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Intrinsic Value is all-important and is the only logical way to evaluate the relative attractiveness of investments and businesses.
Greetings. Welcome to Ladder Capital Corp. Fourth Quarter 2020 Earnings Call. At this time all participants are in a listen only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] Please note this conference is being recorded.
I will now turn the conference over to your host, Ladder's Chief Compliance Officer - I'm sorry, Senior Regulatory Counsel, Ms. Michelle Wallach. Please go ahead, Ms. Wattach.
Thank you. And good afternoon, everyone. I'd like to welcome you to Ladder Capital Corp. earnings call for the fourth quarter and year ended December 31, 2020. With me this afternoon are Brian Harris, the company's Chief Executive Officer, Pamela McCormack, the company's President, Marc Fox, the company's Chief Financial Officer, and Paul Miceli, the company's Director of Finance and Chief Financial Officer commencing on March 1 2021.
This afternoon, we released our financial results for the quarter and year ended December 31, 2020. The earnings release is available in the investors section of the company's website. And our annual report on form 10-K will be filed this week with the FCC. Before the call begins, I'd like to remind everyone that certain statements made in the course of this call are not based on historical information, and may constitute forward looking statements. These statements are based on management's current expectations and beliefs and are subject to a number of trends and uncertainties that could cause actual results to differ materially from those described in these forward-looking statements. I refer you to Ladder Capital Corp. 2020 form 10 k for more detailed discussion of the risk factors that could cause actual results to differ materially from those expressed or implied in any forward-looking statements made today. Accordingly, you are cautioned not to place undue reliance on these forward-looking statements. The company undertakes no duty to update any forward-looking statements that may be made during the course of this call.
Additionally, certain non-GAAP financial measures will be discussed on this conference call. The company's presentation of this information is not intended to be considered in isolation, or as a substitute for financial information presented in accordance with GAAP. Reconciliation these non-GAAP financial measures for most comparable measures preparing according to GAAP are contained in our earnings release.
With that, I'll turn the call over to our President, Pamela McCormack.
Thank you, Michelle. And good afternoon, everyone. 2020 was an unforgettable year. All of us including those in the financial markets, faced unprecedented challenges, met those challenges with quick and decisive actions. And the company is now well positioned to the opportunities we expect 2021 to bring.
My remarks today will focus on the key actions we have taken since the onset of COVID. First, we quickly raised liquidity and reduced leverage. Next, we turned our attention to proactively managing our balance sheet in order to protect book value. And finally, we went back to originating new business and are pleased to share that we currently have over $200 million of new loans, both conduit and balance sheet under application and indeed with due diligence.
Our deep enhanced origination team is fully engaged in actively pursuing compelling opportunities. And our multi-cylinder business model allows us to pivot quickly to take advantage of the best available risk adjusted returns.
Before I begin, I'm excited to confirm our appointment of Paul J. Miceli, as Chief Financial Officer effective March 1 2021. Paul will succeed Marc Fox who have to 12.5 years we'll be moving on but will remain with us through the beginning of May to help ensure an orderly transition.
As many of you know, Paul joined Ladder nearly 3two years ago and is currently Ladder's Director of Finance. Since then, post and working closely with Marc and the senior management team as part of Ladder's long term succession plan, on a personal note, I want to thank Marc for being a great partner and a great friend to both Ladder and me personally and let him know how much we all value the contributions he has made for Ladder's success.
Looking back at 2020, I'll start with a look at liquidity, leverage and liability management. We increased our unrestricted cash balance to $1.25 billion as of December 31, 2020. Our ability to increase liquidity by monetizing assets was driven by strong asset performance, healthy repayments and vigorous asset management efforts.
Since the onset of COVID, we achieved a 99% collection rate of interest and rents across our entire portfolio of loan and real estate assets, including 100% collections from our net lease portfolio. Our focus on a highly diversified and granular mid market origination strategy enhanced the pace of our balance sheet loan repayments with a much larger base of capital available to refinance our smaller average loan sizes.
Since the onset of COVID, we've reduced our balance sheet loan portfolio by $1.4 billion to just 37% of our assets as of February 19, 2021. More importantly, we are now in a strong position to reset our basis in this portfolio, as we rebuild it with the origination of new loans reflecting current market conditions.
In conjunction with these repayments, our hotel exposure decreased approximately 30% in 2020. As of February 19, 2021, hotel collateral represents only 14.5% of our significantly smaller balance sheet loan portfolio.
Our approach to security investments was also validated during the pandemic. Our focus has always been on highly rated short duration liquid investments. The market for the super senior securities recovered quickly, and they are now regularly trading at or above par value as we expected.
Since March, we reduce that securities portfolio by approximately $1.1 billion to a total of approximately $800 million outstanding as of February 19, 2021. In total, we reduced our securities repo by over $800 million, or 68% since March. As a result, securities repo now only represents about 10% of our total debt outstanding as of February 19, 2021.
We entered the New Year with exceptional liquidity and a strong portfolio of loans, securities and investments. We had over $2.8 billion of unencumbered assets, which is nearly half of our asset base. These assets are also a very high quality with over 80% comprised of cash and first mortgages.
A substantial unencumbered asset pool contributed greatly to our financial flexibility during this pandemic. These assets played a key role in our ability to raise liquidity quickly in disrupted market conditions and enabled us to reduce mark to market debt by raising a $0.5 billion of non-recourse, non-mark to market debt.
As of today, and after paying off an additional $390 million of debt since the end of the fourth quarter, we still have over $1.3 billion in unrestricted cash on hand. And over 80% of our capital base is now comprised of unsecured bonds, non-recourse and non-mark to market debt and book equity.
As of February 19 2021, our adjusted leverage ratio net of cash is 1.4. times after further excluding a predominantly AAA rated short duration securities holdings, our leverage ratio was only 0.8 times and our total mark to market debt is now less than a quarter of our total debt.
We recently redeemed all the remaining five and seven eight unsecured corporate bonds in advance of their due date this August. We see the unsecured market as a safe and prudent way to finance our business. And we expect to continue to be an active issue in that market.
While we are pleased that our stock price has recovered significantly from the lower levels, we saw earlier last year, we remain committed to reclaiming the pricing on both our outstanding bonds and stocks that better reflect the intrinsic value of Ladder's platform. In the meantime, we are very happy to be back to the business of writing new loans at attractive risk adjusted returns.
With that, I'll turn the call over to Marc.
Thank you, Pamela. Before turning this presentation over to Paul, I want to thank Brian, Pamela, the Board of Directors, the investment community and most of all my colleagues at Ladder for their support over the past 12.5 years. I felt very fortunate to be offered the opportunity to serve as Ladder CFO in 2008.
Accepting the role was a major step in my career, taking in the most uncertain of times with no guarantees from anyone. Together, we encountered a lot of challenges. And the results indicate a record of success along the way. I'd like to believe that those who decided I deserved this chance more than a decade ago now look back on that decision with satisfaction and pride, as that was always my goal.
Based on my personal observations, going forward, I am competency the investment community will see at least the same level of commitment, skill and professionalism from Paul Miceli as they have seen from the rest of the l Ladder team from day one. I too will miss working with the most talented team of professionals in this industry, and leave confident that despite all of our achievements to date, Ladder's best days lie ahead.
With that, I will turn the discussion over to Ladder's new Chief Financial Officer, Paul Miceli.
Thanks, Marc. As noted in today's earnings released Ladder's replaced its two primary non-GAAP measures of earnings. Based on informal guidance from the SEC staff, core earnings has been replaced by distributable earnings and core EPS has been replaced by distributable EPS. The definitions of distributable earnings and distributable EPS at Ladder are very similar to those of core earnings and core EPS. The one exception is related to the timing of asset impairment recognition.
Going forward in computing distributable earnings, Ladder will recognize assets specific loan and real estate impairment charges upon realization, which will occur at the time an impairment is determined to be non-recoverable. With the change to distributable earnings or non-GAAP performance measurable more closely aligned with the computation of non-GAAP performance measures used by a public company commercial mortgage rate peers.
For the fourth quarter Ladder produced distributable earnings of $4.9 million or $0.05 per share. For the full year 2020, Ladder produced distributable earnings of $68.3 million or $0.60 per share. Continuing with a measured approach to risk management in the fourth quarter Ladder did not newly originate or securitize any loans and only acquired one small net leased property.
Loan repayments continued at a strong pace during the quarter with $286 million of loan payoffs at par. In addition, Ladder reduced its balance of non-accrual loans by 35%, mainly by selling forward defaulted loans at near par value. We sold two defaulted loans in bankruptcy in Austin, Texas, with an outstanding principal balance of $101 million. We also contemporaneously foreclosed on and sold a residence in South Bend, Indiana [ph] and a hotel in Miami, Florida, with an outstanding principal - with outstanding principal balances of $4.1 million and $45 million respectively.
These sales resulted in the disposition of $150 million of defaulted loans and generated net impairment charge in the aggregate of $4.0 million recorded in the fourth quarter.
Our CECL reserve decreased overall by $5.6 million to $42 million in the fourth quarter, as a result of loan payoffs and sales executed during the quarter and to a lesser extent a moderately improved macro-economic outlook. The net decrease included a $1.2 million specific loan provision related to the $45 million hotel loan, we've foreclosed on and sold in Q1 as previously referenced.
Also during the fourth quarter, Ladder redeemed $100 million of its five and seven eighths corporate bonds scheduled to mature and August 2021. The remaining $147 million of that issuance was redeemed in January 2021. Market pricing of Ladders outstanding corporate bonds has improved substantially, reflecting more favorable market conditions in recognition of the progress made in strengthening Ladders liquidity and capital base.
Also in December 2020, Koch Real Estate Investments exercises option to acquire 4 million shares of Ladders Class A common stock, thereby increasing equity by $32 million and demonstrating their long-term commitment to Ladder.
Additionally, in an effort to reduce cash costs and further align interest to Ladders employees and shareholders, Ladder elected to distribute 97% of annual incentive compensation awards for the 2020 calendar year in the form of stock instead of cash to all employees, including senior management. A portion of those shares were awarded in December, the remainder in January.
With regards to shareholders equity, in addition to the 32 million contributed by Koch, the value of our securities portfolio increased by $18 million. We declared a $0.20 per share dividend in Q4 which was paid in January and repurchased 50,000 shares of stock and an average price at $9.05. We expect our dividend to remain unchanged in the first quarter of 2021.
Under appreciated book value per share was $13.94 at year end, our GAAP book value per share was $12.21 based on 126.4 million shares outstanding as of December 31 2020.
As 2021 begins, we do so with over $1.3 billion of unrestricted cash, representing over 24% of our total balance sheet with corporate leverage by any measure at historically low levels. Our three segments reflect the same strong credit metrics to which Ladder shareholders have grown accustomed to over the years. Our $2.3 billion balance sheet loan portfolio is primarily first mortgage loans diverse in terms of collateral type, with a 67%, LTV, an average loan size of $19 million and a short 1.2 year weighted average duration, with only $149 million of future funding commitments.
Our $1.2 billion real estate portfolio was diverse and granular, and includes 164 net lease properties with strong tenants that include major [indiscernible] chains, warehouse clubs, dollar stores, and supermarket chains. The portfolio is the result of Ladders long standing strategy of focusing on net leased real estate Investments on necessity-based retail properties occupied by solid credit tenants.
Finally, Ladders $1.1 billion securities portfolio remains 89% AAA rated almost entirely investment grade, with a weighted average duration of two years as of December 31. As noted, values of the senior first mortgage-backed securities with significant credit subordination have recovered and are again trading at or above par with financing costs improving to pre-pandemic levels.
Overall, our loan and securities portfolios have decreased in size due to strong levels of natural amortization, healthy levels of payoffs. Our strengthened capital base and solid liquidity position provide a strong foundation for Ladder as we ramp up our investing activity in the New Year. And for more details on our fourth quarter and year end 2020 operating results, please refer to our quarterly earnings supplement which is available on our website, as well as our 10-K which we expect to fall this week.
I'll now turn over the call to our Chief Executive Officer, Brian Harris.
Thanks, Paul. 2020 delta is a very different type of market disruption at the end of the first quarter, while we've never seen such a rapid and severe downturn in the economy. Our decades of experience managing through harsh recessions and strong recoveries provided us with the template we've learned to follow in times of extreme volatility.
Job number one in the spring of 2020 was to ensure we had enough liquidity to weather what looked to be some very rough times ahead, as 33 million jobs were lost in the United States in just 30 days, as the government essentially turned off the economy to stem the spread of the virus.
I won't repeat the details of the steps we took. But as with most negative surprises, it helps to be prepared, and we were having just issued 750 million of corporate bonds only six weeks prior to the pandemic beginning.
Fast forwarding to today we presently have over $1.3 billion of unrestricted cash. And keep in mind that after we reduce debt by $1.9 billion over the last 11 months. Building up a liquidity cushion of that size was made possible by our ownership of high quality investments going into the downturn. We were very pleased to see that many of our loans coming due over the last year were able to pay us off at maturity in full.
When we sold some of our investments at what was probably not the best time to do so in order to raise additional liquidity, we were still able to achieve sales prices near our basis during the worst of market times, while de leveraging the company overall.
We took appropriate steps to conserve cash during the remainder of 2020, always anticipating that in 2021, the health emergency the country was dealing with would begin to subside. We said in a prior call that we were anticipating a deep recession that would probably last about one year. And while we're not out of the woods, yet, that position has not changed.
The second step we took to defend book value of our stock would take time, patience, and a hell of a lot of hours and asset management. By staying on top of our inventory and working with our borrowers, we were able to monetize many of our investments during the year.
When underwriting loans, we obsessively concern ourselves with asset values first and foremost. Since the start of the pandemic in March and into 2021, we were able to monetize over $2.8 billion of assets at nearly 100% of our investment amount. In the last four and a half months alone, we have sold over $680 million of securities at an average price above par.
I'll now move to the go forward planet Ladder and start by saying that I am very pleased to report that we began issuing new loan applications in January and business has been brisk with over 200 million in new loans under application at this time. I've waited a long time to say those words. We were repeatedly asked about when we plan to deploy our large cash position and achieve the operating leverage, we see returning us to increase earnings, and that answer is now.
We are not restarting our lending operations solely because we see adequate demand, but mostly because we are seeing the attractive investment opportunities that invariably come about after a deep downturn in the economy. We still think the economy has some serious challenges ahead. But the relationship between risk and reward seems to be producing the kinds of situations we've been waiting for.
We turned a corner at Ladder, and I'm very happy with the way our team reacted to some pretty horrible market conditions in 2020. We made the necessary sacrifices to have the liquidity needed to navigate the shutdown of the economy, which has had some devastating effects on parts of the commercial real estate sector.
We then made sure our management of our existing investments preserved book value. And now we finally get to the third step we've been waiting for, we now move ahead in an offensive manner to create durable and growing earnings in the quarters ahead.
We still have some housekeeping to do with the liability side of our balance sheet. But in starting from a very low leverage position today, we feel this can all be accomplished rather easily over the next year or so. Since we paid down over $450 million of our corporate bonds in advance of their due dates, we hope to return to the capital markets with another bond offering if acceptable conditions prevail.
There's no immediate need to access additional capital at this time. And we can continue to sell down our securities portfolio to provide additional capital if needed to avail ourselves of the high yielding opportunities we're now seeing in the equity and debt markets.
It's nice to sign off today by saying we look forward to building our earnings in the quarters ahead, with the future looking much brighter these days, we're looking forward to it and referring to the next chapter of our growth as the post-pandemic period at Ladder. In the meantime, we're very happy to be back in business and writing new loans at attractive risk adjusted returns.
With that, I'll open up the call to questions.
[Operator Instructions] Our first question is from Tim Hayes, BTIG. Please proceed with your question.
Hey, good evening, everyone. Hope you're doing well. My first question, you know, glad happy to see that you guys hit that inflection point where you're starting to play some offense now. If we could just touch on the pipeline here, what are the levered returns that you're seeing across your asset classes? You know, what's - where do you expect most of your capital deployment to go? And if you could just touch on the asset types and any other color from the pipeline that can be helpful?
Sure, happy to help with that. We opened up really applications just a few weeks ago. And already I think Pamela mentioned we're a little over $200 million, I actually think we're approaching $300 million. As a check this right before we got on the phone. I'd imagine most of our allocation for new investments is going to come in the form of bridge loans, and conduit loans.
The conduit, I probably would have answered that with a little bit more of a 50-50 attach to it, you know, five hours ago, but with the 10-year moving up rather briskly today, then, you know, I think that there will be a very attractive conduit business, but I have to suspect we're going to see a little pause here. And in all likelihood, because a lot of people who were refinancing have done the pull forward.
So sometimes that takes a few, you know, 60, 90 days to for it to really set in, although I certainly wouldn't call a 1.6% 10 year a high rate either. So, you know, we'll see, but I think - we'll we're always on the lookout for equity investments. We've seen a few that we like, we haven't gone under contract with any of them yet. But I think the lion share of what we're going to do is going to be involved with the bridge loan portfolio of the balance sheet, and securities will continue to come down.
Okay. So securities will be a provider of capital then to you guys going forward. So, on the bridge portfolio, can you just again, talk about the types of assets that are in the pipeline? How that has, I guess compares to how the pipeline has fared in the past? And maybe how lever returns? Because Brian, you mentioned that the shift to offense, somewhat, or largely is because of the returns you're now seeing there. And, you know, your liquidity position has been pretty strong for a couple quarters now.
So I'm just wondering if, if you've seen returns, and I guess, spreads widen on certain loans that even from six months ago, or, you know, what, what does cause the shift?
Sure, well, I think it's really come about because I think you've had a situation here where the Fed has been on TV, I think the banks are, you know, cleaning up their balance sheets, I think that everybody was all lenders, I think we're pretty much tolerant of the need for forbearance agreements, you know, when the initial pandemic hit, and some of the some of the borrowers are now in their second, you know, forbearance agreement, I think it's hitting the point where, you know, it's either going to get straightened out, or they'll sell the note. And then we have seen that too.
So we've seen definitely seen some bank sales of notes where people are acquiring things or where the sponsor finally woke up and said, Wow, my bank sold my note, the guy who bought it probably wants to take it over. So I need to refinance this quickly and pay all the penalty interest.
When a sponsor is in that mode, that's usually a great place to step in, because you're no longer competing with your competitors, you're competing with his default interest. And you have to try to close as quickly as possible.
So there's definitely been a shift, I would say it's in the last 30 days. And it's a little bifurcated, I would say, I think that the market because the CLO market has kind of rebounded, and there have been a few new CLOs issued. And, you know, just a few weeks ago, there was no alternative for any yield at all. So, you know, new CLO, AAA's, were trading well inside of 100 over.
I think the weighted average financing cost of a call it a 90 over AAA deal was probably about 120, 125 over LIBOW. So you can get a lot of things done there. You can get a lot of business done. But I think that the market because of that is overbidding multifamily. And I think it's kind of a bifurcated opportunity set. And the multifamily sector is LIBOR plus 350, to 400. And it doesn't matter if it's a Class C, or you know, rehab, you know, just coming back online in two years after they put in new kitchens. Or else if it's a brand new apartment building and coming off a construction loan and just going into lease up. When you see the same price on every single thing that usually means it's a bit of a dislocated market, or else a one-way market.
The - once you get past apartments at LIBOR plus 350 to say 400, it's kind of a gap. There's very little in the LIBOR plus 500 or LIBOR plus 600. I would say that people that are in a hurry, you know, LIBOR 600 is not at all out of the question. And if you have a hotel, I don't even think it's LIBOR plus anything, I think it's a nine or a 10. And, you know, those are just rates that they're looking at that point.
So we are seeing I you know, it's one of these markets, where there's a lot coming due in the next couple of years. And a lot of it is in the CMBS business, but also there's a lot of it in the insurance companies and the banks too. So I think we're going to be going through an enormous amount of opportunities, and we'll be selecting a few but if the last 30 days are any indicator, I think that it'll probably be about a 6% yield unlevered. And then, you know, given that we have almost a billion for in cash at this point, I think we'll probably you know, either just go through the first 500 to a $1 billion unlevered and then just possibly do a CLO or else take it to the banks at that point. Because we have a country club problem of too much liquidity right now.
Yeah, that's a good way of putting it. But, yeah, that was going to be the part B that question was going to be on the financing side. So it sounds like you're interested in maybe testing the waters with CREs, CLO. Is there any timing around that? I mean, do you need to kind of build the portfolio back a little bit before you look to do that or, you know, any color on that would be helpful.
We could one rather quickly, we have over $2 billion worth of loans. But I think it you know, if I had to fast forward and think what's the best way to do this, I suspect probably out around June or July, we'll probably do a, I think a CLO is so far looks a little bit easier than bank repo lines. So let's assume nothing changes there will probably stick to the CLO. And my suspicion is it'll work better if we go with all loans that are originated after the pandemic.
Okay, got it. That's helpful. And just one follow up to that, I'll hop back in the queue, but just in terms of your funding costs, you know, have you seen costs come down on your warehouse lines with your repo counterparties? You know, our banks - are they and we've heard this anecdotally, are they feeling kind of pressure to compete with the CLO market now that it's so hot, and you're seeing issuance pick up there and just curious if that, in the form of cost or leverage is benefited you guys?
Well, the securities repo market has fully recovered to where it was pre-pandemic, in fact, it might even be through where it was. So there's plenty of leverage if you want to be in the securities business. However, the yield is quite low. So even levered returns are 3%. So that's one of the reasons we've drastically cut down in our holdings of securities at this point, I suspect, we'll continue to do that even though very attractive financing terms, at the end of the day, we'd rather have the capital deliver the company through the repo line, and then get unlevered 6% returns and then, you know, use the CLO market to amp that number up a little bit.
The banks are not, I wouldn't say they're very comfortable yet, because we are still in, you know, a difficult time in the economy. And there's plenty of headwinds, that you certainly don't want to look at too many hotels, apartments, you can do, and I think the healthier banks, and we won't get into who they are, but the healthier banks are more apt to be reasonable about financing. You know, their rates haven't gone up necessarily from before.
But the - what they will accept has gotten narrower. And the advanced rate has maybe dropped about 10%, which is fine. Yeah, I think that's an appropriate situation. I think that you know, real estate in general has been pushed a little here. And the CLO market keeps the risk in the hands of the originators. And that's probably the way it should be handled.
So, you know, and you can do a managed CLO deal or you can do a static CLO deal. We have the luxury of probably doing either, but I suspect we'll wait until we get about $6 or $800 million of new loan originations.
Got it. No, that's good color. Appreciate it. Brian. I'll hop in the queue. But again, thanks for taking my questions.
Sure.
And our next question is from Randy Binner with B. Riley. Please proceed with your question.
Good evening. Thanks. Thanks. That was really interesting. I guess. I'd like to go back, though. You mentioned $2 to 300 million of new loans, you know, under application this year post pandemic, and I heard in there, multifamily is a little tight for your preference on spread, which makes sense.
But then it was all the way back out to hotels again, and I know that you've gotten smaller and hospitality. So I just - I guess I'd like to maybe ask the question, you know, of the 2 to 300, can you give us rough buckets of where you're actually writing it.
And if it is, hotels, again, you know, maybe a little bit more color on how those make sense, you know, occupancy, location, that sort of thing?
Of the - I'm going to say closer to $300 million at this point, because I've got a pretty good sense of what came in even in the last day, very little that is hotel, I think there is one on there for about $18 million. And the one that is on there, the sponsor of the hotel has, it's a very brand new hotel, and he's putting in more capital to refinance his construction loan. So he's going pay down that principal. And while we know, we're operating on a dollars per unit basis, because there really is no underwriting for the new hotel, I suspect that, you know, we're going to be able to generate that we're comfortable enough, given the rest of the hotels, we know in the area there, densely populated area.
And so I don't know if we'll get there either, by the way, these are just under wrap at this point. And - but I wouldn't want you to think that because they said we're going to get about a 6% unlevered return that we're loading up hotels, that would be the furthest thing from the truth.
That's why I wanted to clarify it….
For all hotels it would be 9% or 10%.
That's fair enough. But yeah, I just wanted to clarify that so what are the categories that you're mostly looking to go into if it's not apartments, and it's not as much hotels?
Well, we have some apartments, and most of ours are north of 400 over, but we're losing plenty of them at 350. We have some offers, and we have some conversion, you know, industrial is changing into something else. Some of it is land, you know, land deals or are traveling at a fraction of the basis, they were traveling at, you know, two years ago, and most land loans, you're right alone with a double-digit rate with a 50% of acquisition cost. And oftentimes with recourse.
So, again, we don't want to make a career out of writing land loans, but, you know, if you're pretty comfortable with the basis, that's another place you can get a good deal. And what I like in particular about it is if we're concerned about our ability to finance a bridge loan, say, an office building with one of our line lenders, try to imagine how a land loan is getting financed with the same banks, it's, it's very difficult.
So well, you know, I would say there is a little bit of a bifurcation going on, you know, there are some cash flowing assets that are simply coming off construction loans, and they're going to be out for a year. And then there's others that, you know, they're just being acquired.
But the one thing, we're spending more time on is acquisitions of new assets now, and oftentimes, there's a seller selling because he has to, not because he wants to. And that's always helpful. And typically, people who are acquiring assets at this point with no real history, they're usually very deep with capital and have been waiting for these opportunities.
So we're pretty comfortable with that. If there is a situation where there's a bridge loan coming due, and it's CLO, and somebody asks us to refinance that that's, that's what we look at as a bridge-to-bridge financing. That's kind of a dangerous animal, because you have to think that the previous lender probably could keep it if he wants to do and he's decided not to. So we understand that they know more about that loan than we do. So we're trying to avoid that in many ways.
The only follow up I have is just on the on the size of the loans and this new batch of nearly 300. Does it conform to your normal distribution of loan sizes that average around $20 million? Or is there is there a change?
I'm going to let - Pamela has the list in front of her.
Yeah, I can jump in just by way of just to go back, the answer is it's the same business plan and the same strategy with an average loan size of about $20 million or so. And we're focused on all the asset groups, most of what signed up is a combination of multi asset and a lot of multi with some office necessity-based products. So it does not look very different from what we've done historically, both in terms of product type and asset size.
All right, great. I'll leave it there. Thanks a lot.
And our next question is from Charlie Arestia with JPMorgan. Please proceed with your question.
Hey, good evening, everyone. Thanks for taking the questions. Marc, by the way, I just want to say it's been a pleasure working with you best of luck in your new chapter. And, Paul, I look forward to, you know, continuing our discussion.
You guys have built up, obviously, a sizable pool of capital here. Tremendous amount of cash on the balance sheets, you know $1.3 billion or more? How do you think about the cadence of deploying that throughout the year? And how should we really think about, you know, the economics of those new investments flowing through to, you know, generating distributable earnings growth above the dividend?
It's really a several part question there. Because we also have to gauge if you notice that we actually take quite a few payoffs every quarter also. So the good part is as it's a pretty good statement as to what our portfolio of underwriting - underwritten loans look like. I think, you know, we mentioned that we sold some non-performing loans this quarter and got almost par for all of them.
So we're pretty comfortable that our underwriting has withheld and held its mud throughout the pandemic. The question is, what is the pace at which we're going to originate loans? Versus what is the pace at which we're going to get payoffs and, in the portfolio, which tend to be pretty high rate anyway, I think we had I don't know what our floor is now, but I'm sure it's in one of our documents, but it probably begins with a six anyway.
And what is the pace at which we decide to delever our securities portfolio so and this dispose of that, as I mentioned, in the call, I think we sold $680 million of securities in the last couple of months. And we didn't do that because they weren't making money. We do that because we saw this pipeline building. And rather than go to repo lenders, and hang on to assets that were only yielding 3%. We decided let's get rid of the 3% yield. Let's get the leverage down. And I think Pamela mentioned I think we're at 0.8 leverage if you get rid of our securities and cash.
So we do use corporate bonds on secured would probably use them more than most in the business that we're going to try to do another corporate bond deal, hopefully will be welcomed in that area, we paid off 450 million of those before scheduled due date this year.
So the real question is, well, how quickly does it translate through? And, Charlie, I can't really tell you, I can't - based on what I saw in the last 30 days, I think we could put a billion dollars out in 90 days if we wanted to. We will not do that, though, I assure you, we and we could go to larger loans. But it is a bit of a flea market right now, we are seeing a lot of transactions come in that you know it rarely do you see us internally having discussions that don't agree with each other. But we do have some disagreement here occasionally, where we think well, maybe we shouldn't do that, even though that's a pretty high rate. And it looks like a pretty good loan. And it's somebody gave me the reference. If it's like when you go fishing, and you're allowed to catch two fish, if you catch them both in the first half hour, do you get in your car and go home? Or do you throw a couple of them back and hope for bigger ones.
And I think right now, we believe the opportunity set is expanding, because the patience of the financial institutions that are holding these loans is waning. And in a rising interest rate environment, I think that that patience will get shorter and shorter as time goes on.
So we are - this is as good as it can look, going forward. This reminds us so much of how it looked in 2008 when we opened the doors of the company and you know, love not having to rely on repo, love not having to rely on being able to borrow money in a world where you know, the only problem here is rates are pretty low. And I think I said in one of our previous calls, just didn't like the idea of lending 10-year money at 280 to 3%, which is where a lot of it was, well, in 90 days, that one straighten itself out. And of course, there'll be some demand destruction as a result of higher rates.
But I still think the lending apparatus in the United States is dramatically smaller than it was last year. The banks are open. There's a lot of competition for apartment buildings, but there's not a lot of competition for other things. And that that is so symptomatic of a recovery after a deep recession that, you know, this is, what we've been waiting for. This is why we've been holding our capital.
Appreciate, Brian, thanks so much.
Our next question is from Jade Rahmani with KBW. Please proceed with your question.
Thank you very much good to speak with everyone, wanted to start off by asking if there's any credit items of note that took place during the quarter. Noting the remarks he made about the forward defaulted loans that were sold. So hopefully you could give the dollar amount and percentage of loans that are either in defaults or on non-accrual at this point?
I think Pamela probably has a better handle on that than anybody. If you have that Pamela available?
I can do that. Our non-accrual, I think Paul mentioned in the script was at $201 million is now down to $130 million as of today, and the end of - Paul, that's 2Q 4. But I think it's accurate as of today.
Correct. Yeah, with the resolution of the hotel loan that we exited in 2021 our non-accrual loan book is down to $131 million.
And when you ask about the credit, quality Jade, I think we feel really good. I think that's one of the things that justice distinguishes us. You know, we have short duration loans that turn very quickly, we have not kicked the can on anything at all. I don't know how others are treating their books. But I can tell you, we've been really proactive. And we've moved literally almost every large problematic loan off our balance sheet to free up liquidity, as Brian said, we're excited about the opportunity ahead of us. And we wanted to free up more capital to do that. And we feel like we have a really strong balance sheet right now. And that's reflected both in our CECL reserve and in our non-accrual status.
Thanks, that's good to hear. And $131 million is a pretty low statistic relative to total assets of close to $6 billion, and even the loan portfolio at around $2.3 billion at 12/31. I think there is a myth about Ladder that the reason you're sitting on such a high liquidity position is that there's some you know, some outside risks some things you're worrying about in the loan portfolio that could cause issues from a credit perspective.
So I guess when you think of Ladder versus peers, why is it that the company has such an outsized currency cash position of $1.3 billion I mean, Star Woods got a market cap of close to $7 billion and they, you know, they have about liquidity of $700 million at this point. So how would you answer that?
Well, I try not to figure out what other people are doing. But I know internally at our end of things, it's not a surprise I think we're probably getting more payoffs than anybody else. And one of the - there's two reasons for that. One is we have very high floors, and we deal with smaller loans. And so our loans are readily financeable by lots of people, as opposed to people who can write $100 million loans.
Secondly, we have short maturity dates, you know, we don't usually use the CLO market, which tends to default to a three plus one plus one, you know, with a LIBOR floor, you know, we write two-year loans with a one-year extension. And if you're not doing well, after two years, then one year extension isn't there. So as a result, we get right on top of, you know, problems very quickly.
And I learned a long time ago, it's better to get on top of things when there's a lot of liquidity around. And banks are not taking losses. And you know, of course, you always want to pressure test your portfolio, and by being able to move $100 million loan in bankruptcy in Texas for $100 million, and moving a hotel in Miami, I think it was a $45 million loan, we sold it for just under $44 million, you know, slight loss there. And probably we could have done something with that asset. But given the damage, I think we can do right now with a lot of capital, I think it's much easier, it's we're trying to run a low friction business, we're not trying to run a big real estate operation.
But we are seeing, you know, some pretty good opportunities here. And I would say that, you know, some of these assets that we're selling, in many ways, it's similar to when we sold securities back in April, we, you know, that probably wasn't the best idea to sell those at 96.
But first of all, we were able to prove to ourselves, we could sell them at 96, when the world was thinking maybe we were down 20 points, which was crazy. So you know, that all came back. But I think you know, the opportunity set that we see here, and just holding capital, we held capital for liquidity purposes, because one I had a high rate bond outstanding five and seven eighths, we have raised our interest costs temporarily. And we're aware of that. We do have some maturity dates coming up. So I know for instance, we have about $450 million coming due in a year from now.
Now most people don't even think about that a year from now. We think about that two years from before it's due date. So we're going to try to get that refinanced. And so I think we have a lot of cash around so that we can't really get pushed around by lenders and, and also have the ability to pick and choose our spots. We don't have to worry about if it's securitized bubble or whether a BP sky [ph] will buy it or whether a rating agency likes it. You know, we handle our own credit. And you know, we always talk to the rating agencies, and they said, well, we're going to see how you guys do in a recession. All right, well, they're going see how we did in this recession. And we're not out of it yet. So we're not we're not doing any premature victory laps, but it sure looks pretty good to me.
I think if you've got rate floors, that sick, low 6% yields and rates on the 10, year were below 1%, and your loans are not paying off, you ought to be getting ready for a couple of problems. And I don't know how it gets handled elsewhere in the world. But I would expect to see a lot of payoffs, if the credit underwriting is tight, and lots of pay off creates lots of liquidity, and especially when you're not riding alone.
So I think the post mortem on this whole pandemic, hopefully at ladder will be we shut off the earnings column, you know, and just wrote earnings for 10 or 11 months. And then we turned it back on, and hopefully, it'll be just like the health emergency that we all experienced here.
Pamela is bucking here, say something. So I'm going let her get in. But, you know, I think the difference is, you know, we, we there isn't, there's only four assets in the company, right? We have real estate, we have securities, we have loans, and we have cash. We were trading at 50% of book value six months ago. This is the first time we've been on a call where our cash holdings are lower than our market value.
And so despite the fact that the stock went up about 60%, in the last quarter, our cash rose faster than the stock. And so this, this company hasn't begun to stretch yet. And the fact that we're holding a lot of cash, I don't know why it scares people. It shouldn't. It should. I would think that's pretty prudent. But if we're going to go out and face bondholders for unsecured debt, we better look them in the eye and say when the pandemic hit, here's what we did a, b and c we bought back bonds. We paid you off early. You know, we're looking to come back to an unsecured market again, and here we are walking through the door at point eight times leverage and you know, the market. You know, one thing we see on the residential mortgage resize, they don't give it sorry, they don't care if the companies are levered 10 to one. And I personally think it's a very dangerous situation, if you're levered like that. And, you know, we've preached lack of leverage for years now on these calls. And in April, people thought we were over leveraged.
Okay. I can't I can't explain to the stock market, why they think what they think I it is baffling to me. And I missed the days of being a private company badly. Because, you know, you walk in and you talk to people who understand what you're talking about. But, you know, we have been issued cell recommendations because people think we're going to cut our dividends. Or we said, we weren't going to, I don't know why that didn't count.
We have a billion dollars in cash, and we have a clear path to growing into our dividends. And we raised our dividend five times when LIBOR went up, we cut it once. You know, when we said we're doing this one time, so I must tell you, I'm a little baffled by what people are looking at when they think we're going to cut our dividends.
I'm not talking of lapping. Because Brian, you covered a lot of it. But at the end there, but I think what I was going to say is just at the end of the day, I watched this same movie back when we opened the doors in 2008. We exercise led by Brian enormous patience. Yes, we have a lot of capital, yes, we could deploy quickly. Yes, our originators were out there looking and anxious to redeploy months ago, and you heard what happened, you know, to returns in the last 90 days, we waited because we thought there would be a better opportunity and there was, and when any, you know, I just I'm laughing because people speculating about cash, if you just listen, we have $2.7 billion of unencumbered assets, half of lattice assets are unencumbered, we have a securities portfolio of $800 million, with very little leverage against it, it could be it could be sold with selling it at par as opportunities come in, we could sell it all tomorrow, at the end of the day, our balance sheet loan, we have $2 billion dollars of loans, we've turned the portfolio with almost no losses. When we have low maturities coming up, I think we've probably taken more payoffs than anyone, especially if you look at our size.
And when you look at, we have like $240 million of loan repo on our balance sheet. So if we needed to raise liquidity, notwithstanding everything Brian just said, I just gave you buckets of liquidity across the board. And our triple net lease portfolio is outperforming the market, it's 100% collections. It's a necessity base. And it's, you know, one of the strongest assets on the street that I just think is overlooked.
So I just - as Brian said, we can't help what people think. But we've been as transparent as we can be through this process. And I think the thing that gets overlooked a little bit, is we turned our balance sheet and took off. And I hope over time this will be seen, really all the problem assets. And we are moving into this new origination opportunity with a very strong clean balance sheet, and tons of capital to deploy.
Thank you for that. Two follow ups. Firstly, share repurchases, does that fit into your capital deployment plan? How much of the $1.3 billion in cash would you allocate to share purchases, it just stands to reason that as an internally managed commercial mortgage REIT is the value of control of these entities is worth about 15%. So just apples to apples, Ladders retrieved 15% higher than a [indiscernible] mortgage REIT that would suggest relative to 80% of book value, you know, more than 30% upside versus unlevered yield at 6%. So how does have the share repurchase factor into your calculation?
You know, we - I said last time, I thought our stock was very, very cheap. And I thought we'd go out and buy and as soon as we got off the phone, you know, I let the period go by that has to go by before you can buy stock. And we went right into the market and began buying it. And I think the stock was down around 695 or seven. And it very quickly went to eight and I can give for all the credit I get as a trader. Let me tell you I was pretty off on this one. I thought the stock would come back to me It never did. It just kept going up. So it went from eight then I went to nine then it went to 10 then it went to 11.
So I was slow. And so I wouldn't hire me to be a stock repurchases If I were you but because I've been a little bit slow on that I do a little better on the bonds when it when they're really low. But I think if that is the next the best alternative investment we've got, then that's what we'll do, but to separate us from capital in this kind of a market is going to be difficult although I certainly can understand the benefits of buying our stock at 80% of book value.
Okay, and then last question and I get this from a lot investors in my view, there's probably a decent cohort of very high quality institutional investors, evaluating Ladder, but they look at the dividend. And that keeps them on the sidelines because you could buy the S&P [indiscernible] even, you know, something like ARI at a much higher dividend yield. And those companies seem to have convinced the market for now that their dividends are not going to be cut, they're sustainable, look at Ladders, $0.80 cent dividend, relative to its undepreciated book value of 1394, acknowledging book value did take a hit a little bit of a hit due to the COCS [ph] exercise their option, nevertheless, the current dividend is a 5.75% yield on that book value, historically, Ladder generated and 11% to 12% ROE and I remember Brian, you saying you don't go to work every day to generate, you know, a 10% to 12% ROI, you'd shoot for something much higher.
So that would suggest if you can just get back to the 11% ROE and do an 80% payout ratio. Yeah, there should be about 50% potential upside to the dividend. It's just about the timing of deploying this capital. So you validate the idea that the dividend is going to be once capital gets deployed on a growth path, Ladder, we'll be back to raising the dividend, you know, at a measured pace. But that's basically what investors should be expecting.
A whole lot of forecasting, but a lot of what you said there is kind of the business plan. And it gets a lot easier in a rising rate environment. And I am hoping I know that most mortgage guys don't say that, but I kind of like bright, smart rising. And - they, you know, will be as patient as we need to be. And we're kind of at that part of the juncture. I think we're - the recession isn't over. I mean, there's still high unemployment. Yeah, 33 million jobs got lost. And maybe now it's only 10 million, but that's how many jobs were lost in the great recession or so.
So we're not done here. And I wouldn't tell you we're done, you know, having discussions, you know, with borrowers that are having a tough time. But I think what we've proven out now, by getting to some of our larger, most illiquid, and like most elastic, non-performers, like hotels and land loans and loans in bankruptcy, is it's kind of proven to us all that we do know how to underwrite and this pandemic has been a shock to the system. And in the teeth of the worst recession I've ever seen in my life, we've been able to sell securities, home loans, hotels, land, you know, defaulted loans, bankrupt loans, and all of them with a 98-ish type number, you know, across the board.
So I don't think that's going to change with the next roster of loans that are coming due at ladder. So I'm going speculate a little bit there that, you know, we have some, some legacy that's coming due that we think is fine, we're getting paid off on a lot of loans, but we still have some wood to chop, and some of that transition that took place and not a lot of transition went well in the in 2020, unless you own Zoom or, you know, one of the delivery companies, but you know, so we are now what we're looking at is this new class, and we're going to reset the inventory here. And we're going to set the reset the inventory with very little in the way of competition with an extremely supportive Federal Reserve Bank.
I think if you're going to shoot for what gets done in the bank market, you know, you're going to struggle at LIBOR plus 350. But if you just expand that target just a little bit, and maybe you go to 75%, instead of 65%, I oftentimes find when you come out of these recessions, it's the year - it's almost like you should have done every loan you looked at. And because it's five years later, you realize with all the stimulus, every damn thing you look, that worked out just fine.
But we're still pretty particular about it, we're still dealing with the possibility of who knows what could happen. You know, this has been a lot to deal with, as far as the election goes, the election that we thought would end in November ended in January, by the way, if you hear those dogs, those are mine, and I have no control over them. So I'm just going to party through this.
And so the way I look at it, it's like it's a great opportunity set. You can't get overly cocky here. Like I said, we could probably push a $1 billion out the door in 90 days. But that would be insane because you could have another leg down here. And we're going to be cautious about it. But will we grow into that dividend? Yes, easily? Do we have any plans to cut it? No. Let me say it again? No. One more time? So for the people who keep writing that we're expecting to cut it. I wish they'd call my phone number.
But we don't think that's going to be difficult at all. We don't think we're going to be there next quarter. But we do think any year we're going to be there and hopefully even getting to the good news that you talked about there as a possibility.
Great. Well hope hopefully that happens and maybe even faster than you anticipate considering Ladders high ROE track record. And thanks so much for taking the questions.
We have reached the end of the question-and-answer session. And I'll now turn the call over to CEO, Brian Harris for closing remarks.
All right. Well, thank you everybody for listening. And sorry about my dogs. They have a few questions too. But I guess as we end here, I want to welcome Paul as our new CFO and Marc, I can't grab you on a zoom call, but he knows I'll kiss him right in front of anyone. So I if I were around, I'd give you a hug right now. So thank you for all your help. And I appreciate all your time with our investors and our patients. I know it's been a difficult year but we look - we look forward to better times ahead. So thank you.
This concludes today's conference and you may disconnect your line. Thank you for your participation.