoes, tsunamis, floods, and other extreme weather and permanent climate changes, which may result in uninsured and underinsured losses; and • in addition to the physical risks of climate change, transition risks such as changes in consumer preferences or additional legislative or regulatory requirements, including those associated with the transition to a low-carbon economy.
A substantial portion of our real estate investments we own are subject to net leases. A net lease requires the tenant to pay, in addition to the fixed rent, some or all of the property expenses that normally would be paid by the property owner.
A substantial portion of our real estate investments are subject to net leases. A net lease requires the tenant to pay, in addition to the fixed rent, some or all of the property expenses that normally would be paid by the property owner.
However, under Section 3(a)(1)(C) of the Investment Company Act, because we are a holding company that will conduct its businesses primarily through majority-owned subsidiaries (including any series thereof), the securities issued by these subsidiaries (including any series thereof) that are excepted from the definition of “investment company” under Section 3(c)(1) or 3(c)(7) of the Investment Company Act, together with any other investment securities we may own, may not have a combined value in excess of 40% of the value of our adjusted total assets (exclusive of government securities and cash items) on an unconsolidated basis (the “40% test”).
However, under Section 3(a)(1)(C) of the Investment Company Act, because we 37 Table of Contents are a holding company that will conduct its businesses primarily through majority-owned subsidiaries (including any series thereof), the securities issued by these subsidiaries (including any series thereof) that are excepted from the definition of “investment company” under Section 3(c)(1) or 3(c)(7) of the Investment Company Act, together with any other investment securities we may own, may not have a combined value in excess of 40% of the value of adjusted total assets (exclusive of government securities and cash items) on an unconsolidated basis (the “40% test”).
The Risk Retention Rules, CEO certification and other rules and regulations that have been adopted or may be adopted in the future may alter the structure of securitizations and could pose additional risks to or reduce or eliminate the economic benefits of our participation in the securitization market.
The Risk Retention Rules and other rules and regulations that have been adopted or may be adopted in the future may alter the structure of securitizations and could pose additional risks to or reduce or eliminate the economic benefits of our participation in the securitization market.
Significant restrictions exist, and additional restrictions may be added in the future, regarding who may hold risk retention interests, the structure of the entities that hold risk retention interests and when and how such risk retention interests may be transferred or financed. Therefore, such risk retention interests will be generally illiquid and may not be easily financed.
Significant restrictions exist, and additional restrictions may be added in the future, regarding who may hold risk retention interests, the structure of the entities that hold risk retention interests and when and how such risk retention interests may be transferred or financed. Therefore, such risk retention interests would be generally illiquid and may not be easily financed.
In addition, certain of our loans may be subordinate to other debt of the borrower. If a borrower defaults on a subordinate loan from us or on debt senior to our loan, or in the event of a borrower bankruptcy, our loan will be satisfied only after the senior debt is paid in full.
In addition, certain of our loans may be subordinate to other debt of the borrower. If a borrower defaults on a subordinate loan from us or on debt senior to our loan, or in the event of a borrower bankruptcy, our loan would be satisfied only after the senior debt is paid in full.
Our ability to satisfy the asset tests depends upon our analysis of the characterization and fair market values of our assets, some of which are not susceptible to a precise determination, and for which we will not obtain independent appraisals.
Our ability to satisfy the gross income and asset tests depends upon our analysis of the characterization and fair market values of our assets, some of which are not susceptible to a precise determination, and for which we will not obtain independent appraisals.
Additionally, our results of operations for a given period could be adversely affected if our determinations regarding the fair value of these investments were materially higher than the values that we ultimately realize upon their disposal. 33 Table of Contents Risks Related to Our Indebtedness Our business is leveraged, which could lead to greater losses than if we were not as leveraged.
Additionally, our results of operations for a given period could be adversely affected if our determinations regarding the fair value of these investments were materially higher than the values that we ultimately realize upon their disposal. Risks Related to Our Indebtedness Our business is leveraged, which could lead to greater losses than if we were not as leveraged.
Part of our strategy involves entering into hedging transactions that could require us to fund cash payments in certain circumstances (such as the early termination of the hedging instrument caused by an event of default or other early termination event, or the decision by a counterparty to request margin transfers it is contractually owed under the terms of the hedging agreement).
Part of our strategy involves entering into hedging transactions that could require us to fund cash payments in certain circumstances (such as the early termination of the hedging instrument caused by an event of default or other early termination 39 Table of Contents event, or the decision by a counterparty to request margin transfers it is contractually owed under the terms of the hedging agreement).
To the extent we breach a covenant or cannot satisfy a condition, such facility may not be available to us, or may be required to be repaid in full or in part, which could limit our ability to pursue our business strategies.
To the extent we breach a covenant or cannot satisfy a condition, such financing may not be available to us, or may be required to be repaid in full or in part, which could limit our ability to pursue our business strategies.
If the market in which the asset is located fails to recover according to the borrower’s projections, or if the borrower fails to improve the quality of the asset’s management and/or the value of the asset or fails to execute its business plan, the borrower may not receive a sufficient return on the asset to satisfy the interim loan, and we bear the risk that we may not recover some or all of our initial expenditure.
If the market in which the asset is located fails to recover according to the borrower’s projections, or if the borrower fails to improve the quality of the asset’s management and/or the value of the asset or fails to execute its business plan, the borrower may not receive a sufficient return on the asset to satisfy the interim loan, and we bear the risk that we may not recover some or all of our investment.
The more favorable rates applicable to regular corporate qualified dividends could cause investors who are individuals, trusts and estates to perceive investments in REITs to be relatively less attractive than investments in the stocks of non-REIT corporations that pay qualified dividends, which could adversely affect the value of the stock of REITs, including our common stock.
Still, the more favorable rates applicable to regular corporate qualified dividends could cause investors who are individuals, trusts and estates to perceive investments in REITs to be relatively less attractive than investments in the stocks of non-REIT corporations that pay qualified dividends, which could adversely affect the value of the stock of REITs, including our Class A common stock.
The commercial real estate lending business depends on the creditworthiness of borrowers and, to some extent, the sponsors thereof, which we must judge. In making such judgment, we will depend on information obtained from non-public sources and the borrowers in making many decisions related to our portfolio, and such information may be difficult to obtain or may be inaccurate.
The commercial real estate lending business depends on the creditworthiness and skills of borrowers and the sponsors thereof, which we must judge. In making such judgment, we will depend on information obtained from non-public sources and the borrowers in making many decisions related to our portfolio, and such information may be difficult to obtain or may be inaccurate.
In addition, borrowers often use the proceeds of a long-term mortgage loan to repay an interim loan. We may, therefore, be dependent on a borrower’s ability to obtain permanent financing to repay our interim loan, which could depend on the borrower’s ability to execute its business plan, market conditions and other factors.
In addition, borrowers often use the proceeds of a long-term mortgage loan to repay an interim loan. We may, therefore, be dependent on a borrower’s ability to obtain permanent financing to repay our interim loan, which could depend on the borrower’s ability to execute its business plan, the sponsor’s financial wherewithal, market conditions and other factors.
If we do not have other funds available in these situations, we could be required to borrow funds on unfavorable terms, sell investments at disadvantageous prices or distribute amounts that would otherwise be invested in future acquisitions to make distributions sufficient to maintain our qualification as a REIT, or avoid corporate income tax and the non-deductible 4% excise tax in a particular year.
If we do not have other funds available in these situations, we could be required to borrow funds on unfavorable terms, sell investments at disadvantageous prices, make a taxable distribution of our shares, or distribute amounts that would otherwise be invested in future acquisitions to make distributions sufficient to maintain our qualification as a REIT, or avoid corporate income tax and the non-deductible 4% excise tax in a particular year.
The captive is regulated by the State of Michigan and is subject to regulations that cover all aspects of its business, including a requirement to maintain a certain minimum net capital. Violation of these regulations can result in revocation of its authorization to do business as a captive insurer or result in censures or fines.
The 36 Table of Contents captive is regulated by the State of Michigan and is subject to regulations that cover all aspects of its business, including a requirement to maintain a certain minimum net capital. Violation of these regulations can result in revocation of its authorization to do business as a captive insurer or result in censures or fines.
Moreover, in the case of a taxable distribution of shares of our stock with respect to which any withholding tax is imposed on a non-U.S. shareholder, we may have to withhold or dispose of part of the shares in such distribution and use such withheld shares or the proceeds of such disposition to satisfy the withholding tax imposed.
Moreover, in the case of a taxable distribution of shares of our stock with respect to which any withholding tax is imposed on a non-U.S. shareholder, we may have to withhold or dispose of part of the shares in such 44 Table of Contents distribution and use such withheld shares or the proceeds of such disposition to satisfy the withholding tax imposed.
Some mortgage loans underlying CMBS may default. Under such circumstances, cash flows of CMBS investments held by us may be adversely affected as any reduction in the mortgage payments or principal losses on liquidation of any mortgage loan may be applied to the class of CMBS relating to such defaulted loans that we hold.
Under such circumstances, cash flows of CMBS investments held by us may be adversely affected as any reduction in the mortgage payments or principal losses on liquidation of any mortgage loan may be applied to the class of CMBS relating to such defaulted loans that we hold.
We may change our investment strategy and financing policy in the future without stockholder consent and any such changes may not be successful. Our management team is authorized to follow broad investment guidelines that have been approved by our board of directors and has great latitude within those guidelines to determine which assets make proper investments for us.
We may change our investment strategy, asset allocation and financing policy in the future without shareholder consent and any such changes may not be successful. Our management team is authorized to follow broad investment guidelines that have been approved by our board of directors and has great latitude within those guidelines to determine which assets make proper investments for us.
All distributions will be made at the discretion of our board of directors and will 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.
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.
Under many net leases the owner of the property retains certain obligations with respect to the property, including, among other things, the responsibility for maintenance and repair of the property, to provide adequate parking, maintenance of common areas and compliance with other affirmative covenants in the lease.
Under many net leases the owner of the property retains certain obligations with respect to the property, including, among other things, the responsibility for maintenance and repair of the property, to provide adequate parking, maintenance of common 29 Table of Contents areas and compliance with other affirmative covenants in the lease.
We may incur substantial additional indebtedness in the future. Although the agreements governing our indebtedness do limit our ability to incur additional indebtedness, these restrictions are subject to a number of qualifications and exceptions and, under certain circumstances, debt incurred in compliance with these restrictions could be substantial.
Although the agreements governing our indebtedness do limit our ability to incur additional indebtedness, these restrictions are subject to a number of qualifications and exceptions and, under certain circumstances, debt incurred in compliance with these restrictions could be substantial.
We also cannot guarantee that we will be able to maintain or develop new relationships with additional brokers. 20 Table of Contents The allocation of capital among our business lines may vary, which may adversely affect our financial performance.
We also cannot guarantee that we will be able to maintain or develop new relationships with additional brokers. The allocation of capital among our business lines may vary, which may adversely affect our financial performance.
Such a borrower under an interim loan often has identified a transitional asset that has been under-managed, is located in a recovering market and/or requires rehabilitation or capital improvements in order to improve the value of the asset.
Such a borrower under an 26 Table of Contents interim loan often has identified a transitional asset that has been under-managed, is located in a recovering market and/or requires rehabilitation or capital improvements in order to improve the value of the asset.
Because of the requirements of the Risk Retention Rule, if we purchase a horizontal subordinate strip of a CLO to satisfy the Risk Retention Rule, we would not be able to dispose of those subordinate interests during the required risk retention period, which may increase our risk of loss.
As a result of the requirements of the Risk Retention Rule, if we purchase a horizontal subordinate strip of a CLO to satisfy the Risk Retention Rule, we would not be able to dispose of those subordinate interests during the required risk retention period, which may increase our risk of loss.
Our subsidiary that operates as a captive insurance company is subject to insurance laws and its outstanding borrowings are subject to the lending policies of the FHLB. We maintain a captive insurance company, Tuebor, to provide coverage previously self-insured by us, including nuclear, biological or chemical coverage, excess property coverage and excess errors and omissions coverage.
Our subsidiary that operates as a captive insurance company is subject to insurance laws and its outstanding borrowings are subject to the lending policies of the FHLB. We have organized a captive insurance company, Tuebor (the “captive”), to provide coverage previously self-insured by us, including nuclear, biological or chemical coverage, excess property coverage and excess errors and omissions coverage.
Further, declining real estate values significantly increase the likelihood that we will incur losses on our loans in the event of default because the value of our collateral may be insufficient to cover our cost on the loan.
Further, declining real estate values significantly increase the likelihood that we will incur losses on our loans in the event of default because the value of our collateral may be insufficient to cover our basis in the related loan.
Like any other investment, the captive’s participation in the FHLB involves some risk of loss and/or access to assets of the captive, both with respect to the shares of FHLB stock and the assets provided by the captive as collateral for its borrowings. Tuebor’s outstanding advances from the FHLB as of December 31, 2022 were $213 million.
Like any other investment, the captive’s participation in the FHLB involves some risk of loss and/or access to assets of the captive, both with respect to the shares of FHLB stock and the assets provided by the captive as collateral for its borrowings. Tuebor’s outstanding advances from the FHLB as of December 31, 2023 were $115 million.
These properties subject to net leases will generally be occupied by a single tenant and, therefore, the success of these investments will be materially dependent on the financial stability of each such tenant and the ability of the applicable tenant to meet its obligations to maintain the property under the terms of the net lease.
These properties subject to net leases will generally be occupied by a single tenant and, therefore, the success of these investments will be materially dependent on the financial stability of each such tenant (or, sometimes, its parent entity) and the ability of the applicable tenant to meet its obligations to maintain the property under the terms of the net lease.
There can be no assurance, however, that we will be able to comply with the TRS limitations or to avoid application of the 100% excise tax discussed above. 45 Table of Contents REIT distribution requirements could adversely affect our ability to execute our business plan.
There can be no assurance, however, that we will be able to comply with the TRS limitations or to avoid application of the 100% excise tax. 43 Table of Contents REIT distribution requirements could adversely affect our ability to execute our business plan.
To the extent that we satisfy this distribution requirement, but distribute less than 100% of our taxable income, we will be subject to U.S. federal corporate income tax on our undistributed taxable income.
To the extent that we satisfy this distribution requirement, but distribute less than 100% of our REIT taxable income, we would be subject to U.S. federal corporate income tax on our undistributed taxable income.
We generally must distribute annually at least 90% of our taxable income, subject to certain adjustments and excluding any net capital gain, in order for U.S. federal corporate income tax not to apply to earnings that we distribute.
We generally must distribute annually at least 90% of our REIT taxable income, subject to certain adjustments and excluding any net capital gain, in order to qualify as a REIT and for U.S. federal corporate income tax not to apply to earnings that we distribute.
Our hedging activity will vary in scope based on the level and volatility of interest rates, the type of assets held, compliance with REIT rules, and other changing market conditions.
Our hedging activity varies in scope based on the level and volatility of interest rates, the type of assets held, compliance with REIT rules, and other changing market conditions.
Those investment guidelines, as well as our financing strategy or hedging policies with respect to investments, originations, acquisitions, growth, operations, indebtedness, capitalization and distributions, may be changed at any time without the consent of our stockholders.
Those investment guidelines, as well as our financing strategy, asset allocation or hedging policies with respect to hedging, investments, originations, acquisitions, growth, operations, indebtedness, capitalization and distributions, may be changed at any time without the consent of our shareholders.
If our subsidiary that is regulated as a registered investment adviser is unable to meet the requirements of the SEC or fails to comply with certain U.S. federal and state securities laws and regulations, it may face termination of its investment adviser registration, fines or other disciplinary action.
Risks Related to Regulatory and Compliance Matters If our subsidiary that is regulated as a registered investment adviser is unable to meet the requirements of the SEC or fails to comply with certain U.S. federal and state securities laws and regulations, it may face termination of its investment adviser registration, fines or other disciplinary action.
While ASU 2016-13 does not require any particular method for determining the CECL allowance, it does specify the allowance should be based on relevant information about past events, including historical loss experience, current portfolio and market conditions, and reasonable and supportable forecasts for the duration of each respective loan.
While the CECL Standard does not require any particular method for determining the CECL allowance, it does specify that the allowance should be based on relevant information about past events, including historical loss experience, current portfolio and market conditions, and reasonable and supportable forecasts for the duration of each respective loan.
Our determinations of fair value may have a material impact on our earnings, in the case of impaired loans and other assets, trading securities and available-for-sale securities that are subject to other than temporary impairment (“OTTI”), or our accumulated other comprehensive income/(loss) in our shareholders’ equity, in the case of available-for-sale securities that are subject only to temporary impairments.
Our determinations of fair value may have a material impact on our earnings, in the case of impaired loans and other assets, trading securities and available-for-sale securities that are subject to the CECL Standard or impairment review, or our accumulated other comprehensive income/(loss) in our shareholders’ equity, in the case of available-for-sale securities that are subject only to temporary impairments.
Shifts in consumer patterns and advances in communication and information technology that affect the use of traditional retail, hotel and office space may have an adverse impact on the value of our debt and equity investments.
Shifts in consumer patterns, remote work policies and advances in communication and information technology that affect the use of traditional retail, hotel and office space may have an adverse impact on the value of certain of our debt and equity investments.
Other protections in such proceedings to borrowers, owners and tenants include the restructuring or forgiveness of debt, the ability to create super priority liens in favor of certain creditors of the debtor, the potential loss of cash collateral held by the lender if the lender is over-collateralized, and certain well defined claims procedures.
Other results of such proceedings include the restructuring or forgiveness of debt, the ability to create super priority liens in favor of certain creditors of the debtor, the potential loss of cash collateral held by the lender if the lender is over-collateralized, and certain well-defined claims procedures.
These economic losses will be reflected in our results of operations, and our ability to fund these obligations will depend on the liquidity of our assets and access to capital at the time, and the need to fund these obligations could adversely impact our financial condition.
These economic losses would be reflected in our results of operations, and our ability to fund these obligations depends on the liquidity of our assets and access to capital at the time, and the need to fund these obligations could adversely impact our financial condition.
Current and future venture investments could be adversely affected by our lack of sole decision-making authority, our reliance on venture partners’ financial condition and liquidity and disputes between us and our venture partners. We have made, and may in the future make, investments through ventures.
Current and future venture investments could be adversely affected by our lack of sole decision-making authority, our reliance on venture partners’ financial condition and liquidity and disputes between us and our venture partners. We have made, and may in the future make, investments through ventures with another party or parties.
We have historically expected to distribute certain of the first mortgage loans that we originate through securitizations and, in many circumstances, upon completion of a securitization, we will recognize certain non-interest revenues which will be included in total other income (loss) on our consolidated statements of income and cease to earn net interest income on the securitized loans.
We have historically expected to distribute certain of the first mortgage loans that we originate through securitizations and, in many circumstances, upon completion of a securitization, we recognize certain non-interest revenues which is included in total 28 Table of Contents other income (loss) on our consolidated statements of income and cease to earn net interest income on the securitized loans.
Such incidents may include unauthorized access to our data assets, phishing attacks, account takeovers, denial of service, malicious software, ransomware that encrypts critical data as part of a scheme to extort payment, and other electronic or cybersecurity breaches.
Such incidents may include unauthorized access to our data assets, phishing attacks, account takeovers, business email compromise, social engineering, denial of service, malicious software, ransomware that encrypts critical data as part of a scheme to extort payment, and other electronic or cybersecurity breaches.
In addition, if the underlying mortgage portfolio has been overvalued by the originator, or if the values subsequently decline and, as a result, less collateral is available to satisfy interest and principal payments due on the related mortgage-backed securities, the securities in which we may invest may effectively become the “first loss” position behind the more senior securities, which may result in significant losses to us.
In addition, if the underlying mortgage portfolio has been overvalued by the originating lender, or if the values subsequently decline and, as a result, less collateral is available to satisfy interest and principal payments due on the related mortgage-backed securities, the securities in which we may invest may effectively become the “first loss” position behind the more senior securities, which may result in significant 27 Table of Contents losses to us.
Our ability to influence our partners may be limited and non-alignment of interests on various strategic decisions may adversely impact our business.
Our ability to influence our partners may be limited and non-alignment of interests on 18 Table of Contents various strategic decisions may adversely impact our business.
Furthermore, in the operation of our business we also use third-party vendors that store certain sensitive data, including confidential information about our employees, and these third parties are subject to their own cybersecurity threats.
Furthermore, in the operation of our business we also use third-party vendors that store certain sensitive data, including confidential information about our employees, and while we conduct due diligence on these vendors, these third parties are subject to their own cybersecurity threats.
If such mortgage-backed securities turn out not to be fully collectible, an offsetting loss deduction will become available only in the later year that uncollectibility is provable.
If such mortgage-backed securities turn out not to be fully collectible, an offsetting loss deduction would become available only in the later year that uncollectability is provable.
Dealers may claim to furnish valuations only as an accommodation and without special compensation, and so they may disclaim any and all liability for any direct, incidental or consequential damages arising out of any inaccuracy or incompleteness in valuations, including any act of negligence or breach of any warranty.
Furthermore, in general, dealers and pricing services heavily disclaim their valuations. Dealers may claim to furnish valuations only as an accommodation and without special compensation, and so they may disclaim any and all liability for any direct, incidental or consequential damages arising out of any inaccuracy or incompleteness in valuations, including any act of negligence or breach of any warranty.
A portion of our portfolio also may be committed to the origination or purchasing of commercial loans where the borrower is a business with a history of poor operating performance, based on our belief that we can realize value from a loan on the property despite such borrower’s performance history.
A portion of our portfolio also may be committed to the origination or purchasing of commercial real estate loans where the borrower has a history of poor operating performance, based on our belief that we can realize value from a loan on the property despite such borrower’s performance history.
Although we have not requested and we do not intend to request a ruling from the IRS as to our REIT qualification, in connection with various corporate initiatives we have received opinions from Skadden, Arps, Slate, Meagher & Flom LLP and Kirkland & Ellis LLP with respect to our qualification as a REIT.
Although we have not requested and we do not intend to request a ruling from the IRS as to our REIT qualification, in connection with various corporate initiatives we have received opinions from Skadden, Arps, Slate, Meagher & Flom LLP 42 Table of Contents (“Skadden”) and Kirkland & Ellis LLP (“Kirkland”) with respect to our qualification as a REIT.
However, if such borrower were to continue to perform poorly after the origination or purchase of such loan, including due to the above financial challenges, we could be adversely affected. Consumer demand, combined with tight labor markets and supply chain imbalances have created inflationary pressure on the economy.
However, if such borrower were to continue to perform poorly after the origination or purchase of such loan, including due to the above financial challenges, we could be adversely affected. Consumer demand, combined with tight labor markets and supply chain imbalances have created inflationary pressure on the economy. Increased operating costs could stress property performance and thus mortgage loan performance.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeItem 2. Properties We lease our corporate headquarters office at 320 Park Avenue, 15th Floor, New York, New York, 10022. The Company also leases regional offices in Santa Monica, California and Miami, Florida. Refer to Schedule III included in Item 8 of this Annual Report on Form 10-K for a listing of investment properties owned as of December 31, 2022.
Biggest changeItem 2. Properties We lease our corporate headquarters office at 320 Park Avenue, 15th Floor, New York, New York, 10022. The Company also leases regional offices in Los Angeles, California and Miami, Florida. Refer to Schedule III included in Item 8 of this Annual Report on Form 10-K for a listing of investment properties owned as of December 31, 2023.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeWe maintain insurance policies in amounts and with the coverage and deductibles we believe are adequate, based on the nature and risks of our business, historical experience and industry standards. Item 4. Mine Safety Disclosures Not applicable. Part II
Biggest changeWe maintain insurance policies in amounts and with the coverage and deductibles we believe are adequate, based on the nature and risks of our business, historical experience and industry standards. Item 4. Mine Safety Disclosures Not applicable. 51 Table of Contents Part II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeThe past shareholder return shown on the following graph is not necessarily indicative of future performance. 54 Table of Contents Total Shareholder Returns Based upon initial investment of $100 on December 31, 2017 (1) Ladder Capital Corp Bloomberg REIT Mortgage Index S&P 500 Index December 31, 2017 $ 100.00 $ 100.00 $ 100.00 December 31, 2018 $ 124.76 $ 97.37 $ 93.76 December 31, 2019 $ 153.60 $ 116.65 $ 120.84 December 31, 2020 $ 99.89 $ 93.95 $ 140.49 December 31, 2021 $ 121.97 $ 105.66 $ 178.27 December 31, 2022 $ 114.12 $ 88.66 $ 143.61 (1) Dividend reinvestment is assumed at quarter end.
Biggest changeThe past shareholder return shown on the following graph is not necessarily indicative of future performance. 53 Table of Contents Total Shareholder Returns Based upon initial investment of $100 on December 31, 2018 (1) Ladder Capital Corp Bloomberg REIT Mortgage Index S&P 500 Index December 31, 2018 $ 100.00 $ 100.00 $ 100.00 December 31, 2019 $ 125.40 $ 122.05 $ 128.88 December 31, 2020 $ 78.09 $ 96.09 $ 149.83 December 31, 2021 $ 97.54 $ 109.48 $ 190.13 December 31, 2022 $ 90.63 $ 90.04 $ 153.16 December 31, 2023 $ 106.08 $ 97.32 $ 190.27 (1) Dividend reinvestment is assumed at quarter end.
Prior to that time, there was no public market for our Class A common stock. The following graph compares total shareholder returns, assuming reinvestment of dividends, for the period December 31, 2017 through December 31, 2022 to the Bloomberg REIT Mortgage Index and the Standard & Poor’s Index (“S&P 500 Index”).
Prior to that time, there was no public market for our Class A common stock. The following graph compares total shareholder returns, assuming reinvestment of dividends, for the period December 31, 2018 through December 31, 2023 to the Bloomberg REIT Mortgage Index and the Standard & Poor’s Index (“S&P 500 Index”).
(2) Amount excludes commissions paid associated with share repurchases. Securities Authorized for Issuance Under Equity Compensation Plans The following table summarizes information, as of December 31, 2022, relating to the 2014 Ladder Capital Corp Omnibus Incentive Equity Plan (the “2014 Omnibus Incentive Plan”) pursuant to which equity securities of the Company are authorized for issuance.
(2) Amount excludes commissions paid associated with share repurchases. 52 Table of Contents Securities Authorized for Issuance Under Equity Compensation Plans The following table summarizes information, as of December 31, 2023, relating to the 2014 Ladder Capital Corp Omnibus Incentive Equity Plan (the “2014 Omnibus Incentive Plan”) pursuant to which equity securities of the Company were authorized for issuance.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Market Information Our Class A common stock trades on the NYSE under the symbol “LADR.” Holders On January 27, 2023, the Company had 26 Class A common shareholders of record. This does not include the beneficial ownership of shares held in nominee name.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Market Information Our Class A common stock trades on the NYSE under the symbol “LADR.” Holders On February 2, 2024, the Company had 25 Class A common shareholders of record. This does not include the beneficial ownership of shares held in nominee name.
The following table presents information with respect to repurchases of Class A common stock of the Company made during the three months ended December 31, 2022 ($ in thousands, except per share data and average price paid per share): 53 Table of Contents Period Total Number of Shares Purchased Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs(1) Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs(2) October 1, 2022 - October 31, 2022 — $ — — $ 47,376,723 November 1, 2022 - November 30, 2022 — — — 47,376,723 December 1, 2022 - December 31, 2022 62,300 10.27 62,300 46,737,061 Total 62,300 $ 10.27 62,300 $ 46,737,061 (1) In July 2022, our board of directors renewed the Company’s ability to repurchase up to $50.0 million of the Company’s Class A common stock from time to time.
The following table presents information with respect to repurchases of Class A common stock of the Company made during the three months ended December 31, 2023 ($ in thousands, except per share data and average price paid per share): Period Total Number of Shares Purchased Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs(1) Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs(2) October 1, 2023 - October 31, 2023 — $ — — $ 44,255,768 November 1, 2023 - November 30, 2023 — — — 44,255,768 December 1, 2023 - December 31, 2023 — — — 44,255,768 Total — $ — — $ 44,255,768 (1) In July 2022, our board of directors renewed the Company’s ability to repurchase up to $50.0 million of the Company’s Class A common stock from time to time.
As of December 31, 2022, the Company has a remaining amount available for repurchase of $46.7 million, which represents 3.7% in the aggregate of its outstanding Class A common stock, based on the closing price of $10.04 per share on such date.
As of December 31, 2023, the Company has a remaining amount available for repurchase of $44.3 million, which represents 3.0% in the aggregate of its outstanding Class A common stock, based on the closing price of $11.51 per share on such date.
The closing price of the Company’s Class A common stock on December 31, 2017 (on which the graph is based) was $13.72.
The closing price of the Company’s Class A common stock on December 31, 2018 (on which the graph is based) was $15.47.
During the year ended December 31, 2022, the Company repurchased 783,599 shares of Class A common stock at an average of $10.11 per share for a total aggregate purchase price of $7.9 million.
During the year ended December 31, 2023, the Company repurchased 269,000 shares of Class A common stock at an average of $9.22 per share for a total aggregate purchase price of $2.5 million.
The closing price per share of Class A common stock on January 27, 2023 was $11.08. On January 27, 2023, the Company had no Class B common shareholders of record and no Class B common stock outstanding.
The closing price per share of Class A common stock on February 2, 2024 was $10.79. On February 2, 2024, the Company had no Class B common shareholders of record and no Class B common stock outstanding.
Added
New awards will be issued under the 2023 Ladder Capital Corp Omnibus Incentive Equity Plan (the “2023 Omnibus Incentive Plan”).

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeYear ended December 31, 2022 compared to the year ended December 31, 2021 The following table sets forth information regarding our consolidated results of operations ($ in thousands): Year Ended December 31, 2022 2021 Difference Net interest income Interest income $ 293,520 $ 176,099 $ 117,421 Interest expense 195,602 182,949 12,653 Net interest income (expense) 97,918 (6,850) 104,768 Provision for (release of) loan loss reserves, net 3,711 (8,713) 12,424 Net interest income (expense) after provision for (release of) loan losses 94,207 1,863 92,344 Other income (loss) Real estate operating income 108,269 101,564 6,705 Sale of loans, net (2,511) 8,398 (10,909) Realized gain (loss) on securities (73) 1,594 (1,667) Unrealized gain (loss) on equity securities (41) — (41) Unrealized gain (loss) on Agency interest-only securities (45) (91) 46 Realized gain (loss) on sale of real estate, net 115,998 55,766 60,232 Fee and other income 15,020 11,190 3,830 Net result from derivative transactions 12,360 1,749 10,611 Earnings (loss) from investment in unconsolidated ventures 1,410 1,579 (169) Gain (loss) on extinguishment of debt 685 — 685 Total other income (loss) 251,072 181,749 69,323 Costs and expenses Compensation and employee benefits 75,836 38,347 37,489 Operating expenses 20,716 17,672 3,044 Real estate operating expenses 38,605 26,161 12,444 Fee expense 7,235 5,810 1,425 Depreciation and amortization 32,673 37,801 (5,128) Total costs and expenses 175,065 125,791 49,274 Income (loss) before taxes 170,214 57,821 112,393 Income tax expense (benefit) 4,909 928 3,981 Net income (loss) $ 165,305 $ 56,893 $ 108,412 Investment Overview Activity for the year ended December 31, 2022 included originating and funding $1.3 billion in principal value of commercial mortgage loans, which was offset by $0.9 billion of principal repayments and $29.2 million of proceeds of sales of loans.
Biggest changeYear ended December 31, 2023 compared to the year ended December 31, 2022 The following table sets forth information regarding our consolidated results of operations ($ in thousands): Year Ended December 31, 2023 2022 Difference Net interest income Interest income $ 407,284 $ 293,520 $ 113,764 Interest expense 245,097 195,602 49,495 Net interest income (expense) 162,187 97,918 64,269 Provision for (release of) loan loss reserves, net 25,096 3,711 21,385 Net interest income (expense) after provision for (release of) loan loss reserves 137,091 94,207 42,884 Other income (loss) Real estate operating income 96,950 108,269 (11,319) Net result from mortgage loan receivables held for sale (523) (2,511) 1,988 Realized gain (loss) on securities (276) (73) (203) Unrealized gain (loss) on securities 29 (86) 115 Realized gain (loss) on sale of real estate, net 8,808 115,998 (107,190) Fee and other income 9,178 15,020 (5,842) Net result from derivative transactions 1,481 12,360 (10,879) Earnings from investment in unconsolidated ventures 758 1,410 (652) Gain on extinguishment of debt 10,718 685 10,033 Total other income (loss) 127,123 251,072 (123,949) Costs and expenses Compensation and employee benefits 63,618 75,836 (12,218) Operating expenses 19,503 20,716 (1,213) Real estate operating expenses 37,587 38,605 (1,018) Investment related expenses 8,847 7,235 1,612 Depreciation and amortization 29,914 32,673 (2,759) Total costs and expenses 159,469 175,065 (15,596) Income (loss) before taxes 104,745 170,214 (65,469) Income tax expense (benefit) 4,244 4,909 (665) Net income (loss) $ 100,501 $ 165,305 $ (64,804) Investment Overview Activity for the year ended December 31, 2023 included originating and funding $68.4 million in principal value of commercial mortgage loans and $726.7 million of principal repayments, which contributed to a net decrease in our loan portfolio of $0.8 billion.
We acquired $96.2 million of new securities, which was offset by $184.8 million of amortization in the portfolio and $5.8 million of sales, which partially contributed to a net decrease in our securities portfolio of $115.8 million during the year ended December 31, 2022.
We acquired $96.2 million of new securities, which was offset by $5.8 million of sales and $184.8 million of amortization in the portfolio, which partially contributed to a net decrease in our securities portfolio of $115.8 million during the year ended December 31, 2022.
To ensure that Ladder Capital 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 the issuance of the unsecured bonds; (4) borrowings under repurchase agreements; (5) principal repayments on investments including mortgage loans and securities; (6) borrowings under our Revolving Credit Facility; (7) proceeds from securitizations and sales of loans; (8) proceeds from the sale of securities; (9) proceeds from the sale of real estate; (10) proceeds from the issuance of CLO debt and other non-mark-to-market loan financing; and (11) proceeds from the issuance of equity capital.
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 the issuance of the unsecured bonds; (4) borrowings under repurchase agreements; (5) principal repayments on investments including mortgage loans and securities; (6) borrowings under our Revolving Credit Facility; (7) proceeds from securitizations and sales of loans; (8) proceeds from the sale of securities; (9) proceeds from the sale of real estate; (10) proceeds from the issuance of CLO debt and other non-mark-to-market loan financing; and (11) proceeds from the issuance of equity capital.
The board of the directors has authorized the Company to repurchase any or all of the Notes from time to time without further approval.
The board of directors has authorized the Company to repurchase any or all of the Notes from time to time without further approval.
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 accounts receivable.
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 derivative positions that generated these results were a combination of five and ten year U.S. treasury rate futures and interest rate swap 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 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.
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 these could be funded through additional debt or equity facility raises.
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 generally will use the direct capitalization rate valuation methodology or the sales comparison approach to estimate the fair value of the collateral for such loans and in certain cases will obtain external appraisals.
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.
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. 55 Table of Contents Ladder Capital Corp is the sole general partner of Ladder Capital Finance Holdings LLLP (“LCFH”) and, as a result of the serialization of LCFH on December 31, 2014, became the sole general partner of Series REIT of LCFH.
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. 54 Table of Contents Ladder Capital Corp is the sole general partner of Ladder Capital Finance Holdings LLLP (“LCFH”) and, as a result of the serialization of LCFH on December 31, 2014, became the sole general partner of Series REIT of LCFH.
The Company has no known material cash requirements other than its contractual obligations in the above table, unfunded commitments and future general corporate expenses. 69 Table of Contents 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.
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.
As discussed in Note 2 to the consolidated financial statements included elsewhere in this Annual Report, we do not designate derivatives as hedges to qualify for hedge accounting and therefore any net payments under, or fluctuations in the fair value of, our derivatives are recognized currently in our GAAP income statement.
As discussed in Note 2, Significant Accounting Policies, to our consolidated financial statements included elsewhere in this Annual Report, we do not designate derivatives as hedges to qualify for hedge accounting and, therefore, any net payments under, or fluctuations in the fair value of, our derivatives are recognized currently in our GAAP income statement.
Our repurchase facilities include covenants covering net worth requirements, minimum liquidity levels, and maximum debt/equity ratios. We believe we were in compliance with all covenants as of December 31, 2022. We have the option to extend some of our existing facilities subject to a number of customary conditions.
Our repurchase facilities include covenants covering net worth requirements, minimum liquidity levels, and maximum debt/equity ratios. We believe we were in compliance with all covenants as of December 31, 2023. We have the option to extend some of our existing facilities subject to a number of customary conditions.
Accordingly, our cash requirement to pay dividends to maintain REIT status could be substantially reduced at the discretion of the board.
Accordingly, our cash requirement to pay dividends to maintain REIT status could be substantially reduced at the discretion of the board of directors.
A discussion regarding our results of operations for the year ended December 31, 2021 compared to the year ended December 31, 2020 can be found in Item 7 of Part II, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021.
A discussion regarding our results of operations for the year ended December 31, 2022 compared to the year ended December 31, 2021 can be found in Part II, Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022.
The premiums are being amortized over the remaining life of the respective debt instruments using the effective interest method. The Company recorded $0.7 million and $1.4 million of premium amortization, which decreased interest expense for the years ended December 31, 2022 and December 31, 2021, respectively.
The premiums are being amortized over the remaining life of the respective debt instruments using the effective interest method. The Company recorded $0.6 million and $0.7 million and $1.4 million of premium amortization, which decreased interest expense for the years ended December 31, 2023, 2022, and 2021 respectively.
(2) Total does not include $1.1 billion of consolidated CLO debt obligations and the related debt issuance costs of $5.9 million, as the satisfaction of these liabilities will not require cash outlays from us. (3) Comprised of interest on secured financings and on senior unsecured notes.
(2) Total does not include $1.1 billion of consolidated CLO debt obligations and the related debt issuance costs of $2.1 million, as the satisfaction of these liabilities will not require cash outlays from us. (3) Comprised of interest on secured financings and on senior unsecured notes.
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. In compliance with the CECL reporting requirements, the Company supplemented its existing credit monitoring and management processes with additional processes to support the calculation of the CECL reserves.
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. In compliance with the CECL reporting requirements, the Company supplements its existing credit monitoring and management processes with additional processes to support the calculation of the CECL reserves.
For borrowings with variable interest rates, we used the rates in effect as of December 31, 2022 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 December 31, 2022.
For borrowings with variable interest rates, we used the rates in effect as of December 31, 2023 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 December 31, 2023.
In addition, we use distributable earnings: (i) to evaluate our earnings from operations because management believes that it may be a useful performance measure for us; and (ii) because our board of directors considers distributable earnings in determining the amount of quarterly dividends.
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.
We were in compliance with all covenants as of December 31, 2022 and December 31, 2021. Further, certain of our financing arrangements and loans on our real property are secured by the assets of the Company, including pledges of the equity of certain subsidiaries or the assets of certain subsidiaries.
We were in compliance with all covenants as of December 31, 2023 and December 31, 2022. Further, certain of our financing arrangements and loans on our real property are secured by the assets of the Company, including pledges of the equity of certain subsidiaries or the assets of certain subsidiaries.
Gain (Loss) on Extinguishment of Debt Gain (loss) on extinguishment of debt totaled $0.7 million for the year ended December 31, 2022.
Gain on extinguishment of debt totaled $0.7 million for the year ended December 31, 2022.
These are reflected as “Adjustments for unrecognized derivative results” for purposes of computing distributable earnings for the period.
These are reflected as “Adjustments for derivative results” for purposes of computing distributable earnings for the period.
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 December 31, 2022 and December 31, 2021, all such acquired intangible assets and liabilities have finite lives.
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 December 31, 2023 and December 31, 2022, all such acquired intangible assets and liabilities have finite lives.
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.
We often borrow at a lower percentage of the collateral asset’s value than the maximum leaving us with excess 62 Table of Contents 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.
Our principal debt financing sources include: (1) long-term senior unsecured notes in the form of corporate bonds; (2) CLO issuances; (3) committed secured funding provided by banks and other lenders; (4) long term non-recourse mortgage financing; (5) uncommitted secured funding sources, including asset repurchase agreements with a number of banks; and (6) secured advances from the FHLB through our captive insurance company.
Our principal debt financing sources include: (1) long-term senior unsecured notes in the form of corporate bonds; (2) CLO issuances; (3) committed secured funding provided by banks and other lenders; (4) long term non-recourse mortgage financing; (5) uncommitted secured funding sources, including asset repurchase agreements with a number of banks; (6) unsecured Revolving Credit Facility and (7) secured advances from the FHLB through our captive insurance company.
Interest income on non-accrual loans in which 71 Table of Contents the Company reasonably expects a full 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.
Interest income on non-accrual loans in which the Company reasonably expects a full 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.
The increase in the rate on borrowings against our securities from December 31, 2021 to December 31, 2022 was primarily due to higher prevailing market borrowing rates as of December 31, 2022 compared to December 31, 2021.
The increase in the rate on borrowings against our securities from December 31, 2022 to December 31, 2023 was primarily due to higher prevailing market borrowing rates as of December 31, 2023 compared to December 31, 2022.
Table of Contents Results of Operations A discussion regarding our results of operations for the year ended December 31, 2022 compared to the year ended December 31, 2021 is presented below.
Table of Contents Results of Operations A discussion regarding our results of operations for the year ended December 31, 2023 compared to the year ended December 31, 2022 is presented below.
As more fully discussed in Note 2 to the consolidated financial statements included elsewhere in this Annual Report, our investments in Agency interest-only securities and equity securities are recorded at fair value with changes in fair value recorded in current period earnings.
As more fully discussed in Note 2, Significant Accounting Policies, to our consolidated financial statements included elsewhere in this Annual Report, our investments in Agency interest-only securities and equity securities are recorded at fair value with changes in fair value recorded in current period earnings.
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.
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.
Provision for (release of) Loan Loss Reserves The provision for the year ended December 31, 2022 was $3.7 million. The net increase represents an increase in the general reserve of loans held for investment of $6.5 million and an increase related to unfunded loan commitments of $0.3 million partially offset by a $3.1 million recovery of provision.
The provision for the year ended December 31, 2022 of $3.7 million represents an increase in the general reserve of loans held for investment of $6.5 million and an increase related to unfunded loan commitments of $0.3 million partially offset by a $3.1 million recovery of provision.
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 7A.
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.
Quantitative and Qualitative Disclosures about Market Risk for further disclosures surrounding the impact of rising or falling interest rate on our earnings. Critical Accounting Policies and 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.
Refer to Item 7A “Quantitative and Qualitative Disclosures about Market Risk” for further disclosures surrounding the impact of rising or falling interest rate on our earnings. Critical Accounting Policies and 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.
As of December 31, 2022, we had outstanding borrowings secured by our securities equal to 75.6% of the carrying value of our real estate securities, compared to 74.4% as of December 31, 2021. 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 December 31, 2023, we had outstanding borrowings secured by our securities equal to 24.0% of the carrying value of our real estate securities, compared to 75.6% as of December 31, 2022. 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 December 31, 2021, the Company had $1.1 billion 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 $9.6 million were included in CLO debt as of December 31, 2021.
As of December 31, 2023, the Company had $1.1 billion 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 $2.1 million were included in CLO debt as of December 31, 2023.
There were $29.2 million of proceeds from sales of mortgage loans for the year ended December 31, 2022, and $305.6 million of proceeds from sales of mortgage loans for the year ended December 31, 2021. Proceeds from the sale of securities We sell our investments in CMBS, U.S. Agency securities, corporate bonds, U.S.
There were no proceeds from sales of mortgage loans for the year ended December 31, 2023, and there were $29.2 million of proceeds from sales of mortgage loans for the year ended December 31, 2022. Proceeds from the Sale of Securities We sell our investments in CMBS, U.S. Agency securities, corporate bonds, U.S.
As of December 31, 2022, our off-balance sheet arrangements consisted of $321.8 million of unfunded commitments of mortgage loan receivables held for investment, 52% of which additional funds relate to 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, 2023, our off-balance sheet arrangements consisted of $204.0 million of unfunded commitments of mortgage loan receivables held for investment, 63% of which additional funds relate to 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.
In order for the Company to maintain its qualification as a REIT under the Code, we must annually distribute at least 90% of our REIT taxable income.
Dividends In order for the Company to maintain its qualification as a REIT under the Code, it must annually distribute at least 90% of its taxable income.
Treasury securities, and equity securities as a part of our normal course of business. Proceeds from sales of securities provided net cash of $5.8 million for the year ended December 31, 2022, and $438.6 million for the year ended December 31, 2021.
Treasury securities, and equity securities as a part of our normal course of business. Proceeds from sales of securities provided net cash of $17.8 million for the year ended December 31, 2023, and $5.8 million for the year ended December 31, 2022.
The Company retained consent rights over major decisions with respect to the servicing of the Contributed December 2021 Loans, including the right to appoint and replace the special servicer under the CLO. The CLO is a VIE and the Company was the primary beneficiary and, therefore, consolidated the VIE - See Note 10, Consolidated Variable Interest Entities.
The Company retained consent rights over major decisions with respect to the servicing of the Contributed December 2021 Loans, including the right to appoint and replace the special servicer under the CLO. The CLO is a VIE and the Company was the primary beneficiary and, therefore, consolidated the VIE. Refer to Note 9, Consolidated Variable Interest Entities, for additional information.
As of December 31, 2022, we had outstanding borrowings secured by our mortgage loan receivables equal to 43.0% of the carrying value of our mortgage loan receivables, compared to 39.0% as of December 31, 2021. As of December 31, 2022, the weighted average yield on our securities was 5.2%, compared to 1.7% as of December 31, 2021.
As of December 31, 2023, we had outstanding borrowings secured by our mortgage loan receivables equal to 53.1% of the carrying value of our mortgage loan receivables, compared to 43.0% as of December 31, 2022. As of December 31, 2023, the weighted average yield on our securities was 6.1%, compared to 5.2% as of December 31, 2022.
As part of that effort, 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.
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.
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.
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.
As of December 31, 2022, the weighted average interest rate on borrowings against our mortgage loan receivables was 4.8%, compared to 2.6% as of December 31, 2021. The increase in the rate on borrowings against our mortgage loan receivables from December 31, 2021 to December 31, 2022 was primarily due to the increase in prevailing interest rates.
As of December 31, 2023, the weighted average interest rate on borrowings against our mortgage loan receivables was 7.5%, compared to 4.8% as of December 31, 2022. The increase in the rate on borrowings against our mortgage loan receivables from December 31, 2022 to December 31, 2023 was primarily due to the increase in prevailing interest rates.
These loans have carrying amounts of $498.0 million and $693.8 million, net of unamortized premiums of $2.4 million and $3.2 million as of December 31, 2022 and December 31, 2021, respectively, representing proceeds received upon financing greater than the contractual amounts due under these agreements.
These mortgage loans have carrying amounts of $437.8 million and $498.0 million, net of unamortized premiums of $1.8 million and $2.4 million as of December 31, 2023 and December 31, 2022, respectively, representing proceeds received upon financing greater than the contractual amounts due under these agreements.
Significant Accounting Policies.” 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.
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.
There were no properties classified as held for sale at December 31, 2022, and we had one property classified as held for sale at December 31, 2021. We did not record any impairments of real estate for the years ended December 31, 2022 or December 31, 2021.
There were no properties classified as held for sale as of December 31, 2023 and December 31, 2022. We did not record any impairments of real estate for the years ended December 31, 2023 or December 31, 2022.
As of December 31, 2022, the Company had $616.9 million of borrowings outstanding, with an additional $683.1 million of committed financing available. As of December 31, 2021, the Company had $184.5 million of borrowings outstanding, with an additional $1.0 billion of committed financing available.
As of December 31, 2022, the Company had $616.9 million of borrowings outstanding, with an additional $683.1 million of committed financing available.
Repayment of mortgage loan receivables provided net cash of $909.8 million for the year ended December 31, 2022 and $1.1 billion for the year ended December 31, 2021. Repayment of real estate securities provided net cash of $184.8 million for the year ended December 31, 2022, and $164.5 million for the year ended December 31, 2021.
Repayment of mortgage loan receivables provided net cash of $738.5 million for the year ended December 31, 2023 and $909.8 million for the year ended December 31, 2022. Repayment of real estate securities provided net cash of $232.1 million for the year ended December 31, 2023, and $184.8 million for the year ended December 31, 2022.
As of December 31, 2021, our off-balance sheet arrangements consisted of $390.1 million of unfunded commitments of mortgage loan receivables held for investment to provide additional first mortgage loan financing.
As of December 31, 2022, our off-balance sheet arrangements consisted of $321.8 million of unfunded commitments of mortgage loan receivables held for investment to provide additional first mortgage loan financing.
The increase in provision associated with the general reserve during the year ended December 31, 2022 is primarily due to adverse changes in macroeconomic scenarios and an overall increase in the size of our balance sheet first mortgage portfolio as a result of net originations during that time. 58 Table of Contents The total provision for the year ended December 31, 2021 was a release of $8.7 million.
The increase in provision associated with the general reserve during the year ended December 31, 2022 is primarily due to adverse changes in macroeconomic scenarios and an overall increase in the size of our balance sheet first mortgage portfolio as a result of net originations during that time.
Net Result from Derivative Transactions Net result from derivative transactions of $12.4 million is composed of realized gains of $11.8 million and an unrealized gain of $0.6 million for the year ended December 31, 2022, compared to a net gain of $1.7 million for the year ended December 31, 2021, which was comprised of a realized gain of $1.7 million and a $34 thousand unrealized loss resulting in a positive change of $10.6 million.
Net Result from Derivative Transactions Net result from derivative transactions of $1.5 million is composed of a realized gain of $1.9 million and an unrealized loss of $(0.4) million for the year ended December 31, 2023, compared to a net gain of $12.4 million for the year ended December 31, 2022, which was comprised of a realized gain of $11.8 million and a $0.6 million unrealized gain resulting in a decrease of $10.9 million.
Our significant accounting policies are described in Item 8—“Financial Statements and Supplemental Data—Note 2.” The following is a list of accounting policies that require more significant estimates and judgments: • Current expected credit losses • Acquisition of real estate • Impairment or disposal of long lived assets • Identified intangible assets and liabilities • Variable interest entities 70 Table of Contents • Valuation of financial instruments The following is a summary of accounting policies that require more significant management estimates and judgments: Current expected credit losses The Company uses a current expected credit loss model (“CECL”) for estimating the provision for loan losses on its loan portfolio.
The following is a list of accounting policies that require more significant estimates and judgments: • Allowance for loan losses • Acquisition of real estate • Impairment or disposal of long lived assets • Identified intangible assets and liabilities • Variable interest entities • Valuation of financial instruments The following is a summary of accounting policies that require more significant management estimates and judgments: 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.
Dividends In order for the Company to maintain its qualification as a REIT under 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.
In order for the Company to maintain its qualification as a REIT under the Code, 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.
The CLO is a VIE and the Company was the primary beneficiary and, therefore, consolidated the VIE - See Note 10, Consolidated Variable Interest Entities. 65 Table of Contents On December 2, 2021, a consolidated subsidiary of the Company completed a privately marketed CLO transaction, which generated $566.2 million of gross proceeds to Ladder, financing $729.4 million of loans (“Contributed December 2021 Loans”) at a maximum 77.6% advance rate on a matched term, non-mark-to-market and non-recourse basis.
On December 2, 2021, a consolidated subsidiary of the Company completed a privately-marketed CLO transaction, which generated $566.2 million of gross proceeds to Ladder, financing $729.4 million of loans (“Contributed December 2021 Loans”) at a maximum 77.6% advance rate on a matched term, non-mark-to-market and non-recourse basis.
The allowance includes $0.7 million and $0.4 million of reserves for unfunded commitments at December 31, 2022 and December 31, 2021, respectively. The estimate is sensitive to the assumptions used to represent future expected economic conditions.
The allowance for loan losses at December 31, 2023 and December 31, 2022 was $43.9 million and $21.5 million, respectively. The allowance includes $0.7 million of reserves for unfunded commitments at December 31, 2023 and December 31, 2022. The estimate is sensitive to the assumptions used to represent future expected economic conditions.
These non-recourse debt agreements provide for primarily fixed rate financing at rates ranging from 4.25% to 8.03%, with anticipated maturity dates between 2023-2031 and an average term of 3.8 years as of December 31, 2022.
These non-recourse debt agreements provide for secured financing at rates ranging from 4.39% to 9.03%, and, as of December 31, 2023, have anticipated maturity dates between 2024 - 2031, with an average term of 3.1 years.
Set forth below is an unaudited reconciliation of income (loss) before taxes to distributable earnings ($ in thousands): Year Ended December 31, 2022 2021 Income (loss) before taxes $ 170,214 57,821 Net (income) loss attributable to noncontrolling interests in consolidated ventures (GAAP) (23,088) (371) Our share of real estate depreciation, amortization and gain adjustments (1) (29,188) 1,662 Adjustments for unrecognized derivative results (2) (9,381) (7,534) Unrealized (gain) loss on fair value securities 86 91 Adjustment for economic gain on loan sales not recognized under GAAP for which risk has been substantially transferred, net of reversal/amortization 1,356 3,063 Adjustment for impairment (3) 6,816 (8,713) Non-cash stock-based compensation 31,584 15,321 Distributable earnings $ 148,399 $ 61,340 (1) The following is a reconciliation of GAAP depreciation and amortization to our share of real estate depreciation, amortization and gain adjustments presented in the computation of distributable earnings in the preceding table ($ in thousands): 74 Table of Contents Year Ended December 31, 2022 2021 Total GAAP depreciation and amortization $ 32,673 $ 37,801 Less: Depreciation and amortization related to non-rental property fixed assets (42) (99) Less: Non-controlling interests in consolidated ventures’ share of accumulated depreciation and amortization and unrecognized passive interest in unconsolidated ventures (1,943) (2,933) Our share of real estate depreciation and amortization 30,688 34,769 Realized gain from accumulated depreciation and amortization on real estate sold (refer to below) (68,992) (31,219) Less: Non-controlling interests in consolidated ventures’ share of accumulated depreciation and amortization on real estate sold 10,879 — Our share of accumulated depreciation and amortization on real estate sold (a) (58,113) (31,219) Less: Our share of operating lease income on above/below market lease intangible amortization (1,763) (1,888) Our share of real estate depreciation, amortization and gain adjustments $ (29,188) $ 1,662 (a) GAAP gains/losses on sales of real estate include the effects of previously recognized real estate depreciation and amortization.
Set forth below is an unaudited reconciliation of income (loss) before taxes to distributable earnings (in thousands): 71 Table of Contents Year Ended December 31 December 31 2023 2022 Income (loss) before taxes $ 104,745 $ 170,214 Net (income) loss attributable to noncontrolling interests in consolidated ventures (GAAP) 624 (23,088) Our share of real estate depreciation, amortization and gain adjustments (1) 18,602 (29,188) Adjustments for derivative results (2) 716 (9,381) Unrealized (gain) loss on fair value securities (29) 86 Adjustment for economic gain on loan sales not recognized under GAAP for which risk has been substantially transferred, net of reversal/amortization (604) 1,356 Adjustment for impairment (3) 25,096 6,816 Non-cash stock-based compensation 18,577 31,584 Distributable earnings $ 167,727 $ 148,399 (1) The following is a reconciliation of GAAP depreciation and amortization to our share of real estate depreciation, amortization and gain adjustments ($ in thousands): Year Ended December 31, December 31, 2023 2022 Total GAAP depreciation and amortization $ 29,914 $ 32,673 Less: Depreciation and amortization related to non-rental property fixed assets (431) (42) Less: Non-controlling interests in consolidated ventures’ share of depreciation and amortization and adjustment for passive interest in unconsolidated ventures (1,068) (1,943) Our share of real estate depreciation and amortization 28,415 30,688 Realized gain from accumulated depreciation and amortization on real estate sold (8,016) (68,992) Less: Non-controlling interests in consolidated ventures’ share of accumulated depreciation and amortization on real estate sold — 10,879 Accumulated depreciation and amortization on real estate sold (a) (8,016) (58,113) Less: Our share of operating lease income on above/below market lease intangible amortization (1,797) (1,763) Our share of real estate depreciation, amortization and gain adjustments $ 18,602 $ (29,188) (a) GAAP gains/losses on sales of real estate include the effects of previously recognized real estate depreciation and amortization.
Collateralized Loan Obligations (“CLO”) Debt On July 13, 2021, a consolidated subsidiary of the Company completed a privately-marketed CLO transaction, which generated $498.2 million of gross proceeds to Ladder, financing $607.5 million of loans (“Contributed July 2021 Loans”) at an 82% advance rate on a matched term, non-mark-to-market and non-recourse basis.
During the year ended December 31, 2022, the Company executed one new term debt agreement to finance properties in its real estate portfolio. 63 Table of Contents Collateralized Loan Obligations (“CLO”) Debt On July 13, 2021, a consolidated subsidiary of the Company completed a privately-marketed CLO transaction, which generated $498.2 million of gross proceeds to Ladder, financing $607.5 million of loans (“Contributed July 2021 Loans”) at an 82% advance rate on a matched term, non-mark-to-market and non-recourse basis.
As of December 31, 2021, we had $1.6 billion of unsecured corporate bonds outstanding.
As of December 31, 2022, the Company had $1.6 billion of unsecured corporate bonds outstanding.
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 Item 8—“Financial Statements and Supplemental Data—Note 2.
Therefore, when market data is not available, we would use valuation techniques requiring more management judgment to estimate the appropriate fair value measurement. 70 Table of Contents 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 Annual Report.
As of December 31, 2021, we held unencumbered cash of $0.5 billion, unencumbered loans of $1.7 billion, unencumbered securities of $150.9 million, unencumbered real estate of $85.9 million and $358.5 million of other assets not secured by any portion of secured indebtedness. Borrowings under various financing arrangements Our financing strategies are critical to the success and growth of our business.
As of December 31, 2022, we held unencumbered cash and cash equivalents of $609.1 million, unencumbered loans of $1.7 billion, unencumbered securities of $97.5 million, unencumbered real estate of $140.3 million and $351.6 million of other assets not encumbered by any portion of secured indebtedness. 61 Table of Contents Borrowings under various financing arrangements Our financing strategies are critical to the success and growth of our business.
During the year ended December 31, 2022, the Company repurchased $4.0 million of the 2025 Notes and recognized a gain of $0.3 million on extinguishment of debt, $1.0 million of the 2027 Notes and recognized a gain of $0.2 million on extinguishment of debt, and $1.0 million of the 2029 Notes and recognized a gain of $0.2 million on extinguishment of debt.
During the year ended December 31, 2023, the Company repurchased $16.2 million of the 2025 Notes and recognized a net gain of $1.3 million on extinguishment of debt, $38.9 million of the 2027 Notes and recognized a net gain of $6.8 million on extinguishment of debt, and $13.1 million of the 2029 Notes and recognized a net gain of $2.6 million on extinguishment of debt.
As of December 31, 2022, collateral for the borrowings was comprised primarily of $248.8 million of CMBS.
As of December 31, 2023, collateral for the borrowings was comprised primarily of $140.3 million of CMBS.
The increase in expense of $4.0 million during the year ended December 31, 2022 as compared to December 31, 2021 is primarily a result of increases to GAAP income in our TRSs and an uncertain tax position. 60 Table of Contents 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.
The decrease in expense of $0.7 million during the year ended December 31, 2023 as compared to December 31, 2022 is primarily a result of a tax reserve recognized in 2022 offset by changes in income generated by our TRSs. 59 Table of Contents Liquidity and Capital Resources The management of our liquidity and capital diversity and allocation strategies is critical to the success and growth of our business.
The following table is a summary of the Company’s repurchase activity of its Class A common stock during the year ended December 31, 2022 ($ in thousands): Shares Amount(1) Authorizations remaining as of December 31, 2021 $ 44,122 Additional authorizations 10,534 Repurchases paid 783,599 (7,919) Authorizations remaining as of December 31, 2022 $ 46,737 (1) Amount excludes commissions paid associated with share repurchases.
The following table is a summary of the Company’s repurchase activity of its Class A common stock during the year ended December 31, 2023 ($ in thousands): Shares Amount(1) Authorizations remaining as of December 31, 2022 $ 46,737 Repurchases paid: March 1 - March 31, 2023 250,000 (2,285) September 1 - September 30, 2023 19,000 (196) Authorizations remaining as of December 31, 2023 $ 44,256 (1) Amount excludes commissions paid associated with share repurchases.
Proceeds from the sale of real estate Proceeds from sales of real estate provided net cash of $310.5 million for the year ended December 31, 2022, and $190.9 million for the year ended December 31, 2021.
Proceeds from the Sale of Real Estate There were $13.4 million, net proceeds from sales of real estate for the year ended December 31, 2023, and $310.5 million for the year ended December 31, 2022.
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. 63 Table of Contents Committed loan facilities We are a party to multiple committed loan repurchase agreement facilities, totaling $1.3 billion of credit capacity.
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.
Compensation and Employee Benefits Compensation and employee benefits are comprised primarily of salaries, bonuses, equity-based compensation and other employee benefits. The increase of $37.5 million in compensation expense is primarily due to the timing of employee stock and bonus compensation in 2020, 2021 and 2022. Operating Expenses Operating expenses are primarily comprised of professional fees, lease expense and technology expenses.
Compensation and Employee Benefits Compensation and employee benefits are comprised primarily of salaries, bonuses, equity-based compensation and other employee benefits. The decrease of $12.2 million in compensation expense is primarily due to to the timing of employee stock and bonus compensation in 2021, 2022 and 2023.
Net Interest Income The $117.4 million increase in interest income was primarily attributable to increases in prevailing interest rate benchmarks on our floating rate balance sheet loan and securities portfolios and an increase in net originations from our balance sheet first mortgage loans.
Net Interest Income The $113.8 million increase in interest income was primarily attributable to increases in prevailing interest rate benchmarks on our floating rate balance sheet loan and securities portfolios partially offset by net payoffs.
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). 61 Table of Contents Cash, Cash Equivalents and Restricted Cash We held cash, cash equivalents and restricted cash of $659.6 million at December 31, 2022, of which $609.1 million was unrestricted cash and cash equivalents and $50.5 million was restricted cash.
All of our existing financial obligations due within the following year can be extended for one or more additional years at our discretion, refinanced or repaid at maturity or are incurred in the normal course of business (i.e., interest payments/loan funding obligations).
As of December 31, 2022, the weighted average interest rate on borrowings against our securities was 4.8%, compared to 0.9% as of December 31, 2021.
As of December 31, 2023, the weighted average interest rate on mortgage borrowings against our real estate assets was 5.9%, compared to 5.5% as of December 31, 2022.
Cash Flows The following table provides a breakdown of the net change in our cash, cash equivalents, and restricted cash ($ in thousands): Year Ended December 31, 2022 2021 Net cash provided by (used in) operating activities $ 106,710 $ 79,739 Net cash provided by (used in) investing activities 81,590 (651,460) Net cash provided by (used in) financing activities (150,244) (91,017) Net increase (decrease) in cash, cash equivalents and restricted cash $ 38,056 $ (662,738) Year ended December 31, 2022 We experienced a net increase in cash, cash equivalents and restricted cash of $38.1 million for the year ended December 31, 2022 reflecting cash provided by operating activities of $106.7 million, cash provided by investing activities of $81.6 million and cash used in financing activities of $(150.2) million.
Year ended December 31, 2022 We experienced a net increase in cash, cash equivalents and restricted cash of $38.1 million for the year ended December 31, 2022 reflecting cash provided by operating activities of $106.7 million, cash provided by investing activities of $81.6 million and cash used in financing activities of $(150.2) million.
For the year ended December 31, 2022, we sold $4.3 million of CMBS securities and $1.5 million of equity securities. For the year ended December 31, 2021, we sold $438.6 million of securities, comprised of $408.2.0 million of CMBS and $30.4 million of Agency securities.
For the year ended December 31, 2023, we sold $14.9 million of CMBS securities. For the year ended December 31, 2022, we sold $4.3 million of CMBS securities and $1.5 million of equity securities.
As of December 31, 2021, Tuebor had $263.0 million of borrowings outstanding from the FHLB, with terms of 0.7 years to 2.75 years (weighted average of 1.95 years), interest rates of 0.36% to 2.74% (with a weighted average of 0.96%), and advance rates of 71.7% to 95.7% on eligible collateral.
As of December 31, 2023, Tuebor had $115.0 million of borrowings outstanding, with terms of 0.3 years to 0.75 years (with a weighted average of 0.57 years), interest rates of 5.76% to 5.88% (with a weighted average of 5.82%), and advance rates of 71.7% to 95.7% on eligible collateral.
The increase was a result of aggregate gains of $116.0 million derived from the sale of two office properties for realized gain of $61.5 million, one warehouse property for a realized gain of $14.6 million, three apartment properties for a realized gain of $29.1 million and two retail properties for realized gain of $10.8 million for the year ended December 31, 2022.
During the year ended December 31, 2022, there were sales of: (i) two office properties for a realized gain of $61.5 million; (ii) one warehouse property for a realized gain of $14.6 million; (iii) three apartment buildings for a combined realized gain of $29.1 million; and (iv) two retail properties for a realized gain of $10.8 million.
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. 76 Table of Contents
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. 73 Table of Contents
The $12.7 million increase in interest expense is primarily related to higher outstanding balances on our loan and security repurchase facilities at higher prevailing rates, and higher interest expense on our Contributed July 2021 CLO Loans and Contributed December 2021 CLO Loans debt issuances at higher prevailing rates.
The $49.5 million increase in interest expense is primarily related to higher prevailing rates on our floating rate debt and higher outstanding balances on our loan repurchase facilities.
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.
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.
(2) Presented net of unamortized debt issuance costs of $5.9 million as of December 31, 2022. (3) Presented net of unamortized debt issuance costs of $15.4 million as of December 31, 2022.
(2) Presented net of unamortized debt issuance costs of $2.1 million as of December 31, 2023. (3) Presented net of unamortized debt issuance costs of $11.8 million as of December 31, 2023.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeEffective as of July 16, 2021, LCAM is a registered investment adviser under the Investment Advisors Act of 1940 and currently provides investment advisory services solely to Ladder-sponsored collateralized loan obligation trusts (“CLO Issuers”). The CLO Issuers invest primarily in first mortgage loans secured by commercial real estate originated or acquired by Ladder and in participation interests in such loans.
Biggest changeIf Tuebor fails to comply with regulatory requirements, it could be subject to loss of its licenses and registration and/or economic penalties. Effective as of July 16, 2021, LCAM is a registered investment adviser under the Investment Advisors Act of 1940, as amended and currently provides investment advisory services solely to Ladder-sponsored collateralized loan obligation trusts (“CLO Issuers”).
Interest rate swap and futures agreements are utilized to hedge against future interest rate increases on the Company’s borrowings and potential adverse changes in the value of certain assets that result from interest rate changes.
Interest rate futures agreements are utilized to hedge against future interest rate increases on the Company’s borrowings and potential adverse changes in the value of certain assets that result from interest rate changes.
The Company faces the risk that the market value of its assets will increase or decrease at different rates than that of its liabilities, including its hedging instruments. The Company mitigates interest rate risk through utilization of hedging instruments, primarily interest rate swap and futures agreements.
The Company faces the risk that the market value of its assets will increase or decrease at different rates than that of its liabilities, including its hedging instruments. The Company mitigates interest rate risk through utilization of hedging instruments, primarily interest rate futures agreements.
Item 7A. Quantitative and Qualitative Disclosures about Market Risk For a discussion of current market conditions, refer to Part II, Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” Interest Rate Risk The nature of the Company’s business exposes it to market risk arising from changes in interest rates.
Item 7A. Quantitative and Qualitative Disclosures about Market Risk For a discussion of current market conditions, refer to Part II, Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations”. Interest Rate Risk The nature of the Company’s business exposes it to market risk arising from changes in interest rates.
We may become subject to additional regulatory and compliance burdens if our investment adviser subsidiary expands its product offerings and investment platform. 79 Table of Contents
We may become subject to additional regulatory and compliance burdens if our investment adviser subsidiary expands its product offerings and investment platform. 76 Table of Contents
A decline in liquidity of real estate and real estate-related investments, as well as a lack of availability of observable transaction data and inputs, may make it more difficult to sell the Company’s investments or determine their fair values.
A decline in liquidity of real estate and real estate-related investments, as well as a lack of availability 74 Table of Contents of observable transaction data and inputs, may make it more difficult to sell the Company’s investments or determine their fair values.
The following table summarizes the change in net income for a 12-month period commencing December 31, 2022 and the change in fair value of our investments and indebtedness assuming an increase or decrease of 100 basis points in the relevant benchmark interest rates on December 31, 2022, both adjusted for the effects of our interest rate hedging activities ($ in thousands): Projected change in net income(1) Projected change in portfolio value Change in interest rate: Decrease by 1.00% $ (26,950) $ 1,767 Increase by 1.00% 27,285 (1,785) (1) Subject to limits for floors on our floating rate investments and indebtedness.
The following table summarizes the change in net income for a 12-month period commencing December 31, 2023 and the change in fair value of our investments and indebtedness assuming an increase or decrease of 100 basis points in the relevant benchmark interest rates on December 31, 2023, both adjusted for the effects of our interest rate hedging activities ($ in thousands): Projected change in net income(1) Projected change in portfolio value Change in interest rate: Decrease by 1.00% $ (25,760) $ (1,073) Increase by 1.00% 26,261 1,106 (1) Subject to limits for floors on our floating rate investments and indebtedness.
Diversification Risk The assets of the Company are concentrated in the commercial real estate sector. Accordingly, the investment portfolio of the Company may be subject to more rapid change in value than would be the case if the Company were to maintain a wide diversification among investments or industry sectors.
Accordingly, the investment portfolio of the Company may be subject to more rapid change in value than would be the case if the Company were to maintain a wide diversification among investments or industry sectors. Furthermore, even within the commercial real estate sector, the investment portfolio may be relatively concentrated in terms of geography and type of real estate investment.
These agreements contain, among other conditions, events of default and various covenants and representations. If such events are not cured by the Company or waived by the lenders, the lenders may decide to curtail or limit extension of credit, and the Company may be forced to repay its advances or loans.
If such events are not cured by the Company or waived by the lenders, the lenders may decide to curtail or limit extension of credit, and the Company may be forced to repay its advances or loans.
The Company may also be subject to risk associated with concentrations of investments in geographic regions and industries. 77 Table of Contents Liquidity Risk Market disruptions may lead to a significant decline in transaction activity in all or a significant portion of the asset classes in which the Company invests and may at the same time lead to a significant contraction in short-term and long-term debt and equity funding sources.
Liquidity Risk Market disruptions may lead to a significant decline in transaction activity in all or a significant portion of the asset classes in which the Company invests and may at the same time lead to a significant contraction in short-term and long-term debt and equity funding sources.
The Company’s failure to comply with these covenants could result in an event of default, which could result in the Company being required to repay these borrowings before their due date. We were in compliance with all covenants as described in this Annual Report as of December 31, 2022.
The Company’s failure to comply with these covenants could result in an event of default, which could result in the Company being required to repay these borrowings before their due date.
Market risk is a potential loss the Company may incur as a result of change in the fair values of its investments.
Market risk is a potential loss the Company may incur as a result of change in the fair values of its investments. The Company may also be subject to risk associated with concentrations of investments in geographic regions and industries.
In addition, decreases in property values reduce the value of the collateral and the potential proceeds available to a borrower to repay the underlying loans, which could also cause the Company to suffer losses. 78 Table of Contents Covenant Risk In the normal course of business, the Company enters into loan and securities repurchase agreements and credit facilities with certain lenders to finance its real estate investment transactions.
In addition, decreases in property values reduce the value of the collateral and the potential proceeds available to a borrower to repay the underlying loans, which could also cause the Company to suffer losses.
Furthermore, even within the commercial real estate sector, the investment portfolio may be relatively concentrated in terms of geography and type of real estate investment. This lack of diversification may subject the investments of the Company to more rapid change in value than would be the case if the assets of the Company were more widely diversified.
This lack of diversification may subject the investments of the Company to more rapid change in value than would be the case if the assets of the Company were more widely diversified. Regulatory Risk Tuebor is subject to state regulation as a captive insurance company.
Our portfolio’s low weighted-average loan-to-value of 67.9% as of December 31, 2022 reflects significant equity value that our sponsors are motivated to protect through periods of cyclical disruption.
Our portfolio’s low weighted average loan-to-value, 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, of 65.6% as of December 31, 2023 reflects significant equity value that our sponsors are motivated to protect through periods of cyclical disruption.
Removed
Regulatory Risk Tuebor is subject to state regulation as a captive insurance company. If Tuebor fails to comply with regulatory requirements, it could be subject to loss of its licenses and registration and/or economic penalties.
Added
Covenant Risk In the normal course of business, the Company enters into loan and securities repurchase agreements and credit facilities with certain lenders to finance its real estate investment transactions. These agreements contain, among other conditions, events of default and various covenants and representations.
Added
We were in compliance with all covenants as described in this Annual Report as of December 31, 2023. 75 Table of Contents Diversification Risk The assets of the Company are concentrated in the commercial real estate sector.
Added
The CLO Issuers invest primarily in first mortgage loans secured by commercial real estate originated or acquired by Ladder and in participation interests in such loans.

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